Ethics Public Interest Due care Objectivity Professional Behaviour Responsibility Confidentiality Sustainable - CIMA
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Ethics
Public Interest
Objectivity Due care
Professional Behaviour
Responsibility Confidentiality
Sustainable Accountable
Competence
Integrity
CIMA Code of Ethics
For Professional Accountants.
Issued January 2020Contents CIMA preface 04 CIMA Code at a glance 05 Part 1 Complying with the Code, fundamental principles and conceptual framework 08 100 Complying with the Code 09 110 The fundamental principles 09 111 Integrity 10 112 Objectivity 10 113 Professional competence and due care 10 114 Confidentiality 11 115 Professional behaviour 12 120 The conceptual framework 12 Part 2 Professional accountants in business (Including CGMA® designation holders) 17 200 Applying the conceptual framework – members in business 18 210 Ethical conflicts 21 220 Conflicts of interest 22 230 Inducements including gifts and hospitality 24 240 Preparation and presentation of information 27 250 Educational services 30 260 General standards / professional competence and due care 30 270 Acts discreditable / professional behaviour / confidentiality 34 280 Pressure to breach the rules / fundamental principles 38 290 Responding to non-compliance with laws and regulations (CIMA only) 39 2
Part 3 Professional accountants in public practice 45 300 Applying the conceptual framework – professional accountants in public practice 46 310 Conflicts of interest 49 320 Professional appointments 52 321 Second opinions 54 330 Fees and other types of remuneration 55 340 Inducements including gifts and hospitality 56 350 Custody of client assets 59 360 Responding to non-compliance with laws and regulations 59 Glossary (Parts 1, 3, 4a and 4b) 68 Glossary (Part 2) 75 Annex 1 – Separate document Part 4A independence for audit and review engagement Part 4B independence for assurance engagements other than audit and review engagements For Annex 1 of the Code, please refer directly to the full IFAC International Code of Ethics for Professional Accountants. 3
CIMA preface
As chartered management accountants, CIMA members (and registered students)
throughout the world have a duty to observe the highest standards of conduct and
integrity, and to uphold the good standing and reputation of the profession. They
must also refrain from any conduct which might discredit the profession. Members
and registered students must have regard to these guidelines irrespective of their
field of activity, of their contract of employment or of any other professional
memberships they may hold.
CIMA upholds the aims and principles of equal CIMA has adopted the following Code of Ethics.
opportunities and fundamental human rights Parts 1 and 3 of this Code are based on the IFAC1 Code
worldwide, including the handling of personal of Ethics that was developed with the help of input from
information. The Institute promotes the highest CIMA and the global accountancy profession. Part 2 of
ethical and business standards and encourages its the Code was developed in cooperation with the
members to be good and responsible professionals. American Institute of CPAs (AICPA). The AICPA and
Good ethical behaviour may be above that required CIMA joined together to create a designation for
by the law. In a highly competitive, complex business management accountants, the Chartered Global
world, it is essential that CIMA members sustain their Management Accountant® (CGMA). The CGMA
integrity and remember the trust and confidence that designation is designed to elevate management
is placed on them by whoever relies on their objectivity accounting and further emphasise its importance for
and professionalism. Members must avoid actions businesses worldwide. Part 2 of the Code is designed
or situations which are inconsistent with their to provide guidance to all CIMA members around the
professional obligations. They should also be world who are members in business and professional
guided not merely by the terms but by the accountants in business and, those who hold the
spirit of this Code. CGMA credential. When a CGMA is also a member in
public practice the CGMA should also comply with the
CIMA members should conduct themselves with
applicable guidance of the CIMA Code of Ethics and
courtesy and consideration towards all with whom
apply the most restrictive provisions.
they have professional dealings and should not
behave in a manner which could be considered If a member cannot resolve an ethical issue by following
offensive or discriminatory. this Code by consulting the ethics information on
CIMA’s website or by seeking guidance from CIMA’s
To ensure that CIMA members protect the good
ethics helpline, they should seek legal advice as
standing and reputation of the profession, members
to both their legal rights and any obligations they may
must report the fact to the Institute if they are
have. The CIMA Charter, Byelaws and Regulations give
convicted or disqualified from acting as an officer
definitive rules on many matters.
of a company or if they are subject to any sanction
resulting from disciplinary action taken by any For further information see: cimaglobal.com/ethics
other body or authority.
Note: The CIMA Code of Ethics is a Law of the Institute
(to which all members and registered students are
required to comply) for the purpose of the definition
of “misconduct” in Byelaw 1.
International Federation of Accountants.
1
Parts 1 - 3 and Annex 1 of the CIMA Code of Ethics are based on the IFAC Handbook of the Code of Ethics for Professional Accountants,
of the International Ethics Standards Board of Accountants (IESBA), published by IFAC in July 2018. Copy right © July 2018 by the
International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact Permissions@ifac.org for
permission to reproduce, store or transmit, or to make similar uses of this document.
4CIMA Code at a glance
How the Code is structured statements or records”, “subordination of judgment”,
and “obligation of a member to their employer’s
Part 1: Complying with the Code, external accountant”.
fundamental principles, and Information related to educational services can be
conceptual framework found in section 250. Section 260 highlights the
Part 1 establishes the fundamental principles of principle of Professional competence and due care and
professional ethics for professional accountants. AICPA’s General Standards Rule, and includes
It also provides a conceptual framework that they information around submission of financial statements,
shall use to identify, evaluate and apply safeguards accounting principles, and responsibility for affirming
to eliminate threats to compliance with the that financial statements are in conformity with the
fundamental principles. applicable financial reporting framework.
