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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
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.
240.3 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:
• An advance written agreement with the client as to the basis of remuneration.
• Disclosure to intended users of the work performed by the professional accountant in public practice and the basis of remuneration.
• Quality control policies and procedures.
• Review by an independent third party of the work performed by the professional accountant in public practice.
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 (for example, 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.
1 Contingent fees for non-assurance services provided to audit clients and other assurance clients are discussed in Sections 290
and 291 of this Code.
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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.
SECTION 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 behavior 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:
a) Make exaggerated claims for services offered, qualifications possessed, or experience gained; or
b) Make disparaging references or unsubstantiated comparisons to the work of another.
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
the relevant professional body.
SECTION 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.
SECTION 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 behavior 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:
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a) Keep such assets separately from personal or firm assets;
b) Use such assets only for the purpose for which they are intended;
c) 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
d) Comply with all relevant laws and regulations relevant to the holding of and accounting for such
assets.
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.
SECTION 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.
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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
PART C—PROFESSIONAL ACCOUNTANTS IN BUSINESS Page
Section 300 Introduction 23
Section 310 Potential Conflicts 25
Section 320 Preparation and Reporting of Information 26
Section 330 Acting with Sufficient Expertise 26
Section 340 Financial Interests 27
Section 350 Inducements 28
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SECTION 300
Introduction
300.1 This Part of the Code describes how the conceptual framework contained in Part A applies in certain
situations to professional accountants in business. This Part does not describe all of the circumstances and
relationships that could be encountered by a professional accountant in business that create or may create
threats to compliance with the fundamental principles. Therefore, the professional accountant in business
is encouraged to be alert for such circumstances and relationships.
300.2 Investors, creditors, employers and other sectors of the business community, as well as governments
and the public at large, all may rely on the work of professional accountants in business. Professional
accountants in business may be solely or jointly responsible for the preparation and reporting of financial
and other information, which both their employing organizations and third parties may rely on. They may
also be responsible for providing effective financial management and competent advice on a variety of
business-related matters.
300.3 A professional accountant in business may be a salaried employee, a partner, director (whether
executive or non-executive), an owner manager, a volunteer or another working for one or more employing
organization. The legal form of the relationship with the employing organization, if any, has no bearing on
the ethical responsibilities incumbent on the professional accountant in business.
300.4 A professional accountant in business has a responsibility to further the legitimate aims of the
accountant’s employing organization. This Code does not seek to hinder a professional accountant in
business from properly fulfilling that responsibility, but addresses circumstances in which compliance with
the fundamental principles may be compromised.
300.5 A professional accountant in business may hold a senior position within an organization. The
more senior the position, the greater will be the ability and opportunity to influence events, practices
and attitudes. A professional accountant in business is expected, therefore, to encourage an ethics-based
culture in an employing organization that emphasizes the importance that senior management places on
ethical behavior.
300.6 A professional accountant in business shall not knowingly engage in any business, occupation, or
activity that impairs or might impair integrity, objectivity or the good reputation of the profession and as a
result would be incompatible with the fundamental principles.
300.7 Compliance with the fundamental principles may potentially be threatened by a broad range of
circumstances and relationships. Threats fall into one or more of the following categories:
a) Self-interest;
b) Self-review;
c) Advocacy;
d) Familiarity; and
e) Intimidation.
These threats are discussed further in Part A of this Code.
300.8 Examples of circumstances that may create self-interest threats for a professional accountant in
business include:
• Holding a financial interest in, or receiving a loan or guarantee from the employing organization.
• Participating in incentive compensation arrangements offered by the employing organization.
• Inappropriate personal use of corporate assets.
• Concern over employment security.
• Commercial pressure from outside the employing organization.
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300.9 An example of a circumstance that creates a self-review threat for a professional accountant in
business is determining the appropriate accounting treatment for a business combination after performing
the feasibility study that supported the acquisition decision.
300.10 When furthering the legitimate goals and objectives of their employing organizations, professional
accountants in business may promote the organization’s position, provided any statements made are
neither false nor misleading. Such actions generally would not create an advocacy threat.
