a. The Five Fundamental Principles of the IFAC’s Code of Ethics for Professional Accountants
(7½ Marks)

1. Integrity: Accountants are required to be honest and straightforward in all professional and business relationships. Integrity involves being truthful, sincere, and fair, and avoiding any actions that might discredit the profession.
2. Objectivity: Accountants must avoid biases, conflicts of interest, or undue influence that may compromise their professional judgment. Objectivity ensures that decisions are made based on factual evidence and are not swayed by personal relationships or external pressures.
3. Professional Competence and Due Care: Accountants must maintain the knowledge and skills needed to provide competent professional services. This involves staying updated with developments in their field and performing duties diligently according to applicable technical and professional standards.
4. Confidentiality: Accountants are required to respect the confidentiality of information acquired during their professional duties. They must not disclose any information without proper authority unless there is a legal or professional duty to do so.
5. Professional Behavior: Accountants should comply with relevant laws and regulations and avoid actions that may discredit the profession. This principle promotes a high standard of conduct and encourages accountants to avoid behaviors that could harm their reputation or that of the profession.

b. Independence of Mind and Independence of Appearance
(5 Marks)

• Independence of Mind: This refers to the state of mind that allows auditors to perform their audit duties with integrity, objectivity, and professional skepticism, making unbiased judgments. Independence of mind ensures that the auditor is free from any influence that could compromise their decision-making process.
• Independence of Appearance: This relates to how an auditor’s independence is perceived by external parties. Even if an auditor believes they are unbiased, if their actions or relationships appear to compromise their independence, it may impact stakeholders’ trust. Therefore, independence of appearance is essential to maintain public confidence in the auditor’s work.

c. Three General Sources of Threat to the Fundamental Principles of the IFAC’s Code of Ethics
(7½ Marks)

1. Self-Interest Threat: Occurs when personal interests or financial incentives might influence an accountant’s professional judgment. For example, owning shares in a client company or having a close financial relationship with a client could lead to biased decisions.
2. Self-Review Threat: This arises when an accountant is required to review or evaluate their own work or judgments. If an auditor performs consulting services for a client and later audits the same client, they might be reluctant to highlight errors in their work, compromising objectivity.
3. Familiarity Threat: This threat occurs when a close relationship with a client or their employees affects an accountant’s objectivity. Long-standing personal relationships may lead to a level of trust that could reduce professional skepticism and result in overlooking potential issues in the client’s financial statements.