Part 1 is applicable to all professional accountants. CIMA’s Professional Behaviour and Confidentiality
The five fundamental principles listed in Part 1 Principles, and AICPA’s Acts Discreditable Rule are
are Integrity (111), Objectivity (112), Professional addressed in section 270, with subheadings including
competence and due care (113), Confidentiality “discrimination and harassment in employment
(114), and Professional behaviour (115). practices”, “solicitation or disclosure of CPA/CIMA
examination questions and answers”, “failure to file
Part 2: Professional accountants a tax return or pay a tax liability”, “negligence in the
preparation of financial statements or records”,
in business (including CGMA “governmental bodies, commissions, or other
designation holders) regulatory agencies”, “indemnification and limitation
Part 2 sets out additional material that applies of liability provisions”, “confidential information
to professional accountants in business when obtained from employment or volunteer activities”,
performing professional activities. Part 2 of the and “false, misleading or deceptive acts in promoting
Code was developed in cooperation with the or marketing professional services”.
American Institute of CPAs (AICPA); and, like Parts 1 A new section, Section 280, addresses pressure to
and 3, the elements of the updated Part 2 that apply breach the rules or fundamental principles, and Section
to CIMA members and students continue to reflect 290 sets out requirements and application material
fundamental principles and conceptual for professional accountants in business in responding
framework approach. to non-compliance with laws and regulations (NOCLAR).
Professional accountants in business include The provisions in Section 290 only apply to CIMA
professional accountants employed, engaged members including those who hold the CGMA
or contracted in an executive or non-executive credential (or are entitled to do so) and do not apply
capacity in, for example: to AICPA members who hold the CGMA credential
(or are entitled to do so).
• Commerce, industry or service
• The public sector Part 3: Professional accountants
in public practice
• Education
Part 3 sets out additional material that applies to
• The not-for-profit sector professional accountants in public practice when
• Regulatory or professional bodies. providing professional services.
Part 2 is also applicable to individuals who are It provides examples of threats that could be
professional accountants in public practice when encountered and how such threats might be
performing professional activities pursuant to their evaluated and addressed. Requirements relating
relationship with the firm, whether as a contractor, to communicating with those charged with
employee, or owner. governance is also covered (300.9).
Part 2 section 210 addresses ethical conflicts, and Part 3 addresses conflicts of interest (310), professional
includes an interpretation under CIMA’s Integrity and appointments including client and engagement
Objectivity Principles, and AICPA’s Integrity and acceptance and changes in a professional
Objectivity Rule. Section 220 addresses conflicts of appointment (320), second opinions (321), fees
interest, including how they are identified, evaluated and other types of remuneration (330), inducements
and disclosed. Offering or accepting gifts, entertainment including gifts and hospitality (340), custody of client
and other forms of inducements are found in section assets (350), and responding to non-compliance with
230. Preparing and reporting information (240) is laws and regulations (360).
addressed with subheadings including “knowing
misrepresentations in the preparation of financial
5Annex 1 How to use the Code
Part 4a — Independence for audit The fundamental principles, independence
and review engagements and conceptual framework
Part 4b — Independence for assurance CIMA’s Code of Ethics is made up of five
engagements other than audit and fundamental principles:
review engagements
• I ntegrity: Being straightforward, honest and truthful in
These Parts collectively form the International all professional and business relationships. You should
Independence Standards, and set out additional not be associated with any information that you believe
material that applies to professional accountants contains a materially false or misleading statement,
in public practice when providing assurance services. or which is misleading by omission.
For Annex 1 of the Code, please refer directly to the •O
bjectivity: Not allowing bias, conflict of interest or
full IFAC International Code of Ethics for Professional the influence of other people to override your
Accountants. professional judgment.
•P
rofessional competence and due care: An ongoing
Glossary commitment to your level of professional knowledge
The glossary contains defined terms (together and skill. Base this on current developments in practice,
with additional explanations where appropriate) legislation and techniques. Those working under your
and described terms which have a specific meaning authority must also have the appropriate training and
in certain parts of the Code. The glossary also includes supervision.
lists of abbreviations that are used in the Code •C
onfidentiality: You should not disclose professional
and other standards to which the Code refers. information unless you have specific permission or
a legal or professional duty to do so.
Section structure
•P
rofessional behaviour: Comply with relevant laws
The Code contains sections which address specific and regulations. You must also avoid any action that
topics. Some sections contain subsections, dealing could negatively affect the reputation of the profession.
with specific aspects of those topics. Each section of
the Code is structured, where appropriate, as follows: The Code requires you to comply with these fundamental
principles of ethics. The Code also requires you to apply
• Introduction — Sets out the subject matter addressed the conceptual framework to identify, evaluate and
within the section, and introduces the requirements address threats to compliance with the fundamental
and application material in the context of the conceptual principles. Applying the conceptual framework requires
framework. Introductory material contains information, exercising professional judgment, remaining alert for new
including an explanation of terms used, which is information and to changes in facts and circumstances,
important to the understanding and application and using the reasonable and informed third party test.
of each Part and its sections.
Threats to compliance with the fundamental principles
• Requirements — Establish general and specific fall into one or more of the following categories:
obligations with respect to the subject matter addressed.
• Self-interest threat: Commonly called a “conflict
•A
pplication material — Provides context, explanations, of interest” which may inappropriately influence
suggestions for actions or matters to consider, judgment or behaviour.
illustrations and other guidance to assist in
• Self-review threat: When you are required to evaluate
complying with the requirements.
the results of a previous judgment or service.
