Section 1- Definitions
1. The Statue :
GCCAAO statute issued in the 19th
session held in Abudhabi during the period
2.
The committee :
Professional ethics committee.
3. The organization :
GCCAAO
4. Code of ethics and professional conducts a group of principles representing ethical values and considered as ideal measurements for professional conduct , and group of rules representing behavioral characteristics that member should possess when practicing his work and dealing with his professional fellows, clients or others.
5. Member :
Any natural person possessing GCCAAO membership.
6. Member in practice :
Any member licensed to practice the accounting and auditing profession in one or more of GCC countries.
7. Firm :
Any artificial person (individual or company) licensed to practice the accounting and auditing profession in one or more of GCC countries.
8. Client :
Any person, natural or artificial – whether profit or non-profit – that engages a member in practice to perform professional service.
9.
Financial statements :
Financial information s derived from the client's accounting records, presented in a form that reflects its financial position on specific date and the results of its work, cash flows, and change in equity.
During specific period of time, in accordance with generally accepted accounting standards.
10. The accounting and auditing profession the profession :
The group of philosophically and practically correlated services rendered by members in practice including , as example :
Auditing :
Reviewing financial statements prepare by the entity in accordance with auditing standards approved by GCCAAO for the purpose of expressing on opinion whether the financial statements present fairly the financial position of the entity on a specific date and the results of its work and its cash flows during a specific financial period.
Consulting services :
It aims to assist clients with respect to their business activities, whether management, financial or others.
10.3 Accounting services :
Aims to assist the entity in measuring financial events and circumstances, including maintaining complete records for its operations and also measurement results in the form of financial reports to be submitted to the related users.
10.4 Zakat and tax :
Aims to provide advice to client with respect to Zakat and tax and related planning, and assist the client in computing Zakat and tax base and completing necessary legal requirements.
11. Interpretations :
Opinions issued by committee to detail, clarify, or explain the rules of ethics and professional conduct, which will assist in understanding and proper application of those rules.
12.
Opinions issued by the committee about the extent of compliance of members practice with the code of ethics and professional conduct
Section
2 : Preface
1.
Introduction :
The main function of audit is give confidence to the informations provided in financial statements . These informations assist decision makers in assessing the various principles , expected return, costs and risks, which will enhance the effectiveness of individuals, projects, markets and governments in allocating scarce resources.
In recognition of this role and to realize their mission, the member banded themselves by a group of principles and conduct rules that govern their work, in excess of the regulatory requirements imposed by government and at same time add an ethical dimension to those requirements. These principles and rules are entitled code of ethics and professional conduct and aims to raise status of the profession, improve member performance and acquire public confidence .
Members compliance with these rules indicates that the profession recognizes its responsibilities towards the public, clients and professional colleagues. Their acceptance to the ethical conduct rules, during performance of their professional duties, shall lead to enhancement of the profession status and to acquiring public trust. This code of ethics id divided in to two groups : the principles and the rules.
The principles provided the framework for the rules. These principles and behavior rules are supported by a group of ethical values such integrity, objectivity, independence, due care and unswerving commitments to honorable behavior, even at the Sacrifice of personal advantage . However, these principles and ethical value included in the profession’s code of conduct is not a new innovation , in facts it represents true Islamic values originated from the holey Koran and Suna and called fro by Islamic principles . The honorable behavior called for by Islam included true testimony , integrity, fairness , faith fullness, avoiding false testimony, avoiding concealment of facts, and avoiding prejudice, Islam emphasized its sublime mission which was stated by prophet Mohmed, God’s blessing and peace be upon him, when he said “ Iam dispatched to complete high moral standards”. Definitely the ethical rules and principles imposed by the profession on its members represents a very small part of those morals called for by Islam, therefore, these ethical rules and principles are strongly required because they are imposed by religion in addition of being imposed by the profession.
The space is not roomy enough for listing the Islamic teaching’s that urge and obligate Muslims to adhere to honorable morals, however we provide some examples to show how Islamic principles emphasize on moral behavior.
In
regard of responsibility, Islam required any worker, before being responsible
towards the public the profession and the clients, to remember that he is at first responsible in front of
God to when be ascribed all perfection and majesty. This can not be completed
unless the Moslem believes that God will hold him responsible for any part of
his work , as Allah said “ Then shall anyone who has done an atom’s weight of
good, sect it. And any one who has done an atom’s weight of evil, shall see
it.” (A yats 7 and 8 of
With regard, of carrying out responsibility , Islam connected integrity with, strength when performing work, which requires members in charge of professional responsibility to have efficiency and capacity. All said “truly the best of men for these to employ is the (man) who is strong and trusty”.
