AUDITING IA

(ATA216D / AUA215D / AUA216D)

Chapter 2 (Professional Conduct)
FACILITATORS:
Ga-Rankuwa: Ms Maidi, Ms Kupayi, Mr Maapola and Ms Masethe
Polokwane Campus: Mr Moshidi
Mbombela: Mr Lebese
 Chapter 2
Professional Conduct

Faculty Economics and Finance

Department of Auditing
 ASSESSMENT OUTCOME

Explain the general application of the

SAICA Code of Ethics for Chartered
Accountants.

Faculty Economics and Finance

Department of Auditing
 SESSION 1: ASSESSMENT CRITERIA

Professional Fundamental Threat to

Conduct 01 Principles 02 compliance with the

principles
03
To explain the purpose of professional List and explain the five fundamental To list and explain the threat to compliance
conduct. principles. with the principles.

Safeguard to
reduce the threat 04
Therat
To list and explain safeguards to eliminate or
reduce the threat to an acceptable level.
 SAICA and IRBA codes of
professional conduct

• The SAICA code of professional conduct for professional

accountants.
• The IRBA code of professional conduct for registered auditors.

Faculty Economics and Finance

Department of Auditing
 Why two South African Codes?

• Most professional accountants are not members of IRBA.

• Some CA’s do not conduct Audits = SAICA
• Auditors = IRBA (Registered Auditors)
• Codes are similar
• Can be a member of 1 or both (Not a requirement)
• SAICA has additional sections: CA’s in public practice and CAs in
business
• Members can be charged in terms of the codes

Faculty Economics and Finance

Department of Auditing
Ethics and Professional Conduct
Oxford Dictionary defines ethics …a set of principles or morals
…rules of conduct …”

Moral is concerned with the distinction between right or wrong

…virtuous in general conduct”.

Professional conduct – is a set of principles governing

accountants and auditors professional and wider behaviour.

Faculty Economics and Finance

Department of Auditing
Trainees bound by SAICA code?

• Yes, when entered a formal training contract that is registered with

SAICA.
• The contract signed will have a clause that requires adherence to
the code.

Faculty Economics and Finance

Department of Auditing
 SAICA code of Professional Conduct
The code is broken down into three parts, and each part into sections :

Part 1 (ss 100 to 120) – Complying with the Code, Fundamental

Principles and Conceptual Framework – deals with the general
application of the Code and is applicable to all professional accountants.
Part 2 (ss 200 to 299) - Professional Accountants in Business – applicable to
professional accountants in business when performing professional activities.
Part 2 is also applicable to professional accountants in public practice when
performing professional activities related to their relationship with the firm,
whether as a contractor, employee or owner
Part 3 (ss 300 to 399) - Professional Accountants in Public Practice –
applicable to professional accountants in public practice when providing
professional services
Faculty Economics and Finance
Department of Auditing
Part 1 (FUNDAMENTAL PRINCIPLES)
AUA216D / ATA216D / AUA215D

Auditing IA
 Part 1: Fundamental Principles

Professional
Integrity 01 Objectivity 02 Competence and
due care
03
Doing what is right when no one is watching Auditor not being bias in taking a decision Possessing the right skills to perform the job

Confidentialit Professional
y 04 behavior 05
The ability to not share information acquired The ability to adhere to relevant laws and
in performing business or professional duties regulations.
1. Integrity

Faculty Economics and Finance

12 Department of Auditing
 1. Integrity
Requires straightforwardness, honesty, fair dealing and truthfulness in
professional and business relationships.
Professional accountants should not be associated with information:
• contains a materially false or misleading statement;
• contains statements or information provided recklessly; or
• omits or obscures information where such omission or obscurity
would be misleading.
If a professional accountant becomes aware that he has been associated
with such information, he must take steps to disassociate him/herself
therefrom. Note: this may present a threat to the fundamental principle
of confidentiality.

