AT: Code of Ethics feta > Handbook of the International Code of Ethies for Professional Accountants (including International Independence Standards) by the IFAC - 2021 ed. > IAESBAE-Code Set of moral principles, rules of conducts or values: Effectivity Date (Latest): December 31, 2021 (2020 and 2021 ed.) > Part 1 | Complying with the Code, Fundamental Principles and Conceptual Framework Part2 _ | Professional Accountants in Business (PAIBs) © Part3 _ [Professional Accountants in Public Practice (PAPPs) > Part 4A_| independence for Audit and Review Engagements > Part 4B [independence for Assurance Engagements other than Audit and Review Engagements > Glossary The need for a Code of Ethics > Adistinguishing mark of the accountancy profession is its acceptance of responsibilty to the public. > All recognized professions have developed codes of professional ethics. > The profession's attempt to achieve a number of common interests and by its observance of certain fundamental principles for that purpose. Pace os More User-Friendly Comprehensive Integrated Suite Significant Upgrades » New design Increased focus on compliance wi | > Enhanced conceptual framework >» Completely re-written fundamental principles > Clearer and more robust » More accessible and > Includes NOCLAR and Long safeguards digestible Associations provisions New section about “pressure” » Easily understandable » Tied more tightly w/ Conceptual > Strengthened requirements when > New user guide and glossary | Framework preparing or presenting information > More prominent Professional > Inducements Accountants in Business (PAIB) and Independence provisions Cerner tere » Revisions to Part 4B of the Code to refiect terms and concepts used in the IAASB's International Standard on Assurance Engagements (ISAE) 3000 (Revised). Geo Fundamental Principles Conceptual Framework International Independence ‘Standards Standard of Behavior (COBID) [> Comply w/ fundamental principles | > For audit, reviews and other + Confidentiality > Identiy, evaluate and address assurance engagements > Objectivity threats to compliance > Threats to independence > Professional Behavior > Integrity > Professional Competence and Due Care Part 1: Complying with the Code, Fundamental Principles and Conceptual Framework ‘Compliance Breach of Independence Standards Ref: Parts 4A and 4B of any other provisions of the Code Code of Ethics vs. [Laws and Regulations [> Evaluate the significance and impact of the breach Laws and Regulations | prevail > Take whatever actions might be available to address the Conflicting ly stricter consequences Reauivemantor2 | eeurctante > Determine whether to report the breach to relevant parties countriesFundamental Principles (COBID) > Confidentiality | To respect the confidentiality of information acquired as a result of professional and business relationships Objectivity To exercise professional or business judgment without being compromised by: * Bias * Individuals * Conflict of interest = Organizations Undue Influence of * Technology + Undue Reliance on + Other Factors > Professional To comply with relevant laws and regulations, behave in a manner consistent w/ the Behavior profession's responsibly to act in the public interest in all professional activities and business relationships and avoid any conduct that the professional accountant knows or should know might discredit the profession. > Integrity ‘To be straightforward and honest in all professional and business relationships ® Professional Professional | To attain and maintain professional knowledge and skill at the level Competence and | Competence | required to ensure that a client or employing organization receives Due Care competent professional service Due Care | To act diligently and in accordance w/ applicable technical and professional standards Conceptual Framework > Have an inquiring mind | » Consider the source, relevance, and sufficiency formation obtained > Be open and alert to a need for further investigation or action > Exercise Professional | > Apply relevant training, knowledge and experience in making decisions Judgment > Consult experts or regulatory bodies when needed > Use the reasonable ‘and | > Aperson (not necessarily an accountant) who weighs all the relevant facts and informed third party test | circumstances that the accountant knows, or could reasonably be expected to know, at the time that the conclusions are made Identify Threats to wi Fundamental ‘Address the threats by Paneipiee Evaluate the threats identified eliminating or reducing them to ‘an acceptable level LFASS [Acceptable Level Eliminating he > Intimidation > Eamiliarity » Advocacy > Selt-Review > Selt-interest circumstances. Applying Safeguards Dectining or ending the activity or engagement ‘Areasonable and informed third party would conclude that the accountant is compliant Threats to compliance w/ the Fundamental Principles (|-FASS) > Intimidation Threat > The threat that a professional