PART C PROFESSIONAL ACCOUNTANTS IN BUSINESS

Transcription

1 PART C PROFESSIONAL ACCOUNTANTS IN BUSINESS 300 Intrductin 310 Ptential Cnflicts 320 Preparatin and Reprting f Infrmatin 330 Acting with Sufficient Expertise 340 Financial Interests 350 Inducements SECTION INTRODUCTION This Part f the Cde describes hw the cnceptual framewrk cntained in Part A applies in certain situatins t prfessinal accuntants in business*. This Part des nt describe all f the circumstances and relatinships that culd be encuntered by a prfessinal accuntant in business* that create r may create threats t cmpliance with the fundamental principles. Therefre, the prfessinal accuntant in business* is encuraged t be alert fr such circumstances and relatinships. Prfessinal accuntants in business* shall als read Part A which sets ut the fundamental principles and cnceptual framewrk that prfessinal accuntants* are required t adhere t. It may als be helpful fr prfessinal accuntants in business* t refer t ther parts f this Cde in relevant circumstances: fr example, sectins 221, Crprate finance advice, and 241, Agencies and referrals Investrs, creditrs, emplyers and ther sectrs f the business cmmunity, as well as gvernments and the public at large, all may rely n the wrk f prfessinal accuntants in business*. Prfessinal accuntants in business may be slely r jintly respnsible fr the preparatin and reprting f financial and ther infrmatin, which bth their emplying rganisatins and third parties may rely n. They may als be respnsible fr prviding effective financial management and cmpetent advice n a variety f business-related matters. Prfessinal accuntants in business* are engaged in an executive r nnexecutive capacity in such areas as cmmerce, industry, the public and service sectrs (including public sectr bdies), educatin, the nt fr prfit sectr, regulatry bdies r prfessinal bdies A prfessinal accuntant in business* may be a salaried emplyee, a partner*, directr* (whether executive r nn-executive), an wner manager, a vlunteer r anther wrking fr ne r mre emplying rganisatin. The legal frm f the relatinship with the emplying rganisatin, if any, has n bearing n the ethical respnsibilities incumbent n the prfessinal accuntant* in business.

2 Prfessinal accuntants* are reminded that this Cde applies t all their prfessinal and business activities, with and withut reward A prfessinal accuntant in business* has a respnsibility t further the legitimate aims f the accuntant s emplying rganisatin. This Cde des nt seek t hinder a prfessinal accuntant in business* frm prperly fulfilling that respnsibility, but addresses circumstances in which cmpliance with the fundamental principles may be cmprmised A prfessinal accuntant in business* may hld a senir psitin within an rganisatin. The mre senir the psitin, the greater will be the ability and pprtunity t influence events, practices and attitudes. A prfessinal accuntant in business* is expected, therefre, t encurage an ethics-based culture in an emplying rganisatin that emphasises the imprtance that senir management places n ethical behaviur A prfessinal accuntant in business* shall nt knwingly engage in any business, ccupatin, r activity that impairs r might impair integrity, bjectivity r the gd reputatin f the prfessin and as a result wuld be incmpatible with the fundamental principles. Fundamental Principles 300.6a A prfessinal accuntant* shall cmply with the fllwing fundamental principles: (a) (b) (c) (d) (e) Integrity t be straightfrward and hnest in all prfessinal and business relatinships. Objectivity t nt allw bias, cnflict f interest r undue influence f thers t verride prfessinal r business judgments Prfessinal Cmpetence and Due Care t maintain prfessinal knwledge and skill at the level required t ensure that a client r emplyer receives cmpetent prfessinal services* based n current develpments in practice, legislatin and techniques and act diligently and in accrdance with applicable technical and prfessinal standards. Cnfidentiality t respect the cnfidentiality f infrmatin acquired as a result f prfessinal and business relatinships and, therefre, nt disclse any such infrmatin t third parties withut prper and specific authrity, unless there is a legal r prfessinal right r duty t disclse, nr use the infrmatin fr the persnal advantage f the prfessinal accuntant* r third parties. Prfessinal Behaviur t cmply with relevant laws and regulatins and avid any actin that discredits the prfessin Cmpliance with the fundamental principles may ptentially be threatened by a brad range f circumstances and relatinships. Threats fall int ne r mre f the fllwing categries: (a) Self-interest;

