Question

Five fundamental principles are stated in the Code of Ethics. In your own words, briefly explain what each means and state why it is important.

Answer 1

The Code of Ethics is largely based on the International Ethics Standards Boardfor Accountants (IESBA) Code of Ethics.

The Code establishes the five fundamental principles of professional ethics for all professional accountants:

• Integrity

• Objectivity

• Professional Competence and Due Care

• Confidentiality

• Professional Behaviour

Integrity :-

To be straightforward and honest in all professional and business relationships.  

Objectivity :-

To not allow bias, conflict of interest or undue influence of others to override professional or business judgements.  

Professional Competence and Due Care :-

To maintain professional knowledge and skill at the level required to ensure that a client or employer 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.  

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 professional accountant or third parties.  

Professional Behaviour :-

To comply with relevant laws and regulations and avoid any action that discredits the profession.

Importance of Code of Ethics:-

A code of ethics is important because it clearly lays out the rules for behavior and provides the groundwork for a preemptive warning. Regardless of size, businesses count on their management staff to set a standard of ethical conduct for other employees to follow.