Integrity
implies not merely honesty but fair dealing and truthfulness.
The principle of objectivity imposes the obligation on all members as
professional accountants to be fair, intellectually honest and free of
conflicts of interest.
Members
serve
in many different capacities and should demonstrate their objectivity in
varying circumstances. Members in
public practice undertake reporting assignments, and render tax and other
management advisory services. Other
members prepare financial statements as a subordinate of others, perform
internal auditing services and serve in financial management capacities in
industry, commerce, the public sector and education.
They also educate and train those who aspire to admission into the
profession. Regardless of service
or capacity, members should protect the integrity of their professional
services and maintain objectivity in their judgement.
In
selecting the situations and practices to be specifically dealt with in
ethical requirements relating to objectivity, adequate consideration should be
given to the following factors:
Members
are exposed to situations which involve the possibility of pressures being
exerted on them. These pressures
may impair their objectivity.
It
is impracticable to define and prescribe all such situations where these
possible pressures exist. Reasonableness
should prevail in establishing standards for identifying relationships that
are likely to, or appear to, impair a member’s objectivity.
Relationships
should be avoided which allow prejudice, bias or influences of others to
override objectivity or where not practicable, assignments should not be
undertaken.
Members
have an obligation to ensure that personnel engaged to perform professional
services adhere to the principle of objectivity.
Members
should neither accept nor offer gifts or entertainment which might reasonably
be believed to have a significant and improper influence on their professional
judgement or those with whom they deal.
2.1
From time to time members encounter
situations which give rise to conflicts of interest.
Such conflicts may arise in a wide variety of ways, ranging from the
relatively trivial dilemma to the extreme case of fraud and similar illegal
activities. It is not possible to
attempt to itemise a comprehensive checklist of potential cases where
conflicts of interest might occur. A
member should be constantly conscious of and be alert to factors which give
rise to conflicts of interest. It
should be noted that an honest difference of opinion between a professional
accountant and another party is not in itself an ethical issue.
However, the facts and circumstances of each case need investigation by
the parties concerned.
2.2
It is recognised, however, that there can be particular factors which
occur when the responsibilities of a member may conflict with internal or
external demands of one type or another.
Hence:
There
may be the danger of pressure from an overbearing supervisor, manager,
director or partner; or when there are family or personal relationships which
can give rise to the possibility of pressures being exerted upon them.
Indeed, relationships or interests which could adversely influence,
impair or threaten a member’s integrity should be discouraged.
A
member may be asked to act contrary to technical and/or professional
standards.
A
question of divided loyalty as between the member’s
superior and the required professional standards of conduct could occur.
·
Conflict
could arise when misleading information is published which may be to the
advantage of the employer or client and which may or may not benefit the
member as a result of such publication.
2.3
In applying standards of ethical conduct members may encounter problems
in identifying unethical behaviour or in resolving an ethical conflict.
When faced with significant ethical issues, members should follow the
established policies of the employing organisation to seek a resolution of
such conflict. Members are expected to take all reasonable steps to resolve
ethical problems internally and if necessary to consult the Institute in order
to seek objective advice.
If
those policies do not resolve the ethical conflict, the following should be
considered:
·
Members
should discuss the problem with their immediate superior.
If this does not result in a satisfactory resolution then their
immediate superior should be notified of the decision to communicate with a
more senior management level. In
cases where the organisation has an agreed grievance procedure, this should be
used if meeting with one’s immediate superior does not achieve a
satisfactory solution to the problem;
·
In
circumstances where it appears that the member’s immediate superior is
involved in an unlawful act then it may be necessary to go immediately to a
higher level of management, the Board of directors, or the Audit Committee;
·
If
an ethical conflict still exists after fully exhausting all levels of internal
review members in such a situation as a last resort may conclude that they
have no alternative but to resign. Employees
should normally state their reasons for doing so to the employer but their
duty of confidentiality normally precludes them from communicating the issue
to others (unless legally or professionally required to do so).
Before resigning it is strongly recommended that members should obtain
appropriate legal advice.
·
Seek
counseling and advice on a confidential basis with an independent advisor or
the Institute to be guided on the possible course of action.
·
In
some case or statute, regulations or professional standards may require
certain serious matters to be reported to an external body.
It
is important to keep a written record of all meetings and discussions, which
take place in seeking to resolve an ethical conflict.