(Ayah
26,
With
regard to true testimony, may Ayats were provided such as “whenever you speak,
speak justly , even if a near relative is concerned…” (Ayah 52,
“O ye who believe stand out firmly for justice, as witness to Allah, even as against yourselves, or your parents, or your kin, and whether it be (against) rich or poor; for Alla can best protect both.(Ayah 135, surat An – Nisa).
Integrity is a component of the Islamic personality is unique characteristic of profession work and is one of the characteristics from which the public derives confidence in the profession. Integrity requires the member to be fair and truth ful, and also means any noble behavior and non-violation of such morals for personal advantage or benefit. Integrity can accommodate the in adverted error and the honest difference of opinion; it can not accommodate deceit or subordination of principles.
In
these meaning many Ayats and Hadiths were provided such as “Therefore stand
firm (in straight path) as thou art commanded, thou and those who with these
turn (unto allah)….” (Ayah 112,
In
regard of controlling inclinations, swerve and affectation, Alla Said “Follow
not the lusts (of your hearts ) , lest ye swerve , and if ye distort (justice)
or decline to do justice, verily Allah is well – acquainted with all that ye
do. “(Ayah 135,
In
regard of betraying entrustment, Allah said “O ye that believe, betray not the
trust of Allah and the Messenger, nor misappropriate knowingly things entrusted
to you.” (Ayah 27,
In
regard of truthfulness, Allah said “O. ye who believe, fear Allah and be with
those who are truthful. “Ayah 119,
On
the other hand , lying leads immorality and immorality leads hell. The man
continues lying until being written with Allah as untruthfully.” In regard of
avoiding concealment of evidence, Allah said “ Conceal not evidence, for
whoever conceals it, his heart is tainted with sin …..” (Ayah 283,
In
prohibiting frand, Allah said “ Woe to those that deal in frand. These who, when
they to receive by measure from men, exact full measure. But when they haveto
give by measure or weight to men, give less than due.” (Ayat 1,2,3
The prophet, God’s blessing and peace upon him, said ?Any one who takes up arms against us or who cheats us, is not one of us.”
2. Code of ethics and professional conduct and its relation with other professional standards it included an approach indicating the base of principles in the light of which the rules are prepared and the relation between these principles and Islamic values, and principles supported by a group of ethical values that are considered as ideal measures for professional conduct governing the frame work for the rules, and rules consisting of a group of behavior characteristics that the member is required to have at minimum.
Code of ethic and professional conducts and other professional standards are correlated and integral to each other. In most instance , rules are integral and interpreting to the general provisions of professional standards. The provisions, provided in general in auditing standards , such as independence will have detailed provisions set up by the code of ethics and professional conduct. Also, the code of ethic and professional conduct includes detailed provisions for certain subjects usually not addressed by the standards such as commissions and advertizmetn.
Section 3 : Principles
In carrying out their responsibilities, members should exercise sensitive professional and moral integuments in all their activities. The member have significant responsibilities to those who use their services and to the public as a whole, due to their essential role in society. Members also have a continuing responsibility to cooperate with each other to improve their performance , maintain the public's confidence, carry out the profession's special responsibilities for self – governance and maintain and enhance the tradition of the profession.
The public interest :
Members should perform their works in a way that maintain the public interests, honor the public trust, and demonstrate commitment to professionalism . A distinguishing mark of the profession is acceptance of its responsibility to the public which consist of clients, credit grantors, government organizations , employers, investors, businessmen, and others who rely on the objectivity and integrity of members. This reliance impose a public interest responsibility on members. All who accept membership in the GCCAAO commit themselves to honor the public interest and should seek continually to demonstrate their dedication to professional excellence in order to main the public trust in the profession.
In discharging their professional responsibilities , member may encounter conflicting pressures from among from the groups using their services. In solving those conflicts, members should act with integrity, objectivity and due care to provide quality services in accordance with the code of ethics and against fees that are consistent with the effort made.
Generally, member responsibility is not limited only to satisfying the needs and requirements of the client or employer, but go further to achieve the public interest as it is one of the basic principles that identify professional behavior.