300.11 Examples of circumstances that may create familiarity threats for a professional accountant in
business include:
• Being responsible for the employing organization’s financial reporting when an immediate or close
family member employed by the entity makes decisions that affect the entity’s financial reporting.
• Long association with business contacts influencing business decisions.
• Accepting a gift or preferential treatment, unless the value is trivial and inconsequential.
300.12 Examples of circumstances that may create intimidation threats for a professional accountant in
business include:
• Threat of dismissal or replacement of the professional accountant in business or a close or immediate
family member over a disagreement about the application of an accounting principle or the way in
which financial information is to be reported.
• A dominant personality attempting to influence the decision making process, for example with regard
to the awarding of contracts or the application of an accounting principle.
300.13 Safeguards that may eliminate or reduce threats to an acceptable level fall into two broad
categories:
a) Safeguards created by the profession, legislation or regulation; and
b) Safeguards in the work environment.
Examples of safeguards created by the profession, legislation or regulation are detailed in paragraph 100.14
of Part A of this Code.
300.14 Safeguards in the work environment include:
• The employing organization’s systems of corporate oversight or other oversight structures.
• The employing organization’s ethics and conduct programs.
• Recruitment procedures in the employing organization emphasizing the importance of employing
high caliber competent staff.
• Strong internal controls.
• Appropriate disciplinary processes.
• Leadership that stresses the importance of ethical behavior and the expectation that employees will
act in an ethical manner.
• Policies and procedures to implement and monitor the quality of employee performance.
• Timely communication of the employing organization’s policies and procedures, including any
changes to them, to all employees and appropriate training and education on such policies and
procedures.
• Policies and procedures to empower and encourage employees to communicate to senior levels
within the employing organization any ethical issues that concern them without fear of retribution.
• Consultation with another appropriate professional accountant.
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300.15 In circumstances where a professional accountant in business believes that unethical behaviour
or actions by others will continue to occur within the employing organization, the professional accountant
in business may consider obtaining legal advice. In those extreme situations where all available safeguards
have been exhausted and it is not possible to reduce the threat to an acceptable level, a professional
accountant in business may conclude that it is appropriate to resign from the employing organization.
SECTION 310
Potential Conflicts
310.1 A professional accountant in business shall comply with the fundamental principles. There may
be times, however, when a professional accountant’s responsibilities to an employing organization
and professional obligations to comply with the fundamental principles are in conflict. A professional
accountant in business is expected to support the legitimate and ethical objectives established by the
employer and the rules and procedures drawn up in support of those objectives. Nevertheless, where a
relationship or circumstance creates a threat to compliance with the fundamental principles, a professional
accountant in business shall apply the conceptual framework approach described in Section 100 to
determine a response to the threat.
310.2 As a consequence of responsibilities to an employing organization, a professional accountant in
business may be under pressure to act or behave in ways that could create threats to compliance with the
fundamental principles. Such pressure may be explicit or implicit; it may come from a supervisor, manager,
director or another individual within the employing organization. A professional accountant in business
may face pressure to:
• Act contrary to law or regulation.
• Act contrary to technical or professional standards.
• Facilitate unethical or illegal earnings management strategies.
• Lie to others, or otherwise intentionally mislead (including misleading by remaining silent) others, in
particular:
−− The auditors of the employing organization; or
−− Regulators.
• Issue, or otherwise be associated with, a financial or non-financial report that materially misrepresents
the facts, including statements in connection with, for example:
−− The financial statements;
−− Tax compliance;
−− Legal compliance; or
−− Reports required by securities regulators.
310.3 The significance of any threats arising from such pressures, such as intimidation threats, shall be
evaluated and safeguards applied when necessary to eliminate them or reduce them to an acceptable level.
Examples of such safeguards include:
• Obtaining advice, where appropriate, from within the employing organization, an independent
professional advisor or a relevant professional body.
• Using a formal dispute resolution process within the employing organization.
• Seeking legal advice.