Faculty Economics and Finance

Department of Auditing
 2.
Objectivity
Professional accountants should not
allow bias, conflict of interest, or
undue influence of others to override
or compromise professional or
business judgements.

Faculty Economics and Finance

Department of Auditing
 3. Professional
competence and due care
Professional accountants are required to:
• attain and maintain professional knowledge and skill at a level
which ensures that clients or employers (in the case of
professional accountants in business) receive competent
professional service. CPE, and
• act diligently in accordance with applicable technical and
professional standards when providing professional services.

Faculty Economics and Finance

Department of Auditing
3. Professional competence and due care
Rendering “competent professional service” assumes the exercising of
sound judgment in applying professional knowledge and skill. To maintain
professional competence a professional accountant must remain abreast
of relevant technical, professional, and business developments.
Acting diligently (with due care) requires that the professional accountant
act timeously, carefully, thoroughly, and in accordance with the
requirements of the assignment.
A professional accountant must ensure that those working under his
authority in a professional capacity, have appropriate training and
supervision.

Faculty Economics and Finance

Department of Auditing
 3. Professional
competence and due care
Clients, employers and other users shall be made aware of
the inherent limitations of services provided.
A professional accountant shall not undertake or continue
with any engagement which he is not competent to perform,
unless advice and assistance are obtained in order to carry
out the engagement satisfactory.

Faculty Economics and Finance

Department of Auditing
4. Confidentiality
• Requires a professional accountant
to respect the confidentiality of
information acquired as a result of
professional and business
relationships.
• A professional accountant shall:

Faculty Economics and Finance

Department of Auditing
 4. Confidentiality
Disclosure of confidential information is permitted when:
• disclosure is permitted by law and is authorised by the client or employer
• disclosure is required by law, for example:
 providing documents and other provision of evidence in the course of
legal proceedings
 disclosure to appropriate public authorities, including disclosures of
reportable irregularities reported to the regulatory board as required by
section 45 of the Auditing Profession Act.
• there is a professional duty or right to disclose confidential information about a client, for
example:
 to comply with the quality review of the regulatory board or the professional
body (where the professional accountant’s practice is being reviewed)
 to respond to an enquiry or investigation by the regulatory board or a regulatory
body
 to protect the professional interests of a professional accountant in legal
proceedings, or
 to comply with technical standards and the requirements of this code.

Faculty Economics and Finance

19 Department of Auditing
 • In deciding whether to disclose info, consider:
• Interest of parties could be unnecessarily
harmed.
4.
• Whether all relevant information is known and
Confidentiality substantiated.
• Whether the method of type of communication
is appropriate and the recipient is appropriate

Faculty Economics and Finance

20 Department of Auditing
 This fundamental principle requires that professional
accountants:
5. • comply with relevant laws and regulations, and

Professio • avoid any action which the professional accountant knows

or should know that may bring discredit to the profession
nal (act in a way which negatively affects the good reputation
of the profession as judged by a reasonable and informed
behavior third party taking into account the specific facts and
circumstances available to the professional accountant at
the time of his actions).

Faculty Economics and Finance

Department of Auditing
 5. Professional behavior
Publicity, advertising and solicitation:
Professional accountants are entitled to market and promote themselves and their firm, but in doing
so must:
• not bring the profession into disrepute
• be honest and truthful
• not make exaggerated claims for the services they offer, the qualifications they possess, or
experience they have gained, and
• not make disparaging references or unsubstantiated comparisons to the work of others.
Publicity –the communication to the public of information about a professional accountant or his
firm or bringing his name or the firm’s name to the notice of the public.
Advertising –the communication to the public of information as to the services or skills provided by a
professional accountant with a view to procuring professional business.
Perhaps the key word is good taste. However, it is impossible to define “good taste” as it is very
subjective. The code does not give guidance as to what would be regarded as contrary to good taste
and ultimately the responsibility for the application of the requirements of this section lies with the
professional accountant