Integrity
:
Integrity requires a member to be, among other things, honest and conduct when performing his duties. He should maintain client confidentiality, and should not subordinate public interest to personal given and advantage. He should observe both the form and the sprite of technical and ethical standards, circumvention of those standards constitutes subordination of judgment – Integrity can accommodate the inadvertent error and honest difference of opinion, it can not accommodate deceit or subordination of principles.
Integrity
is measured in terms of what is right and just. In the absence of specific
rules, standards or guidance's, or in the face of conflicting opinions, a member should test
decisions and deeds by asking "" Am / doing what a person of
integrity would do? "
Objectivity
and independence :
Objectivity and independence lends value to a member's service. It is a distinguish feature of the profession. The principle of objectivity imposes the obligation to be impartial, intellectually honest, and free of conflicts of interest. Member shall avoid relations that may appear to impair his objectivity and independence in rendering his professional services.
Members often render different services to their clients such as expressing an opinion, services related to Zakat and tax, and management advisory services. Other members prepare financial statements in the employment of others, perform internal auditing services, and serve in financial and management capacities in different forms of entities. They also educate and train those who aspire to admission into the profession. Regardless of service or capacity, members should protect the integrity of their work, maintain objectivity , and avoid any subordination of their judgment.
For member in public practice , in addition to the above , he should continually assess his relations with clients and his public responsibility. Such a member who provides auditing services should be independent in fact and appearance. In providing all other services , a member should maintain objectivity and avoid conflicts of interest.
Although members not in public practice can not maintain the appearance of independence , the never the less have the responsibility to maintain objectivity in rendering professional services.
Members employed by others to prepare financial statements or perform auditing , tax, or consulting services are charged with the same responsibility for objectivity as members in public practice and must be scrupulous in their application of generally accepted accounting principles and candid in all their dealings with members in public practice.
Due
Care :
A member should observe the profession's technical and ethical standards strive continually to improve competence and quality services, and discharge professional responsibility to the best of the member's ability. The quest for excellence is the essence of due care. Due care requires a member to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a member's ability with concern for the best interest of those for whom the services are performed and consistent with the profession's responsibility to the public.
Competence is derived from a synthesis of education and experience. It begins with a mastery of the common body of knowledge required for designation as a certified public accountant. The maintenance of competence requires a commitment to learning and professional improvement that must continue throughout a member's professional life. It is a member's individual responsibility. I all engagements and in all responsibilities , each member should undertake to achieve a level of competence that will assure that the quality of member's services meets the high level of profession required by these principles. A member shall not accept any engagement unless he is able to perform it in the adequate level of competence and diligence.
Competence represents the attainment and maintenance of a level of understanding and knowledge that enables a member to render services with facility and acumen. It also establishes the limitations of member's capabilities be dictating that consultation or referral may be required when a professional engagement exceeds the personal competence of a member.
Each member is responsible for assessing his competence – of evaluating whether his education, experience , and judgment are adequate for the responsibility to be assumed. Members should be diligent in discharging responsibilities to clients, employers, and the public. Diligence imposes the responsibility to render services promptly and carefully, to be thought, and observe applicable technical and ethical standards.
Due care requires a member to plan and supervise adequately any professional activity for which he is responsible.
Scope
and nature of services :
A member in public practice should observe the principles of the code of professional conduct in determining the scope and nature of services to be provided. The public interest requires professional services provided by members to be consistent with acceptable professional behavior. Integrity requires that service and the public trust not be subordinated to personal gains and advantage. Objectivity and independence require that member be free from conflicts of interest in discharging professional responsibilities. Due care requires that services be provided with competence and diligence. Each of these principles should be considered by members in determining whether or not to provide specific services in individual circumstances. No hard – and – fast rules can be developed to help members reach these judgments, but they must be satisfied that they are meeting the sprit of the principles in this regard.
In order to accomplish this , members should :
- Practice in firms that have in place internal quality – control procedures to ensure that services are competently delivered and adequately supervised.
- Determine , in their individual judgments , whether the scope and nature of other services provided to an audit client would create a conflict of interest in performance of the audit function for that client .
- Before starting any activity assess, in their individual judgments , whether such activity is consistent with their role as professionals, or reasonable continuation or an extension or development of existing services provided by the member or other in the profession.
Objective of
the profession :
The profession aims to perform the duties and professional services to the highest level of professionalism in accordance with the code of professional conduct. These objectives require four basic needs to be met :
· Credibility :
Means credibility in informations provided by a member.