3 (b) Self-review; (c) Advcacy; (d) Familiarity; and; (e) Intimidatin. These threats are discussed further in Part A f this Cde Examples f circumstances that may create self-interest threats fr a prfessinal accuntant in business* include: Hlding a financial interest* in, r receiving a lan* r guarantee frm the emplying rganisatin. Participating in incentive cmpensatin arrangements ffered by the emplying rganisatin. Inapprpriate persnal use f crprate assets. Cncern ver emplyment security. Cmmercial pressure frm utside the emplying rganisatin An example f a circumstance that creates a self-review threat fr a prfessinal accuntant in business* is determining the apprpriate accunting treatment fr a business cmbinatin after perfrming the feasibility study that supprted the acquisitin decisin When furthering the legitimate gals and bjectives f their emplying rganisatins, prfessinal accuntants in business* may prmte the rganisatin s psitin, prvided any statements made are neither false nr misleading. Such actins generally wuld nt create an advcacy threat Examples f circumstances that may create familiarity threats fr a prfessinal accuntant in business* include: Being respnsible fr the emplying rganisatin s financial reprting when an immediate r clse family* member emplyed by the entity makes decisins that affect the entity s financial reprting. Lng assciatin with business cntacts influencing business decisins. Accepting a gift r preferential treatment, unless the value is trivial and incnsequential Examples f circumstances that may create intimidatin threats fr a prfessinal accuntant in business* include: Threat f dismissal r replacement f the prfessinal accuntant in business* r a clse r immediate family* member ver a disagreement

4 abut the applicatin f an accunting principle r the way in which financial infrmatin is t be reprted. A dminant persnality attempting t influence the decisin making prcess, fr example with regard t the awarding f cntracts r the applicatin f an accunting principle Safeguards that may eliminate r reduce threats t an acceptable level* fall int tw brad categries: (a) (b) Safeguards created by the prfessin, legislatin r regulatin; and Safeguards in the wrk envirnment. Examples f safeguards created by the prfessin, legislatin r regulatin are detailed in paragraph f Part A f this Cde Safeguards in the wrk envirnment include: The emplying rganisatin s systems f crprate versight r ther versight structures. The emplying rganisatin s ethics and cnduct prgrams. Recruitment prcedures in the emplying rganisatin emphasising the imprtance f emplying high calibre cmpetent staff. Strng internal cntrls. Apprpriate disciplinary prcesses. Leadership that stresses the imprtance f ethical behaviur and the expectatin that emplyees will act in an ethical manner. Plicies and prcedures t implement and mnitr the quality f emplyee perfrmance. Timely cmmunicatin f the emplying rganisatin s plicies and prcedures, including any changes t them, t all emplyees and apprpriate training and educatin n such plicies and prcedures. Plicies and prcedures t empwer and encurage emplyees t cmmunicate t senir levels within the emplying rganisatin any ethical issues that cncern them withut fear f retributin. Cnsultatin with anther apprpriate prfessinal accuntant* In circumstances where a prfessinal accuntant in business* believes that unethical behaviur r actins by thers will cntinue t ccur within the emplying rganisatin, the prfessinal accuntant in business* may cnsider btaining legal advice. In thse extreme situatins where all available safeguards have been exhausted and it is nt pssible t reduce the threat t