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SECTION 320
Preparation and Reporting of Information
320.1 Professional accountants in business are often involved in the preparation and reporting
of information that may either be made public or used by others inside or outside the employing
organization. Such information may include financial or management information, for example, forecasts
and budgets, financial statements, management’s discussion and analysis, and the management letter of
representation provided to the auditors during the audit of the entity’s financial statements. A professional
accountant in business shall prepare or present such information fairly, honestly and in accordance with
relevant professional standards so that the information will be understood in its context.
320.2 A professional accountant in business who has responsibility for the preparation or approval of the
general purpose financial statements of an employing organization shall be satisfied that those financial
statements are presented in accordance with the applicable financial reporting standards.
320.3 A professional accountant in business shall take reasonable steps to maintain information for which
the professional accountant in business is responsible in a manner that:
a) Describes clearly the true nature of business transactions, assets, or liabilities;
b) Classifies and records information in a timely and proper manner; and
c) Represents the facts accurately and completely in all material respects.
320.4 Threats to compliance with the fundamental principles, for example, self-interest or intimidation
threats to objectivity or professional competence and due care, are created where a professional
accountant in business is pressured (either externally or by the possibility of personal gain) to become
associated with misleading information or to become associated with misleading information through the
actions of others.
320.5 The significance of such threats will depend on factors such as the source of the pressure and the
degree to which the information is, or may be, misleading. The significance of the threats shall be evaluated
and safeguards applied when necessary to eliminate them or reduce them to an acceptable level. Such
safeguards include consultation with superiors within the employing organization, the audit committee or
those charged with governance of the organization, or with a relevant professional body.
320.6 Where it is not possible to reduce the threat to an acceptable level, a professional accountant in
business shall refuse to be or remain associated with information the professional accountant determines
is misleading. A professional accountant in business may have been unknowingly associated with
misleading information. Upon becoming aware of this, the professional accountant in business shall take
steps to be disassociated from that information. In determining whether there is a requirement to report,
the professional accountant in business may consider obtaining legal advice. In addition, the professional
accountant may consider whether to resign.
SECTION 330
Acting with Sufficient Expertise
330.1 The fundamental principle of professional competence and due care requires that a professional
accountant in business only undertake significant tasks for which the professional accountant in business
has, or can obtain, sufficient specific training or experience. A professional accountant in business shall
not intentionally mislead an employer as to the level of expertise or experience possessed, nor shall a
professional accountant in business fail to seek appropriate expert advice and assistance when required.
330.2 Circumstances that create a threat to a professional accountant in business performing duties with
the appropriate degree of professional competence and due care include having:
• Insufficient time for properly performing or completing the relevant duties.
• Incomplete, restricted or otherwise inadequate information for performing the duties properly.
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• Insufficient experience, training and/or education.
• Inadequate resources for the proper performance of the duties.
330.3 The significance of the threat will depend on factors such as the extent to which the professional
accountant in business is working with others, relative seniority in the business, and the level of supervision
and review applied to the work. 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:
• Obtaining additional advice or training.
• Ensuring that there is adequate time available for performing the relevant duties.
• Obtaining assistance from someone with the necessary expertise.
• Consulting, where appropriate, with:
−− Superiors within the employing organization;
−− Independent experts; or
−− A relevant professional body.
When threats cannot be eliminated or reduced to an acceptable level, professional accountants in business
shall determine whether to refuse to perform the duties in question. If the professional accountant in
business determines that refusal is appropriate, the reasons for doing so shall be clearly communicated.