· Professional conduct :
There is a need for individuals who can be clearly identified by clients , employers and other interested parties as professional persons in the accountancy field.
· Quality of services :
There is a need for assurance that all services provided by member in public practice are carried out to the highest standards of performance.
· Confidence :
Users
of services provided by a member should be able to feel confident that there
exists a framework of professional ethics which governs the provision of those
services .
Section 4 – Rules
A member in public practice shall be independent in the performance of professional services as required by applicable regulations bylaws, and professional rules and standards promulgated by GCCAAO.
It is impossible to enumerate all circumstances in which independence may be impaired, therefore member in public practice should consider whether personal and business relationships between the member and the client or an individual associated with the client may impair the independence of a member in public practice , in the performance of professional services.
Independence shall be considered to be impaired if , for example, a member audited the accounts of companies or entities in which he has any direct or indirect interest or with which he has relations of significant influence on his independence, particularly the following :
1. Companies and entities in which the member in public practice or one of his partners or one of his employees in the firm, is a partner or a relative to second degree of a founder, of a board member, or of an employee in a position of influence on the audit engagement.
2. Companies and entities in which the member in public practice , one of his partners, or one of his employees in the firm, is a partner of a partner, a key position employee, or a board member in that company.
3. Companies and entities in which the member is a board member or if he has contributed in its foundation.
4. Companies and entities in which the member in public practice or one of his colleagues in the firm, his a significant investment during his auditing period.
5. Companies and entities in which the member in public practice, is a partner of one of its employees or of one of its main partners or of the company itself.
6. Companies and entities in which the member in public practice is a trustee or an administrator of estate sharing in those companies and entities.
7. Companies and entities in which one of the former partners of the member, is a manager, a board member or an employee in a position that influence the audit engagement.
8. Companies and entities, where the member in public practice has obtain loan form it, one of its managers, one of its board members, or a significant stakeholder except :
- Loans obtained from lending governmental financial institutions.
- Loans from other financial entities, fully secured.
9. Companies with business activities similar to that of the companies in which the member in public practice is a board member.
10. Companies and entities with which the member in public practice conduct joint business activities.
11. Companies and entities in which the member in public practice was a key position employee during the auditing period.
12. Companies and entities in which the member in public practice is likely to work in the future.
13. Companies and entities, between which and the member in public practice there are actual or threatened litigation.
Member in public practice may audit the above companies in which has financial interests provided to dispose these interest before accepting the audit engagement.
Interpretations
of independence rule :
1.1
Due to continuous economic developments and rapid change in information technology , it is difficult environment the conditions and circumstances where a member who perform an audit engagement for a client may also perform other non-audit services for that client without impairing his independence.
Generally a member in public practice who performs audit services for a client may also perform other non-audit services for that client provided that his independence is not impaired. Therefore the member must evaluate the effect of such services on his independence. If there is significant influence on independence , the member should not perform those services unless precautionary measures were applied to minimize the influence.
Before performing other services, the member should establish an understanding with the client regarding the objectives of the engagement, the services to be performed, management's responsibilities, the member's responsibilities, and the limitations of the engagement. It is preferable that this understanding be documented in an engagement letter.
In particular, car should be taken not to perform management functions or make management decisions for the client, the responsibility for which remains with the client's board of directors and management.
The following are examples of some general activities that would be considered to impair a member's independence :
1. Authorizing, executing or consummating a transaction, or otherwise exercising authority on behalf a client.
2. Determining which recommendations of the member should be implemented.
3. Reporting to the board of directors on behalf of management.
4. Having custody of client assets.
5. Supervising client employees in the performance of their normal recurring activities.
6. Preparing source documents or originating data, in any form, evidencing the occurrence of a transaction or performing any work that may influence the audit engagement.
7. Advocating the client's opinions before the professional or litigation authorities.
In all circumstances and if there is a matter that may impair independence, member in public practice must use his professional judgment to identify necessary precaution measurements that minimize the influence to acceptable level. If precaution measurements are not available, then the only solution for the member is to dispose the service or interests, or rejecter discontinue performance of services.
Rule
No 2:
In the performance of any professional services, a member shall maintain objectivity and integrity , shall subordinate his judgment to others.