2.4
Any member in a senior position should endeavor to ensure that policies
are established within his or her employing organisation to seek resolution of
conflicts.
2.5
The Institute will make available counseling and advice to members who
experience ethical conflicts.
SECTION
3
3.1
Members should not portray themselves as having expertise or experience
they do not possess.
3.2
Professional competence may be divided into two separate phases:
a)
Attainment of professional competence
The
attainment of professional competence requires initially a high standard of
general education followed by specific education, training and examination in
professionally relevant subjects, and whether prescribed or not, a period of
work experience. This should be
the normal pattern of development for a member.
b)
Maintenance of professional competence
i)
The maintenance of professional competence requires a continuing
awareness of development in the accountancy profession including relevant
local and international pronouncements on accounting, auditing and other
relevant regulations and statutory requirements.
ii)
A member should adopt a programme designed to ensure quality control in
the performance of professional services consistent with appropriate local and
international pronouncements.
4.1
Members have an obligation
to respect the confidentiality of information about a client’s or
employer’s affairs acquired in the course of professional services.
The duty of confidentiality continues even after the end of the
relationship between the member and
the client or employer.
4.2
Confidentiality should always be observed by a member unless specific
authority has been given to disclose information or there is a legal or
professional duty to disclose.
4.3
Members have an obligation to ensure that staff under their control and
other persons from whom advice and assistance is obtained respect the
principle of confidentiality.
4.4
Confidentiality is not only a matter of disclosure of information.
It also requires that a member acquiring
information in the course of performing professional services neither uses nor
appears to use that information for personal advantage or for the advantage of
a third party.
4.5
A member has access to much confidential information about a client’s
or employer’s affairs not otherwise disclosed to the public.
Therefore, the member should
be relied upon not to make unauthorised disclosure to other persons of such
information in order properly to discharge the member’s responsibility
according to the profession’s standards.
4.6
It is in the interest of the public and the profession that the
profession’s standards relating to confidentiality be defined and guidance
given on the nature and extent of the duty of confidentiality and the
circumstances in which disclosure of information acquired during the course of
providing professional services shall be permitted or required.
4.7
It should be recognised, however, that confidentiality of information
is part of statute or common law and therefore detailed ethical requirements
in respect thereof will depend on the applicable laws.
4.8
The following are examples of the points which should be considered in
determining whether confidential information may be disclosed:
a)
When disclosure is authorised:
When
authorisation to disclose is given by the client or the employer the interests
of all the parties including those third parties whose interests might be
affected should be considered.
b)
When disclosure is required by law:
Examples
of when a member is required by law to disclose confidential information are:
i)
To produce documents or to give evidence in the course of legal
proceedings; and
ii)
To disclose to the appropriate public authorities infringements of the
law which come to light.
c)
When there is a professional duty or right to disclose:
i)
To comply with technical standards, regulations and ethics
requirements; such disclosure is not contrary to this section;
ii)
To protect the professional interests of the member in legal
proceedings;
iii)
To comply with the quality (or peer) review of the Institute or
professional body; and
iv)
To respond to an inquiry or investigation by the Institute or
regulatory body.
4.9
When the member has determined that confidential information can be
disclosed, the following points should be considered:
·
Whether
or not all the relevant facts are known and substantiated, to the extent it is
practicable to do so; when the situation involves unsubstantiated fact or
opinion, professional judgement should be used in determining the type of
disclosure to be made, if any;
·
What
type of communication is expected and the addressee; in particular, the member
should be satisfied that the parties to whom the communication is addressed
are appropriate recipients and have the responsibility to act on it; and
·
Whether
or not the member would incur any legal liability having made a communication
and the consequence thereof.
5.1
A member rendering professional tax services is entitled to put forward
the best position in favor of a client, or an employer, provided the service
is rendered with professional competence, does not in any way impair integrity
and objectivity, and is in the opinion of the member consistent with the law.
Doubt may be resolved in favour of the client or the employer if there
is reasonable support for the position.
5.2
A member should not hold out to a client or an employer the assurance
that the tax return prepared and the tax advice offered are beyond challenge.
Instead, the member should ensure that the client or the employer is
aware of the limitations attaching to tax advice and services so that they do
not misinterpret an expression of opinion as an assertion of fact.
5.3
A member who undertakes or assists in the preparation of a tax return
should advise the client or the employer that the responsibility for the
content of the return rests primarily with the client or employer.