SECTION 340
Financial Interests
340.1 Professional accountants in business may have financial interests, or may know of financial interests
of immediate or close family members, that, in certain circumstances, may create threats to compliance
with the fundamental principles. For example, self-interest threats to objectivity or confidentiality may be
created through the existence of the motive and opportunity to manipulate price sensitive information in
order to gain financially. Examples of circumstances that may create self-interest threats include situations
where the professional accountant in business or an immediate or close family member:
• Holds a direct or indirect financial interest in the employing organization and the value of that
financial interest could be directly affected by decisions made by the professional accountant in
business;
• Is eligible for a profit related bonus and the value of that bonus could be directly affected by decisions
made by the professional accountant in business;
• Holds, directly or indirectly, share options in the employing organization, the value of which could be
directly affected by decisions made by the professional accountant in business;
• Holds, directly or indirectly, share options in the employing organization which are, or will soon be,
eligible for conversion; or
• May qualify for share options in the employing organization or performance related bonuses if certain
targets are achieved.
340.2 The significance of any threat shall be evaluated and safeguards applied when necessary to
eliminate the threat or reduce it to an acceptable level. In evaluating the significance of any threat, and,
when necessary, determining the appropriate safeguards to be applied to eliminate the threat or reduce
it to an acceptable level, a professional accountant in business shall evaluate the nature of the financial
interest. This includes evaluating the significance of the financial interest and determining whether it
is direct or indirect. What constitutes a significant or valuable stake in an organization will vary from
individual to individual, depending on personal circumstances. Examples of such safeguards include:
• Policies and procedures for a committee independent of management to determine the level or form of
remuneration of senior management.
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• Disclosure of all relevant interests, and of any plans to trade in relevant shares to those charged with the
governance of the employing organization, in accordance with any internal policies.
• Consultation, where appropriate, with superiors within the employing organization.
• Consultation, where appropriate, with those charged with the governance of the employing organization or
relevant professional bodies.
• Internal and external audit procedures.
• Up-to-date education on ethical issues and on the legal restrictions and other regulations around
potential insider trading.
340.3 A professional accountant in business shall neither manipulate information nor use confidential
information for personal gain.
SECTION 350
Inducements
Receiving Offers
350.1 A professional accountant in business or an immediate or close family member may be offered an
inducement. Inducements may take various forms, including gifts, hospitality, preferential treatment, and
inappropriate appeals to friendship or loyalty.
350.2 Offers of inducements may create threats to compliance with the fundamental principles. When
a professional accountant in business or an immediate or close family member is offered an inducement,
the situation shall be evaluated. Self-interest threats to objectivity or confidentiality are created when an
inducement is made in an attempt to unduly influence actions or decisions, encourage illegal or dishonest
behavior, or obtain confidential information. Intimidation threats to objectivity or confidentiality are
created if such an inducement is accepted and it is followed by threats to make that offer public and
damage the reputation of either the professional accountant in business or an immediate or close family
member.
350.3 The existence and significance of any threats will depend on the nature, value and intent behind
the offer. If a reasonable and informed third party, weighing all the specific facts and circumstances,
would consider the inducement insignificant and not intended to encourage unethical behavior, then a
professional accountant in business may conclude that the offer is made in the normal course of business
and may generally conclude that there is no significant threat to compliance with the fundamental
principles.
350.4 The significance of any threats shall be evaluated and safeguards applied when necessary to
eliminate them 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 business shall
not accept the inducement. As the real or apparent threats to compliance with the fundamental principles
do not merely arise from acceptance of an inducement but, sometimes, merely from the fact of the offer
having been made, additional safeguards shall be adopted. A professional accountant in business shall
evaluate any threats created by such offers and determine whether to take one or more of the following
actions:
a) Informing higher levels of management or those charged with governance of the employing
organization immediately when such offers have been made;
b) Informing third parties of the offer – for example, a professional body or the employer of the
individual who made the offer; a professional accountant in business may however, consider seeking
legal advice before taking such a step; and
c) Advising immediate or close family members of relevant threats and safeguards where they are
potentially in positions that might result in offers of inducements, for example, as a result of their
employment situation; and
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d) Informing higher levels of management or those charged with governance of the employing
organization where immediate or close family members are employed by competitors or potential
suppliers of that organization.
Making Offers
350.5 A professional accountant in business may be in a situation where the professional accountant
in business is expected, or is under other pressure, to offer inducements to influence the judgment or
decision-making process of an individual or organization, or obtain confidential information.
