International Federation of Accountants Code of Ethics

International Federation of Accountants edict of moral philosophy write in grave of Ethics is internal for both accountants and attenders as they hold positions of expectation that the community rely on them and the capability. The codification of Ethics is regulated by International Federation of Accountants (IFAC) at international train. repay subject to the c whollyer failures such as Enron and Equitable life, good manner and independence has become to a largeer extent authoritative. The Enron case clearly demonstrates the apprise devise of IFAC. (ACCA, 2002)Therefore, IFACs work out of Ethic is broadly defined as calculate of conduct based on a set of moral principles or values that indicates how an individual should be commit. (Velayutham, 2003) Through this, if an listener is incompetent, the parties to the contract go forth rear end little or no value on the service digestd. (Messier et al., 2007).Further more than, listeners argon required to be independ ence to apply unbiased judgment and documentary consideration to establish facts in giving an opinion. It is essential beca affair the users expect the auditor to have an unbiased viewpoint when forming opinion on the true and beauteousness of the fiscal story. If the auditors atomic number 18 non independence, then the value of audit is lost. (Gomes, 2010) Online.It is live to provide assurance services as it stick out increase authorisation of users of the information and to avoid conflicts of interests that may occur towards the auditor.2.0 Main report2.1 critically evaluate of the role of IFACs Code of Ethics for sea captain accountants in strengthen independence of auditors.Over these years, IFAC has been revising a newer Code of Ethics to crystalise requirements for all professional accountants and to nurture the independence of auditor. (IFAC, 2009) Online.This Code of Ethics ar follow up and practiced by its members until it becomes a system in the organization .(Ravendran,2006) Online. Principles-based memory access is roosted in the revised Code of Ethic and it establishes a conceptual framework for professional accountants and out-of-door auditor to follow. This is to perform sure they be compliance with fundamental principles of professional ethics. It is important for fundamental of principle to remain the same, as it would be more tensile for all professional accountants and the extraneous auditors. (Ward, 2006) OnlineThe IFAC Code of Ethic has constantly revised to meet the changing require of the profession and the expectations of stakeholders in Malaysia. (MIA, 2006) Online.Therefore IFAC Code of Ethic is set as a correct example to follow because of its holistic approach that considers many aspects of the issue. (Gomes, 2009) Online.External auditors to get hold out possible threats and evaluate how it could affect the audit are use conceptual framework. They have to apple safeguards on the identified threats to swerve them to an refreshing level. (MIA, 2006) OnlineFurthermore, auditors play an important role to provide a high- caliber pecuniary statement because any loss in carrying out their work allow pass water a bad impact on investor protection and confidence. For example, many auditors failed to moderate their opinion leading to compromising the shareholders of prevalent listed companies. (Izma, 2009) Online .As a result, independence of auditors is affected. In solving this kind of situation, auditors volition need to follow the fundamental of principles to reduce this threat. (MIA, 2005) OnlineBy applying a principle-based approach, it can in any case help to standardize the IFACs Code of Ethic globally. Through standardizing the international standards, the auditors result have high quality standards in auditing the financial statement. (Ward, 2006) Online.If all(prenominal) ground standardized the preparation of financial statements, making it flexible for cross-border sec urities listing globally. This forget enable the company for a better flow of resources, using it systematically. (Kumar, Porwal, 2003) Online .Therefore opinion form by auditors will be more credible and reliable in ensuring auditors to be more independence.On the other hand, the behavior of a human cannot be confirm by upright following the IFACs Code of Ethic. This is because personal behavior cannot be control and it depends on how they want to behave. (MIA, 2006) Online.For example wishing of ethical mandate, peculiarly one client may jeopardized another clients business due to the financial difficultly they faced.(Gomes, 2009) Online The reasons why auditors cannot control themselves, probably due to the characteristic of the auditors are self-centered, grasping and unprincipled, thus this will create a self- interest threat for the auditors.( Jackling et al., 2007)As such, it is not good to understand the principle only, the knowledge of ethical code need to be apply. (Gomes, 2010) Online.If not independence of auditor will be influence and then nobody would be able to trust them just like Arthur Anderson. Due to the cases like Enron or WorldCom, which ended up as a fraud, IFACs has revised stronger ethical code and stringent rules that a company must follow. However, the revised IFACs Code of Ethic cannot be perfect all the time. Somehow, loopholes can be found, as it may not fully becharm the culture, belief and practice the code and it will make auditors to be futile to enhance independence. (ACCA, 2009) and external auditors may not adapt to this standards as there are changes to the ethical code.It can also make mistakes as the environment is changing, so does the culture and the personality of the auditor as well. Therefore, without a prudish guidance, certain parts of the organization may interpret the code otherwise and IFACs Code of Ethic cannot promise that very country or auditor may process the ethical code. For example as the culture in the world is changing so as the behavior of an auditor and for that auditor may do what they want, as the Code of Ethic is not include in the law system. In general, by have goting the same code is not possible, as it has to change consistently. (Pflugrath et al., 2007)2.2 Evaluate the important of maintaining principle-based approach in the Code of Ethics.Many corporation failures has shows the need of principle- based approach is essential. The suggested ways for IFACs Code of Ethic to strengthen the independence of auditors are by having a principle-based approach, as it is flexible and easy for the auditors and accountants to adapt. With a strong principle-based, this will enhance the auditor to perform a high quality standards of auditing in making ratiocinations and the public would have more trust towards them (IFAC, 2009) Online. By having a principles- based approach, problems it maintaining will be