• Advocacy threat: Arising if promoting a position or
opinion to the point that your subsequent objectivity
is compromised.
• Familiarity threat: When you become so sympathetic to
the interests of others as a result of a close relationship
that your professional judgment becomes compromised.
• Intimidation threat: When you are deterred from acting
objectively by actual or perceived pressure or influence.
6The conceptual framework recognises that the Requirements
existence of conditions, policies and procedures
established by the profession, legislation, regulation, Requirements are designated with the letter “R” and, in
the firm, or the employing organisation might affect the most cases, include the word “shall”. The word “shall”
identification of threats. Those conditions, policies and in the Code imposes an obligation on you or your firm
procedures might also be a relevant factor in your to comply with the specific provision in which “shall”
evaluation of whether a threat is at an acceptable level. has been used.
When threats are not at an acceptable level, the In some situations, the Code provides a specific
conceptual framework requires you to address those exception to a requirement. In such a situation, the
threats. Applying safeguards is one way that threats provision is designated with the letter “R” but uses
might be reduced. Safeguards are actions you take “may” or conditional wording.
individually or in combination that effectively reduce
threats to an acceptable level. When the word “may” is used in the Code, it denotes
permission to take a particular action in certain
Complying with the Code requires knowing, circumstances, including as an exception to a
understanding and applying: requirement. It is not used to denote possibility.
• All of the relevant provisions of a particular section When the word “might” is used in the Code, it denotes
in the context of Part 1, together with the additional the possibility of a matter arising, an event occurring
material set out in Sections 200, 300, 400 and 900 or a course of action being taken. The term does not
as applicable. ascribe any particular level of possibility or likelihood
• All of the relevant provisions of a particular section, when used in conjunction with a threat, as the
for example, applying the provisions that are set out evaluation of the level of a threat depends on the
under the subheadings titled “General” and “All Audit facts and circumstances of any particular matter,
Clients” together with additional specific provisions, event or course of action.
including those set out under the subheadings titled
“Audit Clients that are not Public Interest Entities” or Application material
“Audit Clients that are Public Interest Entities”. In addition to requirements, the Code contains
• All of the relevant provisions set out in a particular application material that provides context relevant
section together with any additional provisions to a proper understanding of the Code. In particular,
set out in any relevant subsection. the application material is intended to help you to
understand how to apply the conceptual framework
Requirements and application material to a particular set of circumstances and to understand
and comply with a specific requirement. While such
Requirements and application material are to be read application material does not of itself impose a
and applied with the objective of complying with the requirement, consideration of the material is necessary
fundamental principles, applying the conceptual to the proper application of the requirements of
framework and, when performing audit, review and the Code, including application of the conceptual
other assurance engagements, being independent. framework. Application material is designated
with the letter “A”.
Where application material includes lists of examples,
these lists are not intended to be exhaustive.
7Part 1
Complying with the code, fundamental principles and conceptual framework
100 Complying with the Code 09
110 The fundamental principles 09
Subsection 111 – Integrity 10
Subsection 112 – Objectivity 10
Subsection 113 – Professional competence and due care 10
Subsection 114 – Confidentiality 11
Subsection 115 – Professional behaviour 12
120 The conceptual framework 12
8Section 100 Breaches of the Code
Complying with the Code R100.4 aragraphs R400.80 to R400.89 and
P
R900.50 to R900.55 address a breach of
General International Independence Standards.
100.1 A1 distinguishing mark of the accountancy
A A professional accountant who identifies
profession is its acceptance of the a breach of any other provision of the Code
responsibility to act in the public interest. shall evaluate the significance of the breach
A professional accountant’s responsibility and its impact on the accountant’s ability
is not exclusively to satisfy the needs of an to comply with the fundamental principles.
individual client or employing organisation. The accountant shall also:
Therefore, the Code contains requirements (a) Take whatever actions might be available,
and application material to enable as soon as possible, to address the
professional accountants to meet their consequences of the breach satisfactorily;
responsibility to act in the public interest. and
100.2 A1 pplication material, designated with the
A (b) D
etermine whether to report the breach
letter “A”, provides context, explanations, to the relevant parties.
suggestions for actions or matters to 100.4 A1 Relevant parties to whom such a breach
consider, illustrations and other guidance might be reported include those who might
relevant to a proper understanding of the have been affected by it, a professional or
Code. In particular, the application material regulatory body or an oversight authority.
is intended to help a professional
accountant to understand how to apply the
conceptual framework to a particular set
of circumstances and to understand and
Section 110
comply with a specific requirement. While The fundamental principles
such application material does not of itself
impose a requirement, consideration of
General
the material is necessary to the proper 110.1 A1 There are five fundamental principles of
application of the requirements of the ethics for professional accountants:
Code, including the application of the
(a) I ntegrity — to be straightforward and
conceptual framework.
honest in all professional and business
R100.3 professional accountant shall
A relationships
comply with the Code. There might be (b) O
bjectivity — not to compromise
circumstances where laws or regulations professional or business judgments
preclude an accountant from complying because of bias, conflict of interest or
with certain parts of the Code. In such undue influence of others.
circumstances, those laws and regulations
prevail, and the accountant shall comply (c) Professional competence
with all other parts of the Code. and due care — to:
100.3 A1 he principle of professional behaviour
T (i) A
ttain and maintain professional
requires a professional accountant to knowledge and skill at the level
comply with relevant laws and regulations. required to ensure that
Some jurisdictions might have provisions a client or employing organisation
that differ from or go beyond those set receives competent professional
out in the Code. Accountants in those service, based on current technical
jurisdictions need to be aware of those and professional standards and
differences and comply with the more relevant legislation; and
stringent provisions unless prohibited (ii) A
ct diligently and in accordance with
by law or regulation. applicable technical and professional
100.3 A2 A
professional accountant might standards.
encounter unusual circumstances in (d) Confidentiality
— to respect the
which the accountant believes that the confidentiality of information acquired
result of applying a specific requirement as a result of professional and business
of the Code would be disproportionate relationships.
or might not be in the public interest.
