ICPAK AUDIT MANUAL 4. ETHICAL REQUIREMENTS AND QUALITY CONTROL IN RELATION TO AUDIT ENGAGEMENTS (INCORPORATING ISQC 1, ISA 220 AND COE) Each firm should develop policies to comply with the requirements of ISQC 1 and the COE and procedures to monitor compliance with such policies. While it is not possible to cover all the requirements of ISQC 1 and the COE within the scope of this manual, this section provides a framework which covers the key aspects of ISQC 1 and the CEO in relation to audit engagements that firms may adopt in developing their policies and procedures. The policy and procedures in relation to ISQC 1 and the CEO should be communicated to the firm's personnel and others subject to them. 4.1. Ethical Requirements in Respect to Audit Engagements ISQC 1 requires that the firm establish policies and procedures designed to provide it with reasonable assurance that the firm and its personnel comply with the relevant ethical requirements, while ISA 220 requires the engagement partner to consider whether members of the engagement team have complied with the ethical requirements. The engagement partner must remain alert to evidence of non-compliance with ethical requirements. If such matters come to the engagement partner's attention through the firm's systems or through inquiry and observation during the engagement, the partner, along with other partners, should determine the appropriate course of action. Part A and Part B of the COE establishes fundamental principles which should be followed by the firm and include: > Integrity; > Objectivity; > Professional competence and due care; > Confidentiality; > Professional behaviour; and > Independence. 4.1.1. Integrity and Objectivity Integrity implies not merely honesty but also fair dealing and truthfulness. The principle of Objectivity imposes an obligation on all professional accountants to be fair, intellectual, honest and free of conflict of interest. While it is not possible to identify all potential cases of conflict of interest, a professional accountant should be constantly conscious of and be alert to factors which give rise to such conflicts. The following are some of the situations which may impair objectivity: > Undue pressure exerted by the client or an overbearing supervisor or partner. Relationships, including family and personal, which allow prejudice, bias or influence should be avoided. Reasonableness should prevail in establishing relationships that could impair objectivity. > Accepting or offering gifts which might have a significant or improper influence on professional judgement or which bring the profession into disrepute. > Being asked to act contrary to a technical and / or a professional standard. 4. Quality Control Version 1 - 6th October 2006 1 of 10
ICPAK AUDIT MANUAL > Divided loyalty between the professional accountant's superior and a professional standard. Where ethical conflicts arise, the following should be considered: > Review the conflict with an immediate superior. If this does not resolve the issue, then go to the next higher level. Where the superior is involved in the conflict, then one should go to the next higher level. 11 If the significant