a. Public interest

An obligation of professional bodies, which separates a profession from a trade is that members of the profession are expected to act in the public interest. It is, therefore, a responsibility of an accountant “not to act exclusively to satisfy the needs of a particular client or employer”.

When the demands or needs of a client or employer appear to be contrary to the public interest, accountants should consider the public interest. The auditors should, therefore, report their observations on the reduced costs of maintenance and inspections at MetroPower.

b. It is usual to associate the public interest with the following matters:

i. Detecting and reporting any serious misdemeanour or crime;

ii. Protecting health and public safety;

iii. Preventing the public from being misled by a statement or action by an individual or an organisation;

iv. Exposing the misuse of public funds and corruption in government; and

v. Revealing the existence of any conflict of interests of those individuals who are in positions of power or influence.

c. Principles-based versus rules-based code of ethics

A principles-based code of ethics for accountants is a code that specifies general principles of ethical behaviour, and requires the professional accountant to act in accordance with the principles. The accountant is required to use his judgement in deciding whether in each case a particular course of action is a „proper‟ or „ethical‟ one. Both the IFAC and ICAN codes of ethics are principles-based codes.

The rules-based code of ethics is one in which a regulatory body issues a code of ethics for accountants that contains specific rules about how they should act in specific situations.

The principle-based codes of ethics are considered better than the rules-based code of ethics, especially because of the several weaknesses of the rules-based code of ethics, which include:

i. Complex and varied circumstances an accountant might face. It is impossible to plan for all types of ethical problems that will arise, making rules in advance, without knowing the exact details of the situations and of what courses of action the accountant must take;

ii. Differences in situations (ethical dilemmas) that an accountant might face over time could change as the business environment changes. It might, therefore, be necessary to review and update the rule book regularly; and

iii. Differences in ethical views amongst countries and cultures. Behaviour or disposition that might be considered unethical in one country might be perfectly normal and acceptable in another country. A rule book cannot easily make allowances for national and cultural differences in ethical viewpoints.

d. Importance of the concept of “Due care” or “Reasonable care”

It is a fundamental principle that ICAN members should carry out their work with professional competence and due care. This requirement reinforces a basic principle of the law of contract as it operates in many countries – that a contract for the provision of services should be performed with a reasonable degree of skill and care. The concept of „due care‟ or „reasonable care‟ is obviously important.

The implication is that audit work performed by an auditor for a client must be adapted to the specific circumstances and characteristics of the client. Thus, there is no such thing as a „standard‟ audit.

e. Likely implications of the auditors‟ failure to act on the information they got in relation to the reduced costs of maintenance and inspections at MetroPower

i. There may be legal claims against the auditors in the law of contract or the law of tort. There may also be disciplinary proceedings against the auditor by ICAN.

ii. The audit firm may earn a reputation in the business community for poor work and may, therefore, lose clients.