accountant will be deferred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the accountant > Familiarity Threat > The threat that due to long or close relationship with a clr organization, a professional accountant will be too sympath« or too accepting of their work F employing to their interests > Advocacy Threat > The threat that a professional accountant will promote a client's or employing ‘organization's position to the point that the accountants objectivity is, ‘compromised > Self-Review Threat > The threat that a professional accountant will not appropriately evaluate the results of a previous judgment made; or an activity performed by the accountant, or by another individual within the accountant's firm or employing organization, on which the accountant will not rely when forming a judgment as part of performing a current activity > Self-interest Threat > The threat that a financial or other interest will inappropriately influence a professional accountant's judgment or behavior‘Conceptual Framework — Additional Requirements for Assurance Engagements > Independence > The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment, thereby allowing an individual to act w/ integrity, and exercise objectivity and professional skepticism The avoidance of facts and circumstances that are so significant that a reasonable or informed third party would be likely to conclude that a firm’s or an audit or assurance team member's integrity, objectivity or professional skepticism has been compromised > Independence of mind > Independence of appearance > Professional Skepticism | > An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence Pine nee) Main Fundamental Sec. Circumstances Main Threatls Created Principles atected 210 | Conflict of interest Seltinterest Objectivity Preparation and Presentation of 229 _| Preparation Selt-interest, Intimidation All 230 | Acting w/ Sufficient Expertise Selt-nterest rcteesioral Competence ane Due Care Financial Interests, compensation zag | Financial ntere Set-nterest Objectivity, and Confidentiality 250 | nducements, including gifts and | Selt-interest, Familiy, Integrity, Objectivity, hospitality Intimidation Professional Behavior 260 | Responding to NOCLAR Sel-Interest, Intimidation Se eee Tae) (rescue to breach the Intimidation All fundamental principles 210. Conflict of interest > Professional Accountant undertakes a professional activity related to a particular matter for 2 or more parties whose interests with respect to the matter are in conflict; or > Interest of a Professional Accountant with respect to a particular matter and the interests of a party for whom the accountant undertakes a professional activity related to the matter are in conflict > Conflict identification > Safeguards to threats created (restructuring, segregation of duties, oversight, etc.) > Disclose the relevant parties affected > Obtain consent from relevant parties > Requirements 220. Preparation and Presentation of Information > Preparation or presenting information includes recording, maintaining and approving information * In accordance w/ AFRF (Applicable Financial Reporting Framework) * Not misleading * Use professional judgment + Not omit material information > Use of discretion (accounting estimates, FV, etc.) > Requirements | > Relying on work of others > Addressing information that is, or might be misleading230, Acting with Sufficient Expertise > AProfessional Accountant shall not intentionally mislead an employing of organization as to level of expertise or experience possessed, > Only undertakes tasks that Professional Accountant is capable of Requirements | » Safeguards (assistance or training, ensuring that there is adequate time available for performing the relevant duties) ~ 240. Financial interests, Compensation and Incentives: 7 Having a financial interest, or knowing of a financial interest held by an immediate or close family member might create a self-interest threat to compliance with the principles of objectivity or confidentiality. Immediate Family — spouse (or equivalent) or dependents > Close Family ~ parent, child or sibling who is not an immediate family member Ty ‘financial interest: > Owned directly by and under the control of an individual or entity Direct Financial | (including those managed on a discretionary basis by others); or Interest > Beneficially owned through a collective investment vehicle, estate, trust > Guidance or other intermediary over which the individual or entity has control, or the ability to influence investment decisions ‘Afinancial interest beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has no control or ability to influence investment decisions Indirect Financial Interest 250. inducement, including Gifts and Hospitality > An inducement is an object, situation, or action that is used as a means to influence another individual's behavior, but not necessarily with the intent to improperly influence that individual's