5 an acceptable level*, a prfessinal accuntant in business* may cnclude that it is apprpriate t disassciate frm the task and/r resign frm the emplying rganisatin T assist prfessinal accuntants* t determine an apprpriate curse f actin when faced with a situatin which culd threaten their cmpliance with the fundamental principles the fllwing sectins give examples f specific areas f activity which culd give rise t ethical dilemmas and the actin which culd be taken in respnse. This is nt a cmprehensive list f examples but aims t cver the key areas mst likely t be encuntered by prfessinal accuntants*. Illustrative case studies f hw the guidance might be applied in example situatins are available at Prfessinal accuntants* wh are in dubt as t their ethical psitin may seek advice frm the ICAEW s Technical Advisry Services by ethics@icaew.cm r phne +44 (0) Further guidance n surces f advice is available in sectin 1. SECTION 310 POTENTIAL CONFLICTS A prfessinal accuntant in business* shall cmply with the fundamental principles. There may be times, hwever, when a prfessinal accuntant s* respnsibilities t an emplying rganisatin and prfessinal bligatins t cmply with the fundamental principles are in cnflict. A prfessinal accuntant in business* is expected t supprt the legitimate and ethical bjectives established by the emplyer and the rules and prcedures drawn up in supprt f thse bjectives. Nevertheless, where a relatinship r circumstance creates a threat t cmpliance with the fundamental principles, a prfessinal accuntant in business* shall apply the cnceptual framewrk apprach described in sectin 100 t determine a respnse t the threat As a cnsequence f respnsibilities t an emplying rganisatin, a prfessinal accuntant in business* may be under pressure t act r behave in ways that culd create threats t cmpliance with the fundamental principles. Such pressure may be explicit r implicit; it may cme frm a supervisr, manager, directr* r anther individual within the emplying rganisatin. A prfessinal accuntant in business* may face pressure t: Act cntrary t law r regulatin. Act cntrary t technical r prfessinal standards. Facilitate unethical r illegal earnings management strategies. Lie t thers, r therwise intentinally mislead (including misleading by remaining silent) thers, in particular: The auditrs f the emplying rganisatin; r Regulatrs.

6 Issue, r therwise be assciated with, a financial r nn-financial reprt that materially misrepresents the facts, including statements in cnnectin with, fr example: The financial statements*; Tax cmpliance; Legal cmpliance; r Reprts required by securities regulatrs The significance f any threats arising frm such pressures, such as intimidatin threats, shall be evaluated and safeguards applied when necessary t eliminate them r reduce them t an acceptable level*. Examples f such safeguards include: Obtaining advice, where apprpriate, frm within the emplying rganisatin, an independent prfessinal advisr r ICAEW (see sectin 1 f this Cde). Using a frmal dispute reslutin prcess within the emplying rganisatin. Seeking legal advice. Infrmal discussins with fellw prfessinal accuntants in business* r in practice may assist in clarifying the steps needed t be taken. SECTION PREPARATION AND REPORTING OF INFORMATION Prfessinal accuntants in business are ften invlved in the preparatin and reprting f infrmatin that may either be made public r used by thers inside r utside the emplying rganisatin. Such infrmatin may include financial r management infrmatin, fr example, frecasts and budgets, financial statements*, management's discussin and analysis, and the management letter f representatin prvided t the auditrs during the audit f the entity s financial statements*. A prfessinal accuntant in business* shall prepare r present such infrmatin fairly, hnestly and in accrdance with relevant prfessinal standards s that the infrmatin will be understd in its cntext A prfessinal accuntant in business* wh has respnsibility fr the preparatin r apprval f the general purpse financial statements* f an emplying rganisatin shall be satisfied that thse financial statements* are presented in accrdance with the applicable financial reprting standards A prfessinal accuntant in business* shall take reasnable steps t maintain infrmatin fr which the prfessinal accuntant in business*is respnsible in a manner that:

