Accounting Codes of Ethics: The

Principles
• The Principles
The Principles of the Code ... Express
the profession’s recognition of its
responsibilities to the public, to
clients, and to colleagues.
They guide members in the
performance of their professional
responsibilities and express the basic
tenets of ethical and professional
conduct.
Principle I. Responsibilities

• In carrying out their responsibilities

as professionals, members should
exercise sensitive professional and
moral judgments in all their
activities.
Principle II. Serve the Public
Interest
• Member should accept the obligation
to act in a way that will serve the
public inerest, honor the public trust,
and demonstrate commitment to
professionalism.
Principle III. Integrity

• To maintain and broaden public confidence,

member should perform all professional
responsibilities with highest sense of
integrity.

• Integrity is an element of character

fundamental to professional recognition.
• It is the quality from which the public trust
derives and the benchmark againts which a
member must ultimately test all decisions.
• It requires a member to be, among
other things, honest and candid
within the constraints of client
confidentiality.
• Integrity involves subordinating
personal gain and advantage to the
public trust or doing what is right and
just.
• Integrity is related to the word integer, which
refers to whole numbers.
• Thus, the primary dictionary definition of
integrity is “the quality or state of being
complete or undivided.”
• Integrity means wholeness, the kind wholeness
referred to when people are praised for “having
themselves together.”
• That means having to a good consience and
adhering to it by doing the right things.
Principle IV. Objectivity and
Independence
• A member should maintain
objectivity and be free of conflicts of
interest in discharging professional
responsibilities. A member in public
practice should be independent in
fact and appearance when providing
auditing and other attestation
services.
• The principle requires that the
objective person be impartial,
intelectually honest, and free of
conflicts of interest.
• It precludes relationship that may
appear to impair a member’s
objectivity in rendering attestation
services.
• “He believed because it was a fact”
or “because he believed it was a
fact.”
• What about internal auditor or
management accountant?
• If researchers are motivated by the search
for true knowledge, accountants are
responsible for presenting as true picture
as possible.
• That cannot be done if they subordinate
their judgment to others, or if out of fear
(note the need for courage) or greed (note
the need for tremperance) they tell the
boss what he or she wants to hear.
• They must be true to themselves and their
calling as accountant first and foremost to
keep their integrity.
• Although members not in public practice
cannot maintain appearance of independence,
they nevertheless have the responsibility to
maintain objectivity in rendering professional
services. Members employed by others to
prepare financial statements or to perform
auditing, tax, or consulting services are
charged with the same responsibility for
objectivity as members in public practice and
must be scrupulous in their application of
GAAP and candid in all their dealings with
members in public practices.
Principle V. Due Care
A member should observe the
profession’s technical and ethical
standards, strive continually to
improve competence and the quality
of services, and discharge professional
responsibility to the best of the
member’s ability.
• The essence of due care is the “quest for
excellence”.
• That excellence requires both
competence and diligence.
• Competence comes from education and
experience.
• The common body of accounting
knowledge must be learned and then
supplemented by a continuous
commitment to learning and professional
improvement.
What happens if an accountant
does not know what he or she is
dealing with?
• Due care requires that when an
accountant recognizes the limitations of
his competence, he consult with others or
at least refer the client to another who
has the requisite competence.
• “each member is responsible for
assessing his or her own competence—or
evaluating whether education,
experience, and judgment are adequate
for the responsibility to be assumed.”
Diligence
• “imposes the responsibility to render
services promtly and carefully, to be
thorough, and to observe applicable
technical and ethical standard.”
• This requires an accountant to “plan
and supervise adequately any
professional activity for which he or
she is responsible.”
Principle VI. Scope and
Nature of Service
A member in public practice should
observe the principles of the Code of
Professional Conduct in determining
the scope and nature of services to be
provided.
“in order to accomplish this,
members should
• Practice in firms that have in place internal
quality control procedures to ensure that
services are competently delivered and
adequately supervised
• Determine, in their individual judgments,
whether the scope and nature of other service
provided to an audit client would create a
conflict of interest in the performance of the
audit function for hat client
• Assess, in their individual judgments, whether
an activity is consistent with their role as
professionals.