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Code of Ethics B section 240-280

This part of the Code describes how the conceptual framework contained in General Application applies in certain situations to professional accountants in public practice.

Effective from 1 January 2011, unless stated otherwise. 

Except as noted below, this Code has been derived from the International Ethics Standards Board of Accountants' (IESBA) Code of Ethics issued in July 2009 by the International Federation of Accountants. Accordingly, compliance with the remainder of this Code will ensure compliance with the principles of the IESBA Code. Paragraph numbering in the rest of this Code replicates that used in the IESBA Code of Ethics, except in respect of Sections 221, 241 and Part D which have no direct equivalent in the IESBA Code of Ethics.

Wording replicates the IESBA Code of Ethics.

Text framed in grey is where ICAEW's Council considers additional discussion and/or requirements to be useful or necessary.

The fact that wording is or is not framed in grey does not indicate any difference in the degree of importance that should be attached to it.

240 Fees and other types of remuneration

240.0 ICAEW does not set charge-out rates or otherwise prescribe the basis for calculating fees, nor does it ordinarily investigate complaints relating solely to the quantum of fees charged. However, professional accountants in public practice have certain professional responsibilities in relation to fees as set out in the following paragraphs.
240.1 When entering into negotiations regarding professional services, a professional accountant in public practice may quote whatever fee is deemed appropriate. The fact that one professional accountant in public practice may quote a fee lower than another is not in itself unethical. Nevertheless, there may be threats to compliance with the fundamental principles arising from the level of fees quoted. For example, a self-interest threat to professional competence and due care is created if the fee quoted is so low that it may be difficult to perform the engagement in accordance with applicable technical and professional standards for that price.
240.2 The existence and significance of any threats created will depend on factors such as the level of fee quoted and the services to which it applies. The significance of any threat shall be evaluated and safeguards applied when necessary to eliminate the threat or reduce it to an acceptable level. Examples of such safeguards include:
  • Making the client aware of the terms of the engagement and, in particular, the basis on which fees are charged and which services are covered by the quoted fee.
  • Assigning appropriate time and qualified staff to the task.
240.2a The basis on which fees will be calculated shall be discussed and explained at the earliest opportunity together with, where practicable, the estimated initial fee. Fees shall be determined by reference to:
  • The seniority and professional expertise of the persons necessarily engaged on the work;
  • The time expended by each;
  • The degree of risk and responsibility which the work entails;
  • The nature of the client's business, the complexity of its operation and the work to be performed;
  • The priority and importance of the work to the client;
  • Expenses properly incurred.
240.2b The arrangements agreed shall be confirmed in writing prior to the commencement of any engagement, normally in an engagement letter, including a confirmation of any estimate, quotation or other indication, and where the basis of future fees will differ from that of initial fees, the basis on which such fees will be rendered. Where there is no engagement letter the professional accountant in public practice shall confirm the initial discussion in writing to the client as soon as practicable.
240.2c In the case of assurance work, and in particular audit work, professional accountants in public practice who obtain work having quoted levels of fees which they have reason to believe are significantly lower than existing fees or, for example, those quoted by other tendering firms, shall be aware that their objectivity and the quality of their work may appear to be threatened by self-interest in securing the client. Such professional accountants in public practice shall ensure that their work complies with relevant standards, guidelines and regulations and, in particular, quality control procedures.
240.2d In the event of a complaint being made to ICAEW where fees were a feature in obtaining or retaining the work, professional accountants in public practice shall demonstrate that:
  • The work done was in accordance with relevant standards; and
  • The client was not misled as to the basis on which fees for the current and/or subsequent years are to be determined.
240.3 Contingent fees are widely used for certain types of non-assurance engagements.1 They may, however, create threats to compliance with the fundamental principles in certain circumstances. They may create a self-interest threat to objectivity. The existence and significance of such threats will depend on factors including:
  • The nature of the engagement.
  • The range of possible fee amounts.
  • The basis for determining the fee.
  • Whether the outcome or result of the transaction is to be reviewed by an independent third party.
240.4 The significance of any such threats shall be evaluated and safeguards applied when necessary to eliminate or reduce them to an acceptable level. Examples of such safeguards include:
240.4a In some formal appointments under insolvency legislation, in particular bankruptcies, liquidations and administrations, the remuneration of the professional accountant in public practice may, by statute, be based on a percentage of: Consequently, it may not be possible to base the fee on the principle in paragraph 240.4 above.
240.4b In some circumstances, such as advising on a management buy-in or buy-out, the raising of venture capital, acquisition searches or sales mandates, where no professional opinion is given, it may not be appropriate to charge fees save on a contingent fee basis: to require otherwise might deprive potential clients of professional assistance, for example where the capacity of the client to pay is dependent upon the success or failure of the venture.
240.4c Due diligence assignments, particularly those performed in relation to a prospective transaction, typically involve a high level of risk and responsibility. A higher fee may be charged for such work in respect of a completed transaction than for the same transaction if it is not completed, for whatever reason, provided that the difference reflects any additional risk and responsibility.

Fee information and disputes

240.4d A professional accountant in public practice shall furnish, either in the fee account or subsequently on request, and without further charge, such details as are reasonable to enable the client to understand the basis on which the fee account has been prepared.
240.4e Where fees rendered without prior agreement exceed, by more than a reasonable amount, a quotation or estimate or indication of fees given by a professional accountant in public practice, the professional accountant in public practice shall be prepared to provide the client with a full and detailed explanation of the excess and to take steps to resolve speedily any dispute which arises.
240.4f A professional accountant in public practice whose fees have not been paid may be entitled to retain certain books and papers of a client by exercising a lien and may refuse to pass on information to the client or the successor accountant until those fees are paid (but see section 210, 'Professional appointment'). However, a professional accountant in public practice who so acts shall be prepared to take reasonable and prompt steps to resolve any dispute relating to the amount of that fee.
240.4g Overdue fees may give rise to a perceived or real self-interest threat (see section 280). Similar considerations apply to work-in-progress for a client if billing is unduly deferred.

Referrals and commissions

240.5 In certain circumstances, a professional accountant in public practice may receive a referral fee or commission relating to a client. For example, where the professional accountant in public practice does not provide the specific service required, a fee may be received for referring a continuing client to another professional accountant in public practice or other expert. A professional accountant in public practice may receive a commission from a third party (e.g., a software vendor) in connection with the sale of goods or services to a client. Accepting such a referral fee or commission creates a self-interest threat to objectivity and professional competence and due care.
240.6. A professional accountant in public practice may also pay a referral fee to obtain a client, for example, where the client continues as a client of another professional accountant in public practice but requires specialist services not offered by the existing accountant. The payment of such a referral fee also creates a self-interest threat to objectivity and professional competence and due care.
240.7 The significance of the threat shall be evaluated and safeguards applied when necessary to eliminate the threat or reduce it to an acceptable level. Examples of such safeguards include:
  • Disclosing to the client any arrangements to pay a referral fee to another professional accountant for the work referred.
  • Disclosing to the client any arrangements to receive a referral fee for referring the client to another professional accountant in public practice.
  • Obtaining advance agreement from the client for commission arrangements in connection with the sale by a third party of goods or services to the client.

Remuneration of employees would not normally be included within the scope of the payments addressed above.

240.7a A fiduciary relationship between a professional accountant in public practice and his or her client will arise where the accountant acts as the client's agent; and/or where the accountant gives professional advice to the client so as to give rise to a relationship which the law would regard as one of 'trust and confidence'. Where a fiduciary relationship exists at the time between a professional accountant in public practice and a client, the professional accountant in public practice is legally bound to account to the client for any commission, fee or other benefit received from a third party at any time. ICAEW is advised that the effect is that a professional accountant in public practice will require the informed consent of the client if the professional accountant in public practice is to retain the commission, fee or other benefit or any part of it. If professional accountants in public practice are in doubt as to whether the circumstances give rise to a fiduciary relationship, they are recommended to seek appropriate legal advice.
240.7b Under the general law, professional accountants must adopt one of the following courses in respect of commission receivable2 :
  • Account to the client for the commission or other benefit. This could be effected:
    • By payment of the whole commission or benefit to the client, or
    • By deducting the amount received from the fees otherwise chargeable to the client and by showing such deduction on the face of the bill.
  • Obtain the client's advance consent to each receipt of commission

    This involves obtaining consent before the commission is received and the firm must disclose, in advance, the actual amount of the commission (or its basis of calculation) and the terms and timing of its payment.

  • Obtain the client's advance general consent to the member's retaining commission.

    This could be by way of the engagement letter, or by a supplementary agreement, containing explicit wording permitting such retention, such as the following:

    'In some circumstances, commissions or other benefits may become payable to us [or to one of our associates] in respect of transactions we [or such associates] arrange for you, in which case you will be notified in writing of the amount and terms of payment. [The fees that would otherwise be payable by you as described above will [or will not] be abated by such amounts.] You consent to such commission or other benefits being retained by us [or, as the case may be, by our associates,] without our, [or their,] being liable to account to you for any such amounts.'

    Note:
    • Before the client agrees to any such provision, examples must be given of likely commissions that may be received and the likely amounts, and it shall be emphasised that these are only examples and may not cover all receipts in the future. If, in the future, abnormally large commissions are received which were not envisaged when the engagement letter was signed, it would be advisable to obtain specific consent to the retention of those commissions in order to meet any assertion that retention of such commission was not authorised by the engagement letter.
    • Any further provision which indicated likely levels of commission, and then continued 'Commissions of less than £X will be retained by us, and commissions of more than £X will be divided equally between yourselves and ourselves' might be effective. Members are advised, however, to consult with their lawyers before including such a provision.
    • Where an existing client of the member is to sign a new engagement letter containing such a provision as is referred to above, the firm shall explain that, in the absence of the signed engagement letter, the firm could retain the commission only if the client gave full and informed consent on each occasion after receiving full disclosure of the amount involved, whereas, once the letter is signed, the firm can keep the commission.
  • Obtain the client's subsequent consent

    If the member does not obtain the client's consent in one of the ways referred to in paragraph 240.7b above, the commission may still be able to be retained if the client subsequently expressly consents to such retention (on the basis of foll disclosure of the amount, terms and timing of payment).

240.7c Alternatively professional accountants will be able to retain the commission if the client (with knowledge of all relevant facts) impliedly consents by acquiescing in such retention, for instance by deciding to proceed with the transaction having been notified both of the fact that the firm will receive commission and of the full details of that commission.
240.7d Even where a fiduciary relationship does not exist, where a professional accountant in public practice becomes aware that any commission, fee or other benefit may be received (directly or indirectly), there shall be disclosed to the client in writing:
  • That commission or benefit will result or is likely to result, and
  • When the fact is known, that such commission or benefit will be received, and
  • As early as possible, the amount and terms of the benefit to the professional accountant in public practice.
240.7e As regards payments of referral fees, professional accountants in public practice have a responsibility to ascertain that a referral manner is in accordance with this Code because professional accountants in public practice must not do, or be seen to do, through others what they may not do themselves. To this end, professional accountants in public practice shall consider whether there are any indications that the work or client has been initially procured in an unprofessional manner. In addition, where needed to complete a referred engagement properly, professional accountants in public practice shall:
  • Satisfy themselves as to the competence and professional standards of staff within their firm whose work on the engagement it would be their duty to review; and
  • Ensure their right of direct access to the client and, in appropriate circumstances, render their own fee account to the client.
240.7f In the case of insolvency work, Insolvency Practitioners shall have regard to Part D of this Code.
240.7g Where an invitation to conduct a statutory audit comes other than directly from the client, the professional accountant in public practice shall first ensure that the audit appointment has properly been made in accordance with statute. It shall be made clear to all interested parties on all relevant documents that the professional accountant in public practice is acting as principal, with all that that function implies. In those circumstances, professional accountants in public practice shall deal directly with the client and shall render their own fee account in addition to complying with the other requirements above.
240.8 A professional accountant in public practice may purchase all or part of another firm on the basis that payments will be made to individuals formerly owning the firm or to their heirs or estates. Such payments are not regarded as commissions or referral fees for the purpose of paragraphs 240.5-240.7 above.

Attention is drawn to additional requirements in respect of agency and referral arrangements, in section 241.

241 Agencies and referrals (revised 1 January 2013)

241.1 When referring or receiving referred work or when establishing agency arrangements, which are in effect permanent arrangements for making referrals, professional accountants in public practice are required to assess threats to compliance with the fundamental principles and to apply safeguards. A referral covers a formal request made in the course of a professional relationship for advice on the selection of a potential professional adviser and may also cover an informal request, regardless of whether there is an existing relationship.

Attention is drawn to additional requirements in respect of referral fee arrangements, in section 240.

Duty of care

241.2 In making a referral, a duty of care may arise. The extent of a duty of care varies according to the circumstances, including whether the exchange or provision of information was solicited or not. A greater duty of care will arise for matters which are reasonably expected to be within a professional accountant in public practice's knowledge or where a fee is charged. A professional accountant in public practice needs to look at this from the client's or enquirer's point of view and what their expectations would be of what a professional accountant in public practice would be expected to know:
  • Where a referral fee is received, or where the service referred is in a professional or finance-related sphere, the client (or enquirer) can reasonably presume knowledge by the professional accountant in public practice. Any limitation of knowledge would clearly need to be explained.
  • Where the enquiry relates to a service outside the normal sphere of expertise of an accountant and no referral fee is contemplated, then it is reasonable to presume that the enquiry is being made in a personal capacity, unless circumstances suggest otherwise. It is still advisable to express any limitations of knowledge and to clarify, in case of doubt, that any opinion is based on personal experience rather than in a professional capacity.
241.3 When making a referral, disclosure of relevant knowledge limitations shall be considered. Professional accountants in public practice shall consider whether it would be in their interest for such knowledge limitations to be disclosed in writing, according to the circumstances. Factors that a professional accountant in public practice shall consider when making such a decision include:
  • The nature of the professional relationship with the enquirer (an existing client, someone who could reasonably be considered to be making the enquiry as a prospective client or a casual enquiry).
  • The context in which the enquiry is made. Is it professional or personal, casual or formal?
  • The nature of the personal relationship. Does the enquirer know the professional accountant in public practice is a Chartered Accountant and are they consulting them as a respected professional?
  • The scope of enquiry and whether a referral fee is contemplated, as considered in section 240.
  • The enquirer's expectations.
241.4 A referral arises typically, when the professional accountant in public practice does not have the expertise and/or resource in house to undertake the potential engagement. It follows that the professional accountant in public practice will not necessarily know enough to be able to completely assess whether the third party is the optimum choice or not. This is an inevitable limitation in most referrals, and what the referral is based on will vary. However, the professional accountant in public practice shall consider the fitness for purpose of the third party to address the client's needs.
241.5 In making that consideration, the professional accountant in public practice:
  • Can take account of the professional or regulatory status of the prospective referee;
  • Is not normally expected to have to make additional enquiries about the prospective referee and can make the assessment based on what is already known.
241.6 A referral shall not normally be made to a third party even with a disclaimer, when, taking into account known factors, the professional accountant in public practice knows of a better alternative. If the client or enquirer insists on being referred to a particular third party and the professional accountant in public practice believes there is a better alternative, the reference may be made but the client or enquirer shall be made aware of the professional accountant in public practice's concerns. Where the referral relates to an end product or service, rather than an intermediary, and the professional accountant in public practice knows there are other alternatives but does not know if they are better, this shall be explained.
241.7 If there is a relationship with the third party, for example a family connection or an automatic referral arrangement, there are clear self-interest or familiarity threats and the connection shall be disclosed. This is particularly important where a professional accountant in public practice is considering recommending the products of another supplier with which there is an agency, and/or a principal or employee of the professional accountant in public practice's firm is a principal or officer of the other supplier. If in substance there is a one-to-one relationship between the professional accountant in public practice and the third party (for example, the professional accountant in public practice is the only accountant in the area and the third party is the only solicitor), which implies automatic referral, this shall also be disclosed.
241.8 In summary, professional accountants in public practice shall:
  • Consider any factors they are aware of that would indicate the proposed third party is not fit for purpose in terms of the potential engagement. The professional accountant in public practice shall take into account what a reasonable person might expect a Chartered Accountant to know;
  • Make clients (or enquirers), that are proposed to be referred, aware of limitations in knowledge;
  • Disclose any referral arrangement;
  • Ensure that any contractual arrangement does not override the needs of an individual client.

Establishing Agencies

241.9 The guidance which follows is intended to assist professional accountants in public practice in their arrangements with other suppliers of services and products.
241.10 This section addresses agreements that in effect provide for permanent arrangements for referrals. The issues are considered to be similar to those above for referrals in general except that an agency contract will usually bind the agent in terms of whom it can refer to for particular types of work. When professional accountants in public practice are considering the establishment of an agency, the terms of the agency contract (actual or implied) shall not require exclusive referral of all clients regardless of suitability. For example, professional accountants in public practice shall not be party to an agency by which they are constrained to channel all funds received by it for investment into a single bank/building society. Such a clause would make important safeguards inoperable.
241.11 Before accepting appointment as auditor of another entity of which they are an agent, professional accountants in public practice shall consider whether the agency constitutes a material business relationship. See section 290, 'Independence - audit and review engagements.'
241.12 Professional accountants in public practice shall not, because of the self-interest threat, enter into any financial arrangements with another supplier either personally or through their firm which would prejudice the objectivity of themselves or their firm.
241.13 Before accepting or continuing an agency with another supplier, professional accountants in public practice shall satisfy themselves that their ability to discharge their professional obligations to their clients is not compromised.
241.14 A professional accountant in public practice shall not in any circumstances conduct its practice in such a manner as to give the impression that the professional accountant is a principal rather than an agent. This would include considering signs on premises and any other outward signs or literature used. This would relate in particular to agencies with entities such as banks and building societies, where confusion as to status can arise (see also 'The names and letterheads of practising firms' at (icaew.com/regulations).
241.15

For the arrangement for firms in Ireland, see annex 1.

Investment business agencies and introductions

241.16 When considering referrals of investment business ('introductions') or the establishment of investment business agencies, professional accountants in public practice shall apply the general principles and requirements set out in the previous Sections. However, they will also need to consider:
  • Whether the introduction or agency is permitted by regulation; and
  • Whether the status of the third party investment business provider is compatible with the requirement to give objective advice.
241.17

For the arrangements regarding Investment Business Agencies and Introductions, see annex 2.

Annex 1

Arrangements in Ireland

Firms in Ireland must be authorised under the Investment Intermediaries Act, 1995 to hold an agency with a building society and that arrangement shall relate solely to deposit taking and not for example relate to products of a particular insurance company or unit trust organisation for which the building society is an appointed representative. Firms holding building society agencies must ensure that their agency agreement contains no obligation which would cause, or would be perceived to cause, them to breach the provisions of either the Act or the Institute of Chartered Accountants in Ireland’s Investment Business Regulations and Guidance. Firms cannot hold agencies with banks.

Annex 2

Investment Business Agencies and Introductions

Regulated activities under the Financial Services and Markets Act 2000 (United Kingdom)

1 In order to make a decision about whether an introduction is a regulated activity, the professional accountant in public practice must look at how the introduction is made and also what type of investment the client is considering (such as life assurance and pensions, unit trusts, shares, mortgages or general insurance). A regulated introduction can only be made under the terms of the Act by a firm which is licensed by ICAEW as a Designated Professional Body (‘DPB’) (a licensed firm) or a firm which is authorised by the Financial Services Authority (‘authorised’). Unauthorised / unlicensed firms are restricted in that they can only make introductions for general financial advice where no specific type of investment is referred to, or for a restricted range of investments, such as shares and unit trusts.
2 Further guidance on the difference between a regulated introduction and the provision of information in respect of insurance business, and the regulatory consequences thereof, is set out in Schedule 6 to Part 3 of the DPB Handbook, available at www.icaew.com/dpb.
3 Having established that an introduction can be made in compliance with regulatory requirements, professional accountants in public practice shall bear in mind the need to provide their clients with objective advice, in compliance with these ethical standards.
4 professional accountants in public practice can become appointed representatives of another authorised firm. When selecting which authorised firm to become an appointed representative of, professional accountants in public practice shall again bear in mind the need to provide their clients with objective advice.

Regulated Activities under the Investment Intermediaries Act, 1995 (Ireland)

5 professional accountants in public practice may only make an introduction or refer clients to another authorised firm if they are themselves authorised to conduct investment business under the Investment Intermediaries Act 1995 and where required hold an appropriate letter of appointment.
6 professional accountants in public practice when selecting an authorised firm shall bear in mind the need to provide their clients with objective advice.

Status of Investment Business Providers

7 Authorised firms within the United Kingdom can fall into the following categories:
Type of firm What recommendations the firm can make Can there generally be introduction to this type of firm
Independent a) A firm provides independent advice across all markets and all retail investment products Yes (9 below)
b) A firm provides independent advice in respect of a relevant market that does not include all retail investment products (but does include all retail investment products within the relevant market) Depends (see 10 below)
Restricted A firm provides restricted advice (being advice which is not independent as described in a and b above) Depends on scope of choice 11 below)
Further information and the definitions of independent and restricted is available in the FSA Handbook
8 Authorised firms within Ireland can fall into the following categories:
Type of firm What recommendations the firm can make Can there generally be introduction to this type of firm
Independent Recommend products from the whole market and offer clients the ability to pay by fee. Only these firms can describe themselves as independent financial advisers. The client may be able to elect for the adviser to be paid by commission Yes (9 below)
Multi-agency Recommend the products of more than one product provider with whom the firm has agreements, but recommends on less than the whole market. Depends on scope of choice 11 below)
Tied Recommend the products of one product provider. No
9 An introduction to independent firms (category (a) only for the UK table above) would be likely to meet the requirement to give objective advice but professional accountants in public practice are reminded of the general requirements above.
10 Whether professional accountants in public practice may make recommendations to firms providing independent advice in respect of a relevant market that does not include all retail investment products (category (b) in the UK table above) will depend upon whether the relevant markets covered are appropriate to the client’s requirements and on whether, within those markets, the firm* places business with the product providers who account for a large majority of the relevant market or offer the sector of the market which is most suitable for the client’s needs. The latter aspect is discussed further in 11 below in the context of restricted advice but similar principles apply. Professional accountants should apply the guidance in Sections 241.1 to 241.8 above.
11 professional accountants in public practice may in some situations be able to introduce to restricted firms and still comply with the ethical requirements (however, see paragraphs 1-3 above as to whether the introduction can only be made by a DPB licensed firm or an FSA authorised firm, if it is a ‘regulated’ activity). Clearly the principal threat is that clients might not be offered the most appropriate choice. The professional accountant in public practice shall assess the client’s requirements and whether the restricted firm places business with the product providers who account for a large majority of the relevant market or offer the sector of the market which is most suitable for the client’s needs. However, members must ensure that in making such an assessment, they are not effectively making their own recommendation unless they are able to do so under the terms of a licence or authorisation. The professional accountant in public practice may decide that this does not restrict the client’s access to the range of product providers to an extent where there is any potential detriment. The professional accountant in public practice shall make the client aware of restrictions in the range of investments offered by the firm to which the client is being referred. Whether an introduction to a restricted firm will be acceptable will depend on the particular circumstances and the scope of the available choice and professional accountants should apply the guidance in Sections 241.1 to 241.8 above.
12 Similar considerations to those noted above apply to whether a professional accountant in public practice shall become an appointed representative under the Financial Services and Markets Act 2000. Thus, for example, a professional firm cannot become an appointed representative for regulated investment business, of a restricted firm if the agency agreement would obliged the firm to make referrals to the principal in all circumstances and the firm would be unable to provide objective advice.

250 Marketing Professional services

250.1. When a professional accountant in public practice solicits new work through advertising or other forms of marketing, there may be a threat to compliance with the fundamental principles. For example, a self-interest threat to compliance with the principle of professional behaviour is created if services, achievements, or products are marketed in a way that is inconsistent with that principle.
250.2 A professional accountant in public practice shall not bring the profession into disrepute when marketing professional services. The professional accountant in public practice shall be honest and truthful and not:
  • Make exaggerated claims for services offered, qualifications possessed, or experience gained; or
  • Make disparaging references or unsubstantiated comparisons to the work of another.

In particular, where professional accountants in public practice seek to make comparisons of their promotional material between their practices or services and those of others, great care will be required. In particular, they shall ensure that such comparisons:

  • Are objective and not misleading,
  • Relate to the same services,
  • Are factual and verifiable, and
  • Do not discredit or denigrate the practice or services of others.

particular care is needed in unclear or subjective claims of size or quality. For example, it is impossible to know whether a claim to be 'the largest firm' in an area is a reference to the number of partners or staff, the number of offices or the amount of fee income. A claim to be 'the best firm' is unlikely to be able to be substantiated.

If the professional accountant in public practice is in doubt about whether a proposed form of advertising or marketing is appropriate, the professional accountant in public practice shall consider consulting with ICAEW.

250.3 A professional accountant in public practice shall ensure that all advertisements, including letterheads, invoices and other practice documents, comply with the law and conform with the requirements of the relevant Advertising Standards Authority (for example, the British Code of Advertising) notably, as to legality, decency, clarity, honesty and truthfulness.
250.4 If reference is made in promotional material to fees, the basis on which the fees are calculated, or to hourly or other charging rates, the greatest care shall be taken to ensure that such reference does not mislead as to the precise range of services and the time commitment that the reference is intended to cover. Professional accountants in public practice are unlikely to be able to comply with the requirements of 250.2 if making a comparison in such material between their fees and the fees of another accounting practice, whether members or not. A professional accountant in public practice may offer a free consultation at which fees are discussed.
250.5 Professional accountants in public practice shall never promote or seek to promote their services, or the services of other professional accountants in public practice, in such a way, or to such an extent, as to amount to harassment of a potential client.

It shall be noted that special roles apply in relation to the conduct of Insolvency Practice and licensed practitioners shall have regard to the relevant legislation and to Part D. Similarly professional accountants in public practice whose firm is registered for the conduct of investment business shall have recourse to the relevant Investment Business regulations.

250.6 Further guidance on marketing professional services is available to members in a helpsheet from the Ethics Advisory Services (icaew.com/ethicsadvice). See also sections 210, 'Professional appointment' and 230, 'Second opinions'.

260 Gifts and hospitality

260.1 A professional accountant in public practice, or an immediate or close family member, may be offered gifts and hospitality from a client. Such an offer may create threats to compliance with the fundamental principles. For example, a self-interest or familiarity threat to objectivity may be created if a gift from a client is accepted; an intimidation threat to objectivity may result from the possibility of such offers being made public.
260.2 The existence and significance of any threat will depend on the nature, value, and intent of the offer. Where gifts or hospitality are offered that a reasonable and informed third party, weighing all the specific facts and circumstances, would consider trivial and inconsequential, a professional accountant in public practice may conclude that the offer is made in the normal course of business without the specific intent to influence decision making or to obtain information. In such cases, the professional accountant in public practice may generally conclude that any threat to compliance with the fundamental principles is at an acceptable level.
260.3 A professional accountant in public practice shall evaluate the significance of any threats and apply safeguards when necessary to eliminate the threats or reduce them to an acceptable level. When the threats cannot be eliminated or reduced to an acceptable level through the application of safeguards, a professional accountant in public practice shall not accept such an offer.
260.4 Further guidance on dealing with gifts and hospitality in an assurance engagement is available in paragraph 290.230.

270 Custody of client assets

270.1 A professional accountant in public practice shall not assume custody of client monies or other assets unless permitted to do so by law and, if so, in compliance with any additional legal duties imposed on a professional accountant in public practice holding such assets.
270.2

The holding of client assets creates threats to compliance with the fundamental principles; for example, there is a self-interest threat to professional behaviour and may be a self interest threat to objectivity arising from holding client assets. A professional accountant in public practice entrusted with money (or other assets) belonging to others shall therefore:

  • Keep such assets separately from personal or firm assets;
  • Use such assets only for the purpose for which they are intended;
  • At all times be ready to account for those assets and any income, dividends, or gains generated, to any persons entitled to such accounting; and
  • Comply with all relevant laws and regulations relevant to the holding of and accounting for such assets.

Regulations on the procedures required to be adopted by professional accountants holding client monies are available at 'Clients' money regulations'. For firms licensed by ICAEW under the Designated Professional Bodies arrangements, additional requirements are included in Chapter 4 of the Designated Professional Bodies Handbook.

270.3 As part of client and engagement acceptance procedures for services that may involve the holding of client assets, a professional accountant in public practice shall make appropriate inquiries about the source of such assets and consider legal and regulatory obligations. For example, if the assets were derived from illegal activities, such as money laundering, a threat to compliance with the fundamental principles would be created. In such situations, the professional accountant may consider seeking legal advice.

Further guidance on money laundering regulation and legislation is available in 'Anti-money laundering guidance for the accountancy sector'.

See also 'Document and records: ownership, lien and rights of access'.

280 Objectivity - all services

280.1 A professional accountant in public practice shall determine when providing any professional service whether there are threats to compliance with the fundamental principle of objectivity resulting from having interests in, or relationships with, a client or its directors, officers or employees. For example, a familiarity threat to objectivity may be created from a family or close personal or business relationship.
280.2 A professional accountant in public practice who provides an assurance service shall be independent of the assurance client. Independence of mind and in appearance is necessary to enable the professional accountant in public practice to express a conclusion, and be seen to express a conclusion, without bias, conflict of interest, or undue influence of others. Sections 290 and 291 provide specific guidance on independence requirements for professional accountants in public practice when performing assurance engagements.
280.3 The existence of threats to objectivity when providing any professional service will depend upon the particular circumstances of the engagement and the nature of the work that the professional accountant in public practice is performing.
280.4 A professional accountant in public practice shall evaluate the significance of any threats and apply safeguards when necessary to eliminate them or reduce them to an acceptable level. Examples of such safeguards include:
  • Withdrawing from the engagement team.
  • Supervisory procedures.
  • Terminating the financial or business relationship giving rise to the threat.
  • Discussing the issue with higher levels of management within the firm.
  • Discussing the issue with those charged with governance of the client.
If safeguards cannot eliminate or reduce the threat to an acceptable level, the professional accountant shall decline or terminate the relevant engagement.