The IFAC code of ethics for profession accountants

The IFAC regulation of ethics for profession accountantsIntroductionNowadays, independence is major issues to attain highest level of doances to equip the public quest requirement. (Messier et al, 2006) Therefore, International Federation of Accountants (IFAC) has its mission to reserve consistently high quality of service in the public sake by continues pass on and strengthen the worldwide economic development and enhancement the accountancy profession with harmonized standards. (ICEAW, 2005)Online.An IFAC morality Committee which also known as The International Ethics Standards Board for Accountants (IESBA) has been raiseed by IFAC Board to develop the issues of the mission and in that respectfore published the enrol of Ethics for professional accountants to emphasize the independences and principle- fored onward motion to its professional ethics. (IFAC, 2010)OnlineThe code of Ethics for Professional Accountants (The Code) is guidance for professional accountants identi fy, evaluate and respond to threats in providing independent scrutinise and assurance service. Independence in assurances services are end slightly being discussed in the Code in terms of a principles-based approach which takes into account threats to independence, accepted safeguards and the public interest.(Rick Hayes et al,2005) It is very important since they implicitly zeal limit for un respectable behaviour and provide guidance in canvasing.( Gary Pflugrath,2007)IFAC code always focuses on the issues of independent. Auditing is virtually worthless without independent as it is referred as floor of auditing. An auditors should unbiased, and unaffected by conflict of interest in their viewpoint to provide a true and fair view of the entitys audit report. (Brenda Porter, 2008) It is important to independent to obviate possible threats and access to confidential and sensitive study when carry out their work with professional and due care. Public always rely on the auditors k nowledge, skills and expertise in order to form an independent opinion when providing assurance engagement. (ACCA, no date)OnlineMain Report2.1The role of IFACs code of ethics is strengthening the independent of extraneous auditors to provide reasonable assurance service. With comply with fundamental principles and the conceptual of good example, the Code buttocks provides information that is more confidential and reliable in public coiffure while reserveing professional competence and independence. (Graham W.Cosserat, 2009) .These fundamental principles fulfil their obligation for public interest and achieve objective of write up profession. The conceptual framework of professional get hold of and ethics also provided to identify evaluate and respond to threats with compliance with the fundamental principles are not compromised. (ICAEW, 2005)Online. The Code also prohibiting members from incompatible activities like allowing commission or brokerage that soliciting clients or encroaching upon other members work. (Emmanouil Dedoulis, 2006)For positive aspect, the code of ethics provides high quality standards and strong professional chronicle to serve public interest in a transparent, efficient, and effective manner. Independence plays a vital role for truthfulness and confidentiality financial reporting to investor to serve public interest. (IFAC, 2004) Online. As the public interest continually increase in demand, the rewrite Code of Ethics has been issued and maintain in principles-based approach to strengthen independent requirement. The revised code is regarding the ethical responsibilities of the auditors who detect illegal acts and fraud by developing additional guidance. Newer safeguard also has been applied into the revised safeguard to provide guidance for more quality framework from professional accountants. (IFAC, 2008)Online The revised code is addressing relationships and previous and current interest which related to new entity that may affect independence. Relationship and interest may create strong threats that objectivity could be compromised. (IFAC, 2009)OnlineApart from that, Mr. George has point out that the Code also helps in facilitate the global harmonisations. (IFAC, 2010)Online.Global harmonisation is important because it is to reduce complexity and provides fatal strategic for future global crownworks market. It provides greater self-reliance and sensitive in reliable and transparent information for individual companies. Therefore, it needs high quality accounting framework to develop the truly global stigmatise of the standards.(PWC,2007)Online Independence helps to provide high quality work which are meeting the information needs for capital market to allow the market operate efficiency, smoothly and effectively. This has improves the ability for investor and stakeholders to global basis to achieves substantial benefits from capitals market and lowers their risk and error of feeling. (ACCA, 200 6) OnlineOn the other hand, the revised code of ethics has its negative side. It takes times to adopt the revised Code of ethics as all the professional accountants needs to absorb new information, knowledge, skilful and skills in order to strengthen up the requirement of independent. It is also need to incur extra costs to provide training and preparation to adopt the newer information and requirement. Besides that, it needs to have extra communication for clearly