Professional Ethics of an Auditor

25/07/2020 2 By indiafreenotes

Professional ethics refers to the professionally accepted standards of personal and business behavior, values, and guiding principles.

It encompasses the personal, organizational, and corporate standards of behavior expected of professionals.

Professionals and those working in acknowledged professions, exercise specialist knowledge, and skill.

How the use of this knowledge should be governed when providing a service to the public can be considered a moral issue and is termed professional ethics.

Professionals are capable of making judgments, applying their skills, and reaching informed decisions in situations that the general public cannot because they have not received the relevant training.

Codes of professional ethics are often established by professional organizations to help guide members in performing their job functions according to sound and consistent ethical principles.

Objectives of Professional Ethics

Professional accountants play an important role in building up the economic well­being of their community and country with their attitude, behavior, and unique services.

They have common objectives, whether they work in capacities of external auditors, internal auditors, financial experts, tax experts, and management accountants.

Their common objectives are to perform their duties and responsibilities and to attain the highest levels of performance by the ethical requirements generally to meet the public interest and maintain the reputation of the accounting profession.

Personal self-interest must not prevail over these duties. The IFAC and ICAEW Codes of Ethics help accountants to meet these obligations by setting out ethical guidance to be followed.

To achieve these objectives, they have to establish creditability, professionalism, quality of service, and confidence.

Acting in the public interest involves having regard to the legitimate interests of clients, government, financial institutions, employees, investors, the business and financial community, and others who rely upon the objectivity and integrity of the accounting profession to support the dignity and orderly functioning of commerce.

In summary, then, the key reason accountants need to have an ethical code is that people rely on them and their expertise. It is important to note that this reliance extends beyond clients to the general community.

Accountants deal with a range of issues on behalf of clients. They often have access to confidential and sensitive information.

Auditors claim to give an independent view. It is, therefore, critical that accountants are independent.

Compliance with a shared set of ethical guidelines gives protection to accountants as well, as they cannot be accused of behaving differently from other accountants.

Codes of Professional Ethics

Here we will describe the two well-known codes of professional ethics;

  • IFAC code of ethics for professional accountants,
  • AICPA code of professional conduct.

IFAC Code of Ethics for Professional Accountants

A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest.

In acting in the public interest, a professional accountant should observe and comply with the ethical requirements of this Code.

A professional accountant is required to comply with the following fundamental principles:

  1. Integrity

A professional accountant should be straightforward and honest in all professional and business relationships.

  1. Objectivity

A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments.

  1. Professional Competence and Due Care

A professional accountant has a continuing duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation, and techniques.

Professional accountants should act diligently and by applicable technical and professional standards when providing professional services.

  1. Confidentiality

A professional accountant should respect the confidentiality of information acquired as a result of professional and business relationships and should 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.

Confidential information acquired as a result of professional and business relationships should not be used for the personal advantage of the professional accountant or third parties.

  1. Professional Behavior

A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession.