Guidance to the ICAS Code of Ethics: Objectivity – financial interests in, or relationships with, clients

We have published a new paper - ‘Guidance to the ICAS Code of Ethics: Objectivity – Financial interests in, or relationships with, clients’. The paper provides assistance on how to ensure you adhere to the fundamental principle of objectivity when you or your firm have financial interests in and/or relationships (business, family or other personal) with your client.

The paper discusses some factors that you, as a professional accountant, might need to consider when making an assessment. You will also find case studies illustrating how to use the guide in practice.

ICAS Code of Ethics - objectivity

There are five fundamental ethics principles for all professional accountants within the ICAS Code of Ethics: integrity; objectivity; professional competence and due care; confidentiality; and professional behaviour.

The fundamental ethics principle of objectivity requires you “to exercise professional or business judgement without being compromised by:

(i) Bias;
(ii) Conflict of interest; or
(iii) Undue influence of, or undue reliance on, individuals, organisations, technology or other factors.”

The Code provides a conceptual framework that you should apply to ensure adherence to the fundamental principles. The conceptual framework highlights that you should:

(a) Identify threats to compliance with the fundamental principles;
(b) Evaluate the threats identified; and
(c) Address the threats by eliminating them, or reducing them to an acceptable level by applying safeguards.

The Code also requires professional accountants to have an inquiring mind; to exercise professional judgement; and to apply the ‘reasonable and informed third-party test’.

Evaluating and addressing threats to objectivity

There are clear threats to compliance with the fundamental principle of objectivity resulting from a firm or individual having interests in, or relationships with, a client or its directors, officers or employees. You need to carefully consider these threats prior to initiating any interests or relationships. There will only be very limited circumstances when those threats can be addressed.

The existence of threats to objectivity, and the ability of you to eliminate, or reduce the threats to an acceptable level, will depend upon the particular circumstances of the engagement and the nature of the work you’re performing.

Some factors that you might consider when making an assessment as to whether adherence to the fundamental ethics principle of objectivity can be met, include the following and each is discussed in more detail in the guidance paper:

• Nature of the services being provided to the client
• Reasonable and informed third-party test
• Materiality
• Duration and frequency of a financial interest
• Capacity in which the professional accountant is acting
• Family, or other personal or business, arrangements
• Safeguards

The guidance paper also contains case studies to provide further assistance.

Ultimately, as a professional accountant you will need to exercise professional judgement depending on the facts and circumstances of each individual engagement. You should always consider the views of a reasonable and informed third-party, and it will be up to you to explain and justify your actions.

Documentation is encouraged throughout the decision-making process so that there is a record of the matters taken into consideration in reaching the judgement and action.

The full guidance or alternatively an "abridged version", which provides an outline of the key points within the full guidance paper, are both available for download.

Full version - guidance to the ICAS Code of Ethics: Objectivity – Financial interests in, or relationships with, clients

Abridged version - guidance to the ICAS Code of Ethics: Objectivity – Financial interests in, or relationships with, clients

ICAS ethics resources

Find out more about the ethics resources we provide to support our members below.

ICAS ethics resources