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The Code of Ethics and Conduct is set out in section 3 of the ACCA Rulebook. This covers specific areas
in which ACCA regulates its members, and includes various sections that are relevant to a new practice
seeking additional business from new and existing clients.
Obtaining professional work
This factsheet has no regulatory status. It is issued for guidance purposes only, and in the event of any conflict between the content of this factsheet and the content of the ACCA Rulebook , the latter shall at all times take precedence. Therefore, this factsheet should not be regarded by a member as a substitute for familiarising himself or herself with the appropriate regulations or, where necessary, obtaining specific advice concerning a specific situation.
IntroductIon The Code of Ethics and Conduct is binding on all members of ACCA, and a principal in an ACCA practice is also responsible for ensuring that all non-ACCA principals and staff of the practice comply. Some of the most important areas of the Code of Ethics and Conduct, from the point of view of a practitioner seeking to increase the size of the practice, are discussed below. These include advertising and publicity, changes in professional appointments, money laundering considerations, clients’ monies, and fees.
AdvertIsIng And publIcIty Subject to the rules which follow, members may seek publicity for their services and achievements, and may advertise their services and products, in any way they think fit.
There is a general requirement that the medium of advertising and other forms of promotion used should not reflect adversely on the member, ACCA or the accountancy profession. Neither the content nor the presentation should:
a bring ACCA into disrepute or bring discredit to the member, firm or the accountancy profession;
b discredit the services offered by others, whether by claiming superiority for the member’s or firm’s own services or otherwise;
c be misleading, either directly or by implication;
d fall short of any local regulatory or legislative requirements (such as the requirements of the United Kingdom Advertising Standards Authority’s Code of Advertising and Sales Promotion), notably as to legality, decency, clarity, honesty and truthfulness.
An advertisement should be clearly distinguishable as such.
Promotional material may contain any factual statement the truth of which a member is able to justify, but it should not make unflattering references to, or unflattering comparisons with, the services of others. Members are also reminded that any promotional activity should be carried out in accordance with any relevant legislation and should not amount to harassment of the recipient.
reference to fees Where reference is made in promotional material to fees, the basis on which those fees are calculated should be clearly stated. Care should be taken to ensure that any reference to fees does not mislead the reader as to the precise range of services and time commitment that the reference is intended to cover.
Members may make comparisons in promotional material between their fees and the fees of other accounting practices, whether members or not, providing that any such comparison does not give a misleading impression. When making comparisons, members must ensure that they pay appropriate attention to relevant local codes or legislation. The following conditions shall normally be met by all members, and conform with the EC Directive on Comparative Advertising (97/55/EC):
a The material compares services meeting the same needs or intended for the same purpose.
b The material objectively compares one or more material, relevant, verifiable and representative features of those services, which may include fees.
c It does not create confusion in the marketplace between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor.
d It does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities or circumstances of a competitor.
e For products with designation of origin, it relates in each case to products with the same designation.
f It does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products.
g It does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name.
(The danger of giving a misleading impression is particularly pronounced when constraints of space limit the amount of information that can be given.)
Promotional material that is based on the offer of percentage discounts on existing fees is permitted, and a member may offer a free consultation at which levels of fees will be discussed.
Introductions Generally, a member may, in return for the introduction of a client, give or offer a commission, fee or reward to any third party.
However, this would be inappropriate for those firms concerned with insolvency business (although there may be an arrangement between an insolvency practitioner and a bona fide employee, whereby the employee’s remuneration is based, to some extent, on introductions obtained through the efforts of the employee).
Similarly, those members carrying out exempt regulated activities in the United Kingdom and firms which carry on investment business in the Republic of Ireland should exercise particular caution and should refer to regulation 5 of the Designated Professional Body Regulations 2001 and regulation 6 of the Irish Investment Business Regulations 1999 respectively.
chAnges In professIonAl AppoIntments Section 210 of the Code of Ethics and Conduct sets out various requirements concerning professional appointments, including changes in appointments. An accountant who is asked to accept an appointment to perform any recurring professional work must, save where the client has not previously had an accountant acting for him or her, request the prospective client’s permission to communicate with the existing accountant. If such permission is refused by the prospective client, the appointment should be declined. Where permission is granted, the duty to communicate with the previous accountant applies even if that other accountant is not a member of ACCA or is not qualified at all.
Members who are asked to replace another accountant (or who are considering tendering for an engagement) should consider whether such an engagement would threaten compliance with the Fundamental Principles. Any threats should be evaluated, and this might require direct communication with the existing accountant. Therefore, communication with the existing accountant is not just a matter of professional courtesy. Its main purpose is to enable members to ensure that there has been no action by the client which would, on ethical grounds, preclude the member from accepting the appointment, and to establish, after considering all the facts, whether the client is someone for whom the member would wish to act.