350.6 Such pressure may come from within the employing organization, for example, from a colleague
or superior. It may also come from an external individual or organization suggesting actions or business
decisions that would be advantageous to the employing organization, possibly influencing the professional
accountant in business improperly.
350.7 A professional accountant in business shall not offer an inducement to improperly influence
professional judgment of a third party.
350.8 Where the pressure to offer an unethical inducement comes from within the employing
organization, the professional accountant shall follow the principles and guidance regarding ethical conflict
resolution set out in Part A of this Code.
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Definitions
In the CIMA Code of Ethics for Professional Accountants, the following expressions have the following
meanings assigned to them:
Acceptable level A level at which a reasonable and informed third party would be likely to
conclude, weighing all the specific facts and circumstances available to the
professional accountant at that time, that compliance with the fundamental
principles is not compromised.
Advertising The communication to the public of information as to the services or skills
provided by professional accountants in public practice with a view to
procuring professional business.
Assurance client The responsible party that is the person (or persons) who:
a) In a direct reporting engagement, is responsible for the subject matter;
or
b) In an assertion-based engagement, is responsible for the subject matter
information and may be responsible for the subject matter.
Assurance
engagement
An engagement in which a professional accountant in public practice
expresses a conclusion designed to enhance the degree of confidence of the
intended users other than the responsible party about the outcome of the
evaluation or measurement of a subject matter against criteria.
(For guidance on assurance engagements see the International Framework
for Assurance Engagements issued by the International Auditing and
Assurance Standards Board which describes the elements and objectives of
an assurance engagement and identifies engagements to which International
Standards on Auditing (ISAs), International Standards on Review
Engagements (ISREs) and International Standards on Assurance Engagements
(ISAEs) apply.)
Assurance team a) All members of the engagement team for the assurance engagement;
b) All others within a firm who can directly influence the outcome of the
assurance engagement, including:
i) those who recommend the compensation of, or who provide direct
supervisory, management or other oversight of the assurance
engagement partner in connection with the performance of the
assurance engagement;
ii) those who provide consultation regarding technical or industry specific
issues, transactions or events for the assurance engagement; and
iii) those who provide quality control for the assurance engagement,
including those who perform the engagement quality control review for
the assurance engagement.
Audit client An entity in respect of which a firm conducts an audit engagement. When
the client is a listed entity, audit client will always include its related entities.
When the audit client is not a listed entity, audit client includes those
related entities over which the client has direct or indirect control.
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Audit engagement A reasonable assurance engagement in which a professional accountant in
public practice expresses an opinion whether financial statements are prepared,
in all material respects (or give a true and fair view or are presented fairly, in
all material respects,), in accordance with an applicable financial reporting
framework, such as an engagement conducted in accordance with International
Standards on Auditing. This includes a Statutory Audit, which is an audit
required by legislation or other regulation.
Audit team a) All members of the engagement team for the audit engagement;
b) All others within a firm who can directly influence the outcome of the
audit engagement, including:
i) Those who recommend the compensation of, or who provide direct
supervisory, management or other oversight of the engagement partner
in connection with the performance of the audit engagement including
those at all successively senior levels above the engagement partner
through to the individual who is the firm’s Senior or Managing Partner
(Chief Executive or equivalent);
ii) Those who provide consultation regarding technical or industry-specific
issues, transactions or events for the engagement; and
iii) Those who provide quality control for the engagement, including
those who perform the engagement quality control review for the
engagement; and
c) All those within a network firm who can directly influence the
outcome of the audit engagement.
Close family A parent, child or sibling who is not an immediate family member.
Contingent fee A fee calculated on a predetermined basis relating to the outcome of a
transaction or the result of the services performed by the firm. A fee that is
established by a court or other public authority is not a contingent fee.
Direct financial
interest
A financial interest:
a) Owned directly by and under the control of an individual or entity
(including those managed on a discretionary basis by others); or
b) Beneficially owned through a collective investment vehicle, estate,
trust or other intermediary over which the individual or entity has
control, or the ability to influence investment decisions.