The member should take the necessary steps to ensure that the tax
return is properly prepared on the basis of the information received.
5.4
Tax advice or opinions of material consequence given to a client or an
employer should be recorded, either in the form of a letter or in a memorandum
for the files.
5.5
A member should not be associated with any return or communication in
which there is reason to believe that it:
a)
Contains a false or misleading statement;
b)
Contains statements or information furnished recklessly or without any
real knowledge of whether they are true or false; or
c)
Omits or obscures information required to be submitted and such
omission or obscurity would mislead the revenue authorities.
Members should take note that Section 99 of the Income Tax Act makes
liable to penalties a person who for himself or any other person, makes a
false statement or representation in connection with a tax return. The section
also makes persons who aid or abet another person in such falsehoods liable to
penalties.
5.6
A member may prepare tax returns involving the use of estimates if it
is impractical under the circumstances to obtain exact data.
When estimates are used, they should be presented as such in a manner
so as to avoid the implication of greater accuracy than exists.
The member should be satisfied that estimated amounts are reasonable
under the circumstances.
5.7
In preparing a tax return, a member ordinarily may rely on information
furnished by the client or employer, provided that the information appears
reasonable. Although an
examination of documents or other evidence in support of the information is
not required, the member should encourage, when appropriate, such supporting
data to be provided.
In
addition, the member:
a)
should make use of the client’s returns for prior years whenever
feasible;
b)
is required to make reasonable inquiries when the information presented
appears to be incorrect or incomplete; and
c)
is encouraged to make reference to the books and records of the
business operations.
5.8
When a member learns of a material error or omission in a tax return of
a prior year (with which the member may or may not have been associated), or
of the failure to file a required tax return, the member has a responsibility
to:
a)
promptly advise the client or employer of the error or omission and
recommend that disclosure be made to the revenue authorities. The member is
not obligated to inform the revenue authorities, nor may this be done without
permission, except when specifically required by law. In these circumstances
the member should advise the client or employer of the position before
informing the authorities and should give no additional information to the
authorities without the consent of the client or the employer.
b)
if the client or the employer does not correct the error the member:
i)
should inform the client or the employer that it is not possible to act
for them in connection with that return or other related information submitted
to the authorities; and
ii)
should consider whether continued association with the client or
employer in any capacity is consistent with professional responsibilities.
c)
if the member concludes that a professional relationship with the
client or employer can be continued, all reasonable steps should be taken to
ensure that the error is not repeated in subsequent tax returns.
6.1
When considering the application of ethical requirements in cross
border activities a number of situations may arise.
Whether a professional accountant is a member of the profession in one
country only or is also a member of the profession in the country where the
services are performed should not affect the manner of dealing with each
situation.
6.2
A member may reside outside Jamaica or may be temporarily visiting
another country to perform professional services.
In all circumstances, the member should carry out professional services
in accordance with the relevant technical standards and ethical requirements.
The particular technical standards which should be followed are not
dealt within this section. In all
other respects, however, the member should be guided by the ethical
requirements set out below.
6.3
When a member performs services in a country other than Jamaica and
differences on specific matters exist between ethical requirements of the two
countries the following provisions should be applied:
a)
When the ethical requirements of the country in which the services are
being performed are less strict than the Jamaican Code of Ethics, then the
Jamaican Code of Ethics should be applied.
b)
When the ethical requirements of the country in which services are
being performed are stricter than the Jamaican Code of Ethics, then the
ethical requirements in the country where services are being performed should
be applied.
In
the marketing and promotion of themselves and their work, Members should:
a)
not use means which brings the profession into disrepute;
b)
not make exaggerated claims for the services they are able to offer,
the qualifications they possess, or experience they have gained; and
c)
not denigrate the work of other accountants.
Where
the opinion of a member, whether in practice or otherwise, is sought on the
application of accounting standards or principles to specific circumstances or
transactions, either completed or contemplated, of an entity with which the
member does not have an ongoing professional relationship to provide audit
services, he should be alert to the possibility of his opinion creating undue
pressure on the judgement and objectivity of the auditor.
Accordingly, he should seek to minimize the risk of giving
inappropriate guidance by ensuring that he has access to all relevant
information.
PART
B – APPLICABLE TO MEMBERS IN PUBLIC PRACTICE
9.1
Members in public practice when undertaking a reporting
assignment, should be and appear to be free of any interest which might be
regarded, whatever its actual effect, as being incompatible with integrity,
objectivity and independence.
