Unit 4: Professional Ethics

SAICA Code of Professional

Conduct
1st Phase:
February/March 2024
Announcements

Semester Test 1
Date: 18 March 2024
Time: 8:00 – 11:00
Venue: EXR 6
 Roadmap to the Unit (1st PHASE)
Class Preparation In class Activities to complete

Class 1: • Watch the video on Professional • Introduction • Work through the module
Tuesday, 27 February Accountants in Business vs • Format of the CPC guide for the unit
Professional Accountants in Public • Part 1 • Read Part 1 of the CPC
Practice • Start with Worksheet 1 • Complete Worksheet 1
• Watch the video on the CPC
Framework and Exam Technique
Class 2: • Ensure that all activities from the • Worksheet 1 recap • Work through Part 2
Thursday, 29 February previous class have been • Part 2 (excl NOCLAR) • Complete Part 2 of Worksheet 2
completed. (first two pages)
• Read the index for Part 2 • 2023 Semester Test 1 Q2 (d,e)
• 2021 Semester Test 3 Q1 (c)
• ACS 7.19 (b)
Class 3: • Ensure that all activities from the • Questions • Complete Worksheet 3, Case
Monday, 3 March previous class have been • NOCLAR (260) Studies 1 and 2
completed. • Start with Worksheet 3 • ACS Simulated Exam #6, Q1 (f)
• Watch IESBA video on NOCLAR • 2022 Sem Test 3 Q2 (a) & (b)
Tutorial: 7 March • Bring your ACS books to class • Additional question to be Additional Questions:
handed out in (tutorial) • ACS 1.3 (a) only 10 Feb ’23
• ACS Simulated Exam #7, Q2 (a)
Class 7 – 14: August 2024 • TBC • TBC • TBC
(2nd PHASE)
Additional resources available on BB

• Module guide
• Guidance on how to tag and highlight the CPC
• SAICA Legal & Discipline documents with real-life examples of CPC breaches and
disciplinary matters
• Additional news articles regarding Accountancy scandals and disciplinary matters
• IRBA: NOCLAR Frequently Asked Questions (FAQs)
• SAICA Social Media Guidelines

Please note: You will be asked to submit some of the Worksheets/ homework
questions, so it is therefore important to stay up to date…the deadline will be very
tight…
SAICA Code of Professional Conduct (CPC)
• At the start of Volume 2B of the SAICA student handbook, indicated as
“Ethics (ET)”
• Electronic resource:
https://saicawebprstorage.blob.core.windows.net/uploads/SAICA-Code-of-Professional-Conduct-2023.pdf
(use this if you do not yet have a book, but you will need a book for the upcoming tests)
• Some changes from prior year, so new book is preferred. If old book is
used, note and study changes.
• These notes and other explanatory material provided can never replace
the actual CPC. We are working directly from the source (the CPC) as this
is the document that you should be familiar with, not only for test and
exam purposes, but also for your professional career.
Where does the CPC come from?

• International Ethics Standards Board for Accountants (IESBA):

International Code of Ethics for Professional Accountants (applicable to
Professional Accountants worldwide)

• Adopted and slightly adapted by SAICA for SA-context:

SAICA Code of Professional Conduct (examinable version)
• SAICA defines Professional Accountant (PA) as CAs(SA), AGAs(SA) and
ATs(SA)
• The SAICA CPC therefore applies to persons with these designations
• When doing CPC questions, always identify who the CA or AGA is
Ethics and the Accountancy Profession

World Economic Forum, Global Competitiveness Report

• South Africa used to be rated number 1 in the world for its Audit and Assurance
Standards
• In 2017, dropped to number 30
• Number 1 problematic factor for doing business in SA = CORRUPTION

• Professional Accountants = Trust = Informed decision/sensible investments

• No trust = Financial world crumbles
• Who is responsible for ethics? Governance?
 “A distinguishing mark of the accountancy
profession is its acceptance of the
responsibility to act in the public interest.”
[CPC 100.1 A1]

Money Support Family

Prestige Respect
Introduction to the CPC (continued)
Introduction to the CPC
• Guide to the Code – very important!
• Underlined - changed by SAICA from the IESBA Code
• Paragraph numbers starting with “R” (e.g. R400.20) - Requirements, i.e. it is compulsory
• Paragraph numbers ending with “A” (e.g. 300.7 A7) - Application paragraph, providing context and guidance
• Paragraph numbers followed by “SA” (e.g. R113.4 SA) - South African amendments (also underlined).
• Definitions
• Assurance Engagement
• Audit Team vs Engagement Partner vs Key Audit Partner
• Close family vs Immediate family
• Independence (NB!)
• Inducement (this is a strange word to many…please read what it means)
• Network firm
• Professional Accountant in Business vs Professional Accountant in Public Practice
• Public Interest Entity (note that for your purposes, this refers only to LISTED entities)
• Reasonable and Informed Third Party
• Reasonable and Informed Third Party Test
 Fundamental CPC Guidance (abbreviated)
Principle
Integrity This means being straight-forward & honest. This includes, not
associating with information that is false or misleading or that leaves
out important detail.
Objectivity Not letting judgement be influenced by bias / conflict of interest /
undue influence
Professional Doing work with required competence & diligence