behavior > Prohibited by laws and regulations — comply w/ requirement > Not prohibited by law, with intent (based on judgment) to improperly influence behavior = do not accept > Not prohibited by law, no intent (based on judgment) to Improperly influence behavior — Accept only If trivial and inconsequential » Transparency and reporting » An inducement is considered as improperly influencing an individual's behavior if it causes the individual to act in an unethical manner > Requirements 260, Responding to NOCLAR > Non-compliance w/ laws and regulations (“non-compliance”) comprises acts of omission or commission, tentional or unintentional, which are contrary to the prevailing laws or regulations committed by the ff parties: = The Professional Accountant's employing organization = TCWG of the employing organization = Management of the employing organization Other individuals working for or under the direction of the employing organization > Responsibilities of the employing organization's management and TCWG. > Responsibilities of all Professional Accountants > Responsibilities of Senior PAIBs (Directors, Officers or Senior Employees able to exert significant influence over, and make decisions regarding the acquisition, deployment and control of the organization's resources) Responsibilities of Professional Accountants other than Senior PAIBS > Requirements Vv270. Pressure to breach fundamental principles > AProfessional Accountant Shall not = Allow pressure from others to result in a breach of compliance with the fundamental principles; or = Place pressure on others that the accountant knows, or has reason to believe, would result in the other individuals breaching the fundamental principles v Intent of the individual Laws, regulations, and professional standards Culture and leadership of employing organization Policies and procedures of the employing organization > Considerations Individual exerting pressure ‘Superior > Discuss the Higher levels of management matter w/ > HR, ethics committee > Regulatory Bodies > Legal Counsel > Requirements vev|vye Part 3: Professional Accountants in Public Practice (PAPPs) Main Fundamental see, Creumstances Main Treats Createa | _Maln Fundamental 310 | Confit of merest Satrneest Objectivity 320 Professional Appointments All All 321 Second Opinions Self-Interest yjrckeselonal Compevstica and Bue Care Fees and Other pes of : Professional Competence ard 330 | Remunerations Se Due Care, and Objectivity 340 Inducements, including gifts and Self-Interest, Familiarity, Integrity, Objectivity, hospitality Intimidation Professional Behavior 350 | custody of cient Assets Setinerest Objectivity, Profesional 360 | Responding to NOCLAR Self-Interest, Intimidation Integrity, Professional Behavior 310, Conflict of Interest > Professional Accountant undertakes a professional activity related to a particular matter for 2 or more clients whose interests with respect to the matter are in conflict; or > Interest of a Professional Accountant with respect to a particular matter and the interests of a client for whom the accountant undertakes a professional activity related to the matter are in conflict, > Conflict identification > Safeguards to threats created (restructuring, segregation of duties, oversight, ete.) > Requirements | > Disclose the relevant parties affected > Obtain consent from relevant parties > Confidentiality (when conflict of interest involves 2 or more nts) 320. Professional Appointments > Acceptance of a new client relationship or changes in an existing engagement might create a threat to compliance w/ one more of the fundamental principles (Primarily, Self-Interest Threat) Client and Engagement Acceptance (competencies needed) Changes in a Professional Appointment (ex. Replacement of existing PA) Changes in Audit/Review Appointment (ex. Communication w/ Predecessor Auditor) Client and Engagement Continuance (recurring engagements) Using the work of an expert (determine the necessity of expert and reliability of work done) > Requirements VvvvY321. Second Opinions > AProfessional Accountant might be asked to provide a second opinion on the application of accounting, auditing, reporting or other standards or principles to: = Specific Circumstances; or = Transactions by or on behalf of a company or an entity that is not an existing client lot same set of facts, or insufficient evidence > Obtain information from the existing or predecessor accountant (w/ client permission) > Describing the limitations surrounding second opinion > Providing the existing or predecessor accountant w/a copy of opinion (may also include basis) > Requirements 330. Fees and Other types of Remunerations > AProfessional Accountant might quote whatever fee is considered appropriate, Quoting a fee lower than another accountant is not in itself unethical Issue: Fees are so low that Professional Accountants can no longer comply with the applicable technical and professional standards > Adjustment