Code of Ethics and

Republic Act 9298

Reading Materials
1. Code of Ethics for Professional Accountants in the
Philippines (January 2004)
2. Republic Act 9298 (Philippine Accountancy Act of 2004)
3. PSA 200 - Overall Objectives of the Independent Auditor
and the Conduct of an Audit in Accordance with PSAs
 Code of Ethics for Professional
Accountants in the Philippines

Approved by the PRC in December 2003

Norms and principles governing the practice of the accountancy
profession in the highest standards of ethical conduct

Based on the International Code of Ethics for Professional

Accountants developed by International Federation of Accountants
(IFAC)
Mandatory for all CPAs and is applicable to professional services
performed in the Philippines
BASIC PRINCIPLES that CPAs should follow in the performance
of their work (public practice, commerce and industry, education and
government service)
 Code of Ethics for Professional
Accountants in the Philippines

Public interest - collective well-being of the community of

people and institutions that the professional accountant
serves
Objectives of the accountancy profession:
• highest standard of professionalism
• attain highest level of performance
• meet the public interest requirement
Parts of the Code of Ethics:
• Part A - all professional accountants
• Part B - accountants in public practice
• Part C - employed professional accountants
 Code of Ethics
Part A (all professional accountants)

1. Integrity and objectivity - honesty, truthfulness, fair

and free of conflict of interest
2. Resolution of ethical conflicts - follow established
policies of the employing organization
3. Professional competence - general education, training,
work experience and continuing awareness of
developments in the profession
 Code of Ethics
Part A (all professional accountants)

4. Confidentiality - respect confidentiality of information

acquired in the course of services rendered. Disclosure
is allowed when:
– authorized by the client or the employer
– required by law (give evidence in legal proceedings)
– professional duty or right (comply with technical
standards and ethics requirements)
5. Tax practice
– based on information received
– consistent with the law
– not obliged to inform revenue authorities of errors
 Code of Ethics
Part A (all professional accountants)

6. Cross boarder activities

7. Publicity
– not to bring the profession into disrepute
– not exaggerate qualification or experience
– not denigrate the work of other accountants
 Code of Ethics
Part B (professional accountants in public
practice)
1. Independence
2. Professional competence and responsibilities regarding
the use of non-accountants
3. Fees and commissions
4. Activities incompatible with the practice of public
accountancy
5. Client's monies
6. Relations with other professional accountants in public
practice
7. Advertising and solicitation
 INDEPENDENCE

Independence of mind - the state of mind that permits the

provision of an opinion without being affected by influences
that compromise professional judgment, allowing an individual
to act with integrity, and exercise objectivity and professional
skepticism
Independence in appearance - the avoidance of facts and
circumstances that are so significant a reasonable and informed
third party, having knowledge of all relevant information, including
any safeguards applied, would reasonably conclude a firm's or a
member of the assurance team’s integrity, objectivity or
professional skepticism had been compromised may occur when a
professional accountant may be deterred from acting objectively by
threats, actual or perceived
 THREATS to INDEPENDENCE

a) Self-interest threat – occurs when a firm or a member of the

assurance team could benefit from a financial interest in, or other
self-interest conflict with, an assurance client
b) Self-review threat
• any product or judgment of a previous assurance engagement or
non-assurance engagement needs to be re-evaluated in reaching
conclusions on the assurance engagement
• when a member of the assurance team was previously a director
or officer of the assurance client, or was an employee in a
position to exert direct and significant influence over the subject
matter of the assurance engagement
 THREATS to INDEPENDENCE

c) Advocacy threat – occurs when a firm, or a member of the

assurance team, promotes, or may be perceived to promote, an
assurance client's prosition or opinion to the point that objectivity
may, or may be perceived to be, compromised
d) Familiarity threat – occurs when, by virtue of a close relationship
with an assurance client, its directors, officers or employees, a firm
or a member of the assurance team becomes too sympathetic to the
client’s interests

e) Intimidation threat – occurs when a member of the assurance

team may be deterred from acting objectively and exercising
professional skepticism by threats, actual or perceived, from the
directors, officers or employees of an assurance client
 Ethical Requirements Relating to an Audit
of Financial Statements (PSA 200)

