Class 3 - Professional Ethics

AF4228

Auditing and

Assurance

2021/22 S1

Class 3

Professional Ethics

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Learning Objectives

2.1 What are ethics?

2.2 Explain the importance of ethical conduct for the

accounting profession.

2.3 Describe the purpose and content of the HKICPA

Code of Ethics for Professional Accountants.

2.4 Explain independence and describe threats?

2.5 Explain requirements for advertising and client

monies.

2.6 Guidelines for anti-money laundering and counter-

terrorist financing for professional accountants

Prepared by RW for AF4228 2021/22 S1

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2.1 What are Ethics?

Ethics can be defined broadly as a set of

moral principles or values. E.g., Caring,

Fairness, Trustworthiness.

Ethics is concerned with the evaluation of

choices where options are not clear, or where

there is no absolute right or wrong answer.

Ethical behavior is necessary for a society to

function in an orderly manner.

Prepared by RW for AF4228 2021/22 S1

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2.2 Importance of ethical conduct

for the accounting profession

Our society has attached a special meaning to

the term professional.

The term professional means a responsibility

for conduct that extends beyond satisfying

individual responsibilities and beyond the

requirements of our society’s laws and

regulations.

ACPA,as a professional, recognizes a

responsibility to the public,to the client, and

to fellow practitioners, including honorable

behavior, even if that means personal sacrifice.

Prepared by RW for AF4228 2021/22 S1

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2.2 Importance of ethical conduct for

the accounting profession (Cont)

CPA firms have a different relationship with users of

financial statements than most professionals have with their

customers.

Most clients pay professionals for services and the

professional’s primary responsibility is to the client.

CPA firms are in practice engaged by management or the

audit committee and paid by the company, but the CPA firm’s

primary responsibility is to the users of the financial

statements, in particular the shareholders as a group.

It is essential that users of the financial statements regard

CPA firms as competent and unbiased. This is contingent on

CPA firms conducting themselves at a high professional

level.

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2.3 Code of Ethics for Professional

Accountants

Members of the HKICPA agree to follow the Code of Ethics for

Professional Accountants (“Code”).

The Code consists of Part A, C, D, E and F.

Part A consists of:

Part 1 –Complying with the Code, Fundamental Principles and

Conceptual Framework

Part 2 –Professional Accountants in Business

Part 3 –Professional Accountants in Public Practice

Part 4A –Independence for Audit and Review Engagements

Part 4B –Independence for Assurance Engagements other than

Audit and Review Engagements

The latest update was issued in November 2018, revised in July 2020

and June 2021, and effective on 15 June 2019.

Prepared by RW for AF4228 2021/22 S1

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2.3 Code of Ethics for Professional

Accountants (Cont)

Fundamental Principles of Ethics

1. Integrity –to be straightforward and honest in all professional and business

2. Objectivity –not to compromise professional or business judgments

because of bias, conflict of interest or undue influence of others.

3. Professional Competence and Due Care –to:

•attain and maintain professional knowledge and skill at the level

required to ensure that a client or employing organization receives

competent professional service, based on current technical and