In those circumstances, the accountant (e) Professional
behaviour — to comply with
is encouraged to consult with a relevant laws and regulations and avoid
professional or regulatory body. any conduct that the professional
accountant knows or should know
might discredit the profession.
9R110.2 professional accountant shall comply with
A 111.2 A1 I f a professional accountant provides a
each of the fundamental principles. modified report in respect of such a report,
return, communication or other information,
110.2 A1 he fundamental principles of ethics
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the accountant is not in breach of paragraph
establish the standard of behaviour
R111.2.
expected of a professional accountant. The
conceptual framework establishes the R111.3 When a professional accountant becomes
approach which an accountant is required to aware of having been associated with
apply to assist in complying with those information described in paragraph R111.2,
fundamental principles. Subsections 111 to the accountant shall take steps to be
115 set out requirements and application disassociated from that information.
material related to each of the fundamental
principles.
110.2 A2 professional accountant might face a
A Section 112
situation in which complying with one Objectivity
fundamental principle conflicts with
complying with one or more other R112.1
A professional accountant shall comply with
fundamental principles. In such a situation, the principle of objectivity, which requires an
the accountant might consider consulting, accountant not to compromise professional
on an anonymous basis if necessary, with: or business judgment because of bias, conflict
of interest or undue influence of others.
•O
thers within the firm or employing
organisation. R112.2
A professional accountant shall not
undertake a professional activity if a
• Those charged with governance.
circumstance or relationship unduly
• A professional body. influences the accountant’s professional
• A regulatory body. judgment regarding that activity.
• Legal Counsel.
However, such consultation does not relieve
the accountant from the responsibility to
Section 113
exercise professional judgment to resolve Professional competence and due care
the conflict or, if necessary, and unless
R113.1
A professional accountant shall comply with
prohibited by law or regulation, disassociate
the principle of professional competence and
from the matter creating the conflict.
due care, which requires an accountant to:
110.2 A3 he professional accountant is encouraged to
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(a) Attain and maintain professional
document the substance of the issue, the
knowledge and skill at the level required
details of any discussions, the decisions
to ensure that a client or employing
made, and the rationale for those decisions.
organisation receives competent
professional service, based on current
technical and professional standards
Section 111 and relevant legislation; and;
Integrity (b) A
ct diligently and in accordance with
applicable technical and professional
R111.1 professional accountant shall comply with
A
standards.
the principle of integrity, which requires an
accountant to be straightforward and honest 113.1 A1 Serving clients and employing organisations
in all professional and business relationships. with professional competence requires the
exercise of sound judgment in applying
111.1 A1 Integrity implies fair dealing and truthfulness.
professional knowledge and skill when
R111.2 A professional accountant shall not knowingly undertaking professional activities.
be associated with reports, returns,
113.1 A2 Maintaining professional competence requires
communications or other information where
a continuing awareness and an understanding
the accountant believes that the information:
of relevant technical, professional and
(a) C
ontains a materially false or misleading business developments. Continuing
statement; professional development enables a
(b) C
ontains statements or information professional accountant to develop and
provided recklessly; or maintain the capabilities to perform
competently within the professional
(c) O
mits or obscures required information
environment.
where such omission or obscurity would
be misleading.
10113.1 A3 iligence encompasses the responsibility to
D 144.1 A1
Confidentiality serves the public interest
act in accordance with the requirements of because it facilitates the free flow of
an assignment, carefully, thoroughly and on information from the professional
a timely basis. accountant’s client or employing organisation
to the accountant in the knowledge that the
R113.2 In complying with the principle of professional
information will not be disclosed to a third
competence and due care, a professional
party. Nevertheless, the following are
accountant shall take reasonable steps to
circumstances where professional
ensure that those working in a professional
accountants are or might be required to
capacity under the accountant’s authority
disclose confidential information or when
have appropriate training and supervision.
such disclosure might be appropriate:
R113.3 here appropriate, a professional accountant
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(a) Disclosure is required by law, for example:
shall make clients, the employing
organisation, or other users of the (i) P
roduction of documents or other
accountant’s professional services or provision of evidence in the course
activities, aware of the limitations inherent in of legal proceedings; or
the services or activities. (ii) D
isclosure to the appropriate public
authorities of infringements of the
law that come to light;
Section 114 (b) Disclosure is permitted by law and is
Confidentiality authorised by the client or the employing
organisation; and
R114.1 professional accountant shall comply with
A
the principle of confidentiality, which requires (c) There is a professional duty or right to
an accountant to respect the confidentiality of disclose, when not prohibited by law:
information acquired as a result of professional (i) T
o comply with the quality review of a
and business relationships. An accountant shall: professional body;
(a) B
e alert to the possibility of inadvertent (ii) To respond to an inquiry or
disclosure, including in a social investigation by a professional or
environment, and particularly to a close regulatory body;
business associate or an immediate or a (iii) T
o protect the professional interests
close family member; of a professional accountant in legal
(b) M
aintain confidentiality of information proceedings; or
within the firm or employing organisation; (iv) T
o comply with technical and
(c) M
aintain confidentiality of information professional standards, including
disclosed by a prospective client or ethics requirements.