9.2
The following paragraphs indicate some of those situations which,
because of the actual or apparent lack of independence, would give a
reasonable observer grounds for doubting the independence of a member in
public practice. They also apply to all professional employees engaged in the
reporting assignment, and all managerial employees located in an office
participating in a significant part of the reporting assignment.
9.3
Any beneficial interest on the part of a member in public practice or
anyone closely connected with a member in public practice’s audit firm, in a
client company will constitute an impairment of independence. A member in
public practice therefore should not hold shares in a client company.
9.4
A beneficial interest is a beneficial shareholding or other direct
investment in the company. Shares and shareholding include debenture and other
loan stock and the equivalent, and rights to acquire shares, debenture or
other loan stock. Shareholdings also include options to purchase or sell such
securities. A person’s holdings include holdings by a nominee on behalf of
that person or by a trust created by that person for his or her personal
benefit. Shareholdings in parent, subsidiary or associated companies of a
client company should normally be regarded on the same basis as shareholdings
in the client company itself. However, if the member in public practice or the
relevant firm is auditor only of a company or companies which taken together
constitute an insignificant part of a group, independence of the parent, or
subsidiary or associated companies is not required.
9.5
Where an employee, or a person closely connected with an employee, has
such a beneficial interest, the employee should not take part in the audit of
the client company.
9.6
The foregoing paragraph (9.4) is not intended to preclude a member in
public practice or person closely connected with the member from holding or
continuing to hold, in the normal course of business and on normal commercial
terms, an insurance or pension policy with a client insurance company or
society, though an engagement partner should not take out a new policy with
such a client.
9.7
Paragraph 9.4 does not preclude a member in public practice or a person
closely connected with the member from having a beneficial holding in an
authorised unit trust or mutual fund or similar managed fund which holds
shares in a client company, provided that the firm does not report upon the
trust.
9.8
Where a member in public practice inherits shares or marries a
shareholder, or a relevant investment occurs as a result of a takeover, the
investment should be disposed of at the earliest practicable date, being a
date at which the transaction would not amount to insider dealing. Similar
action should be taken where a beneficial investment is held in a company
becoming an audit client. Where the necessary disposal cannot be achieved
within the timescale envisaged the member in public practice or relevant firm
should not continue as auditor.
9.9
When a member in public practice holds or advises on investing in
shares in an audit client on behalf of a third party, for example a trust, the
appearance of independence is at risk as responsibilities to the third party
may conflict with responsibilities to the audit client. In the case of trustee
shareholdings, if a member in public practice or employee of a firm or person
closely connected to the member in public practice or employee
is a trustee of a trust with a holding in shares material to the size of
the issued share capital of the company or the total assets of the trust, the
practice should not accept the audit of that company. This also applies in the
case of those who serve as executors and administrators of any estate. A
shareholding in excess of ten percent of the issued share capital of a company
would normally be considered material.
By
Loans to or from the Client or Any Officer, Director or Principal Shareholder
of a Client Company
9.10
A member in public practice or relevant audit firm or
a closely connected person of a member in public practice should not
directly or indirectly make any loan to, or receive a loan from a client or
give or accept any guarantee in relation to a debt of the client, firm, member
in public practice or closely
connected person of a member in public practice.
9.10A
Paragraph 9.10 does not apply to any account in credit with an
audit-client bank or similar financial institution or to preclude a loan,
overdraft, home mortgage or other dealings being accepted by a member in
public practice, or relevant audit firm or a closely connected person of a
member in public practice, from an audit-client bank, building society,
financial or other institution in the ordinary course of business and on
normal commercial terms, provided that the loan is not applied so as to
subscribe to partnership capital of the audit firm.
9.11
A mutual business interest or joint venture between a member in public
practice with a client company or with an officer or employee of the company
would be considered to impair the member’s independence with respect to the
client. Where such a mutual business interest exists the engagement should not
be accepted or continued.
9.12
Where a member in public practice has an immaterial financial interest
in a non-client investor and the
non-client investor has a financial relationship with the client, this would
not impair the member’s independence provided the member could not
reasonably be expected to have knowledge of the financial interests or joint
venture.
By
Having a Financial Interest Considered Material in a Non-client That Has an
Investor or Investee Relationship with the Client.