Interpretations
under Rule No. 2 – Integrity and Objectivity :
Knowing misrepresentations in the preparation of financial statements or records. A member shall be considered to have knowingly misrepresented facts in violation of rule No.2 when he knowingly.
a. Makes , or permits or directs another to make, materially false and misleading entries in an entity's financial statements or records.
b. Fails to correct an entity's financial statements or records that are materially false and misleading when he has the authority to record an entry, or
c. Signs, or permits or directs another to sign, a document containing materially false and misleading information.
Conflicts of interest. A conflict of interest may occur if a member performs a professional service for a client and the member or his firm has a relationship with that could , in the member's professional judgment, be viewed by the client, as impairing the member's objectivity. If the member believes that the professional service can be performed with objectivity, and the relationship is disclosed to and consent is obtained from such client the rule shall not operate to prohibit the performance of the professional service.
Subordination of judgment by a member. Rule No. 2 prohibits a member from knowingly misrepresenting facts or subordinating his judgment when performing professional services. Under this rule, if a member and his supervisor have a disagreement or dispute relating to the preparation of financial statements or the recording of the transactions, the member should take the following steps to ensure that the situation does not constitute a subordination of judgment.
1. The member should consider whether the entry to record a transaction in the records, or the preparation the financial statements, as proposed by the supervisor, represents the use of an acceptable accounting method and does not materially misrepresent the facts. If after appropriate research or consultation, the member concludes that the matter has authoritative support and / or does not result in a material misrepresentation, the member need do nothing further.
2. If the member concludes that the financial statements or records could be materially misstated, the member should make his concerns known to the management. The member should consider documenting his understanding of the facts, the accounting principles involved, the application of those principles to the facts, and the parties, with whom these matters were discussed.
3. If, after discussing his concerns with the management the member concludes that appropriate action was not taken, he should consider his continuing relationship with the employer. The member also should consider any responsibility that may exist to communicate to third party.
Professional services involving client advocacy :
If a member performed professional services involving client advocacy such as acting as an advocate for the client with respect tax and similar services, the member shall perform these services in compliance with Rule N.4 (general standards), Rule No.3 (compliance with standards) and Rule No.5 (Accounting standards). Furthermore , the member shall comply with Rule No.3 which requires maintaining objectivity and integrity and prohibits subordination of judgment to others and that member shall not knowingly misrepresent information.
Rule
No.3 Compliance with standards :
A member who performs auditing, accounting, consultations , Zakat and income, or any other professional services shall comply with standards of the profession and the country's laws and regulations governing those services, and shall justify and departure from those standards.
Rules
No. (4) : General standards
A member shall comply with the professional standards and with any interpretations therefore by the competent authority, particularly the following :
A. Professional competence. Undertake only those professional services that the member member's firm can reasonably expect to be completed with professional competence.
B. Due professional Care. Exercise due professional care in the performance of professional services.
C. Planning and supervision. Adequately plan and supervise the performance of professional services.
D. Sufficient relevant Data : Obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed.
Rules
No. (5) : Accounting Principles :
01 Rule 203 – Accounting principles. A member shall not express an opinion or state affirmatively that the financial statements of any entity are presented in conformity with generally accepted accounting principles promulgated if such statements contain any departure from principles that has a material effect on the statements taken as a whole. If, however, the statements contain such a departure and the member can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading the member can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading the member can comply with the rule by describing the departure, its approximate effects, if practicable, and the reasons describing the departure, its approximate effects, if practicable, and the reasons why compliance with the principle would result in a misleading statement.
Rules
No. (6) : Zakat and Tax services :
A member in public practice who prepares or assists in preparing Zakat liability and tax return for a client shall advice the client that the responsibilities for the content of the liability and return rests primarily with the client.
He shall also take necessary steps to ensure that the liability or return is properly prepared. He shall not associate his name with any liability return or other data submitted to the concerned authorities if he believes that it contains false or misleading statement, contains statements or information furnished recklessly or without any real knowledge of whether they are true , or omits or obscures inform required to be submitted and such amission or obscurity would mislead the concerned authority.
A member in public practice who renders professional tax services is entitled to put forward the best position in favor of his client provided the service is rendered with professional competence, dues not in any way impair integrity and objectivity, and in the option of the member consistent with tax regulations (law).
Rule
No. 7 Association of member's name with the financial statements :
With consideration of audit standards a member in public practice shall enclose with any financial statement or information with which is name is associated a report showing clearly the kind of service he rendered and the extent of his responsibility.
