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MIA BY-LAWSPART A: FUNDAMENTAL PRINCIPLES AND CONCEPTUAL FRAMEWORKFUNDAMENTAL PRINCIPLESINTEGRITY Straightforward & honest in all pro & business rship Also implies fair dealing & truthfulness PA shall not knowingly be assoc with reports, returns, comms or other inform where P...

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• Circums where PA req to disclose confid info or such disclosure may be appropriate: o Disclosure permitted by law, auth by client o Disclosure req by law:  Doc as evidence in legal proceedings  Disclosure to approp public authority o Pro duty/right to disclose:  Comply quality review of MIA  Respond to inquiry/investigation by reg body  Protect pro interest of PA in legal proceedings  Comply with tech standards & ethics req • Factors to consider whether to disclose confid info: o Whether interests of all parties could be harmed if the client give consent to disclosure of info o Whether all relevant info is known & substantiated; if not, pro judgment is used in determining type of disclosure to make o Type of comm expected & to whom it is addressed o Whether parties receiving comm are approp recipients

MIA BY-LAWS PART A: FUNDAMENTAL PRINCIPLES AND CONCEPTUAL FRAMEWORK

FUNDAMENTAL PRINCIPLES INTEGRITY

• Straightforward & honest in all pro & business rship • Also implies fair dealing & truthfulness • PA shall not knowingly be assoc with reports, returns, comms or other inform where PA believes: o Contains a materially false or misleading statement o Contains statements/info furnished recklessly o Omits/obscures info req to be included = misleading • When aware, PA shall take steps to be disassoc from that info

OBJECTIVITY

• Not allow bias, conflict of interest or undue influence of others to override pro/business judgments • PA may be exposed to situations that may impair objectivity • Impracticable to define and prescribe all such situations • PA shall not perform a pro service if circum/rship biases or unduly influences his judgment with respect to that service

PROFESIONAL COMPETENCE AND DUE CARE

CONFIDENTIALITY

• Maintain prof knowledge & skill at the level req to ensure client/employer receives competent pro services based on current dev in practice, legis & techniques • Act diligently & in accd with applicable technical & pro standards • Pro competence: exercise of sound judgment in applying pro knowledge & skill in performance of service • Phases of pro competence: o Attainment o Maintenance: req continuing awareness & understanding of relevant technical, pro & business dev • Diligence: resp to act in accd with reqs of an asgmt, carefully, thoroughly & on timely basis • Ensure those working under PA’s authority in a pro capacity have approp training & supervision • Make clients, employers or other users of professional services aware of the limitations inherent in services • Respect confid of info acq from pro & business rships rd • Not disclose info to 3 parties without proper & specific authority, unless there is a legal/pro right or duty to disclose rd • Not use the info for the personal advantage or 3 parties • Maintain confidentiality: o In soc enviro – alert to possibility of inadvertent disclosure (to close/immediate family member) o Info disclosed by a prospective client o Info within firm/employing org • Ensure staff under PA’s control & persons from whom advice & assistance is obtained respect PA’s duty of confidentiality • Continues even after end of rship between PA & client: o When PA acquires new client, entitled to use prior experience but NOT use/disclose confidential info acq/receive as a result of pro/business rship.

PROFESIONAL BEHAVIOR

• Comply with relevant laws & regulations • Avoid any action that discredits the profession rd o Actions that a reasonable & informed 3 party would be likely to conclude adversely affects the good reputation of the profession (after weighing all specific facts & circums available to PA at that time) Advertising, Marketing and Promotions • PA shall not bring profession into disrepute – ensure that advrt, marketing or promo material is: o Pro dignified & in good taste o Carried out in accd with relevant legis where applicable • PA shall be honest & truthful – shall not make: o Exaggerated claims for services they able to offer, the qualf they possess, or experience they gain o Disparaging ref/unsubst comparisons to work of others

CONCEPTUAL FRAMEWORK APPROACH • Why use CFA? o Impossible to define every situation that creates threats to compliance with fundm principles & specify appropriate action o Nature of engagements & work assignments may differ: diff threats, diff safeguards STEP 1 STEP 2