9.13
When a non-client investee
is material to client investor, any direct or material indirect financial
interest of the member in public practice in the non-client investee would be
considered to impair the member’s independence with respect to the client.
Likewise, where a client investee is material to a non-client investor, any
direct or material indirect financial interest of the member in public
practice in the nonclient investor would be considered to impair the
member’s independence with respect to the client.
9.14
When a member in public practice is or are, within the period under
current review or immediately preceding an assignment:
(a)
a member of the board, an officer or employee of a company; or
(b)
a partner of, or in the employment of, a member of the board or an
officer or employee of a company;
he
or she would be regarded as having an interest which could detract from
independence when reporting on that company.
9.15
A member should not personally take part in the conduct of an audit of
a company if he or she has, during the period upon which the report is to be
made, or at any time in the two years prior to the first day thereof, been a
member of the board, an officer (other than auditor) or employee of that
company.
9.16
Paragraph 9.14 applies where a member has been a partner of, or in the
employment of, a member of the board or an officer or employee of a company in
the two years prior to the commencement of the period being audited.
9.17A
firm’s independence may be impaired because of the participation in the
conduct of an audit by a member in public practice or senior employee who
intends to join the client. The firm’s guidelines should include the
requirement for immediate notification to the firm by a member in public
practice or senior employee involved in a client’s audit of his or her
intention or any discussions concerning the possibility of joining the client.
9.18
Where a member in public practice or senior employee is to join the
client or is involved in substantive negotiations with the client he or she
should be removed from the audit team and the significant audit decisions made
by the member or senior employee should be reviewed.
9.19
When a member in public practice, in addition to carrying out an audit
or other reporting function, provides other services to a client, care should
be taken not to perform management functions or make management decisions,
responsibility for which remains with the board of directors and management.
9.20
In all cases in which independence is required and in which a member in
public practice is concerned in the preparation of accounting records for a
client, the following should be
observed:
(a)
The member in public practice should not have any relationship or
combination of relationships with the client or any conflict of interest which
would impair integrity or independence.
(b)
The client should accept responsibility for the statements.
(c)
The member in public practice should not assume the role of employee or
of management conducting the operations of an enterprise.
(d)
Staff assigned to the preparation of accounting records ideally should
not participate in the examination of such records. The fact that the member
in public practice has processed or maintained certain records does not
eliminate the need to make sufficient audit tests.
9.23
When the receipt of recurring fees from a client or group of connected
clients, represents a substantial proportion of the total gross fees of a
member in public practice or of the practice as a whole, the dependence on
that client or group of clients should inevitably come under scrutiny and
could raise doubts as to independence.
9.24
A branch office which is auditing the financial statements of a client
of the practice as a whole and that client forms a major part of the business
of the branch office, in such circumstances, professional services for that
client or group should be reviewed by a partner from another office.
Transitional
arrangement effective July 1, 2001
Professional
Competence and Responsibilities Regarding the Use of Non-Accountants
10.1
A member in public practice should refrain from agreeing to perform
professional services which they are not competent to carry out unless
competent advice and assistance is obtained so as to enable them to
satisfactorily perform such services. If a member does not have the competence
to perform a specific part of the professional service, technical advice may
be sought from experts such as other members of the Institute, lawyers,
actuaries, engineers, geologists, valuers.
10.2
In such situations, although the member is relying on the technical
competence of the expert, the knowledge of the ethical requirements cannot be
automatically assumed. Since the ultimate responsibility for the professional
service rests with the member, he or she should see that the requirements of
ethical behaviour are followed.
10.3
When using the services of experts who are not professional
accountants, the member must take steps to see that such experts are aware of
ethical requirements. Primary attention should be paid to the fundamental
principles. These principles would extend to any assignment in which such
experts would participate.
10.4
The degree of supervision and the amount of guidance that will be
needed will depend upon the individuals involved and the nature of the
engagement. Examples of such guidance and supervision might include:
·
asking
individuals to read the appropriate ethical codes
·
requiring
written confirmation of understanding of the ethical requirements, and
·
providing
consultation when potential conflicts arise.
10.5
The member should also be alert to specific independence requirements
or other risks unique to the engagement. Such situations will require special
attention and guidance to see that ethical requirements are met.
10.6
If at any time the member is not satisfied that proper ethical
behaviour can be respected or assured, the engagement should not be accepted;
or, if the engagement has commenced, it should be terminated.