Director or officer Those charged with the governance of an entity, or acting in an equivalent
capacity, regardless of their title, which may vary from jurisdiction to
jurisdiction.
Engagement partner The partner or other person in the firm who is responsible for the
engagement and its performance, and for the report that is issued on behalf
of the firm, and who, where required, has the appropriate authority from a
professional, legal or regulatory body.
Engagement quality
control review
A process designed to provide an objective evaluation, on or before the
report is issued, of the significant judgments the engagement team made
and the conclusions it reached in formulating the report.
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Engagement team All partners and staff performing the engagement, and any individuals
engaged by the firm or a network firm who perform assurance procedures
on the engagement. This excludes external experts engaged by the firm or a
network firm.
Existing accountant A professional accountant in public practice currently holding an audit
appointment or carrying out accounting, taxation, consulting or similar
professional services for a client.
External expert An individual (who is not a partner or a member of the professional staff,
including temporary staff, of the firm or a network firm) or organization
possessing skills, knowledge and experience in a field other than accounting
or auditing, whose work in that field is used to assist the professional
accountant in obtaining sufficient appropriate evidence.
Financial interest An interest in an equity or other security, debenture, loan or other debt
instrument of an entity, including rights and obligations to acquire such an
interest and derivatives directly related to such interest.
Financial statements A structured representation of historical financial information, including related
notes, intended to communicate an entity’s economic resources or obligations
at a point in time or the changes therein for a period of time in accordance
with a financial reporting framework. The related notes ordinarily comprise a
summary of significant accounting policies and other explanatory information.
The term can relate to a complete set of financial statements, but it can
also refer to a single financial statement, for example, a balance sheet, or a
statement of revenues and expenses, and related explanatory notes.
Financial statements
on which the firm will
express an opinion
In the case of a single entity, the financial statements of that entity. In the
case of consolidated financial statements, also referred to as group financial
statements, the consolidated financial statements.
Firm a) A sole practitioner, partnership or corporation of professional
accountants;
b) An entity that controls such parties, through ownership, management
or other means; and
c) An entity controlled by such parties, through ownership, management
or other means.
Historical financial
information
Information expressed in financial terms in relation to a particular entity,
derived primarily from that entity’s accounting system, about economic events
occurring in past time periods or about economic conditions or circumstances
at points in time in the past.
Immediate family A spouse (or equivalent) or dependent.
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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
Independence Independence is:
a) Independence of mind – the state of mind that permits the expression
of a conclusion without being affected by influences that compromise
professional judgment, thereby allowing an individual to act with
integrity, and exercise objectivity and professional skepticism
b) Independence in appearance – the avoidance of facts and circumstances
that are so significant that a reasonable and informed third party would be
likely to conclude, weighing all the specific facts and circumstances, that a
firm’s, or a member of the audit or assurance team’s, integrity, objectivity
or professional skepticism has been compromised.
Indirect financial
interest
A financial interest beneficially owned through a collective investment
vehicle, estate, trust or other intermediary over which the individual or
entity has no control or ability to influence investment decisions.
Key audit partner The engagement partner, the individual responsible for the engagement quality
control review, and other audit partners, if any, on the engagement team who
make key decisions or judgments on significant matters with respect to the
audit of the financial statements on which the firm will express an opinion.
Depending upon the circumstances and the role of the individuals on the audit,
“other audit partners” may include, for example, audit partners responsible for
significant subsidiaries or divisions.
Listed entity An entity whose shares, stock or debt are quoted or listed on a recognized
stock exchange, or are marketed under the regulations of a recognized stock
exchange or other equivalent body.
Network A larger structure:
a) That is aimed at co-operation; and
b) That is clearly aimed at profit or cost sharing or shares common
ownership, control or management, common quality control policies
and procedures, common business strategy, the use of a common
brand-name, or a significant part of professional resources.
Network firm A firm or entity that belongs to a network.
Office A distinct sub-group, whether organized on geographical or practice lines.