employing organisation; 114.1 A2 In deciding whether to disclose confidential
(d) N
ot disclose confidential information information, factors to consider, depending
acquired as a result of professional and on the circumstances, include:
business relationships outside the firm
or employing organisation without •W
hether the interests of any parties,
proper and specific authority, unless including third parties whose interests
there is a legal or professional duty or might be affected, could be harmed if the
right to disclose; client or employing organisation consents
to the disclosure of information by the
(e) N
ot use confidential information professional accountant.
acquired as a result of professional and
business relationships for the personal •W
hether all of the relevant information is
advantage of the accountant or for the known and substantiated, to the extent
advantage of a third party; practicable. Factors affecting the decision
to disclose include:
(f) N
ot use or disclose any confidential
information, either acquired or received • Unsubstantiated facts.
as a result of a professional or business • Incomplete information.
relationship, after that relationship has • Unsubstantiated conclusions.
ended; and;
•T
he proposed type of communication, and
(g) Take reasonable steps to ensure that to whom it is addressed.
personnel under the accountant’s control,
and individuals from whom advice and •W
hether the parties to whom the
assistance are obtained, respect the communication is addressed are
accountant’s duty of confidentiality. appropriate recipients.
11R114.2 professional accountant shall continue to
A
comply with the principle of confidentiality
Section 120
even after the end of the relationship The conceptual framework
between the accountant and a client or
employing organisation. When changing Introduction
employment or acquiring a new client, the 120.1 he circumstances in which professional
T
accountant is entitled to use prior experience accountants operate might create threats to
but shall not use or disclose any confidential compliance with the fundamental principles.
information acquired or received as a result Section 120 sets out requirements and
of a professional or business relationship. application material, including a conceptual
framework, to assist accountants in
complying with the fundamental principles
Section 115 and meeting their responsibility to act in the
public interest. Such requirements and
Professional behaviour application material accommodate the wide
R115.1 professional accountant shall comply with
A range of facts and circumstances, including
the principle of professional behaviour, the various professional activities, interests
which requires an accountant to comply with and relationships that create threats to
relevant laws and regulations and avoid any compliance with the fundamental principles.
conduct that the accountant knows or In addition, they deter accountants from
should know might discredit the profession. concluding that a situation is permitted
A professional accountant shall not solely because that situation is not
knowingly engage in any business, specifically prohibited by the Code.
occupation or activity that impairs or might
120.2 The conceptual framework specifies an
impair the integrity, objectivity or good
approach for a professional accountant to:
reputation of the profession, and as a result
would be incompatible with the fundamental (a) Identify threats to compliance with the
principles. fundamental principles;
115.1 A1 onduct that might discredit the profession
C (b) Evaluate the threats identified; and
includes conduct that a reasonable and (c) Address the threats by eliminating or
informed third party would be likely to reducing them to an acceptable level.
conclude adversely affects the good
reputation of the profession. Requirements and application material
R115.2 hen undertaking marketing or promotional
W
activities, a professional accountant shall
General
not bring the profession into disrepute. R120.3 he professional accountant shall apply the
T
A professional accountant shall be honest conceptual framework to identify, evaluate
and truthful and shall not make: and address threats to compliance with the
(a) Exaggerated claims for the services fundamental principles set out in Section 110.
offered by, or the qualifications or
120.3 A1
Additional requirements and application
experience of, the accountant; or
material that are relevant to the application of
(b) Disparaging references or unsubstantiated the conceptual framework are set out in:
comparisons to the work of others.
(a) Part 2 – Professional Accountants in
115.2 A1 I f a professional accountant is in doubt Business (including CGMA designation
about whether a form of advertising or holders)
marketing is appropriate, the accountant is
encouraged to consult with the relevant (b) Part 3 – Professional Accountants in
professional body. Public Practice; and
(c) I nternational Independence Standards,
as follows:
(i) Part 4A – Independence for Audit and
Review Engagements; and
(ii) Part 4B – Independence for
Assurance Engagements Other than
Audit and Review Engagements.
12R120.4 hen dealing with an ethics issue, the
W •T
here might be other reasonable
professional accountant shall consider the conclusions that could be reached from
context in which the issue has arisen or might the available information.
arise. Where an individual who is a professional
accountant in public practice is performing Reasonable and informed third party
professional activities pursuant to the
accountant’s relationship with the firm, 120.5 A4 he reasonable and informed third party
T
whether as a contractor, employee or owner, test is a consideration by the professional
the individual shall comply with the provisions accountant about whether the same
in Part 2 that apply to these circumstances. conclusions would likely be reached by
another party. Such consideration is made
R120.5 hen applying the conceptual framework,
W from the perspective of a reasonable and
the professional accountant shall: informed third party, who weighs all the
(a) Exercise professional judgment; relevant facts and circumstances that the
accountant knows, or could reasonably be
(b) Remain alert for new information and to
expected to know, at the time the conclusions
changes in facts and circumstances; and
are made. The reasonable and informed
(c) Use the reasonable and informed third third party does not need to be an accountant,
party test described in paragraph 120.5 A4. but would possess the relevant knowledge
and experience to understand and evaluate
Exercise of professional judgment the appropriateness of the accountant’s
120.5 A1 rofessional judgment involves the application
P conclusions in an impartial manner.
