# Professional Ethics — Fundamental Principles
## What is Ethics?
Ethics = moral principles that govern a person's behaviour.
## Principles-Based vs Rules-Based Approach
| Aspect | Principles-Based | Rules-Based |
|---|---|---|
| Compliance with | Spirit of ethics | Strictly established rules |
| Application | Professional judgment per knowledge/skill/expertise | Narrow, rigid outlook |
| Practical situations | Adaptable | May not cover every scenario |
| Risk | Subjectivity | Spirit may be overlooked |
Conclusion: It is necessary that the spirit of the code is followed — principles-based approach is preferred for accountants.
## The Five Fundamental Principles
### 1. Integrity
- Be straightforward and honest in all professional relationships, with fair dealing and truthfulness
- Must NOT knowingly be associated with reports/info that:
- Contains materially false or misleading statements
- Contains statements provided negligently
- Omits required info in a manner that misleads
### 2. Objectivity
- No compromise of professional judgment due to:
- Bias
- Conflict of interest
- Undue influence of others
### 3. Professional Competence & Due Care
- Attain and maintain professional knowledge & skill
- Act diligently per technical and professional standards
- Diligence = carrying out the assignment carefully, thoroughly & on a timely basis
- Example of breach: Not sending an audit engagement letter
### 4. Confidentiality
- Do NOT disclose info acquired from client or employer
- Serves public interest by facilitating free flow of information
- Permitted disclosures:
- Disclosure required by law
- Disclosure permitted by law AND authorised by client/employer
- Professional duty to disclose (when not prohibited by law)
### 5. Professional Behaviour
- Comply with laws and regulations
- Avoid conduct that would discredit the profession
## Memory Aid: "IOPCP"
Integrity · Objectivity · Professional Competence · Confidentiality · Professional Behaviour