STEP 3

STEP 4

Is there a threat to compliance with fundm principles? Is the threat significant (not at acceptable level)? • Eval threat when acct know/reasonably expected to know will compromise fundm principles • Take qual & quant factors to eval Is there any safeguard can be applied? • To eliminate threat/to reduce it to acceptably low level • Must exercise pro judgment rd • Take into acc whether 3 party will consider the safeguard will reduce/eliminate threat If threat is too significant/no safeguard? • Decline/discontinue pro service • Resign from client/employing org

THREATS THREAT

EXAMPLES

SELF-INTEREST Financial/other interest will inapp influence pro acct judgment/behavior

Member of assurance team: • Have direct financial interest (FI) in client MAT • Have significant close business rship with client • MAT enter into employment nego with client • Discovering significant error when eval results of previous pro service performed by firm member Firm: • Have undue dependence on total fees from client • Concerned about possibility of losing significant client • Contingent fee arrangement on assurance engmt with client

SELF-REVIEW Will not approp eval results of previous judgmt made or service performed by firm member, which will be relied when forming judgmt in providing current service

Member of assurance team: • Being/recently been, a director/officer of the client • Being/recently been employed by client in position to exert signf influence over subject matter of engmt Firm: • Issue assur report on effectiveness of fin systems op after design/implement the systems • Prepare ori data used to generate records which subject matter of assur engmt • Perform service for assur client that directly affects subject matter info of assurance engmt

ADVOCACY Will promote client’s position: objectivity is compromised

• Firm promoting shares in an audit client • Acting as an advocate on behalf of an audit client in litigation or disputes with third parties

FAMILIARITY Due to a long/close relationship with client/employer: too sympathetic to their interests or too accepting of their work

• Member of engmt team having close/immediate family member who is a o Director/officer of client, or o Employee of client in position to exert signf influence over subject matter of engmt • Director/officer of client in position to exert signf influence over subject matter of engmt, recently engmt partner • Accept gifts/preferential treatment from client, unless value is trivial/inconsequential • Senior personnel have long association with assur client Firm: • Threatened with dismissal from a client engagement • Threatened with litigation by the client • Pressured to  inapprop extent of work performed in order to  fees • Threatened: no non-assurance contract given if disagree with client’s inapprop actg treatment Pro acct: • Pressured to agree with client employee’s judgment because  expertise on matter in question • Informed by firm partner that planned promotion won’t occur unless agree with client’s inapprop acctg treatment

INTIMIDATION Deterred from acting objectively because of actual/perceived pressures: attempts to exercise undue influence over pro acct

Threats: • May be created by broad range of rships & circums • Could compromise/preceived to compromise compliance with fundm principles • A circum/rship may create >1 threat, a threat may compromise >1 fundm principle

SAFEGUARDS CATEGORY

EXAMPLES

FIRM-WIDE

• Firm’s leadership: o Stress importance to comply fundm principles o Expect that members of assur team will act in public interest • Policies and procedures: o Implement & monitor quality control of engagements o Need to identify threats to compliance with fundm principles, evaluate significance, apply safeguards to eliminate/reduce threats, when no safeguards – terminate/decline engmt o Requiring compliance with fundm principles (documented) o Enable identification of interests/rships between firm or members of engmt teams & clients o Monitor & manage reliance on revenue received from 1 client o Prohibit non-members of engmt team from inapprop influencing engmt outcome o Encourage & empower staff to comm to senior levels within firm any issue relating to compliance with fundm principles that concerns them • Use diff partners & engmt teams with separate reporting lines for provision of non-assur services to assur client • Designate member of senior mgmt to be responsible for overseeing adequate functioning of firm’s QC system • Advise partners & pro staff of assur clients: indp is req • Disciplinary mech to promote compliance with policies

ENGAGEMENTSPECIFIC

• Having PA who was: o Not involved with the non-assur service review the non-assur work performed or otherwise advise as necessary o Not a member of assur team review the assur work performed or otherwise advise as necessary. rd • Consult indp 3 party e.g. committee of indp directors, a pro reg body or another PA • Discuss with those charged with govn of client on: o Ethical issues o Nature of services provided & extent of fees charged • Involve another firm to perform/re-perform part of engmt • Rotate senior assur team personnel • Client req persons other than mgmt to ratify/approve aptmt of a firm to perform engmt • Client has competent employees with experience & seniority to make managerial decisions • Client implement internal procedures that ensure obj choices in commissioning non-assur engmt • Client has corp govn structure: provide approp oversight & comm regarding firm’s services