of relevant training, professional knowledge,
skill and experience commensurate with the Identifying threats
facts and circumstances, including the R120.6 he professional accountant shall identify
T
nature and scope of the particular professional threats to compliance with the fundamental
activities, and the interests and relationships principles.
involved. In relation to undertaking professional
activities, the exercise of professional 120.6 A1 An understanding of the facts and circumstances,
judgment is required when the professional including any professional activities, interests
accountant applies the conceptual framework and relationships that might compromise
in order to make informed decisions about compliance with the fundamental principles,
the courses of actions available, and to is a prerequisite to the professional accountant’s
determine whether such decisions are identification of threats to such compliance.
appropriate in the circumstances. The existence of certain conditions, policies
and procedures established by the profession,
120.5 A2 n understanding of known facts and
A legislation, regulation, the firm, or the employing
circumstances is a prerequisite to the proper organisation that can enhance the accountant
application of the conceptual framework. acting ethically might also help identify
Determining the actions necessary to obtain threats to compliance with the fundamental
this understanding and coming to a conclusion principles. Paragraph 120.8 A2 includes
about whether the fundamental principles general examples of such conditions,
have been complied with also require the policies and procedures which are also
exercise of professional judgment. factors that are relevant in evaluating the
120.5 A3 In exercising professional judgment to obtain level of threats.
this understanding, the professional 120.6 A2 T
hreats to compliance with the fundamental
accountant might consider, among other principles might be created by a broad range
matters, whether: of facts and circumstances. It is not
•T
here is reason to be concerned that possible to define every situation that
potentially relevant information might be creates threats. In addition, the nature of
missing from the facts and circumstances engagements and work assignments might
known to the accountant. differ and, consequently, different types of
threats might be created.
•T
here is an inconsistency between the
known facts and circumstances and the
accountant’s expectations.
•T
he accountant’s expertise and experience
are sufficient to reach a conclusion.
•T
here is a need to consult with others with
relevant expertise or experience.
•T
he information provides a reasonable basis
on which to reach a conclusion.
•T
he accountant’s own preconception or
bias might be affecting the accountant’s
13 exercise of professional judgment.120.6 A3 T
hreats to compliance with the fundamental 120.8 A2 The existence of conditions, policies and
principles fall into one or more of the procedures described in paragraph 120.6 A1
following categories: might also be factors that are relevant in
evaluating the level of threats to compliance
(a) Self-interest threat – the threat that a
with fundamental principles. Examples of such
financial or other interest will
conditions, policies and procedures include:
inappropriately influence a professional
accountant’s judgment or behaviour; • Corporate governance requirements.
(b) Self-review threat – the threat that a •E
ducational, training and experience
professional accountant will not requirements for the profession.
appropriately evaluate the results of a •E
ffective complaint systems which enable
previous judgment made; or an activity the professional accountant and the general
performed by the accountant, or by public to draw attention to unethical
another individual within the accountant’s behaviour.
firm or employing organisation, on which • A
n explicitly stated duty to report breaches
the accountant will rely when forming a of ethics requirements.
judgment as part of the performing a
•P
rofessional or regulatory monitoring and
current activity;
disciplinary procedures.
(c) Advocacy threat – the threat that a
professional accountant will promote a Consideration of new information or
client’s or employing organisation’s changes in facts and circumstances
position to the point that the accountant’s
objectivity is compromised; R120.9 If the professional accountant becomes aware
of new information or changes in facts and
(d) F
amiliarity threat – the threat that due to circumstances that might impact whether a
a long or close relationship with a client, threat has been eliminated or reduced to an
or employing organisation, a professional acceptable level, the accountant shall re-
accountant will be too sympathetic to evaluate and address that threat accordingly.
their interests or too accepting of their
work; and 120.9 A1 Remaining alert throughout the professional
activity assists the professional accountant in
(e) Intimidation threat – the threat that a determining whether new information has
professional accountant will be deterred emerged or changes in facts and
from acting objectively because of actual circumstances have occurred that:
or perceived pressures, including
attempts to exercise undue influence over (a) Impact the level of a threat; or
the accountant.
(b) Affect the accountant’s conclusions
120.6 A4 A circumstance might create more than one about whether safeguards applied
threat, and a threat might affect compliance continue to be appropriate to address
with more than one fundamental principle. identified threats.
120.9 A2 If new information results in the identification
Evaluating threats of a new threat, the professional accountant is
R120.7 When the professional accountant identifies a required to evaluate and, as appropriate,
threat to compliance with the fundamental address this threat. (Ref: Paras. R120.7
principles, the accountant shall evaluate and R120.10).
whether such a threat is at an acceptable level.
Addressing threats
Acceptable level R120.10 If the professional accountant determines that
120.7 A1 An acceptable level is a level at which a the identified threats to compliance with the
professional accountant using the reasonable fundamental principles are not at an
and informed third party test would likely acceptable level, the accountant shall address
conclude that the accountant complies with the threats by eliminating them or reducing
the fundamental principles. them to an acceptable level. The accountant
shall do so by:
Factors relevant in evaluating the (a) Eliminating the circumstances, including
level of threats interests or relationships, that are creating
120.8 A1 The consideration of qualitative as well as the threats;
quantitative factors is relevant in the (b) Applying safeguards, where available and
professional accountant’s evaluation of capable of being applied, to reduce the
threats, as is the combined effect of threats to an acceptable level; or
multiple threats, if applicable. (c) Declining or ending the specific
professional activity.
