## Fundamental Principles of Professional Ethics

A professional accountant must comply with five fundamental principles at all times:

Principle	Core Requirement
Integrity	Be straightforward and honest in all professional and business relationships
Objectivity	Do not allow bias, conflicts of interest or undue influence to override professional judgment
Professional Competence & Due Care	Maintain knowledge and skill; act diligently per applicable standards
Confidentiality	Do not disclose information acquired through professional relationships without proper authority
Professional Behaviour	Comply with relevant laws; avoid actions that discredit the profession

### Mapping Scenarios to Violated Principles

#### 1. Objectivity

When violated: CA accepts appointment as auditor of a firm where their sibling/close relative is a partner.

Why: A close family relationship unduly influences the accountant's professional judgment regarding that activity.

#### 2. Confidentiality

When violated: CA shares insider information about a client with a friend.

Why: Confidentiality requires respecting information acquired through professional/business relationships; friendship is not an exception.

#### 3. Professional Competence & Due Care

When violated: CA fails to inform client about a change in laws applicable to the client.

Why: This principle requires attaining and maintaining professional knowledge to ensure clients receive competent service based on current technical and professional standards and relevant legislation.

### Confidentiality — Permitted Disclosures

Confidentiality is not absolute. Disclosure is permitted/required when:

Required by law (e.g., as evidence in legal proceedings)
Permitted by law and authorised by the client or employer
There is a professional duty or right to disclose when not prohibited by law

> Key exam point: A professional accountant in service who discloses information as mandated by law in legal proceedings does not violate the confidentiality principle.

Worked example

### Example 1

Q17/Q18 (MD 8 – 3 Marks / PYP May 24): Which fundamental principle is violated in each situation?

(1) CA accepts audit of a firm where his sister is a partner.

→ Objectivity — the sister's partnership creates a relationship that unduly influences professional judgment.

(2) CA shares insider client information with a friend.

→ Confidentiality — information acquired professionally must not be disclosed; friendship is not a valid exception.

(3) CA fails to inform client of a change in applicable laws.

→ Professional Competence & Due Care — the accountant must maintain current knowledge and proactively inform clients of relevant legal developments.

### Example 2

Q19 (PYP Sep 24 – 4 Marks): CA P, a professional accountant in service, disclosed client information as evidence in legal proceedings as required by law. Has he violated the confidentiality principle?

Answer: No. Confidentiality serves the public interest by facilitating free flow of information between the accountant and client/employer with the understanding it will not be disclosed to third parties. However, confidential information may be disclosed when required by law. Since CA P disclosed information in the course of legal proceedings as mandated by law, he has not violated the confidentiality principle.

⚠️ Common exam mistakes

Writing 'independence' or 'integrity' instead of naming the specific principle violated — examiners expect the exact principle name
Confusing confidentiality with absolute secrecy — confidentiality has well-recognised exceptions including legal compulsion
Writing 'integrity' for the 'failure to inform about law changes' scenario — the correct answer is 'Professional Competence & Due Care'
Not explaining WHY the principle is violated — exam answers require both naming the principle AND stating the obligation it imposes

Reference:

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Fundamental Principles of Professional Ethics — Objectivity, Confidentiality, Professional Competence

Worked example

⚠️ Common exam mistakes