CLIENT’S SYSTEM & PROCEDURES

• FS audit engmt: cannot accept nomination for engmt without enquiring existing auditor – whether there is pro/other reason for proposed change of which he should be aware before deciding whether to accept aptmt o If there are: request existing auditor to provide details necessary to enable him to come to a decision • When sending tender (reply to requests to send it) – state that contact with existing acct will be req (before accept engmt) so inq may be made as to whether there are pro/other reasons why aptmt should not be accepted • Ask existing acct to provide known info on any facts/circums that needs to be aware of before deciding whether to accept engmt • Obtain info from other sources • If no safeguard: decline engmt

PROFESSIONAL APPOINTMENT EVALUATE SIGNIFICANCE OF THREAT

SITUATION

SAFEGUARDS & OTHER RELEVANT POINTS

CLIENT ACCEPTANCE Accepting new client rship

• Threat to integrity: questionable issues related to client e.g. o Client involve in illegal activities o Dishonesty o Questionable fin rep practices

To provide only those services that PA in public practice is competent to perform

• Self-interest threat to pro competence & due care: o Engmt team not possess/acq competencies necessary to properly carry out engmt

• Obtain knowledge & understanding of client, its owners, managers & those responsible for its govn & business activities • Secure client’s commitment to improve corp govn practices/internal controls • Review acceptance decisions periodically for recurring engmt • If no safeguard: decline to enter into client rship

ENGAGEMENT ACCEPTANCE • Acq approp understanding of nature of client’s business, complexity of ops, specific req of engmt and purpose, nature and scope of work to be performed • Acq knowledge: relevant industries • Possess/obtain experience with relevt reg/rep req • Assign sufficient staff with the necessary competencies. • Use experts where necessary • Agree on realistic time frame to perform engmt • Comply with QC policies & procedures designed to provide reasonable assur that specific engmt are accepted only when they can be performed competently • If to rely on advice/work of expert – determine whether reliance is warranted, consider: o Reputation o Expertise o Resources available o Applicable pro & ethical standards

CHANGES IN A PROFESSIONAL APPOINTMENT Asked to replace/consider tendering for engmt currently held by anor PA in public practice

• Threat to pro competc & due care: o Accepts engmt before knowing all pertinent facts

• May require direct comm with existing acct to est facts & circums regarding proposed change – so can decide whether approp to accept engmt o E.g. reasons for change in aptmt may not fully reflect facts, indicate disagreemt with existing acct that may influence decision to accept

Asked to undertake work that is complementary or additional to work of existing accountant

• Threats to pro competc & due care o Lack of/incomplete info

• Notify existing acct of proposed work, which would give existing acct opportunity to provide relevant info needed for proper conduct of work

Notes: • Whether PA is permitted/required to discuss affairs of a client with a proposed acct depend on: o Nature of the engagement o Whether client’s permission to do so has been obtained o Legal/ethical req relating to such comm & disclosure • PA need to obtain the client’s permission (preferably in writing) to initiate discussion with an existing acct: o Permission refused: decline appointment o Permission obtained: existing acct shall comply with relevant legal & other reg governing such requests. - Where the existing accountant provides information, it shall be provided honestly and unambiguously - If unable to comm with existing acct, proposed acct shall take reasonable steps to obtain rd info about any possible threats by other means e.g. through inquiries of 3 parties or background investigt of senior mgmt/those charged with govn of client

CONFLICT OF INTEREST SITUATION Accepting new client/continue rship/specific engmt

EVALUATE SIGNIFICANCE OF THREAT • Threat to obj: o PA competes directly with client o PA has JV with major competitor of client • Threat to obj/confid: o PA performs services for clients whose interests are in conflict or clients are in dispute with each other in relation to matter or transact in question

