Introduction and fundamentals
Welcome to the Ethics section of International Standards. In this section you will find practical guidance to assist you in applying the fundamental principles. The guidance includes direct references to the Code of Ethics and case studies, as well as less formal guidance such as articles and webcasts.
You may find a number of references to the ICAEW Code of Ethics and the IESBA* Code of Ethics. The two codes are very similar as ICAEW have adopted the IESBA Code in full, however we have also added content where we felt additional clarity or practical tools would be helpful, as well as including certain UK specific references. To facilitate the use of these international resources, we highlight where certain issues may be more relevant in the UK.
*IESBA: International Ethics Standards Board for Accountants
In this section
Illustrative case studies
Understanding ethical concepts
Resolving ethical problems
Professional accountants frequently have ethical dilemmas which they need help in resolving.
A framework to help resolve ethical problems starting with identifying the problems and parties involved to implementing the course of action and monitoring its progress.
- Gather the relevant facts and identify the problems.
- Identify the affected parties.
- Consider the ethical issues involved.
- Identify which fundamental principles are affected.
- Refer to the employing organisation's internal procedures.
- Consider and evaluate alternative courses of action.
- Implement the course of action and monitor its progress.
Fundamental principles of professional ethics for professional accountants
ICAEW pioneered the principles based approach to professional ethics that the IESBA Code now uses. Many codes of ethics are based on the IESBA code, which applies five principles.
According to the IESBA Code, the fundamental principles of professional ethics for professional accountants are as follows:
- Integrity - to be straightforward and honest in all professional and business relationships. Integrity also means that members must not knowingly be associated with misleading information.
- Objectivity – not to compromise professional or business judgements because of bias, conflict of interest or undue influence of others.
- Professional Competence and Due Care – to attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation; and act diligently and in accordance with applicable technical and professional standards.
- Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships. Confidential information must not be disclosed outside the organisation without authority, unless there is a duty or right to disclose, or disclosure is in the public interest and permitted by law.
- Professional Behaviour – to comply with relevant laws and regulations and avoid any conduct that the professional accountant knows or should know might discredit the profession.
We favour a principles based approach to ethics for a number of reasons:
Rules can sometimes have adverse or unintended consequences. A key aspect of our work is professional judgment, so therefore our regulatory framework should reflect this.
A principles based approach avoids the argument that an action is ‘ok unless its specifically prohibited’, because you have to assess each scenario on a case by case basis. Every circumstance can be a little different and deserves treating on its own merits. Similarly it can apply to all sorts of scenarios, including ones that didn’t exist when the code was written.
The approach recognises reality. It is sometimes difficult to have absolutely no conflict of interest but that may not be an issue if the situation can be managed.
A code is shorter and easier to digest than a thick rulebook.
It avoids legalistic compliance with the letter of the requirement, while ignoring the spirit of it.
The principles based approach can actually be fairly straightforward to apply.