ACCA’s Code of Ethics and Conduct states: ‘The prospective accountant shall write to the existing accountant requesting all the information which ought to be made available to enable the prospective accountant to decide whether or not to accept the appointment.’ (Any information provided by the existing accountant must be provided honestly and unambiguously.)
If the existing accountant does not reply to this request for information, or fails to supply a satisfactory reply, the prospective accountant should send a further letter by recorded delivery service. This letter should state that, unless a reply is received within a stated period, the prospective accountant will assume that there are no matters of which they should be aware and, at the end of the stated period, will proceed to accept the appointment.
If the prospective accountant is unable to communicate with the existing accountant through the above means, information about any possible threats should be sought by other means, such as through telephone contact with the existing accountant, enquiries of third parties, or background investigations of senior management or those charged with governance of the client.
Prospective accountants are specifically required to try to find out the reason for the change of accountants. They should be careful that, by accepting an appointment, they are not assisting a client to act improperly or unlawfully.
Once the new accountant has been appointed, the former accountant should ensure that all books and papers belonging to the client that are in their possession are promptly transferred (unless they claim to exercise a lien or other security over them). Section B5 of the Code of Ethics and Conduct provides further guidance relating to legal ownership of, and rights of access to,
books, files, working papers and other documents. In addition, section 210 provides an explanation of the ‘reasonable transfer information’, which is required to be provided by the former accountants, to the new accountants, free of charge.
Additional professional work Members may be asked to undertake work that is complementary or additional to the work of existing accountants who are not being replaced or superseded. Such circumstances may give rise to potential threats to professional competence and due care resulting from, for example, a lack of complete information. Safeguards against such threats will usually include notifying the existing accountant of the proposed work. Therefore, before accepting such work, members must consider communicating with the existing accountants to advise them of the general nature of the proposed engagement.
It is only in exceptional circumstances that members may not be required to communicate with the existing accountants. Members should consult with the advisory services section of ACCA (tel: +44 (0)20 7059 5920) to check whether, in their particular circumstances, they may dispense with the usual communication procedure.
letters of engagement Letters of engagement are mandatory. On accepting an appointment, the practitioner must send the client a letter of engagement. This forms the basis of a contractual relationship between the practitioner and the client.
A properly worded letter of engagement establishes the framework in which the client relationship is managed. It should set out the work that is to be performed and the basis on which the fees will be charged. (It is rarely worthwhile suing a client for non-payment of fees if you do not have a letter of engagement in place.)
Many practitioners now limit their liability for work done by an appropriately worded clause in the letter of engagement. The liability cap should be discussed and agreed with the client at the start of the assignment.
Another area that is strongly recommended to be included in a letter of engagement is that of dispute resolution. Whilst a client should be informed that they have the right to approach ACCA if a dispute cannot be resolved satisfactorily, in the first instance, the engagement letter should explain the firm’s internal disputes resolution procedure. In particular, it should identify the person within the firm that the client should contact in the event that he or she is dissatisfied with the service received.
To assist practitioners in drafting appropriate letters for a variety of engagements, ACCA produces, in partnership with V S Consultancy Limited, a series of template engagement letters, available on CD-ROM. This can be ordered from ACCA Connect (tel: +44 (0)141 582 2000; fax: +44 (0)141 582 2222; e-mail: publications@accaglobal.com).
money lAunderIng consIderAtIons Before agreeing to act for a client, members must consider whether acceptance of the new relationship would create any threats to compliance with the Fundamental Principles (see separate factsheet entitled Code of Ethics and Conduct which can be downloaded from ACCA’s website at www.accaglobal.com/members/professional_standards ). For example, potential threats to integrity may arise due to questionable issues associated with the client, its owners, its management or its activities. Where it is not possible to reduce any identified threats to an acceptable level, members should decline to enter into the client relationship.
Client issues that could threaten compliance with the Fundamental Principles include client involvement in illegal activities. In addition, members must observe their specific responsibilities in
However, monies must not be withdrawn for or towards the payment of fees or commission to the firm unless:
a the client has been notified in writing of the intended withdrawal, and they have not disagreed; and
b a principal of the firm has expressly authorised the withdrawal; and
c either 30 days have elapsed since the client wes notified, or the precise amount to be withdrawn has been agreed with the client in writing or has been determined by a court or arbitrator.