of fees to reasonable level (law or regulation, benchmarking, costs necessary to perform engagement, etc.) Contingent Assets (for non-assurance engagements) = Have an appropriate reviewer who is not involved in the non-assurance work > Requirements * Obtain written agreement from client on basis of renumeration, > Referral Fees and Commissions * Obtain written agreement as to basis of fees or commissions * Disclose such arrangements to relevant parties Purchase or Sale of Firm — not considered referral fees or commissions v a ‘340, Inducement, including Gifts and Hospitality > An inducement is an object, situation, or action that is used as a means to influence another individual's behavior, but not necessarily with the intent to improperiy influence that individual's behavior Prohibited by laws and regulations — comply w/ requirement Not prohibited by law, with intent (based on judgment) to improperly influence behavior = do not accept > Not prohibited by law, no intent (based on judgment) to improperly influence behavior — Accept only if trivial and inconsequential » Transparency and reporting > Requirements | > An inducement is considered as improperly influencing an individual's behavior if it causes the individual to act in an unethical manner Difference: PAIBs: PA and relevant business parties (superior, customer, supplier, etc.) VY 350. Custody of Glient Assets Holding client assets creates a self-interest or other threat to compliance wi the principles of professional behavior and objectivity > Do not assume custody unless permitted to do so by law » Make inquiries about the source of the assets > Consider legal and regulatory obligations Before taking Custody > Comply with laws and regulations relevant to holding and > Rego accounting for the assets oe > Keep the assets separately from personal or firm assets 2 > Use the assets only for the purpose for which they are intended Custody > Be ready at all times to account for the assets. and any income, dividends, or gains generated, to any individuals entitled to that accounting‘360. Responding to NOCLAR > Non-compliance w/ laws and regulations ("non-compliance") comprises acts of omission or commission, intentional or unintentional, which are contrary to the prevailing laws or regulations committed by the ff parties: * Client + TCWG of a Client ‘= Management of a Client = Other individuals working for or under the direction of the Client Responsibilities of the Client's management and TCWG Responsibilities of all Professional Accountants Obtaining an understanding of the matter Addressing the matter ‘Communication w/ respect to audit of components ‘Communication w/ entity's external auditor (for non-audit engagements) Determine whether further action is needed (client's corrective actions) Disclosure to appropriate authority (consider confidentiality) Groen ee ced > Requirements VvVVVVNY __ Periods during which an independence is required: > Engagement Period ‘Audit and Review Engagement | A network firm shall be independent of the > Period covered by FS (4A) audit clients of its member firms When a firm has reason to believe that Other than Auditand Review interests and relationships create a threat, (48) these must be addressed. Doeamentaton Compliance Threats Safeguards See 0 FEES ceuretances Teas Factors FionsTSaeguarde Operating stucure, | maease cent basen he Relative size(tottal | serimerestnimiaion | _coubishmentatt, | tm toteduce dependerer simnfeane ofauatcent | "” “onavat cent Tatease por or reer te | ener || omsseannen revenue of partner parhereconporcaion | — Have an appropiate Relative Size (client is a If > 15% of total fees, Disclose such fact to Punic interest Ent for | oreret tmidaion | cote wether pose Tews 2 years andes > 19% iruanesrevion eet | Consider pre‘suence and atta sation post uance fee Aaa totaannawa Ott paral payment Overdue Fees Settinerest Mave on apropte Guarantee rodent Contngart Fee Ttalowod for Aue Engagement‘Sec, 411 — Compensation and Evaluation Policies Circumstances Threats Factors Actions/Safeguards ‘Audit Team Member is evaluated or Study of Compensation Revise the Policy. compensated for selling Self-interest policies, role inthe | Remove the Individual from non-assurance services engagement team, etc. the Audit Team. toa client ‘Sec. 420 — Gifts and Hospitality Circumstances Threats Factors ‘Actions/Safeguards Gifts and Hospitality Not allowed, unless value is trivial and inconsequential I (Inducements — Part 3) ‘Sec. 430 — Actual or Threatened Litigation Circumstances Threats Factors Actions/Safeguards rape Have an appropriate Actual or Threatened Beene clea reviewer. Litigation Self-interest, Intimidation whether litigation relates to prior audit engagement Removing the individual from the audit team, Sec, 510 — Financ Interests Circumstances Threats Factors Actions/Safeguards Held by firm, a network firm, audit team members and immediate family Not allowed to have Direct Financial Interest