7 (a) (b) (c) Describes clearly the true nature f business transactins, assets, r liabilities; Classifies and recrds infrmatin in a timely and prper manner; and Represents the facts accurately and cmpletely in all material respects Threats t cmpliance with the fundamental principles, fr example, self-interest r intimidatin threats t bjectivity r prfessinal cmpetence and due care, are created where a prfessinal accuntant in business* is pressured (either externally r by the pssibility f persnal gain) t becme assciated with misleading infrmatin r t becme assciated with misleading infrmatin thrugh the actins f thers. Accrdingly, prfessinal accuntants* shall nt be assciated with reprts, returns, cmmunicatins r ther infrmatin where they believe that the infrmatin: Cntains a materially false r misleading statement; Cntains statements r infrmatin furnished recklessly; Omits r bscures infrmatin required t be included where such missin r bscurity wuld be misleading The significance f such threats will depend n factrs such as the surce f the pressure and the degree t which the infrmatin is, r may be, misleading. The significance f the threats shall be evaluated and safeguards applied when necessary t eliminate them r reduce them t an acceptable level*. Such safeguards include cnsultatin with superirs within the emplying rganisatin, the audit cmmittee* r thse charged with gvernance* f the rganisatin, r with ICAEW Where it is nt pssible t reduce the threat t an acceptable level*, a prfessinal accuntant in business* shall refuse t be r remain assciated with infrmatin the prfessinal accuntant* determines is misleading. A prfessinal accuntant in business* may have been unknwingly assciated with misleading infrmatin. Upn becming aware f this, the prfessinal accuntant in business* shall take steps t be disassciated frm that infrmatin. In determining whether there is a requirement t reprt, the prfessinal accuntant in business* may cnsider btaining legal advice. In additin, the prfessinal accuntant* may cnsider whether t resign. SECTION ACTING WITH SUFFICIENT EXPERTISE The fundamental principle f prfessinal cmpetence and due care requires that a prfessinal accuntant in business* nly undertake significant tasks fr which the prfessinal accuntant in business* has, r can btain, sufficient specific training r experience. A prfessinal accuntant in business* shall nt

8 intentinally mislead an emplyer as t the level f expertise r experience pssessed, nr shall a prfessinal accuntant in business* fail t seek apprpriate expert advice and assistance when required Circumstances that create a threat t a prfessinal accuntant in business* perfrming duties with the apprpriate degree f prfessinal cmpetence and due care include having: Insufficient time fr prperly perfrming r cmpleting the relevant duties. Incmplete, restricted r therwise inadequate infrmatin fr perfrming the duties prperly. Insufficient experience, training and/r educatin. Inadequate resurces fr the prper perfrmance f the duties The significance f the threat will depend n factrs such as the extent t which the prfessinal accuntant in business* is wrking with thers, relative senirity in the business, and the level f supervisin and review applied t the wrk. The significance f the threat shall be evaluated and safeguards applied when necessary t eliminate the threat r reduce it t an acceptable level*. Examples f such safeguards include: Obtaining additinal advice r training. Ensuring that there is adequate time available fr perfrming the relevant duties. Obtaining assistance frm smene with the necessary expertise. Cnsulting, where apprpriate, with: Superirs within the emplying rganisatin; Independent experts; r ICAEW When threats cannt be eliminated r reduced t an acceptable level*, prfessinal accuntants in business* shall determine whether t refuse t perfrm the duties in questin. If the prfessinal accuntant in business* determines that refusal is apprpriate, the reasns fr ding s shall be clearly cmmunicated. SECTION FINANCIAL INTERESTS* Prfessinal accuntants in business may have financial interests*, r may knw f financial interests* f immediate r clse family* members, that, in certain circumstances, may create threats t cmpliance with the fundamental

9 principles. Fr example, self-interest threats t bjectivity r cnfidentiality may be created thrugh the existence f the mtive and pprtunity t manipulate price sensitive infrmatin in rder t gain financially. Examples f circumstances that may create self-interest threats include situatins where the prfessinal accuntant in business*r an immediate r clse family* member: Hlds a direct r indirect financial interest* in the emplying rganisatin and the value f that financial interest* culd be directly affected by decisins made by the prfessinal accuntant in business*; Is eligible fr a prfit related bnus and the value f that bnus culd be directly affected by decisins made by the prfessinal accuntant in business*; Hlds, directly r indirectly, share ptins in the emplying rganisatin, the value f which culd be directly affected by decisins made by the prfessinal accuntant in business*; Hlds, directly r indirectly, share ptins in the emplying rganisatin which are, r will sn be, eligible fr cnversin; r May qualify fr share ptins in the emplying rganisatin r perfrmance related bnuses if certain targets are achieved The significance f any threat shall be evaluated and safeguards applied when necessary t eliminate the threat r reduce it t an acceptable level*. In evaluating the significance f any threat, and, when necessary, determining the apprpriate safeguards t be applied t eliminate the threat r reduce it t an acceptable level*, a prfessinal accuntant in businesss*hall evaluate the nature f the financial interest*. This includes evaluating the significance f the financial interest* and determining whether it is direct r indirect. What cnstitutes a significant r valuable stake in an rganisatin will vary frm individual t individual, depending n persnal circumstances. Examples f such safeguards include: Plicies and prcedures fr a cmmittee independent f management t determine the level r frm f remuneratin f senir management. Disclsure f all relevant interests and f any plans t trade in relevant shares t thse charged with the gvernance f the emplying rganisatin, in accrdance with any internal plicies. Cnsultatin, where apprpriate, with superirs within the emplying rganisatin. Cnsultatin, where apprpriate, with thse charged with the gvernance f the emplying rganisatin r relevant prfessinal bdies. Internal and external audit prcedures.