Rule
No. 8 Confidentiality :
A member shall not disclose , use to his own advantage or the advantage or the advantage of a third party, any information that comes to his attention in carrying out his professional work, without the specific consent of the client.
This rule shall not be construed to relieve a member of :
1. His obligation to comply with technical standards and audit and accounting standards mentioned in Rules (3 and 5).
2.
His obligation to comply with any
requirements issued litigation authorities.
3.
His obligation to comply with applicable laws and government
regulations.
4.
His obligation to comply with the
requirements of GCCAAO quality review program.
This rule shall not preclude a member from initiating a compliant with, or responding to any inquiry made by a duly constituted investigative body, in accordance with the regulation and code of professional conduct.
Members working in the quality review program or of the investigative body shall not use to their advantage nor disclose any member's client information that comes to their attention.
Rule
No. 9 : Fees and Contingency Fees :
Fees shall be proportional to time spent and effort made in rendering the service by the member in public practice. Professional services should not be offered or rendered to a client under an arrangement whereby no fee will be charged unless a specific finding or result is obtained or when the fee is otherwise contingent upon the findings or results of such services.
Fees should not be regarded as being contingent if fixed by a court or other public authority.
Rule
No. 10 : Competition on fees :
A member in public practice shall not negotiate, directly or indirectly, with clients to acquire a work hitherto carried out by another colleague. However member in public practice has the right to accept providing service to the one asks him to do so. Consequently, if he is asked to replace another colleague in auditing the accounts of an entity, he should comply with applicable auditing standards.
Member in public practice is prohibited to compete with another colleague, by offering or accepting conderably lower fees, in order to acquire a work hitherto carried out by the latter, without acceptable reason.
Rule No. 11 : Communication with Predecessor auditor :
Upon the client's permission , a member in public practice request by a client to audit his accounts shall ask the predecessor colleague to provide information on any professional reason which should be known before deciding whether or not to accept the appointment, and the later shall provide him , within a reasonable period of time , with any clarifications needed.
Rule
No. 12 : Good Conduct :
The member shall refrain from any conduct which might bring discredit to his reputation, the reputation of the profession, and his relation with professional colleagues.
Interpretations
under Rule No. 12 : Good conduct :
12.1 Knowing misrepresentations in the preparation of financial statements or records. A member shall be considered to have when he knowingly :
1. Makes, or permits or directs another to make, materially false and misleading entries in a client's financial statements or records.
2. Fails to correct a client's financial statements or records that are materially false and misleading when he has the authority to do so.
3. Signs, or permits or directs another to sign a document containing materially false and misleading information.
12.2 Retention of client records. Retention of client records after a demand is made for them is an act discreditable to the profession in violation of rule No.12 .
A client's records are any accounting or other records belonging to the client that were provided to the member by or on behalf of the client. If an engagement is terminated prior to completion, the member is required to return only client records.
A member's work papers – including, but not limited to, analyses and schedules prepared by the client at the request of the member – are the member's property, not client records, and need not be made available.
In some instances a member's work papers contain information that is not reflected in the client's books and records, with the result that the client's financial information is incomplete. This would include, for example, (1) adjusting, closing , combining or consolidating journal entries. In those instances when an engagement has been completed, such information should also be made available to the client upon request. The information should be provided in the medium in which it is requested , provided in exists in that medium. The member is not required to covert information that is not in electronic format to an electronic form. The member may require that all fees due the member, including the fees for the above services, be paid before such information is provided.
Rule No. 13 : Advertising and Publicity : A member in public practice shall not seek to obtain clients by advertising or other forms of solicitation in a manner that is false, misleading, or deceptive. A member may inform the public of the professional services the renders provided that , his aim is at inform the public in an objective manner . Such advertisement should be decent honest, truthful and in good taste. Solicitation by the use of coercion, over-reaching , or harassing conduct is prohibited.
Interpretations
under Rule No. 13 : Advertising and Publicity :
Examples of prohibited acts in advertising or solicitation. Advertising or other forms of solicitation that are false, misleading or deceptive are not in the prohibited and are prohibited. Such activities include those that:
1. Imply to existing or prospective clients, the ability to influence any court, tribunal, regulatory agency, or similar body or official.
2. Contain a representation that specific proposed professional services will be performed for a stated fee, estimated fee or fee range when it was likely at the time of the representation that such fees would be substantially increased and the prospective client was not advised of that likelihood.
3. Contain exaggerated claims for the services they are able to offer, the qualifications they possess, or experience they have gained, and do not denigrate the work of other colleagues.