reducibly and there are ways of resolving it. (MIA, 2008) Onli neFurthermore, the IFACs body has concur that principle-based are better compared to rules-based approach as threats and safeguards better serves the public interest, which cannot provide for all circumstances. (Bagshaw, 2006) Online.As such, the Code of Ethic has been revised in principles- based approach primarily to encourage auditors to make a high quality judgment(MIA, 2006) Online. Therefore, assurance is critical in making sure that their judgments are ethical generous as the auditors and accountants holds these responsibilities. (Haron.H et al., 2010)Other than that, a principles- based approach can adapt to the changes of the environment. This is because each country has a different culture and this culture will generally affect the behavior of that person. Therefore, with principle-based, it can minimize standards behavior for each auditor and accountant globally. (ACCA, 2009) and therefore it is important to maintain a principles-based in the IFACs Code of Ethic. Moreo ver, with the high quality of ethical code, auditors can make a good judgment and this will avoid them from having a financial scandal. (Ismail et al., 2010)Somehow, nigh aspects that may considered as a threat towards a principle-based approach. External auditors and professional accountants that are use to comply with rules- based in Code of Ethics perplex themselves in a difficulty to switch to principles- based. The most important concern is whether a purely principle-based approach is strong enough to ingest with a complicated transactions.(Yong, 2004) Online.Due to the different culture in all country International codes such as the IFACs Code cannot fully comply with elemental principles and practice. (ACCA, 2009)The fact is that auditors and accountants will need to apply judgments according to the principles, which is impossible because Code of Ethic cannot include all situation and dilemmas and by applying judgments blindly, auditors independence are affected. (Gomes, 2009) Online Despite that, all(prenominal) now and then judgment are use to manipulate financial outcomes so a strong ethical behavior and commitment is required for the auditors to avoid temptations from resist client pressuring. (Yong, 2004)OnlineBesides that, the lack of clarity in principle-based approach as ethical code can perceive to be to technical jargon. As such auditors will have a difficult time to understand certain parts particularly when the ethical code is translated, auditors finds themselves that the meaning become weaker thus auditors will find it hard to revise the Code of Ethics and because of this ethical code may not be widely used all over the world. (MIA, 2005) Online (ICAEW, 2006) Online.Therefore every country needs to adjust to have a simpler Code of Ethics.2.3 passportIn general, all companies differs from one and another in terms of practicable operations, its legal systems, institutional base works and cultures, therefore it is critical that every organization must have good corporate governance for survival. indeed corporate governance is another way to enhance the independence of auditors in addition having Code of Ethics. The objectives are to make sure that companys grapplement is organized tutorship and certain requirements that auditors and accountants must comply. Other than that, corporate governance systems are to make sure that threats to independence do not happen. (ICAEW, 2001) OnlineAs audit perpetration are parts of the corporate governance, it is important for them to monitor the external auditors work by checking the financial report. By doing so, external auditors assurance will be improved. Besides this, audit committee can shit some opinions to external auditor especially when problems occur. (ACCA, 2009).Therefore, with the help of audit committee, financial report would be more reliable. Moreover, audit committee can also review the quantify and nature of reports as well as the findings of the exte rnal auditors. (ACCA, 2009) Hence, this will be able to enhance the independence of auditorsBesides this, Continuing Professional maturement (CPD) is another good substitute besides Code of Ethics. This program is great to ensure auditors and accountants are updated with the market developments and changes affecting the accountancy profession and the auditors. Further, it helps the auditors to maintain and raise standards to professional judgments thus this will give auditors to be more up to date in the Guide of Professional Ethics. Through CPD, auditors will have the advantage to improve the capacity to exercise the highest standards of professional judgement. (ICAEW, 2010) OnlineCPD also provides information, support and guidance towards the auditor thus auditors are more self-confident in making a good decision without affecting the financial report. (ICAEW, 2010) Online By adopting this new approach, auditors will be able to follow up with current issue, which can affect thei r professional works, and to be committed in the job as they are responsible to the clients, stakeholders and the employers. (MIA, 2006) Online.Finally, CPD will help them to be more knowledgeable and will enhance them to develop higher level of quality standards (MIA, 2007) Online3.0 ConclusionOverall, it is important that IFACs Code of Ethics is revised every few years to make auditors and accountants are able to adapt with the changes make in the Code of Ethic. Ethical code is needed for the auditors and accountants as the public rely on them to perform the audit work efficient and effectively. Due to this, maintaining a principle-based is in need for every auditors and accountants as it is more flexible and thus it is globally used. However, there are still some prejudicious aspects of ethical code, which auditor finds it difficult to comply with but somehow they manage to resolve it. As such, it is important that auditor and accountants knows when to apply the ethical code and not just understanding the principle only.Nevertheless, by having a good judgment, auditors will be able to make a good decision without getting influence. Therefore, with a strong ethical behaviour, auditors will be able to give a reliable and credible financial report and as a result, independence of auditors can be enhanced.Apart from this, it is essential, that every country will be able to adopt the IFACs Code of Ethics, as it will give high quality standards in the financial statement. Ethical Code cannot plight ethical behavior or resolve all dispute ethical behavior should result from a personal commitment to engage in ethical practice. Audit committee and CPD can also help to enhance the independence of auditors.Lastly, Ethical Code is an essential element of the surroundings in which auditors work and it is important that proper guidance to be given to them.