Bank charges for maintaining client accounts must be paid out of the firm’s own account and not from any client account.
maintaining records Firms must at all times maintain accurate records and controls so as to show clearly the monies they have received, held and paid on account of their clients, and the details of any other monies dealt with by them through a client account, clearly distinguishing the monies of each client from the monies of other clients. Members must maintain such records for a period of not less than six years from the date of the last transaction recorded.
Interest payable In respect of all monies held by a firm on behalf of clients, the firm must pay clients interest of not less than the amount which would have been earned by way of gross interest if all clients’ monies held by the firm had been kept in separate interest-bearing accounts at the small deposit rate with the bank concerned. However, this obligation may be over-ridden (except in the case of trust accounts) by express written agreement between the firm and clients. For example, clients may agree to forgo sums of interest of less than, say, £10.
fees Section B9 of the Code of Ethics and Conduct specifies that the letter of engagement shall ‘set out in detail the actual services to be performed, the fees to be charged, or the basis upon which fees are calculated’. It goes on to state that the terms of the engagement should be accepted by the client so as to minimise the risk of disputes arising.
Fees are discussed in more detail in section 240 of the Code of Ethics and Conduct. The basis of charging fees may incorporate any or all of the following:
a the seniority and professional expertise of the persons necessarily engaged on the work;
b the time expended by each;
c the degree of risk and responsibility which the work entails;
d the urgency of the work to the client;
e the importance of the work to the client.
Members’ other professional responsibilities in respect of fees are discussed further in the following paragraphs.
fee quotations The fact that an accountant may quote a fee that is lower than another is not, in itself, unethical. However, there may be threats to compliance with the Fundamental Principles arising from the level of fees quoted. For example, a self-interest threat to professional competence and due care is created if the fee quoted is so low that it may be difficult to perform the engagement in accordance with applicable technical and professional standards economically. In this situation, safeguards that may be adopted include:
a ensuring that the letter of engagement makes it clear to the client precisely which services are covered by the quoted fees and the basis of the fees quoted; and
b assigning appropriate time and staff to the task.
Members’ attention is also drawn to the paragraphs earlier in this factsheet which discuss references to fees in advertising and promotion.
percentage and contingency fees Fees on a percentage, contingency or similar basis may give rise to threats to compliance with the Fundamental Principles in certain circumstances. In order to preserve members’ objectivity, fees should not be charged on a percentage, contingency or similar basis except where that basis is generally accepted practice for certain specialised work. (Such fees must not be charged in respect of assurance engagements.)
There are circumstances, such as advising on a management buy-out or the raising of venture capital, where in some instances fees cannot realistically be charged other than on a contingency or percentage basis (because the ability of clients to pay is dependent upon the success or failure of the venture). Where this is the case, one of the safeguards suggested to preserve objectivity is to make clear in any document upon which a third party may rely the capacity in which the member has worked and the basis of their remuneration.
fee disputes Members whose fees have not been paid may, in certain circumstances, exercise a lien over certain books and papers of the clients upon which they have been working. Members are referred to section B5 of the Code of Ethics and Conduct, which discusses the legal ownership of, and rights of access to, books, files, working papers and other documents. However, in the case of a fee dispute, members should be prepared to provide clients with reasonable explanations of the fees charged. Such explanation must be provided without charge, and be sufficient to enable the client to understand the nature of the work carried out. Members must also take all reasonable steps to resolve speedily any disputes that arise.
If a member is about to render a fee note that is substantially different from fees rendered to the same client on earlier occasions for work which would appear to be comparable, it is good practice to explain to the client the reason for the variation. To the extent that the increased fee reflects extra work done, the reason for the extra work should be explained in writing. Alternatively, it might relate to an increase in disbursements or costs, and this also should be explained in writing.
other matters Section 240 of the Code of Ethics and Conduct also provides guidance in the areas of insolvency work, investment business and commission received on indemnity terms.
other AreAs to consIder As already stated, the Code of Ethics and Conduct (within the ACCA Rulebook ) contains regulations concerning several other areas that may be relevant to a particular member in practice. In this section, we have focused on those areas most relevant to obtaining new work, but the new practitioner should also be aware of the other contents of the ACCA Rulebook. These include specific responsibilities (such as those relating to whistleblowing), as well as a range of situations in which a practitioner may require guidance regarding compliance with the Fundamental Principles.
If a member has any doubts concerning the requirements of the Code of Ethics and Conduct, or is uncertain about how to proceed in a particular situation, he or she should refer to the ACCA Rulebook and/or consult the technical advisory service in his or her region.
Issued: January 2011