4. Contain testimonials or endorsements, form clients or any other parties.
Engagements obtained through efforts of a third party.
When a member obtains an engagement thought efforts of a third party , the member has the responsibility to ascertain that all promotional efforts are within the bonds professionally accepted. The member must not do through others what they are prohibited from doing themselves.
Rule No. 14 : Commissions and Referral fees
:
A member in public practice is prohibited to pay a commission to obtain a client nor to accept material gifts for him or for his assistants. Also he should not accepts a commission for recommending others to purchase the products of one of his clients a member in public practice may accept or pay referral fees provided such reference is between the member's firm and other firms cooperating with and shall disclose such acceptance or payment to the client .
Article
No. 15 : name and activity of the firm :
A member may practice public accounting only under the provisions of GCC statute and its executive bylaws, professional standards and rules promulgated by GCCAAO and rules and regulations issued by countries in which the profession is practiced. A member in public practice shall not work under a firm name not approved the competent authority, refer to specialization or give untrue information about the form of firm
A member may practice the accounting and auditing profession as an owner or partner in a professional firm. Names of one or more past owners may be included in the firm name, unless the firm is owned by a individual, where he will practice under his own name.
The member shall comply with technical standards and applicable regulations with respect to the form and appearance of the firm name plate. A member in public practice shall never refer to firm relation with international professional firms unless there is an actual , not only formal, correlation.
Rule
No. 16 : Clients Monies :
A member in public practiced entrusted with monies belonging to clients should :
1. Keep such money separately from personal or firm monies.
2. Use such money only for the purpose for which they are intended and according to the client's instructions.
3. At all time, be ready to account for those monies to any person entitled to such accounting.
4. Maintain records for clients' monies, indicating transactions made in general and for each client in particular.
5. The report shall provided to the client about his money , at least yeasrly.
Rule No. 17 : Performing other works :
A member in public practice may perform others works that are compatible with the code of ethics and professional conduct, provided that:
1. Those works are complementary to the nature of his work such as study evaluation financial , accounting and management consultations and works of consultation nature , provided not to perform these works for an audit client on the same time if it has effect on his independence.
2. Performance of such work has no effect on member's integrity, objectivity , independence or compliance. With the code of ethics and professional conduct.
3. Those works are non-professional economical activities such as holding of securities, acquiring farms and estate, and entering in partnerships, provide to comply with the following :
3.1 Designate a management level individual to be responsible for overseeing the services being provided.
3.2 Disclose the nature of his activity to his clients by informing them of his partnerships, providing the Ministry of Commerce with the kinds of activity , his partnerships, names of his partners, and provide GCCAAO with a copy of these information.
Part (2)
Comparative Analytic Study
Study Methodology and Stages
In order to realize the objective of the study which is the review, development, preparation, and approval of the code of Ethics and professional conduct in GCC countries, a plan is prepared including the sub-stages :
First
stage : Collection of data
Second
stage : Tabulation
Third stage : Analysis and comparison
Fourth stage : Recommendations
First
stage : Collection of data :
During this stage, all documents and regulations related to code of ethics and professional conduct in GCC countries were enumerated . These documents and regulations may be identified according to the following schedules .
Schedule
No. 1
|
Country |
Title
of document |
Kind
of document |
Date
of issue |
|
U.A.E |
1. Audirot's law 2. Executive by law of auditor's law |
Federal law No. 22 and its amendments resolution
No. 49 issued by the Minister of Economic and Commerce |
1995 1996 |
|
|
1. Auditor's law 2. Statute of |
Royal decree. Professional regulations Ministerial resolution
|
1996 1986 |
|
|
1. Code of Ethics and professional conduct . 2. CPAS' regulations and its executive bylaw. |
Professional rule Royal decree No. M/12 |
1994 1412 H |
|
Sultante
of |
1. Audit and Accounting profession regulating law. |
Sultanic decree No. 77 and its amendments |
1986 |
|
|
1. Audit profession regulating law. 2. Executive bylaw of the audit profession regulating law. 3. Revised company's law |
Princely decree No. 7 Resolution No. 25 by the Minister of Commerce Princely decree No. 9 |
1974 1979 1998 |
|
|
1. Integrity rules for Audit practicing. 2. Audit practicing law |
Resolution No. 3 by the Minister of Commerce and industry. Princely decree No. 5 |
1989 1981 |
In addition A/CPA code of ethics (2002) and IFAC code of ethics (2001) were collected in order to make a comparison between codes used in GCC Countries and the international practices.
