## Fundamental Principles of Professional Ethics

There are five fundamental principles governing professional ethics for Chartered Accountants. Two key principles covered here:

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### 1. Professional Behaviour

Requirement: Comply with relevant laws and regulations and avoid any conduct that the accountant knows or should know might discredit the profession.

A professional accountant shall not knowingly engage in any employment, occupation, or activity that:

Impairs or might impair the integrity, objectivity, or good reputation of the profession, or
Is otherwise incompatible with the fundamental principles

Examples of violation:

Ignoring letters/communications from ICAI despite reminders
Behaving in a manner unbecoming of a CA in professional or public life

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### 2. Confidentiality

Requirement: Respect the confidentiality of information acquired as a result of professional or business relationships. Do not disclose to third parties without proper authority.

Why it matters: Confidentiality serves the public interest by facilitating the free flow of information from client to accountant, with the understanding it stays protected.

#### Permitted Exceptions — When Disclosure is Allowed:

Basis	Description
Required by law	Court proceedings, regulatory mandates
Permitted by law AND authorised by client/employer	Voluntary disclosure with permission
Professional duty or right	When not prohibited by law

For accountants in service: Must be alert to the possibility of inadvertent disclosure of information outside the employing organisation.

Worked example

### Example 1

Scenario (MD 1 – 3 Marks): CA Tripad conducted an audit of an entity. ICAI sent a letter to him regarding certain matters concerning the audit. Despite reminders, he did not reply. Which fundamental principle has been violated?

Answer: The principle of Professional Behaviour has been violated. Failure to respond to communications from the professional body (ICAI) demonstrates lack of courtesy and professional responsibility. A Chartered Accountant must not engage in conduct that discredits the profession — ignoring the regulator despite repeated reminders constitutes such conduct.

### Example 2

Scenario (MD 3 – 4 Marks): CA P, a professional accountant in service, was required to divulge information and documents as evidence in the course of legal proceedings, as required by law. Has CA P violated the principle of confidentiality?

Answer: No, CA P has not violated the confidentiality principle. While confidentiality requires protecting information acquired through professional relationships, one of the recognised exceptions permits (and in this case, requires) disclosure when required by law. Since disclosure was made in the course of legal proceedings as legally required, CA P's actions are fully justified. CA P is not responsible for any violation of the confidentiality principle.

⚠️ Common exam mistakes

Treating court-ordered disclosure as a violation of confidentiality — it is an explicit permitted exception (required by law)
Listing only one exception to confidentiality — there are three distinct grounds (required by law; permitted by law + authorised; professional duty)
Confusing 'Professional Behaviour' (not discrediting the profession) with 'Integrity' (straightforwardness and honesty) — they are distinct principles
Not recognising that ignoring communications from ICAI violates the professional behaviour principle

Reference:

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Fundamental Principles of Professional Ethics — Professional Behaviour and Confidentiality

Worked example

⚠️ Common exam mistakes