1. Independence

2. Professional Skepticism

3. Professional Judgement

4. Sufficient Appropriate Audit Evidence and Audit Risk

Assessment

5. Conduct of an Audit in Accordance with PSAs

 Fundamental Principles for Professional
Accountants
a) Integrity – straightforward and honest
b) Objectivity – fair, will not allow prejudice or bias, conflict of
interest or influence of others
c) Professional Competence and Due Care – delivers competent
professional service based on up-to-date developments in practice,
legislation and techniques
d) Confidentiality – respects confidentiality and will not disclose
information without specific authority
e) Professional Behaviour – maintains good reputation and will not
discredit the profession
f) Technical Standards – carry out services in accordance with
technical and professional standards
 Threats to Compliance to Fundamental Principles
for Professional Accountants

a) Self-interest threat – may occur as a result of the financial or other

interest of an accountant that may influence his/her judgment

b) Self-review threat – may occur when a previous judgment needs to

be reevaluated by the professional accountant responsible for that
judgment

c) Advocacy threat – may occur when a professional accountant

promotes a client’s position or opinion, that may affect his/her
objectivity
 Threats to Compliance to Fundamental Principles
for Professional Accountants

d) Familiarity threat – may occur when, because of a close

relationship a professional accountant becomes too sympathetic to
the interests of the client

e) Intimidation threat – may occur when a professional accountant

may be deterred from acting objectively by threats, actual or
perceived
 PROFESSIONAL SKEPTICISM

Professional Skepticism - is an attitude that includes:

 a questioning mind
 being alert to conditions which may indicate possible
misstatement due to error or fraud
 critical assessement of audit evidence
The auditor shall plan and perform an audit with professional
skepticism recognizing that circumstances may exist that cause the
financial statements to be materially misstated

Professional skepticism means maintaining an attitude that the client's

management is neither honest nor dishonest
 PROFESSIONAL SKEPTICISM

Professional Skepticism includes being alert to:

 audit evidence that contradicts other audit evidence obtained
 information that brings into question the reliability of
documents and responses to inquiries to be used as audit
evidence
 conditions that may indicate possible fraud
 circumstances that suggest the need for audit procedures in
addition to requirements of PSAs
 PROFESSIONAL SKEPTICISM

Maintaining professional skepticism throughout the audit is

necessary if the auditor is to reduce the risks of:
 overlooking unusual circumstances
 over generalizing when drawing conclusions from audit
observations
 using inaappropriate assumptions in determining the nature,
timing and extent of the audit procedures and evaluating the
results thereof
 PROFESSIONAL JUDGMENT

Professional Judgment - the auditor shall exercise professional

judgment in planning and performing an audit of financial
statements
Professional judgment is the application of relevant training,
knowledge and experience, within the context provided by
auditing, accounting and ethical standards, in making informed
decisions about the courses of action that are appropriate in the
circumstances of the audit engagement
Professional judgment is essential to the proper conduct of an audi
because it enables the proper interpretation of:
 relevant ethical requirements
 PSAs
 Informed decisions
 PROFESSIONAL JUDGMENT

Professional judgment is necessary in particular regarding decisions

about:
 materiality and audit risk
 nature, timing and extent of audit procedures
 evaluating whether sufficient appropriate evidence has been
obtained
 evaluating management's judgments in applying the applicable
PFRS
 drawing conclusions, for example, assessing the reasonableness
of the management's estimates
 QUIZ
Self-interest threat, Self-review threat, Advocacy threat, Familiarity
threat, Intimidation threat

1. A loan or guarantee to or from an assurance Self Interest

client or any of its directors or officers threat
2. A member of the audit team becomes a director Self Review
of the assurance client threat
3. Contingent fees relating to assurance Self Interest
engagements threat
4. Dealing in, or being a promoter, of the securities Advocacy
of an assurance client threat

5. A member of the audit team has an immediate Familiarity

family member who is a director of the assurance threat
client
 QUIZ
Self-interest threat, Self-review threat, Advocacy threat, Familiarity
threat, Intimidation threat

6. Acceptance of gifts, unless the value is clearly Familiarity

insignificant, from the officers of an assurance threat
client
7. Undue dependence on total fees from an Self Interest
assurance client threat

8. Potential employment with an audit client Self Interest

threat
9. Performing services for an audit client that Self Review
directly affect the subject matter of the audit threat
engagement
10. Long association of a senior member of the audit Familiarity
team with the audit client threat