# Fundamental Principles of Professional Ethics

## The Five Principles — Quick Reference

```

I O P C P

Integrity → Objectivity → Professional Competence & Due Care → Confidentiality → Professional Behaviour

```

> Memory Aid: "I Only Practice Careful Professionalism"

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## Detailed Breakdown

### A. Integrity

Be straightforward and honest in all professional and business relationships
Implies fair dealing and truthfulness
A professional accountant shall not knowingly be associated with:
Reports, returns, communications, or other information
Where the information contains a materially false or misleading statement

> Integrity is the foundation. All other principles flow from it.

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### B. Objectivity

Do not compromise professional judgment because of:
Bias
Conflict of interest
Undue influence of others
The auditor must remain unbiased regardless of external pressures

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### C. Professional Competence and Due Care

Two sub-obligations:

Competence — Attain and maintain professional knowledge and skill at the level required to:

Ensure the client/employer receives competent professional service
Remain current with technical/professional standards and relevant legislation

Due Care — Act diligently and in accordance with applicable technical and professional standards

> Both must coexist: knowing what to do AND doing it carefully.

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### D. Confidentiality

Respect the confidentiality of information acquired through professional or business relationships
Do not disclose such information to third parties without proper authority
Exception: Disclosure required by law is permitted

> Confidentiality is not absolute — statutory obligations can override it.

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### E. Professional Behaviour

Shall not knowingly engage in any employment, occupation, or activity that:
Impairs or might impair the integrity, objectivity, or good reputation of the profession
Would be incompatible with the fundamental principles

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## Principle vs. What It Guards Against

Principle	Primary Threat It Guards Against
Integrity	False/misleading information
Objectivity	Bias, conflicts of interest, undue influence
Professional Competence & Due Care	Incompetence, negligence
Confidentiality	Unauthorized disclosure
Professional Behaviour	Actions that discredit the profession

Worked example

### Example 1

Scenario: CA Priya is auditing ABC Ltd. The CFO is her brother-in-law and personally requests her to overlook a questionable revenue recognition entry. Which principles are at risk, and what should she do?

Answer:

Objectivity is most directly threatened — the family relationship creates a conflict of interest and pressure for undue influence
Integrity is also at risk — overlooking a questionable entry would associate her with potentially misleading financial statements

CA Priya must refuse the request. If the relationship materially impairs her independence, she should consider withdrawing from the engagement. She cannot allow personal relationships to compromise professional judgment.

### Example 2

Scenario: A client asks CA Rahul to share details of another client's audit findings (which Rahul has access to due to a prior engagement) to help them in a business negotiation. Rahul sees no law prohibiting this specific disclosure. Can he share it?

Answer: No. The Confidentiality principle prohibits disclosure of information acquired through professional relationships without proper authority, regardless of whether a specific law prohibits it. The absence of a specific legal prohibition does not create permission. Proper authority would require the original client's consent. CA Rahul must decline.

### Example 3

Scenario: Identify which fundamental principle is violated in each scenario: (a) An auditor signs off on accounts he/she hasn't reviewed. (b) An auditor discloses client data to a journalist. (c) An auditor accepts a commission from a software vendor for recommending their product to audit clients.

Answer:

(a) Professional Competence and Due Care — signing without review = lack of diligence

(b) Confidentiality — unauthorized disclosure to third party

⚠️ Common exam mistakes

Listing only 4 principles and omitting 'Professional Behaviour' — all 5 must be stated in full-mark answers
Describing Objectivity as 'being independent' — objectivity is about professional judgment not being compromised by bias/conflict/undue influence; independence is a related but separate concept
Treating Confidentiality as absolute — it has an exception when disclosure is required by law (e.g., PMLA reporting obligations)
Separating 'competence' and 'due care' as two different principles — they are both sub-elements of the SINGLE principle 'Professional Competence and Due Care'
Writing that Integrity only applies to audit reports — it applies to 'all professional and business relationships' including reports, returns, communications, and other information

Reference:

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Five Fundamental Principles of Professional Ethics

Worked example

⚠️ Common exam mistakes