• Integrity
  This requires members not to be associated with any form of communication or report where the information is materially false, provided recklessly or incomplete.
  Potential problems with the proposed new system that will result in large cash outflow from ABC to upgrade the system has been identified. Following the IT director’s suggestion would involve ignoring the issue without a firm idea of how it will be resolved. This means that the report will be incomplete and misleading to its users.
• Objectivity
  This requires accountants to ensure that their judgment is not compromised because of bias or conflict of interest. It is likely that the director’s demands will be adhered to because failing to do that may jeopardize job career prospects. This would clearly be acting in one’s own self-interest.
• Professional competence and due care
  This requires accountants to follow all applicable technical and professional standards when providing services.
  It is clearly known that the cost-benefit analysis, when undertaken properly, shows an unfavourable results for the new IT system. Failing to use the correctly obtained result could be seen as a failure to meet professional and technical standards.
• Professional Behaviour
  This principle requires accountants to avoid any activities that might bring the profession into disrepute.
  If you are found to have knowingly misled the Board of Directors into buying a system that is not cost effective, it would clearly damage confidence in the accountancy profession.

• Conflict of interest
• Deception
• Unprofessional behaviour
• First, you have a conflict of interest as the finance director wants you to keep the takeover a secret, but you probably feel that you should tell a friend what is happening as it may affect their job.
• Secondly, the finance director is asking you to deceive your friend. Deception is unprofessional behaviour and will break your ethical guidelines. Therefore, the situation is presenting you with two conflicting demands. It is worth remembering that no employer can ask you to break your ethical rules.
• Finally, the request to break your own ethical guidelines constitutes unprofessional behaviour by the finance director. You should consider reporting him to their relevant body

• Preparing accounting records and financial statements
  There is clearly a significant risk of a self-review threat if a firm prepares accounting records and financial statements and then audits them. On the other hand auditors routinely assist management with the preparation of financial statements and give advice about accounting treatments and journal entries. Therefore, assurance firms must analyse the risks arising and put safeguards in place to ensure that the risk is at an acceptable level.
• Valuation services
  A valuation comprises the making of assumptions with regard to future developments, the application of certain methodologies and techniques, and the combination of both in order to compute a certain value, or range of values, for an asset, a liability or for a business as a whole. Audit firms should not carry out valuations on matters that will be material to the financial statements. If the valuation is for an immaterial matter, the audit firm should apply safeguards to ensure that the risk is reduced to an acceptable level.

Safeguards for preparing accounting records and financial statements include:

• Using staff members other than assurance team members to carry out work
• Obtaining client approval for work undertaken.
  Safeguards for valuation services include:
• Second partner review
• Confirming that the client understands the valuation and the assumptions used
• Ensuring the client acknowledges responsibility for the valuation
• Using separate personnel for the valuation and the audit

• Disclosure to audit committee – disclosing to the audit committee the nature and extent of the litigation
• Exclusion from audit team – removing specific affected individuals from the engagement team
• Additional reviewer – involving an additional professional accountant on the team to review work
• Resignation from engagement – if the litigation is at all serious, it may be necessary to resign from the engagement, as the threat to independence is so great.

(i) In the first situation, the fundamental principle of integrity was violated. Accountants are required to act with integrity (honesty and truthfulness) while they are performing their duties. By allowing customs official to undervalue the imports, the accountant’s behavior which can be described as bribery of an official and cheating of the state pointed to his dishonesty.
(ii) The second situation was an issue of confidentiality. Any information that is withheld from the public during a bidding process is supposed to be kept as a secret. Revealing this information to anyone who is not supposed to have it violates the fundamental principle of confidentiality.
(iii) The CEO’s refusal to disclose information relating the court suit violates the principle of disclosure. Governance regulations and codes require that organisations make disclosures about the board, internal control reviews, going concern status and relations with stakeholders.

Fundamental ethical principles
In the first instance, the ethical issue at stake is integrity. Integrity ensures that professional accountants are straightforward and honest in all professional and business relationships. It also implies that accountants fair dealing and truthfulness. In this regard, presenting wrong or erroneous information that can misinform and mislead management will be a breach of the accountant’s integrity.

While you, as a professional accountant, may have time to include the information in the management accounts, it is unlikely that you will be able to check its accuracy as well since you are constrained with time. Therefore, you risk misinforming the finance director of the month’s sales which will constitute a breach of integrity.

In the second instance, the ethical issues at stake are professional competence and due care. Accountants have a continuing duty to maintain professional knowledge and skill at a level required to ensure that clients or employers receive competent professional service. It is expected of professional accountants to act diligently in accordance with applicable technical and professional standards when providing professional services.

With reference to the scenario, unless the employee is a tax expert, it is unlikely that he would have sufficient competence to calculate the tax liabilities. Providing financial advice may be a minefield, and one may need to be qualified under the financial services regulations before one could do so.
Even if the employee did have the required competence, it is probable that he could not offer due care as any advice he gives would be on-the-spot, and thus not have been able to look into the matter in enough detail.