Date posted: 25/03/2019 8 min read

5 fundamental principles that govern every CA

How should the fundamental principles of CA ANZ’s Code of Ethics guide accountants’ behaviour in the real world?

In Brief

  • CA ANZ members are expected to always comply with the fundamental principles of the Code of Ethics: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
  • Applying these principles in everyday situations requires judgement and active thinking, rather than learning a set of rules.
  • If an employer asks a CA to do something that goes against these ethical obligations, CA ANZ members should find a way to disengage themselves.

As told to Anthony O’Brien

Five fundamental principles anchor the Code of Ethics that guides Chartered Accountants Australia and New Zealand (CA ANZ) members: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

They apply whether members are in public practice, business, retired, or working in an honorary capacity. They also apply if members provide services to someone with whom they have a personal relationship.

But real life sometimes turns up sticky situations. To clarify some issues around these fundamental principles, we put four questions to Kate Dixon, conduct leader for Chartered Accountants ANZ in Australia, and her New Zealand counterpart Rebecca Stickney.

Acuity: The Code contains some very broad terms such as integrity, objectivity and professional competence. Could members misinterpret parts of the Code based on these sorts of terms

Kate DixonKate Dixon

Kate Dixon: The Code is principles based, and it’s very important that members understand what the principles mean and how they apply in their day-to-day professional life. This isn’t something that can be done by rote; it requires active thinking and judgement.

Rebecca Stickney: The Code is set out in three sections. Section A sets out the key statements of the fundamental principles, with Sections B and C helping members interpret these requirements. Not every single scenario a member will encounter is defined, but members can navigate the key concepts by looking at the explanatory sections in the latter parts of the Code. Members should take note that even though a particular conduct is not described or mentioned in the Code, it does not mean that it is not a breach. Members should be guided by its intent or spirit as well as its words. 

Acuity: Members have a lot of technical information to keep on top of. But what about their ethical obligations? Is it worth members reviewing the Code at least every six months? Or more frequently

Dixon: The fundamental principles don’t change. However, a member’s professional and business dealings may develop over time. Members need to consider how the fundamental principles apply in these new situations. Members should regularly review their obligations and undertake a refresher whenever required.

Stickney: In my view, the Code is the foundation stone of a member’s practice. There are certainly a lot of technical standards and other obligations that members need to address, but the Code of Ethics should be the absolute playbook by which members moderate their behaviour. It should sit on a member’s desk so it can be easily referenced when issues are encountered that could have an ethical element.

Acuity: The Code calls on members to comply with the fundamental principles. How does this work? What does the Code have to say when a member’s employer is encouraging unethical behaviour?

Rebecca StickneyRebecca Stickney

“The Code of Ethics should be the absolute playbook by which members moderate their behaviour.”
Rebecca Stickney NZ conduct leader, CA ANZ

Stickney: A member’s first step should be to consider what their obligations are under the fundamental principles. In this example, perhaps, it could involve threats to integrity, objectivity and professional behaviour.

They also need to think about whether there are any safeguards or actions they should take to protect themselves and reduce the risk of non-compliance with the Code. The explanatory provisions in Sections B and C of the Code provide relevant examples or guidance of the types of issues that can arise and the safeguards that can apply.

Of course, members need to encourage their employer or client to act in an appropriate manner. In addition, accountants also now have obligations under the NOCLAR (non-compliance with laws and regulations) provisions of the Code – in effect, whistleblowing provisions.

But the overarching issue is that members need to find a way to disengage themselves if they know they’ll be put in a situation where they are in conflict with their ethical obligations.

Dixon: One of the beauties of a principles-based Code is that it is responsive to shifting community expectations. Members need to remember that the Code is what sets them apart in their professional relationships and engenders trust. Once you have accepted the responsibility to act in the public interest, this needs to apply in all your work circumstances, and this includes where your employer is encouraging a particular kind of behaviour.

Revisions to the Code that apply in New Zealand from June 2019 and in Australia from January 2020 have increased the guidance for members in business about how to respond to pressure from other parties.

Acuity: Are there times when the Code’s call for compliance with the fundamental principles can justifiably be breached by a member?

Stickney: Members are always expected to comply with the fundamental principles. Compliance with the Code is an ongoing obligation, and it is not just a set-and-forget document.

There have been occasions where members have thought about their ethical obligations after identifying a potential problem. They may have decided on a course of action under the Code, but failed to consider the ethical implications as the circumstances or interest giving rise to the issue develops.

For example, there could be a situation where a member is acting for two parties involved in the sale of a business. Both parties know the member is acting for them, so the member considers they are aware of a potential conflict of interest. However, relying on implied consent to act may be inadequate conflict-of-interest management, particularly if there is a dispute later. The member needs to have an ongoing awareness of the ethical obligations and consider whether they remain compliant.

Dixon: There are often times when a member feels under pressure, but this is no reason to ignore the Code. We had an example recently where a member was engaged to prepare a report in an area outside the member’s expertise. It took about three years, with the result that the member didn’t comply with the obligations of competence or diligence, which are part of the fundamental principles.

The member’s constant refrain was they were doing the client a favour, so prioritised other work where the member would be paid more quickly. But this is not an excuse.

Members need to realise that a breach of the fundamental principles is a breach of the By-Laws and Rules. If a member is experiencing challenges, including being under personal financial stress, these do not mitigate against breaches of the fundamental principles. It may be, however, that these are mitigating factors when it comes to the imposition of sanctions.

It’s worth noting that members are responsible for ensuring anyone who works under their supervision complies with the fundamental principles and the Code. Members must also ensure they do not permit others to carry out acts, on the member’s behalf, which breach the Code.