10 Up-t-date educatin n ethical issues and n the legal restrictins and ther regulatins arund ptential insider trading A prfessinal accuntant in business* shall neither manipulate infrmatin nr use cnfidential infrmatin fr persnal gain. SECTION 350 INDUCEMENTS Receiving Offers A prfessinal accuntant in business*r an immediate r clse family* member may be ffered an inducement. Inducements may take varius frms, including gifts, hspitality, preferential treatment, and inapprpriate appeals t friendship r lyalty Offers f inducements may create threats t cmpliance with the fundamental principles. When a prfessinal accuntant in business*r an immediate r clse family* member is ffered an inducement, the situatin shall be evaluated. Self-interest threats t bjectivity r cnfidentiality are created when an inducement is made in an attempt t unduly influence actins r decisins, encurage illegal r dishnest behaviur, r btain cnfidential infrmatin. Intimidatin threats t bjectivity r cnfidentiality are created if such an inducement is accepted and it is fllwed by threats t make that ffer public and damage the reputatin f either the prfessinal accuntant in business*r an immediate r clse family* member The existence and significance f any threats will depend n the nature, value and intent behind the ffer. If a reasnable and infrmed third party, weighing all the specific facts and circumstances, wuld cnsider the inducement insignificant and nt intended t encurage unethical behaviur, then a prfessinal accuntant in business* may cnclude that the ffer is made in the nrmal curse f business and may generally cnclude that there is n significant threat t cmpliance with the fundamental principles The significance f any threats shall be evaluated and safeguards applied when necessary t eliminate them r reduce them t an acceptable level*. When the threats cannt be eliminated r reduced t an acceptable level* thrugh the applicatin f safeguards, a prfessinal accuntant in business* shall nt accept the inducement. As the real r apparent threats t cmpliance with the fundamental principles d nt merely arise frm acceptance f an inducement but, smetimes, merely frm the fact f the ffer having been made, additinal safeguards shall be adpted. A prfessinal accuntant in business* shall evaluate any threats created by such ffers and determine whether t take ne r mre f the fllwing actins: (a) Infrming higher levels f management r thse charged with gvernance* f the emplying rganisatin immediately when such ffers have been made;

11 (b) (c) Infrming third parties f the ffer fr example, ICAEW r the emplyer f the individual wh made the ffer; a prfessinal accuntant in business* may hwever, cnsider seeking legal advice befre taking such a step; and Advising immediate r clse family* members f relevant threats and safeguards where they are ptentially in psitins that might result in ffers f inducements, fr example, as a result f their emplyment situatin; and (d) Making Offers Infrming higher levels f management r thse charged with gvernance* f the emplying rganisatin where immediate r clse family* members are emplyed by cmpetitrs r ptential suppliers f that rganisatin A prfessinal accuntant in business* may be in a situatin where the prfessinal accuntant in business* is expected, r is under ther pressure, t ffer inducements t influence the judgment r decisin-making prcess f an individual r rganisatin, r btain cnfidential infrmatin Such pressure may cme frm within the emplying rganisatin, fr example, frm a clleague r superir. It may als cme frm an external individual r rganisatin suggesting actins r business decisins that wuld be advantageus t the emplying rganisatin, pssibly influencing the prfessinal accuntant in business* imprperly A prfessinal accuntant in business* shall nt ffer an inducement t imprperly influence prfessinal judgment f a third party Where the pressure t ffer an unethical inducement cmes frm within the emplying rganisatin, the prfessinal accuntant* shall fllw the principles and guidance regarding ethical cnflict reslutin set ut in Part A f this Cde.