unders aliked all the requirement involving in revised Code of Ethics to minimise distrust and confusion. (ACCA, 2006) OnlineThe practice of professional accounting may create loopholes activities which may discredit the profession. Independent of profession accountants leave hard to resolve this situation because the code is severe enforcing by legally. (ACCA P1, 2008) Online Because the IFAC is not in a legislative position, the Code of Ethics contains no formal sanctions. (Hansrudi Lenz, 2008). Therefore, the audito rs can choose to accept and comply with such a code without coercion. In such situation, the Code lead fail to comply because they appear out-of-touch on ethics as they are unwilling or too busy to take the responsibility. (ACCA P1, 2008)Other than that, the code of ethics consists moral norm in provides guidance to strengthen up independence. Unfortunately, it has been fundamentally questioned about the moral base of the profession. It is neither a pure-lip-service nor a strict self-binding agreement in the sense of the Code of ethics. The independence may fail to maintain via the Code as there are self-binding that create opportunity to transgress a moral norm since independence of mind are difficult to observe. (Hansrudi Lenz, 2008)There is empirical evidence that shows moral norm are useless if the human natural are neither truly altruistic nor truly egoistic of the human behaviour. A selfish person will leave no rooms for moral obligations and maximise self-interest in decisi ons making which creates the ethical conflict of interest. (Sara Ann Reiter, 2000)2.2The IFAC code of ethics for profession accountants is essentially to maintain the principles-based approach in applying the fundamental ethics principles and conceptual framework. The IESBA have highlighted the principles-based approach as vital roles in auditing which gives guidance to resolving conflicts of interest. (ACCA P7, 2007). IFAC are more favorite(a) to principles-based approach rather than rules-based approach as rules-based approach professional conduct and ethics cannot provide for all circumstances. There may result in incompatible or inadequate safeguards for fundamental principles of ethics when the rules-based approach lead to unquestioning compliance to rules. (Philomena Leung, 2009)In positive aspect, the IFAC code with accordance with principles-based approach provides numerous set of specific rules for each ethical situation that had been identified. There are wide-ranging in the nature of engagement and work purlieu to professional accountants. (Messier, 2006)Therefore, the code with principles-based approach provides suitable guidance for every(prenominal) possible identified situation that involves ethical consideration with compliance with the fundamental principles that are not compromised. It is therefore the principles-based approach is acts as a driver to provide high quality work of audit. (IFAC, 2004) OnlineAccording to IFAC, external auditors independences are more preferable to principles-based approach because it creates the robust structures and applied to varied and diverse circumstances faced by professional accountants as it is continues to applicable in the speedy change of environment. (IFAC, 2010) Online As it is applicable to global environment, it helps professional accountants to neutralise technical evasion of detailed rules. The Code is more robust and capable of more consistent application as the IFAC code clarifies the abso lute restrictions or prohibition. (IFAC, 2009) OnlineThe principles-based of the Code are potentially very flexible because it provides flexible framework for multi-culture, multi-lingual, and multi-jurisdictional environment. (IFAC, 2004) Online This approach also provides best suited to the rapid change in business environment which allows multitude circumstances that may arise in practise. As such, the standards of the Code can be responsive to the changing needs of the public interest and serves fail for the requirement and interests for both user and financial markets. (Intosai, no date) OnlineConversely, principles-based approach in the Code of ethics may have potential drawbacks. Although the Code provides basic principles to guidance, it is however that a lack of precise guidelines may create inconsistencies. (IVSC, 2007) Online As there are many similar circumstances to follows, the illustrative examples can be mistakenly interpreted.(ACCA P1,2008) The professional accou ntants may covey the false impression in descriptions of situation where it may be misguide the work in practise. Hence, they may not establish any basic principles or essential procedures to be followed in audit review, other assurance and related services engagement. (IFAC, 2009) OnlineThe Code with principles-based approach does not and cannot become all ethical circumstances and dilemma unless the professional accountants have very good and clear understanding in the underlying principles. (ACCA P1, 2008) Ethical dilemma can be inevitably occurring when the code cannot be honoured without apparent breach of another. (FIG, 2007) Online As there are argue in the regional variations in cultural, social and ethical norms, the IFAC code cannot capture important differences in emphasis in some part of the world. In additional, the Code of ethics is not technically enforceable in any legal manner although there are sanctions exists in breach of the code in some jurisdiction. Therefore , the voluntary and perhaps for the ethical code is less effective. (ACCA, no date) OnlinePrinciples-based approaches are required auditors to exercise or apply judgement because specific audit may apply laws and regulations that impact on the audit objectives. However, it is depends in the ethical conduct of the auditors. (Gary Pflugrath, 2007) Fairness expression are necessary require in the audit opinion which limits of the consistent application. Auditor may not to be able to express unqualified opinion and judgement if there are uncertainties affecting in the financial statement. Materiality by nature or by context may found in consideration. (Intosai, no date) Online2.3 Other recommendationsApart from Code of ethics, there is support evidence that shows positive relationship between audit committees and auditors independence which means that audit committee can enhance auditors independence. (Nur Barizah Abu Bakar, 2005) Audit Committee is a committee of independent non-execut ive directors that provide independent point of refer to auditors with view of a companys affairs other than executive directors. By providing additional channel of communication, the audit committee are strengthening the independence of external auditors. (United Nations, 2006) Online The audit committee might provide an impartial body for auditors to consult conflict of interest. Audit committee will also lead to increasing public confidence in the credibility and objectivity of financial report. (ACCA P7, 2009)Besides that, audit effectiveness and independently can be raised through audit quality hold up process. The international Standard on Quality Control (ISQC) further enhancing confidence in independent audit by encourage stakeholders work together with sensory(a) and constructive dialogue in order to contribute the work of government and regulators by generating practical ideas. (ICEAW, 2006) Online. ISQC also provides guidance for auditor to acquire required capabilitie s and competences by impose quality control in perform audit and reviews financial statement and other assurance and services engagement. The ISQC require all professional accountants perform all professional responsibilities with integrity and maintain objectivity which gain the publics confidence in the credibility of their work. (Brenda Porter, 2008)In additionally, IFAC also issued the Continuing Professional Education programme (CPE) to enhancing the professional technical skills and competences which help to develop independent of professional accountants. CPE provides high level of training to helps it members acquire the knowledge they need to face the contemporary rigors and challenges of the professional. (MIA, 2007).CPE provides rapid development in legislation, accounting standards and guidelines, technology development and increase public expectations of the services to maintain professional competence and ensure due care at all times. (MIA, 2005) Online By developing the higher professional standards and fostering greater sharing information between member and expert of the industry, it geared enhancing the quality of the profession. (MIA, 2007) closing curtainIFAC code of ethics plays an important element for professional accountants to serve public interest. The Code has emphasize the important for external auditors to be independent in provide reasonable assurance engagement. With guidance by the Code, the professional accountants can provide high-quality standards works with access of truthfulness and confidentiality financial reporting.From positive view, the independence can be strengthen up by the code of ethics with comply with the fundamental principles and conceptual of framework which allow professional accounting achieve their objective of accounting profession and maintain competences in practices. Besides that, the code of ethics had been revised in order to strengthen independences requirement. The code also helps in facilitate ha rmonisation.The code always based on principles-based approach to provide flexible for professional accountants. Principles-based approach in the Code also provides numerous set of guidance for every possible situation. Apart from that, the principles-based approach of IFAC code provides robust structure to many different circumstances. It is also suitable for business environment that rapid in changing to allows multitude circumstances.Whereas from negative view, the Code needs time consuming and cost incurred to absorb the new information, new technologies and knowledge and skills. The Code also creates loopholes from professional accountants which will possible discredit the profession. Independent cannot be strengthening because of pure-lip-service and self-binding agreement that transgress moral norm.The principles-based approach of IFAC Code has some deficiencies. The guidances examples may mistakenly interpret as it is lack of precise guidelines. IFAC Code also does not and c annot capture all ethical circumstances and dilemma. The principles-based approach also requires the professional accountants provides too many judgement which may brings to uncertainties of financial statement.Thus, besides the IFAC code of ethics, the professional accountants are advices to further develop other international standards or regulated body such as audit committee, ISQC and provide CPE to strengthen independent of auditors in providing assurance service.