Professional
accountant
An individual who is a member of an IFAC member body.
Professional
accountant in
business
A professional accountant employed or engaged in an executive or nonexecutive
capacity in such areas as commerce, industry, service, the public
sector, education, the not for profit sector, regulatory bodies or professional
bodies, or a professional accountant contracted by such entities.
Professional
accountant in public
practice
A professional accountant, irrespective of functional classification (for
example, audit, tax or consulting) in a firm that provides professional
services. This term is also used to refer to a firm of professional accountants
in public practice.
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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
Professional services Services requiring accountancy or related skills performed by a professional
accountant including accounting, auditing, taxation, management consulting
and financial management services.
Public interest entity a) A listed entity; and
b) An entity:
i) Defined by regulation or legislation as a public interest entity; or
ii) For which the audit is required by regulation or legislation to be
conducted in compliance with the same independence requirements
that apply to the audit of listed entities. Such regulation may be
promulgated by any relevant regulator, including an audit regulator.
Related entity An entity that has any of the following relationships with the client:
a) An entity that has direct or indirect control over the client if the client
is material to such entity;
b) An entity with a direct financial interest in the client if that entity has
significant influence over the client and the interest in the client is
material to such entity;
c) An entity over which the client has direct or indirect control;
d) An entity in which the client, or an entity related to the client under (c)
above, has a direct financial interest that gives it significant influence over
such entity and the interest is material to the client and its related entity
in (c); and
e) An entity which is under common control with the client (a ‘sister
entity’) if the sister entity and the client are both material to the
entity that controls both the client and sister entity.
Review client An entity in respect of which a firm conducts a review engagement.
Review engagement An assurance engagement, conducted in accordance with International
Standards on Review Engagements or equivalent, in which a professional
accountant in public practice expresses a conclusion on whether, on the basis
of the procedures which do not provide all the evidence that would be required
in an audit, anything has come to the accountant’s attention that causes
the accountant to believe that the financial statements are not prepared,
in all material respects, in accordance with an applicable financial reporting
framework.
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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
Review team a) All members of the engagement team for the review engagement; and
b) All others within a firm who can directly influence the outcome of the
review engagement, including:
i) Those who recommend the compensation of, or who provide direct
supervisory, management or other oversight of the engagement
partner in connection with the performance of the review engagement
including those at all successively senior levels above the engagement
partner through to the individual who is the firm’s Senior or Managing
Partner (Chief Executive or equivalent);
ii) Those who provide consultation regarding technical or industry specific
issues, transactions or events for the engagement; and
iii) Those who provide quality control for the engagement, including
those who perform the engagement quality control review for the
engagement; and
iv) All those within a network firm who can directly influence the
outcome of the review engagement.
Special purpose
financial statements
Financial statements prepared in accordance with a financial reporting
framework designed to meet the financial information needs of specified
users.
Those charged with
governance
The persons with responsibility for overseeing the strategic direction of
the entity and obligations related to the accountability of the entity. This
includes overseeing the financial reporting process.
36
CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
INDEX
References are to paragraph number.
