Professional skepticism acra and ifaciesba code of

professional skepticism .
ACRA and IFAC/IESBA Code of Ethics
Establishing fundamental principles
• Integrity à Be straightforward and honest
• Objectivity à Do not compromise judgment due to bias, conflict of interest, undue influence
• Professional competence and due care à Exercise sound judgments, observe standards
• Professional behavior à Comply with laws and regulations; avoid any action that brings discredit to the
profession
• Confidentiality
10
Conceptual framework to comply with fundamental principles:
• Identify threats
• Evaluate significance of the threats
• Apply safeguards to eliminate threats or reduce threat to acceptable level
• If no appropriate safeguards are available, eliminate the circumstance or relationship creating the
threats, or decline or terminate the audit engagement.
Identify threats (circumstances or relationships) that may compromise one’s ability to comply with
fundamental principles
Threats to independence:
Independence of Mind à 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 with
integrity and exercise objectivity and professional
skepticism.
Independence in Appearance (relates to third
parties’ perceptions) à The avoidance of facts and
circumstances that are so significant that a reasonable
and informed third party would be likely to conclude,
weighing all the specific facts and circumstances, that a
firm’s, or a member of the assurance team’s, integrity,
objectivity or professional skepticism has been
compromised.
Threats
q Self-interest threat
n financial or other interests that will inappropriately influence one’s judgment or behavior
q Self-review threat
n Threat that accountant will not appropriately evaluate the results of a previous judgment made or service
performed by himself, or by another individual within the firm
q Advocacy threat
n Promoting a client’s position to the point where objectivity is compromised
q Familiarity threat
n The threat due to a long or close relationship with a client or employer, he will be too sympathetic to their
interests or too accepting of their work
q Intimidation threat
n Can be actual or perceived. Pressures and attempts to exercise undue influence over the accountant

11
Evaluate the significance of the threats identified
Financial interest à Nature of financial interest affects significance of the threat.
o Direct/indirect
o Direct financial interest is an interest
owned directly by and under the
control of an individual
o Direct or indirect interest depends
on à Whether control over the
investment vehicle or the ability to
influence investment decisions
exists
• Immediate family à spouse or dependent
• Close family à parent, child or sibling who is
not an immediate family member
• Close relationship
Appropriate safeguards may reduce the self-
interest to an acceptable level when a member of