The fundamental principles:
- integrity
- objectivity
- confidentiality
- professional behaviour
- professional competence and due care
Threats to Fundamental Principles:
- self interest
- self review
- intimidation
- familiarity
- advocacy
Threat to Conflict of Interest (210)
Self Interest Threat to Objectivity
Threat to Preparation and Presentation of Information (220)
Self interest / Intimidation threat to professional competence and due care
Threat to Acting with Sufficient Expertise (230)
Self interest threat to professional competence and due care.
Threat to Financial Interests (240)
Self interest threat to objectivity/confidentiality or integrity.
Threat associated with inducements, including gifts and hospitality (250)
Self interest / familiarity / intimidation threat to integrity / confidentiality / professional behaviour.
Threat associated with responding to non-compliance with laws and regulations (260)
Self interest / Intimidation threat to integrity / professional behaviour.
Threat to conflicts of interest (310)
Self interest threat to objectivity / confidentiality.
Threat to professional appointment (client and engagement acceptance) (320)
Self interest threat to integrity / professional behaviour / professional competence and due care.
Threat to second opinions (321)
Self interest threat to professional competence and due care.
Threat to fees and other types of remuneration (330)
Self interest threat to professional competence and due care / objectivity.
Define ‘Professional Behaviour’:
A professional accountant shall comply with the principle of professional behaviour which requires a professional accountant to:
1. Comply with relevant laws and regulations.
- Behave in a manner consistent with the profession’s responsibility to act in the public’s best interest in all professional activities and business relationships, and
- Avoid any conduct that the professional accountant knows or should know might discredit the profession.
Define ‘Objectivity’:
Requires a professional accountant to exercise professional or business judgement WITHOUT BEING COMPROMISED BY:
1. Bias
2. Conflict of Interest
3. Undue influence of, or undue reliance on, individuals, organisations, technology or other factors.
Define ‘Integrity’:
A professional accountant shall be straight-forward and honest in all professional and business relationships.
Define ‘Confidentiality’:
A professional accountant shall respect the confidentiality of information acquired in the course of professional and business relationships.
What approach does the conceptual framework specify for professional accountants?
- Identify threats to compliance with the fundamental principles.
- Evaluate the threats identified; and
- Address the threats by eliminating or reducing them to an acceptable level.
R120.5 When applying the conceptual framework, the professional accountant shall:
- Have an acquiring mind
- Exercise professional conduct
- Use the reasonable and informed third party test.
Define the Reasonable and Informed Third Party test.
It is a consideration by the professional accountant about whether the same conclusions would likely be reached by another party. The third party does not need to be a professional accountant but someone who posses the knowledge and experience to evaluate appropriately.
Define ‘self-interest’ threat.
The threat that a financial or other interest will inappropriately influence a professional accountant’s judgement or behaviour.
Define ‘self-review’ threat.
The threat that a professional accountant will not appropriately evaluate the results of a previous judgement made.
Define ‘advocacy’ threat.
The threat that a professional accountant will promote a client’s or employing organisation’s position to the point that the professional accountant’s objectivity is compromised.
Define ‘familiarity’ threat.
The threat that due to a long or close relationship with a client, or employing organisation’s position to the point that the professional accountant will be too sympathetic to their interests or too accepting of their work.
Define ‘intimidation’ threat.
The threat that a professional accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the professional accountant.