FEES AND OTHER TYPES OF REMUNERATION SAFEGUARDS & OTHER RELEVANT POINTS • Notify client: firm’s business interest/activities that may rep a COI & obtain consent to act in such circums • Notify all known relevant parties: PA is acting for ≥2 parties in respect of matter where their resp interests are in conflict & obtain consent to so act • Notify client: PA doesn’t act exclusively for a client in provision of proposed services (e.g. in particular market sector/specific service) & obtain consent to so act • If consent asked is refused: PA shall not continue to act for one/more conflicting engmt • If no safeguard: (threat to ≥1 fundm principles) Resign from one/more conflicting engmt Additional safeguards: • Use of separate engmt teams • Procedures to prevent access to info e.g. strict physical separation of teams, confid & secure data filing • Clear guidelines for members of engmt team on issues of security & confid • Use of confid agreemt signed by employees & partners of firm • Regular review of app of safeguards by a senior individual not involved with relevant client engmt

SITUATION

EVALUATE SIGNIFICANCE OF THREAT

SAFEGUARDS & OTHER RELEVANT POINTS

FEES Enter into nego regarding pro services

• Self interest threat to pro competc & due care: o Fee quoted so low that it may be difficult to perform engmt in acc with app tech & pro standards for that price

• Make client aware of terms of engmt particularly basis on which fees charged & which services covered by quoted fee • Make client aware of statutory duties & resp involved in respect of engmt • Assign approp time & qualified staff Fees charged for assur engmt should be fair reflection of value of work involved & should take into account: • Skill & knowledge required for type of work involved • Level of training & experience of persons necessarily engaged on work • Time necessarily occupied by each person engaged on work • Degree of resp & urgency work needs

CONTINGENT FEES Contingent fees widely used for certain types of non-assur engmt

• Self-interest threat to obj depends on: o Nature of engmt o Range of possible fee amount o Basis for determining fee o Whether outcome of transact rd reviewed by 3 party

Fee received for referring a continuing client to another PA/other expert

• Self-interest threat to obj and pro competc & due care: o To receive such fee/commission o Pay referral fee to obtain client e.g. client continues as a client of anor PA but req specialist services not offered by existing acct

• Advance written agreemt with client as to basis of remuneration • Disclosure to intended users of work performed by PA & basis of remuneration • QC policies & procedures. rd • Review work by obj 3 party

SECOND OPINION REFERRAL FEES OR COMMISSIONS SITUATION

EVALUATE SIGNIFICANCE OF THREAT

PA is asked to provide nd 2 opinion on app of accounting, auditing, rep or other standards/principles to specific circums or transact by/on behalf of co/entity that is not existing client

• Threat to pro competc & due care: nd o 2 opinion not based on same set of facts that made available to existing acct or based on inadequate evidence o Existc & signf of threat depends on circums of request & other available facts & assumptions relevant to expression of pro judgment

SAFEGUARDS & OTHER RELEVANT POINTS • Seek client permission to contact existing acct • Describing limitations surrounding any opinion in comm with client • Provide existing acct copy of opinion

Receive commission rd from 3 party (e.g. software vendor) in connection with sale of goods/services to client

• Disclose to client any arrangmt to pay referral fee to anor PA for work referred • Disclose to client any arrangmt to receive a referral fee for referring client to anor PA • Obtain advance agreemt from client for commission arrangmt in connection rd with sale by 3 party of goods or services to the client • PA may purchase all/part of anor firm on basis that payments will be made to individuals formerly owning the firm/to their heirs/estates

MARKETING PUBLIC PRACTICE SERVICES SITUATION

EVALUATE SIGNIFICANCE OF THREAT

SAFEGUARDS & OTHER RELEVANT POINTS

ADVERTISING OR MARKETING SERVICES Solicits new work through advert/other forms of marketing

• Self-interest threat to pro behaviour o Services, achievmts/product marketed inconsistent with that principle

• PA shall not bring profession into disrepute when advert/marketing services • PA shall be honest & truthful and not: o Make exaggerated claims for services offered, qual possessed, experience gained o Make disparaging ref to unsubstantiated comparisons to work of anor • If PA in doubt whether a proposed form of advert/marketing is approp, shall consider guidance from MIA

TENDERS Public advert/unsolicited request to make submission or submit tender for pro services

• Self-interest threat to obj and pro competc & due care: o To receive such fee/commission o Pay referral fee to obtain client e.g. client continues as a client of anor PA but req specialist services not offered by existing acct

GIFTS AND HOSPITALITY SITUATION PA or immediate/close family member, being offered gifts & hospitality from client

SAFEGUARDS & OTHER RELEVANT POINTS • If...