Chapter 3 - Ethics, independence and corporate governance. This chapter outlines the nature and importance of ethics, and the responsibilities imposed on auditors by the profession through the code of professional ethics. One fundamental ethical requirement for an auditor is independence. This chapter explains the concept of independence and how it is supported by legislation and the ethical rules. | ETHICS, INDEPENDENCE AND CORPORATE GOVERNANCE CHAPTER 3 Ethics is concerned with the requirements for the general well-being, prosperity, health and happiness of people. It requires knowledge of moral principles, and skills in applying them to problems and decisions. THE NATURE AND IMPORTANCE OF PROFESSIONAL ETHICS Teleological ethics — deal with consequences or outcomes of actions generally, if benefits of proposed action outweigh costs, decision is morally correct. Deontological ethics — based on duties and rights duties and rights set down in rules which must be followed. Virtue ethics — focus on personal qualities, such as integrity of the decision-maker. ETHICAL THEORY PURPOSE OF CODE OF ETHICS Makes explicit the values implicitly required. Indicates how members should act toward one another. Provides basis for sanctions. Code of Ethics — formal, systematic statement of rules and principles developed by community to promote its well-being and punish undermining behaviour. Therefore: JOINT CODE OF PROFESSIONAL CONDUCT (CPC) - I The ICAA and CPA Australia have jointly issued a code of professional conduct (CPC). Failure to observe expected standards can result in disciplinary procedures and sanctions. Members are expected to comply with the spirit as well as the letter of the code. JOINT CODE OF PROFESSIONAL CONDUCT (CPC) - II Mandatory for all members Six sections Most important sections for auditors are: B: Fundamental Principles F: Professional Statements CPC: SECTION B: FUNDAMENTAL PRINCIPLES 1. public interest 2. integrity 3. objectivity 4. independence 5. confidentiality 6. compliance with technical and professional standards 7. professional competence and due care, and 8. ethical behaviour Eight fundamental principles contained in the codes of ethics: APPLYING ETHICS Sound ethical decision-making is dependent on: Knowledge of the basic principles on which moral values and rules are based; Competence in decision-making; and The | ETHICS, INDEPENDENCE AND CORPORATE GOVERNANCE CHAPTER 3 Ethics is concerned with the requirements for the general well-being, prosperity, health and happiness of people. It requires knowledge of moral principles, and skills in applying them to problems and decisions. THE NATURE AND IMPORTANCE OF PROFESSIONAL ETHICS Teleological ethics — deal with consequences or outcomes of actions generally, if benefits of proposed action outweigh costs, decision is morally correct. Deontological ethics — based on duties and rights duties and rights set down in rules which must be followed. Virtue ethics — focus on personal qualities, such as integrity of the decision-maker. ETHICAL THEORY PURPOSE OF CODE OF ETHICS Makes explicit the values implicitly required. Indicates how members should act toward one another. Provides basis for sanctions. Code of Ethics — formal, systematic statement of rules and principles developed by community to promote its well-being and punish undermining .