Faculty Economics and Finance

Department of Auditing
 5. Professional behavior
However, previous versions of the code have suggested that advertising, publicity or
solicitation characterised by any of the following will not be in good taste:
• racist
• tends to shock, or sensationalise
• offends religious beliefs
• trivializes important issues
• relies excessively on a particular personality
• derides (makes fun of) a public figure, for example the minister of finance
• disparages (mocks) educational attainment
• odious (hateful, obnoxious)
• strident (loud) or extravagant, or
• belittles others or claims superiority.
Faculty Economics and Finance
Department of Auditing
 5. Professional
behavior

Membership of multiple Signing reports or

firms certificates
• May be a member of • Partner or directors
more than one firm • Restriction may be waived
in emergencies (report to
IRBA and client)
• When signing off: full
name, capacity,
designation, name of firm

Faculty Economics and Finance

24 Department of Auditing
Part 2 THE THREAT TO COMPLIANCE TO THE PRINCIPLES
AUA216D / ATA216D / AUA215D

Auditing IA
 Part 2: Threats to compliance to the fundamental
principles

Self Interests Advocacy

01 Self Review 02 threat 03
• Financial or other interest • Promote a client’s position to a
• Not appropriately evaluate the
results of a previous service point that his subsequent
objectivity may be compromised
performed by the CA

Familiarity 04 Intimidation 05
• Close relationship • May be deterred from acting
objectively by actual or
perceived threats
 Threats
• Significant – safeguard
• Insignificant threats – no safeguard
• No “hard and fast” rule
• Professional judgment
• Take into account public interest
• Same conclusion that an informed third party would make

Faculty Economics and Finance

27 Department of Auditing
 Conflict of Interest
In the course of his profession or business activities, a chartered
accountant will be faced with conflict-of-interest situations. These
situations can give rise to threats to the chartered accountant’s
objectivity and his compliance with the fundamental principles of
confidentiality. Breaches of the other fundamental principles may also
result.

Faculty Economics and Finance

28 Department of Auditing
 Ethical conflict resolution

Because ethical matters are not clear-cut and frequently do not

have a single or indisputable solution, chartered accountants
may be required to resolve an ethical dilemma that they face and
they must resolve it so as not to breach the fundamental
principles of moral behaviour

Faculty Economics and Finance

29 Department of Auditing
Initially the chartered accountant should attempt to resolve the conflict
himself by
• establishing all the relevant facts
• identifying as clearly as possible the ethical issues involved, including
establishing the fundamental principles threatened
• making use of the firm’s/company’s internal procedures e.g. discussion
with senior partner (human resources) or the ethics committee of the
firm and
• considering the alternative actions, e.g. should he resign from the
engagement (if employed should he resign his position), change the
engagement team or ignore the matter. Each option should be
evaluated

Faculty Economics and Finance

30 Department of Auditing
Part 3 : (SAFEGUARDS TO ELIMINATE OR REDUCE THE THREAT)
AUA216D / ATA216D / AUA215D

Auditing IA
 Safeguards
• Safeguards created by profession, legislation or regulation
• Legislation such as Companies act – rotate after 5 years –
enhance independence
• Ethics courses
• Corporate governance
• Professional standards e.g. assessment of clients integrity
• Professional monitoring and disciplinary procedures e.g. IRA
or SIACA
• External reviews of a CA’s practice

Faculty Economics and Finance

Department of Auditing
 Safeguards
• Safeguards in the work environment
• Leadership of the firm stresses the importance of
compliance
• Policies and procedures implemented
• Documentary evidence of identified ‘threats’
• Disciplinary mechanisms in place
• Team reviews by independent partner
• Rotating assurance team personnel
• Sound procedures to protect an employee from
intimidatory threats

Faculty Economics and Finance

Department of Auditing
 Examples
• Page 24, 25 and 26
Know the examples off by heart

Faculty Economics and Finance

34 Department of Auditing
Questions?

Faculty Economics and Finance

Department of Auditing