Applies to all members. 

This part of the Code explains the overarching responsibility to act in the public interest and the fundamental principles of the Code. It outlines threats to compliance with the fundamental principles and possible safeguards, as well as the conceptual framework.

The conceptual framework provides a decision making tool to identify and deal with threats to compliance with the principles and a diagram (Figure 1 below) has been developed in this overview, to provide an easy to follow process. An ethical conflict resolution process is also included in Part A.

General application of the Code

Acting in the public interest

Related paragraph: 100.1

The overarching responsibility for professional accountants is the public interest. Paragraph 100.1 of the Code explains that a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. Therefore, a member’s responsibility is not to exclusively satisfy the needs of an individual client or employer.

The fundamental principles of the Code

Related paragraph: 100.5

The fundamental principles of professional accountants are outlined in paragraph 100.5. They are:

a. Integrity – to be straightforward and honest in all professional and business relationships.

b. Objectivity – to not allow bias, conflict of interest or undue influence of others to override professional or business judgements.

c. Professional competence and due care – to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional services based on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards.

d. Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the member or third parties.

e. Professional behaviour – to comply with relevant laws and regulations and avoid any action that discredits the profession.

The Code's conceptual framework

Related paragraphs: 100.6 to 100.11

Paragraphs 100.6 to 100.11 describe the framework that members must use to identify, evaluate and address any threats to compliance with the fundamental principles.

The Code is based on a conceptual framework that requires active consideration of issues based on the fundamental principles. The framework can be applied to differing circumstances and relies on professional judgement rather than on specific rules.

The conceptual framework diagram

Figure 1: The conceptual framework

The conceptual framework

*"Acceptable level" in the Code is defined by using the third party test. It means 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 member at that time – that compliance with the fundamental principles is not compromised.

The conceptual framework requires members to use their professional judgement in order to:

  • identify any threats to compliance with the fundamental principles
  • evaluate the significance of the identified threats
  • apply safeguards to eliminate threats or reduce them to an acceptable level

If threats cannot be eliminated or reduced to an acceptable level because the threats are too significant or safeguards are not available or cannot be applied to address the threats,
then the circumstance or relationship creating the threats must be avoided.

The member in such circumstances is required to decline or discontinue the professional service and, when necessary, a member in public practice is required to resign from the engagement and a member in business is required to resign from the employing organisation.


Related paragraph: 100.12

Paragraph 100.12 states that threats may be created by a broad range of relationships and circumstances. When a relationship or circumstance creates a threat, such a threat could compromise, or could be perceived to compromise, a member’s compliance with the fundamental principles.

Threats fall into one or more of the following categories (paragraph 100.12):

a. Self-interest threat – the threat that a financial or other interest will inappropriately influence the member‘s judgement or behaviour

b. Self-review threat – the threat that a member will not appropriately evaluate the results of a previous judgement made or service performed by the member, or by another individual
within the member‘s firm or employing organisation, on which the member will rely when forming a judgement as part of providing a current service

c. Advocacy threat – the threat that a member will promote a client’s or employer’s position to the point that the member’s objectivity is compromised

d. Familiarity threat – the threat that due to a long or close relationship with a client or employer, a member will be too sympathetic to their interests or too accepting of their work

e. Intimidation threat – the threat that a member will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the member


Related paragraph: 100.3

Paragraph 100.13 defines safeguards as actions or other measures that may eliminate threats or reduce them to an acceptable level. They fall into two broad categories:

a. safeguards created by the profession, legislation or regulation

b. safeguards in the work environment Paragraph 100.2 explains that safeguards are necessary when the member determines that the threats are not at an acceptable level. An acceptable level is the level at which a reasonable and informed third party would be likely to conclude, weighing all specific facts and circumstances available to the member at that time, that compliance with the fundamental principles is not compromised.

Ethical conflict resolution

Related paragraphs: 100.17 to 100.22

Paragraphs 100.17 to 100.22 deal with ethical conflict resolution. They explain that a member may be required to resolve a conflict in complying with the fundamental principles.

In resolving ethical conflict, paragraph 100.18 states that the following factors may be relevant:

  • relevant facts
  • ethical issues involved
  • fundamental principles related to the matter in question
  • established internal procedures
  • alternative courses of action

Having considered the relevant factors, a member must determine the appropriate course of action, weighing the consequences of each possible course of action, and
whether other persons and those charged with governance must be consulted.

Paragraph 100.22 states that, in the best interests of members the substance of the issue, details of discussions held and decisions made regarding the issue should be documented.

If a significant conflict cannot be resolved, paragraph 100.21 states that members may consider obtaining professional advice from the relevant professional body or from legal
advisers ensuring that the fundamental principle of confidentiality is not breached.

This can be achieved by discussing the issue on an anonymous basis with the professional body or under the protection of legal privilege with a legal advisor.

Paragraph 100.22 states that if, after exhausting all relevant possibilities, the ethical conflict remains unresolved, a member shall, where possible, refuse to remain associated with the matter creating the conflict.

In addition to the fundamentals described above that apply to all members, the Code provides specific requirements for members in public practice in Part B and members in business in Part C.