AUDITING: SAICA Code of Professional Conduct

SAICA Code of Conduct

A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. Therefore, a chartered accountant’s responsibility is not exclusively to satisfy the needs of an individual client or employer. In acting in the public interest, a chartered accountant shall observe and comply with this Code. If a chartered accountant is prohibited from complying with certain parts of this Code by law or regulation, the chartered accountant shall comply with all other parts of this Code.
This Code contains three parts. Part A establishes the fundamental principles of professional ethics for chartered accountants and provides a conceptual framework that chartered accountants shall apply to: (a) Identify threats to compliance with the fundamental principles; (b) Evaluate the significance of the threats identified; and (c) Apply safeguards, when necessary, to eliminate the threats or reduce them to an acceptable level. Safeguards are necessary when the chartered accountant determines that the threats are not at a level at which a reasonable and informed third party would be likely to conclude, weighing all the specific facts and circumstances available to the chartered accountant at that time, that compliance with the fundamental principles is not compromised. A chartered accountant shall use professional judgment in applying this conceptual framework.
Part B and C describe how the conceptual framework applies in certain situations. They provide examples of safeguards that may be appropriate to address threats to compliance with the fundamental principles. They also describe situations where safeguards are not available to address the threats, and consequently, the circumstance or relationship creating the threats shall be avoided. Part B applies to chartered accountants in public practice. Part C applies to chartered accountants in business. Chartered Accountants in public practice may also find Part C relevant to their particular circumstances.
The use of the word “shall” in this Code imposes a requirement on the chartered accountant to comply with the specific provision in which “shall” has been used. Compliance is required unless an exception is permitted by this Code.

Fundamental Principles
A chartered accountant shall comply with the following fundamental principles:

(a) Integrity – to be straightforward and honest in all professional and business relationships.

(b) Objectivity – to not allow bias, conflict of interest or undue influence of others to override professional or business judgments.

(c) Professional Competence and Due Care – to maintain professional knowledge and skill at the level required to ensure that a client receives competent professional services based on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards.

(d) Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the chartered accountant or third parties.

(e) Professional Behaviour – to comply with relevant laws and regulations and avoid any action that discredits the accountancy profession.

Threats and Safeguards
Threats may be created by a broad range of relationships and circumstances. When a relationship or circumstance creates a threat, such a threat could compromise, or could be perceived to compromise, a chartered accountant’s compliance with the fundamental principles. A circumstance or relationship may create more than one threat, and a threat may affect compliance with more than one fundamental principle. Threats fall into one or more of the following categories:

(a) Self-interest threat - the threat that a financial or other interest will inappropriately influence the chartered accountant’s judgment or behaviour;

(b) Self-review threat - the threat that a chartered accountant will not appropriately evaluate the results of a previous judgment made or service performed by the chartered accountant, or by another individual within the chartered accountant’s firm, on which the chartered accountant will rely when forming a judgment as part of providing a current service;

(c) Advocacy threat - the threat that a chartered accountant will promote a client’s position to the point that the chartered accountant’s objectivity is compromised; CODE – PART A

(d) Familiarity threat - the threat that due to a long or close relationship with a client, a chartered accountant will be too sympathetic to their interests or too accepting of their work; and

(e) Intimidation threat - the threat that a chartered accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the chartered accountant.

Conceptual Framework Approach 

The circumstances in which chartered accountants operate may create specific threats to compliance with the fundamental principles. It is impossible to define every situation that creates threats to compliance with the fundamental principles and specify the appropriate action. In addition, the nature of engagements and work assignments may differ and, consequently, different threats may be created, requiring the application of different safeguards. Therefore, this Code establishes a conceptual framework that requires a chartered accountant to identify, evaluate, and address threats to compliance with the fundamental principles. The conceptual framework approach assists chartered accountants in complying with the ethical requirements of this Code and meeting their responsibility to act in the public interest. It accommodates many variations in circumstances that create threats to compliance with the fundamental principles and can deter a chartered accountant from concluding that a situation is permitted if it is not specifically prohibited. 

When a chartered accountant identifies threats to compliance with the fundamental principles and, based on an evaluation of those threats, determines that they are not at an acceptable level, the chartered accountant shall determine whether appropriate safeguards are available and can be applied to eliminate the threats or reduce them to an acceptable level. In making that determination, the chartered accountant shall exercise professional judgment and take into account whether a reasonable and informed third party, weighing all the specific facts and circumstances available to the chartered accountant at the time, would be likely to conclude that the threats would be eliminated or reduced to an acceptable level by the application of the safeguards, such that compliance with the fundamental principles is not compromised. 14 CODE – PART A 

A chartered accountant shall evaluate any threats to compliance with the fundamental principles when the chartered accountant knows, or could reasonably be expected to know, of circumstances or relationships that may compromise compliance with the fundamental principles. 

A chartered accountant shall take qualitative as well as quantitative factors into account when evaluating the significance of a threat. When applying the conceptual framework, a chartered accountant may encounter situations in which threats cannot be eliminated or reduced to an acceptable level, either because the threat is too significant or because appropriate safeguards are not available or cannot be applied. In such situations, the chartered accountant shall decline or discontinue the specific professional service involved or, when necessary, resign from the engagement. (in the case of a chartered accountant in public practice) or the employing organization ( in the case of a chartered accountant in business)

Sections 290 and 291 contain provisions with which a chartered accountant shall comply if the chartered accountant identifies a breach of an independence provision of the Code. If a chartered accountant identifies a breach of any other provision of this Code, the chartered accountant shall evaluate the significance of the breach and its impact on the accountant’s ability to comply with the fundamental principles. The accountant shall take whatever actions that may be available, as soon as possible, to satisfactorily address the consequences of the breach. The accountant shall determine whether to report the breach, for example, to those who may have been affected by the breach, a member body, relevant regulator or oversight authority.

When a chartered accountant encounters unusual circumstances in which the application of a specific requirement of the Code would result in a disproportionate outcome or an outcome that may not be in the public interest, it is recommended that the chartered accountant consult with the Regulatory Board or the individual chartered accountant’s professional institute.