Second
stage : Tabulation :
During this stage, documents and regulations enumerated during first stage were reviewed and examined. Then , articles and subjects related to the code of ethics were identified. This because, the above documents vary largely with respect to type , nature and legal form. Some were issued by Royal or princely decree, some by Ministerial resolutions and some under professional standards . With respect to the nature and content of these documents and regulations, some of it regulates the profession of auditing and accounting, some may be considered as general law for companies and some may be considered as professional rules. Consequently, we studied these documents carefully in order to derive any articles or subjects covering professional ethic's and conduct , even if these were not stated in a separate article or chapter.
We concluded to following results :
Schedule (2)
|
Country |
Result |
|
U.A.E |
There are some articles that deal with some of the professional ethics within related regulations, however these articles are not stated under a separate single regulation so as to be described as code of ethics and professional conduct. Moreover it is not comprehensive. |
|
|
There are practicing conditions included within the statute of the accountants and auditors Association. |
|
|
There are separate codes of ethics issued by SOCAP . Also there are professional opinions issued by the Ethics Committee. |
|
Sultante of |
There are articles that deal with some ethics stated within the law regulating accounting auditing profession. |
|
|
There are some articles that deal with some of the ethics, stated within the specified regulations, however these articles are not compressive and therefore can not described as code of ethics and professional conduct. |
|
|
There are
separate rules for professional ethics named the profession honesty
convention of |
Except for
Third stage :
Analysis and Comparison :
Objective comparison requires similarity between items to be compared, however this is not the case with respect to professional ethics exercised in GCC Countries. There is a large variation in these countries with respect to those codes. Based on the above and for the purpose of full clarification this study, shall make comparison in three stages in order to reach a proposed text for GCC code of ethics and professional conduct. The Comparisons shall be as follow :
1. Comprehensive comparison for professional ethics adopted in GCC countries, regardless of legal form, nature, of those ethics or issuing authority. This means that such comparison shall include all GCC countries (see Appendex 1).
2.
Shortened comparison of those ethics similar with respect to legal form and
professional nature. Such comparison will include
3. Final comparison , which will include a comparison between basic rules identified after the shortened comparison – the AICPA and the IFAC code of ethics (see appendex 3).
Comprehensive
Comparison (Appendex 1) :
The comprehensive comparison (appendex 1) addresses all professional ethics and conducts in GCCA countries, that the auditor is required to comply with or used as a guide. This comparison included detailed comparison of 17 rules representing generally accepted rules. This most significant results of this comparison are :
· No ethics rules, in the professional meaning one available in most of
GCC countries. Except for
· Except for
· Wile the are no professional organizations or associations in
· Terms used in GCC countries with respect to code of ethics vary from country to another , which effects the application of those codes.
· Ethics and conducts covered the documents and regulations within GCC
countries are quite limited. A lot of the ethics and conducts were neglected by
most of GCC countries for example, ,
· Most of those ethics are not drawn up in a professional formulation. It is written in a general text inconsistent with the generally accepted professional terminology. The main purpose for those documents and regulation is the organization of the profession rather than strengthening the professional ethics and conducts. Therefore focusing the organizational objective lead to negligence of ethical objective.
· Within GCC countries , professional ethics and conducts are addressed by diverse documents and regulations. In most of these countries identification of professional ethics and conducts is shared within more than one regulation or law.
· Except
· Except Saudi Arabia, other counties has no specific professional definitions for the professional ethics and conducts experienced in those countries, which leads to variation in the interpretation and application of those ethics.
Shortened
Comparison :
As
mentioned before
·
· While Saudi codes of ethics referred to all rules of professional
ethics,
· Most of
· On the contrary to Saudi code of ethics,
·
· Compared to
Due
to the clear deficiency in
Final
Comparison :
Appendix 3 indicates the final comparison made between basis rules – derived after the shortened comparison – and AICPA code of ethic and IFAC code of ethics.
Stage
Four : Recommendations :
Based on comparisons made in stage three above , the study concluded to a draft Code of ethics and professional conducts for GCC countries. The final comparison – see Appendix 3 – indicate the reasons for selecting the text of each rule separately and amendments proposed to be made one basis rules. The following part indicate the proposed code of ethics and professional conduct for GCC Countries.