A professional accountant in public practice shall not knowingly engage in any business, occupation, or

activity that impairs or might impair integrity, objectivity or the good reputation of the profession and as
a result would be incompatible with the fundamental principles.

Fundamental Principles

A professional accountant* shall comply with the following fundamental principles:

(a) Integrity – to be straightforward and honest in all professional and business relationships

(b) Objectivity – to not allow bias, conflict of interest or undue influence of others to override
professional or business judgments.

(c) Professional Competence and Due Care – to maintain professional knowledge and skill at the level
required to ensure that a client or employer receives competent professional services* based on current
developments in practice, legislation and techniques and act diligently and in accordance with applicable
technical and professional standards.

(d) Confidentiality – to respect the confidentiality of information acquired as a result of professional and
business relationships and, therefore, 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, nor use the
information for the personal advantage of the professional accountant* or third parties.

(e) Professional Behaviour – to comply with relevant laws and regulations and avoid any action that
discredits the profession.

Threats and Safeguards

Compliance with the fundamental principles may potentially be threatened by a broad range of
circumstances and relationships. The nature and significance of the threats may differ depending on
whether they arise in relation to the provision of services to an audit client* and whether the audit
client* is a public interest entity*, to an assurance client* that is not an audit client*, or to a
nonassurance client*.

Threats fall into one or more of the following categories:

(a) Self-interest;
- Self-interest threats may occur as a result of the financial or other interests of members or of
immediate or close family members.

Examples of circumstances that may create self-interest threats for a professional accountant in
public practice* include, but are not limited to:

 holding a financial interest in, or receiving a loan or guarantee from, the employing
organization
 Having a close business relationship with a client
 inappropriate personal use of corporate assets.
(b) Self-review;
 - occur when a previous judgement needs to be re-evaluated by members responsible for that
judgement.

Circumstances that may give rise to self-review threats include, but are not limited to:
 business decisions or data being subject to review and justification by the same person
responsible for making those decisions or preparing the data
 external review by a legally empowered third party of the reports, returns, communications
or information produced by a member

(c) Advocacy;
- occur when members promote a position or opinion to the point that subsequent objectivity
may be compromised.

It is natural for a member to advocate their employer’s position, and there is nothing improper
in this provided it does not result in misleading information being given. There could be
circumstances, however, where this may not be acceptable, and these include, but are not
limited to:
 commenting publicly on future events in particular circumstances, having made assertions
without sufficient support
 advocating a position with such tenacity that objectivity may be compromised.

(d) Familiarity;
- occur when, because of a close relationship, members become too sympathetic to the interests
of others.

Circumstances that may create familiarity threats include, but are not limited to:
 being responsible for the employing organisation’s financial reporting when an immediate or
close family member employed by the entity makes decisions that affect the entity’s
financial reporting
 long association with business contacts influencing business decisions
 accepting a gift or preferential treatment, unless the value is trivial and inconsequential.
(e) Intimidation
- occur when members may be deterred from acting objectively by threats, actual or
perceived.

Circumstances that may create intimidation threats include, but are not limited to:
 threat of dismissal or replacement of the member, or a close or immediate family
member, over a disagreement about the application of an accounting principle or the
way in which financial information is to be reported
 a dominant personality attempting to influence the decisionmaking process, for example
with regard to the awarding of contracts or the application of an accounting principle

Situations where a professional accountant in public practice is 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 may create threats
to compliance with the fundamental principles. For example, there may be a threat to professional
competence and due care in circumstances where the second opinion is not based on the same set of
facts that were made available to the existing accountant or is based on inadequate evidence. The
existence and significance of any threat will depend on the circumstances of the request and all the
other available facts and assumptions relevant to the expression of a professional judgment.

The need for independence arises because, in many cases, users of financial statements and
other third parties do not have sufficient information or knowledge to understand what is
contained in a company's annual accounts.

a) A three party relationship involving:

i) A professional accountant;

ii) A responsible party; and

iii) An intended user;

b) A subject matter;

c) Suitable criteria;

d) An engagement process; and

e) A conclusion.

The responsible party and the intended user will often be from separate organizations but need not be.
A responsible party and an intended user may both be within the same organization. For example, a
governing body may seek assurance about information provided by a component of that organization.
The relationship between the responsible party and the intended user needs to be viewed within the
context of a specific engagement.

The subject matter of an assurance engagement may take many forms, such as the following:

 Data (for example, historical or prospective financial information, statistical information,

performance indicators);
 Systems and processes (for example, internal controls); or
 Behavior (for example, corporate governance, compliance with regulation, human resource
practices).

Not all engagements performed by professional accountants are assurance engagements. Other
engagements frequently performed by professional accountants that are not assurance engagements
include:

 Agreed-upon procedures;
 Compilation of financial or other information;
 Preparation of tax returns when no conclusion is expressed, and tax consulting;
 Management consulting; and
 Other advisory services