14120.10 A1 Depending on the facts and circumstances, 120.12 A2 International Independence Standards set out
a threat might be addressed by eliminating requirements and application material on how
the circumstance creating the threat. to apply the conceptual framework to maintain
However, there are some situations in which independence when performing audits,
threats can only be addressed by declining reviews or other assurance engagements.
or ending the specific professional activity. Professional accountants and firms are
This is because the circumstances that required to comply with these standards in
created the threats cannot be eliminated order to be independent when conducting
and safeguards are not capable of being such engagements. The conceptual framework
applied to reduce the threat to an to identify, evaluate and address threats to
acceptable level. compliance with the fundamental principles
applies in the same way to compliance with
Safeguards independence requirements. The categories
of threats to compliance with the fundamental
120.10 A2 Safeguards are actions, individually or in
principles described in paragraph 120.6 A3
combination that the professional
are also the categories of threats to
accountant takes that effectively reduce
compliance with independence requirements.
threats to compliance with the fundamental
principles to an acceptable level.
Professional skepticism
Consideration of significant judgment 120.13 A1 Under auditing, review and other assurance
made and overall conclusions reached standards, including those by the IAASB,
professional accountants in public practice
R120.11
The professional accountant shall form an are required to exercise professional
overall conclusion about whether the skepticism when planning and performing
actions that the accountant takes, or audits, reviews and other assurance
intends to take, to address the threats engagements. Professional skepticism and
created will eliminate those threats or the fundamental principles that are described
reduce them to an acceptable level. In in Section 110 are inter-related concepts.
forming the overall conclusion, the
accountant shall: 120.13 A2 In an audit of financial statements,
(a) Review any significant judgments made compliance with the fundamental principles,
or conclusions reached; and individually and collectively, supports the
exercise of professional skepticism, as shown
(b) Use the reasonable and informed third in the following examples:
party test.
• Integrity requires the professional
Considerations for audits, reviews accountant to be straightforward and
and other assurance engagements honest. For example, the accountant
complies with the principle of integrity by:
Independence (a) Being straightforward and honest when
120.12 A1 Professional accountants in public practice raising concerns about a position taken
are required by International Independence by a client; and
Standards to be independent when
(b) Pursuing inquiries about inconsistent
performing audits, reviews, or other
information and seeking further audit
assurance engagements. Independence is
evidence to address concerns about
linked to the fundamental principles of
statements that might be materially
objectivity and integrity. It comprises:
false or misleading in order to make
(a) Independence of mind – the state of mind informed decisions about the
that permits the expression of a appropriate could of action in the
conclusion without being affected by circumstances.
influences that compromise professional In doing so, the accountant demonstrates
judgment, thereby allowing an individual the critical assessment of audit evidence
to act with integrity, and exercise that contributes to the exercise of
objectivity and professional skepticism. 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 that a firm’s or an audit or
assurance team member’s integrity,
objectivity or professional skepticism has
been compromised.
15• Objectivity
requires the professional (a) Applying knowledge that is relevant to a
accountant not to compromise professional particular client’s industry and business
or business judgment because of bias, activities in order to properly identify risks
conflict of interest or the undue influence of of material misstatement;
others. For example, the accountant
(b) Designing and performing appropriate
complies with the principle of objectivity by:
audit procedures; and
(a) Recognizing circumstances or relationships
(c) A
pplying relevant knowledge when
such as familiarity with the client, that
critically assessing whether audit
might compromise the accountant’s
evidence is sufficient and appropriate in
professional or business judgment; and
the circumstances.
(b) Considering the impact of such
In doing so, the accountant behaves in a
circumstances and relationships on the
manner that contributes to the exercise of
accountant’s judgment when evaluating
professional skepticism.
the sufficiency and appropriateness of
audit evidence related to a matter material
to the client’s financial statements.
In doing so, the accountant behaves in a
manner that contributes to the exercise of
professional skepticism.
•P
rofessional competence and due care
requires the professional accountant to
have professional knowledge and skill at
the level required to ensure the provision of
competent professional service, and to act
diligently in accordance with applicable
standards, laws and regulations. For
example, the accountant complies with the
principle of professional competence and
due care by:
16Part 2
Professional accountants In business (Including CGMA® designation holders)
200 Applying the conceptual framework – professional accountants in business
(including CGMA designation holders) 18
210 Ethical conflicts 21
220 Conflicts of interest 22
230 Inducements including gifts and hospitality 24
240 Preparing and reporting information 27
250 Educational Services 30
260 General standards / professional competence and due care 30
270 Acts discreditable / professional behaviour / confidentiality 34
280 Pressure to breach the rules / fundamental principles 38
290 Responding to non-compliance with laws and regulations (CIMA only) 39
17Section 200 Conceptual framework for
Applying the conceptual framework – members in business
professional accountants in business 200.5
Members may encounter various relationships
(including CGMA designation holders) or circumstances that create threats to the
member’s compliance with the rules and
Introduction fundamental principles. The rules, fundamental
200.1 his Part of the Code applies to “Members”
T principles and interpretations seek to address
as defined and referred to as: many situations; however, they cannot address
all relationships or circumstances that may
(a) M
embers in business (AICPA) who hold arise. Thus, in the absence of an interpretation
the CGMA credential; that addresses a particular relationship or
(b) A
ll professional accountants in business circumstance, a member should evaluate
(CIMA) including those who hold the whether that relationship or circumstance
CGMA credential (or are entitled to do would lead a reasonable and informed third
so); and party who is aware of the relevant information
(c) A
n individual who is a professional to conclude that there is a threat to the
accountant in public practice (CIMA) member’s compliance with the rules and
when performing professional activities fundamental principles that is not at an
pursuant to the accountant’s relationship acceptable level. When making that evaluation,
with the accountant’s firm, whether as a the member should apply the conceptual
contractor, employee or owner. More framework approach as outlined in this
information on when Part 2 is applicable interpretation. The conceptual framework
to professional accountants in public requires members to be alert for such facts
practice (CIMA) is set out in paragraphs and circumstances.