or a Material I indirect Financial Interest In an entity controlling an audit client Not allowed to have Direct Financial Interest or a Material I indirect Financial Interest Held as Trustee Selt-Interest Beneficiary, Materiality, Significant Influence over the Audit Client or the Trust Consider the factors, Not allowed to have Direct Financial interest or a Material Indirect Financial Interest over Audit Client In Common w! the Audit Client Self-nterest Materiality, significant influence over the entity Consider the factors, Not allowed to have Direct Financial Interest or a Material Indirect Financial Interest over Audit Client Received unintentionally Selt-Interest Materiality Not allowed to have Direct Financial Interest or a Material Indirect Financial Interest over Audit Client Sec. 511 — Loan: iS and Guarantees: Circumstances Threats Factors ‘Actions/Safeguards With an Audit Client (general) Not permitted unless immaterial With an Audit Client that is a bank or similar institutions. Not permitted unless the loan or guarantee is made under normal lending procedures, terms and conditions ‘Sec. 520 — Business Relationships Circumstances Threats Factors ‘Actions/Safeguards Between a Firm and an Audit Client Not allowed unless financial interest is immaterial and business relationship is. insignificant to the client and the firm ‘Common Interest in closely-held entities Not allowed unless the immaterial and no investor has the ability to control the closely- held entity Buying Goods or Services ‘Allowed ifin the normal course of business and at arm's length (no preferential terms or pricing)‘Sec, 521 — Family and Personal Relationships Circumstances Threats Factors Actions/Safeguards Responsibilities on the ‘Audi Team. Role ofthe | Removing the individual Family and Personal Self-interest, Familiarity, family member wiin the from the Audit Team Relationships intimidation family memberwin the | pestuctrng the Aud ; ‘eam relationship ‘Sec. 522 - Recent Service wi Audit Client Circumstances Threats Factors Actions/Safeguards > Service during period covered by Audit Report | Removing the individual Recent Service wi Audit | Sel-interest, Self-review, | —not allowed from the Audit Team Client Familiarity, > Service before period Restructuring the Audit covered by Audit Report Team ~ may be allowed ‘Sec. 523 — Serving as a Director or Officer of an Audit Client Circumstances Threats Factors Actions/Safeguards ‘Asa Director or Officer_[ Not allowed Not allowed unless permitted by law, no managerial decisions involved, and limited only ‘As Company Secretary Tio routine and administrative functions Sec. 524 — Employment w/ an Audit Client Circumstances Threats Factors Actions/Safeguards Previously a member of the Audit Team Director or Officer, or any employee in a position to exert Familia, Intimidation significant influence over the preparation of the FS ‘Sec. 525 — Temporary Personnel Assignments Circumstances Threats Factors Actions/Safeguards ‘Additional review of work vi Performed Teorey Selfreview, Advocacy, | Nature and Scope of work | Excluding loaned staff from Assignments Familiarity a Restructuring Audit Team ‘Sec. 540 — Long Association Provisions Client Rules on Rotation Not a Publicly Listed Entity Firm's discretion 7-year “time-on" period (cumulative) for Key Audit Partner roles Cooling-off Period: Publicly Listed Entity > 5 years — Engagement Partner 3 years — EQCR Partner 2 years ~ Other Key Audit Partner role (subsidiaries, division, etc.) V ‘Combination of Key Audit | > Key Audit Partner roles and engagement partner for 4 or more cumulative years Partner roles > 5 years colling off period ‘SRC Rule 68 — Rotation of External Auditors Client Rules on Rotation Time-on Period Rotation after every 5 years of engagement Cooling-off Period 2 years‘Sec. 600 - Provision of Non-Assurance Services to an Audit Client (for Publicly Listed Entity) Prohibited Prohibited if material to the FS > Management Responsibility ® Valuation services > General Counsel > Tax calculation » Accounting and Bookkeeping Services* » Tax advisory or corporate finance advisory » Promoting, dealing in, or underwriting client shares | > Resolution of tax matters > Negotiating for the client as part of a recruiting > Intemal Audit Services service > Designing/implementing financial reporting IT systems > Recrulting directors/officers, or senior management | > Estimating damages or other amounts as part of ‘who will have significant influence over the FS litigation support services » Evaluating of compensating a Key Audit Partner > Acting as an advocate to resolve a dispute or litigation based on selling non-assurance services Mi ee a Similar Provisions Section Content 905 Fees: 906 Gifis and Hospitality ‘907 Actual or Threatened Litigation 1 Loans and Guarantees 920 Business Relationships 924 Family and Personal Relationships 922 Recent Service w/ Assurance Client 923 ‘Serving as Director or Officer of an Assurance Client