acceptance
clients 210.1-210.5
engagements 210.6-210.8
advocacy threats 100.12
public practice 200.6
appointments see professional appointments
association with false or misleading information 110.2
behaviour, professional 100.5, 150.1-150.2
breaches of ethical requirements
duty to report 100.16
business, professional accountants in
competence and due care 330.1-330.4
conflicts of interest 310.1-310.3
ethics-based culture 300.5
financial interests 340.1-340.3
legal form of relationship with employing organization 300.3
offers of inducements
making 350.5-350.8
receiving 350.1-350.4
preparation and reporting of information 320.1-320.6
promoting the organization 300.10
responsibilities 300.2, 300.4
safeguards 300.13-300.15
threats 300.7-300.13
client acceptance 210.1-210.4
periodical reviews of recurring client engagements 210.5
client assets, custody of 270.1-270.3
client consent to act for another party 220.6
commission 240.5- 240.7
competence see professional competence and due care
complaints systems 100.16
confidentiality 100.5, 140.1-140.6
disclosure of confidential information 140.7-140.8
use of confidential information for personal advantage 100.5
conflicts of interest
business, professional accountants in 310.1-310.3
public practice 220.1-220.5
client consent to act for another party 220.6
contingent fees 240.3- 240.4
continuing professional development 130.3
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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
custody of client assets 270.1-270.3
diligence see professional competence and due care
disclosure of confidential information 140.7-140.8
due care see professional competence and due care
duty to report breaches of ethical requirements 100.16
engagement acceptance 210.6-210.8
engagement period see period of engagement
ethical conflict resolution 100.17-100.22
ethics-based culture
professional accountants in business 300.5
expert advice 210.8, 330.1
false information 110.2
familiarity threats 100.12
business, professional accountants in 300.11
public practice 200.7
fees 240.1-240.8
contingent fees 240.3 -240.4
referral fees and commission 240.5-240.7
business, professional accountants in 340.1-340.3
fundamental principles 100.5
compliance with
ethical conflict resolution 100.16-100.22
see also confidentiality; integrity; objectivity; professional behaviour;
professional competence and due care; threats
gifts from clients 260.1-260.3
guarantees see loans and guarantees
hospitality from clients 260.1-260.3
inadvertent violations 100.10
documentation 200.12
see also fees; gifts from clients; hospitality from clients
inducements
making offers 350.5-350.8
receiving offers 350.1-350.4
integrity 100.5, 110.1-110.2
intimidation threats 100.12
business, professional accountants in 300.12
public practice 200.8
marketing 150.2, 250.1-250.2
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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
misleading information 110.2
modified reports 110.2
objectivity 100.5, 120.1-120.2
public practice 280.1-280.4
offers of inducements see inducements
preparation and reporting of information
professional accountants in business 320.1-320.6
professional accountants in business see business, professional accountants in
professional accountants in public practice see public practice, professional accountants in
professional appointments
changes in 210.9-210.14
client acceptance 210.1-210.5
complimentary work to that of existing accountant 210.12
engagement acceptance 210.6-210.8
professional behaviour 100.5, 150.1-150.2
professional competence and due care 100.5 130.1-130.2, 130.6
awareness of limitations inherent in professional services 130.6
business, professional accountants in 330.1-330.3
maintenance of professional competence 130.3
training and supervision of subordinates 130.5
professional development, continuing 130.3
promoting the organization
professional accountants in business 300.10
public interest, acting in 100.1
public practice, professional accountants in 200.1-200.2
conflicts of interest 220.1-220.6
custody of client assets 270.1-270.3
fees 240.1-240.8
gifts and hospitality 260.1-260.3
marketing professional services 250.1-250.2
objectivity 280.1-280.4
professional appointments 210.1-210.14
safeguards 200.9-200.15
second opinions 230.1-230.3
threats 200.3-200.10
purchase of another firm 240.8
referral fees 240.5-240.7
safeguards 100.13-100.16
business, professional accountants in 300.13- 300.15
documented policies 200.12
professional, legislative and regulatory 100.14
public practice 200.11-200.15
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CIMA CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
second opinions 230.1- 230.2
communication with existing accountants 230.3
self-interest threats 100.12
business, professional accountants in 300.8
public practice 200.4
self-review threats 100.12
business, professional accountants in 300.9
public practice 200.5
subordinates
training and supervision of 130.5
supervision of subordinates 130.5
terms of engagement
client awareness 240.2
threats 100.12
business, professional accountants in 300.7 - 300.12
obligation to evaluate 100.8-100.9
public practice 200.3-200.10
see also advocacy threats; familiarity threats; intimidation threats; safeguards;
self-interest threats; self-review threats
training of subordinates 130.5
work environment safeguards 200.11
business, professional accountants in 300.14
clients’ systems and procedures 200.14-200.15
engagement-specific safeguards 200.13
firm-wide safeguards 200.12
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Management Accountants
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© October 2010, Chartered Institute of Management Accountants PS002V0910

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