R120.4, R300.5, and 300.5 A1. 200.6 The CGMA Code specifies that in some
200.2
Investors, creditors, employing circumstances, no safeguards can reduce a
organisations and other sectors of threat to an acceptable level. For example,
the business community, as well as the Code specifies that a member may not
governments and the general public, subordinate the member’s professional
might rely on the work of members. judgment to others without violating the
Integrity and Objectivity Rule and Principles.
200.3 Members might be solely or jointly A member may not use the conceptual
responsible for the preparation and reporting framework to overcome this or any other
of financial and other information, on which prohibition or requirement in the Code.
both their employing organisations and third
parties might rely. Members may also carry Requirements and application material
out a range of other activities, including:
General
•P
roviding effective financial management
and competent advice on a variety of R200.7
Under the conceptual framework approach,
business-related matters. These may members shall identify, evaluate and
include forecasts, estimates, and address threats to compliance with the rules
projections and the assumptions upon and fundamental principles. Members
which they are based being transparent should evaluate identified threats both
and credible; individually and in the aggregate because
•P
roviding robust business case threats can have a cumulative effect on a
information, supporting decisions and member’s compliance with the rules and
capital allocation; and fundamental principles.
•P
roviding assessment of effective and 200.7 A1
Members have a responsibility to further the
sufficient IT controls and procedures as legitimate objectives of the member’s
part of implementing or improving financial employing organisation. The Code does not
and non-financial reporting systems. seek to hinder members from fulfilling that
200.4 member might be an employee, contractor,
A responsibility, but addresses circumstances
partner, director (executive or non-executive), in which compliance with the rules and
owner-manager, or volunteer of an employing fundamental principles might be compromised.
organisation, engaged in commerce, industry
200.7 A2
Members may promote the position of the
or service, the public sector, education, the
employing organisation when furthering
not-for-profit, or regulatory or professional
legitimate goals and objectives of their
bodies. The legal form of the relationship of
employing organisation, provided that any
the member with the employing organisation
statements made are neither false nor
has no bearing on the ethical responsibilities
misleading. Such actions usually would not
placed on the member.
create an advocacy threat.
18200.7 A3 T
he more senior the position of a member, (a) A
member has charged, or expressed an
the greater will be the ability and opportunity intention to charge, the employing
to access information, and to influence organisation with violations of law.
policies, decisions made and actions taken (b) A
member or the member’s immediate
by others involved with the employing family or close family has a financial or
organisation. To the extent that they are able another relationship with a vendor,
to do so, taking into account their position customer, competitor, or potential
and seniority in the organisation, members acquisition of the employing organisation.
are expected to encourage and promote an
(c)A member has sued or expressed an
ethics-based culture in the organisation.
intention to sue the employing organisation
Examples of actions that might be taken
or its officers, directors, or employees.
include the introduction, implementation
and oversight of: 200.7 A4 A
dvocacy threat. The threat that a member
will promote an organisation’s interests or
•E
thics education and training programs;
position to the point that their objectivity
• Ethics and whistle-blowing policies; is compromised. Examples of advocacy
• Policies and procedures designed to prevent threats include the following:
non-compliance with laws and regulations.
(a) O
btaining favorable financing or
additional capital is dependent upon the
Identifying threats information that the member includes in,
R200.8
The relationships or circumstances that a or excludes from, a prospectus, an
member encounters in various engagements offering, a business plan, a financing
and work assignments or positions will often application, or a regulatory filing.
create different threats to complying with the (b) T
he member gives or fails to give
rules. When a member encounters a information that the member knows will
relationship or circumstance that is not unduly influence the conclusions reached
specifically addressed by a rule, fundamental by an external service provider or other
principle or an interpretation, under this third party.
approach, the member shall determine
200.8 A4 Familiarity threat. The threat that, due to a
whether the relationship or circumstance
long or close relationship with a person or
creates one or more threats, such as those
an employing organisation, a member will
identified in paragraphs .07–.12 that follow.
become too sympathetic to their interests or
The existence of a threat does not mean that
too accepting of the person’s work or
the member is not in compliance with the
organisation’s product or service. Examples
rules and fundamental principles; however,
of familiarity threats include the following:
the member should evaluate the significance
of the threat. (a) A
member uses an immediate family’s or
close family’s company as a supplier to
200.8 A1 T
hreats to compliance with the rules and the employing organisation.
fundamental principles might be created by
(b) A
member accepts an individual’s work
a broad range of facts and circumstances.
product with little or no review because the
Many threats fall into one or more of the
individual has been producing an
following six broad categories: adverse
acceptable work product for an extended
interest, advocacy, familiarity, self-interest,
period of time.
self-review, and undue influence (also
referred to as “intimidation threat”). (c) A
member’s immediate family
or close family is employed as
200.8 A2 Examples of threats associated with a specific a member’s subordinate.
relationship or circumstance are identified in
the interpretations of the Code. Paragraphs
200.7 A3 – 200.7 A12 of this section define and
provide examples, which are not all inclusive,
of each of these threat categories.
200.8 A3
Adverse interest threat. The threat that a
member will not act with objectivity, because
the member’s interests are opposed to the
interests of the employing organisation.
Examples of adverse interest threats include
the following:
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