## Fundamental Principles of Professional Ethics

These five principles bind every Professional Accountant (PA) and form the ethical backbone of audit practice.

Memory Aid: I O P C P

### 1. Integrity

Be straightforward and honest in all professional and business relationships
Implies fair dealing and truthfulness
A PA must NOT be associated with any report/return that contains:
False or misleading statements
Material omissions that make the document misleading

### 2. Objectivity

Do not compromise professional or business judgment due to:
Bias
Conflict of interest
Undue influence from any party
If any circumstance is unduly influencing your judgment → do not undertake that activity

### 3. Professional Competence & Due Care

Attain AND maintain professional knowledge and skills at the required level
Act diligently in accordance with applicable technical and professional standards
Two sub-components:
Competence: having the right knowledge and skills
Due Care: applying those skills diligently in practice

### 4. Confidentiality

Maintain confidentiality of client/employing organization information
Exceptions — when disclosure may be appropriate:

#	Situation
1	Disclosure required by law
2	Disclosure permitted by law AND authorized by the client/employing organization

### 5. Professional Behaviour

Comply with relevant laws and regulations
Avoid any conduct that the accountant knows or should know might discredit the profession

Worked example

### Example 1

A CA is offered a substantial gift by a client during audit season. Accepting it may compromise Objectivity (creates undue influence over professional judgment). The CA should decline to preserve independence of mind, even if the gift is not prohibited by law — the risk of bias is sufficient to invoke the Objectivity principle.

### Example 2

During an audit, the auditor discovers that the client's MD has undisclosed income shown only in records the auditor reviewed. The Confidentiality principle applies — disclosure requires either a legal mandate (e.g., Prevention of Money Laundering Act) or the client's consent. If PMLA reporting is triggered, disclosure is permissible under the 'required by law' exception.

⚠️ Common exam mistakes

Confusing Integrity with Objectivity — Integrity is about honesty (being truthful in representations); Objectivity is about independence of mind (freedom from bias and undue influence).
Thinking Confidentiality is absolute — it has two statutory exceptions: legally required disclosure, and disclosure permitted by law with client/employer authorization.
Assuming Professional Competence only means having a qualification — it includes ongoing CPE/training to MAINTAIN skills; the 'maintain' aspect is as important as 'attain'.
Overlooking Professional Behaviour as a separate principle — it requires avoiding conduct that could discredit the profession even when the specific act may be technically legal.

Reference: Fundamental Principles — ICAI Code of Ethics / SA 200 — Overall Objectives of the Independent Auditor

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Fundamental Principles of Professional Ethics (SA-200 / ICAI Code)

Worked example

⚠️ Common exam mistakes