Professional Ethics of an Auditor

A professional accountant is responsible for satisfying the needs of their clients or employers. However, their responsibility also extends toward the public. The accountancy profession requires accountants to act in the public interest. The same concept applies to auditors. In the auditing process, the professional ethics of an auditor is highly crucial to gaining public trust.

What is the Professional Ethics of an Auditor?

The professional ethics of an auditor requires them to behave and be seen to behave professionally and ethically. The purpose of audit engagements is to increase the confidence of the intended users toward the subject matter. Therefore, the users must trust the professional who provides them with assurance. In order to achieve that level of confidence, auditors must be independent of their clients.

One of the critical components of the professional ethics of an auditor is independence. It refers to having freedom from situations and relationships where their objectivity may be perceived as impaired. Since the primary duty of auditors extends toward intended users, it is crucial to act professionally and ethically. The primary benchmark for the professional ethics of an auditor comes from the IFAC code of ethics.

What is the IFAC Code of Ethics?

The International Federation of Accountants is a global accountancy profession advocacy organization. It provides a code of ethics which is a conceptual framework of the professional ethics of an auditor. This framework identifies the fundamental principles of ethical behaviour. These principles help auditors perform their work professionally and ethically.

Similarly, the IFAC Code of Ethics identifies the potential threats to compliance with these fundamental principles. Furthermore, it also provides possible safeguards to eliminate these threats or reduce them to an acceptable level. The IFAC Code of Ethics takes a principle-based approach to ethics which is more flexible. However, auditors must use their professional judgement in using the code in practical situations.

What are the Fundamental Principles of the IFAC Code of Ethics?

As stated above, one of the areas where the IFAC Code of Ethics helps auditors is the identification of fundamental principles. This code requires auditors to follow all of these principles, which include the five below.

Integrity

Integrity refers to the use of honesty and directness during their work. The code states that members should be honest and straightforward in all their professional and business relationships.

Objectivity

Objectivity deals with auditors’ independence during their work. The code states that members should not allow bias, conflicts of interest, or undue influence of others to override their professional or business judgements.

Professional behaviour

Professional behaviour refers to acting professionally during audits. The code states that members should comply with relevant laws and regulations. Furthermore, it requires them to avoid any actions that discredit the profession.

Professional competence and due care

Professional competence and due care relate to the auditor’s knowledge and performance. The code states that members should maintain professional knowledge and skill at a specific level to provide competent professional services. Members should also act diligently under applicable standards.

Confidentiality

The code states that members should respect the confidentiality of the information and not disclose it to third parties. However, they can do so if there is a legal or professional right or duty to disclose or if they have the authority. Similarly, they must not exploit their professional and business relationships for personal gains.

Conclusion

The process of audit involves providing intended users with confidence regarding the subject matter. For that, auditors must act professionally and ethically. The professional ethics of an auditor are crucial during audit engagements. The IFAC Code of Ethics identifies five fundamental principles that are critical in this regard. As mentioned, these include integrity, objectivity, professional behaviour, professional competence, and due care and confidentiality.

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