Part 1 of the Competence & Due Training & Supervision of others working under him
Care
Shall not…

CPC: Confidentiality Keeping client / employer information confidential (including that of

previous or prospective clients / employers);

Fundamental AND
Not using confidential information for your own or other’s personal

Principles
benefit.
Professional Complying with laws and regulations & avoiding discrediting the
Behaviour profession.
(note that this has a Marketing and promotional activities are also specifically mentioned
clear scope!) here, as Professional Accountants should not:
 Make exaggerated claims (e.g. “The best auditor in the world”);
or
 Disparaging references or unsubstantiated comparisons to others
(e.g. “We are faster and better than any Big 4 firm”)
Independence vs Objectivity
Refer to the formal definitions under the “Definitions” section and Subsection 112

Objectivity
• Not bias, not influenced, not conflicted

Independence
• Independence of mind – you know that you are independent and not unduly influenced.
• Independence in appearance – others would also conclude that you are independent and would not
doubt your ability to do your work with the required professionalism.
• All PAs cannot be independent (think King IV)
• When delivering assurance services (audits, reviews), independence is required
• See 120.15 A1 & A2 and 400.5 – 400.7

Refer to Appendix 1, Page 22-24 of the Module Guide (Module 4-22) for practical examples.
Common Biases…
• 1. Anchoring: surely the first evidence is correct?
• 2. Automation: surely the computer is correct?
• 3. Availability: surely what is easier to find is correct?
• 4. Confirmation: surely what I already know is correct?
• 5. Groupthink: surely the majority vote is correct?
• 6. Overconfidence: surely my capabilities are foolproof?
• 7. Representation: surely the pattern is correct?
• 8. Selective perception: surely my expectation is correct? AVOID…
• See 120.12 A1-A2
BECOMING TOO FAMILIAR WITH CLIENTS
OVERRELIANCE ON OWN EXPERIENCE
UNWILLINGNESS TO CORRECT ERRORS
ALLOWING EMOTIONS TO DICTATE DECISIONS INAPPROPRIATELY
Threats to the Fundamental Principles

Self-interest threat
Self-review threat
Advocacy threat
Familiarity threat
Intimidation threat

• Prior year knowledge

• Refer to video
• Refer to 120.6 A3
Part 1 of the CPC: Conceptual Framework (NB!!)
Be alert;
actively looking
Identify the threat(s) to the • Determine which threat(s) is applicable for potential
principle(s) • Determine which fundamental principle(s) is threatened
threats; self-
• Link each threat to a principle
evaluation
(R120.6 - R120.6 A4) • Need to be able to support WHY you say so (reason)

Look out
• Determine whether the threat is at an acceptable level (by applying
Evaluating the threat(s) the reasonable & informed third party test) for bias;
• Consider qualitative & quantitative factors apply
(R120.7 - 120.9 A2) • Consider new information / changes the RIP
test

• Eliminate the circumstances creating the threat; OR

Addressing the threat(s) • Apply safeguards to reduce threats, if possible; OR Take action:
• Declining/ending the professional activity Remove
(R120.10 - R120.11) • These will all differ depending on the circumstances threat, apply
safeguards,
walk away
 Tools to assist in applying the Conceptual Framework

Applying relevant training, knowledge, skill and

Professional Judgement experience in the context of facts and
circumstances (making an informed decision)

Do not accept everything at face value

Remain alert for new information
or rely too much on past experience
Professional Scepticism and to changes in facts and
with client, but consider whether
circumstances
there is a reason to question it

Would another person (not necessarily a CA, however they would

Reasonable and informed
have relevant knowledge and experience) reach the same conclusion
third party test (RIP)
if they had the same facts and circumstances
How to approach a CPC question: Exam Technique
Which part(s) of the CPC are you working with?
Step 1: What happened in the question?
‘Threat to’ vs
Step 2: Identify the threat(s) & the fundamental principle(s)
Step 3: Identify PIE or non-PIE (Note 1) ‘Breach of’…
What if prohibited?
Step 4: Evaluate the threat, i.e. is at an acceptable level?
Step 5: Any additional requirements/ application in Parts 2 to 4? (Any specific
requirements for PIE, if applicable?) (Note 1)
Step 6: Address the threat
Can the circumstances be eliminated?
Are safeguards available to reduce threat(s) to an acceptable level?
Should the activity be declined/ ended?
Note 1: Not all steps are always applicable and some steps would require
elaboration depending on the scenario.
Homework

• Work through the module guide for the unit

• Read Part 1 of the CPC
• Complete Worksheet 1

TUTORIAL 7 March 2023:

• Bring your ACS book to the session!