RULES OF PROFESSIONAL CONDUCT TABLE OF CONTENTS
FOREWORD....................................................................................................................... 3 APPLICATION OF THE RULES OF PROFESSIONAL CONDUCT ................................... 8 INTERPRETATION OF THE RULES OF PROFESSIONAL CONDUCT ...........................11 100 - GENERAL .................................................................................................................12 101 Compliance with Bylaws, Regulations and Rules ........................................12 102.1 Conviction of Criminal or Similar Offences ..................................................12 102.2 Reporting Disciplinary Suspension or Cancellation of Membership, or Restriction of Right to Practise ....................................................................12 103 False or Misleading Applications .................................................................12 104 Requirement to Co-operate .........................................................................13 105 Intimidation .................................................................................................13 200 - STANDARDS OF CONDUCT AFFECTING THE PUBLIC INTEREST......................14 201.1-4 Maintenance of Reputation of the Profession ..............................................14 Advocacy Services ......................................................................................14 201.5 202.1 Integrity and Due Care ................................................................................15 202.2 Objectivity ...................................................................................................15 203 Professional Competence ...........................................................................15 204.1 Independence - Assurance and Specified Auditing Procedures Engagements ...........................................................................15 204.2 Identification of Threats and Safeguards .....................................................15 204.3 Documentation ............................................................................................15 204.4 Specific Prohibitions, Assurance and Specified Auditing Procedures Engagements ...........................................................................16 204.5 Members Must Disclose Prohibited Interests And Relationships .................24 204.6 Licensed Firms To Ensure Compliance by Partners and Professional Employees ..................................................................................................24 204.7 Independence: Insolvency Engagements ....................................................24 204.8 Disclosure of Impaired Independence .........................................................25 205 False or Misleading Documents and Oral Representations .........................30 206 Compliance with Professional Standards ....................................................30 207 Unauthorised Benefits .................................................................................30 208.1-5 Confidentiality of Information .......................................................................31 209 Borrowing from Clients ................................................................................32 210.1-4 Conflict of Interest .......................................................................................32 211.1-2 Duty to Report Breach of Rules of Professional Conduct ............................33 212.1 Handling of Trust Funds and Other Property ...............................................34 212.2 Handling Property of Others ........................................................................34 213.1-2 Unlawful Activity ..........................................................................................34 214 Fee Quotations ...........................................................................................34 215 Contingent Fees..........................................................................................34 216 Payment or Receipt of Commissions or Other Compensation .....................35 217.1 Advertising and Promotion ..........................................................................35 217.2 Solicitation ..................................................................................................36 217.3 Endorsements .............................................................................................36 218 Retention of Documentation and Working Papers .......................................36
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300 - RELATIONS WITH FELLOW MEMBERS AND WITH NON-MEMBERS ENGAGED IN PUBLIC ACCOUNTING.....................................................................37 302.1 Communication with Predecessor ...............................................................37 302.2-3 Reply By Incumbent ....................................................................................37 303.1 Cooperation with Successor Accountant .....................................................37 303.2 Transfer of Client's Records ........................................................................37 304 Joint Engagements .....................................................................................38 305.1-2 Communication of Special Engagements to Incumbent ..............................38 306.1 Responsibilities on Accepting Engagements ...............................................38 306.2 Responsibilities on Referred Engagements.................................................38 400 - ORGANIZATION AND CONDUCT OF A PROFESSIONAL PRACTICE ..................39 401 Practice Names...........................................................................................39 402.1 Use of Descriptive Style ..............................................................................39 402.2 Proprietary Interest with Non-Members .......................................................39 403 Association with Firms ................................................................................39 404 Operation of Members' Offices ....................................................................39 405 Office by Representation.............................................................................39 406 Member Responsible for a Non-Member in Practice of Public Accounting ...................................................................................40 407.1-4 Related Business or Practice, and Member Responsible for Non-Member in Such Business or Practice ............................................40 408 Association of Member with Non-Member in Public Practice .......................40 409 Practice of Public Accounting in Corporate Form ........................................41 500 - RULES OF PROFESSIONAL CONDUCT APPLICABLE ONLY TO LICENSED FIRMS ..............................................................................................42 501 Licensed Firm’s Maintenance of Policies and Procedures for Compliance with Professional Standards ....................................................42 502 Licensed Firm's Maintenance of Policies and Procedures ...........................42 503 Association with Firms ................................................................................43

Note: All rules were adopted in 2004 when they were amended to reflect the changes to the Accountants (Chartered) Act. All subsequent amendments are noted in [brackets] with the month and year in which they were adopted by Council. Incidental changes to numbering and cross-references are not annotated.

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RULES OF PROFESSIONAL CONDUCT FOREWORD The Foreword to the rules of professional conduct (or “rules”) sets out the philosophy that underlies the rules governing the chartered accountant’s responsibilities to those to whom professional services are provided, to the public, and to colleagues, in respect of • • • • • • • • characteristics of a profession; fundamental principles governing conduct; ethical conflict resolution; fiduciary duty; personal character and ethical conduct; application of the rules; principles governing the responsibilities of licensed firms; and interpretation of the rules.

The rules of professional conduct, comprehensive in their scope, practical in application and addressing high ethical standards, serve not only as a guide to the profession itself but as a source of assurance of the profession's concern for the public it serves. It is a hallmark of a profession that there is a voluntary assumption, by those who comprise it – the members – of ethical principles which are aimed, first and foremost, at protection of the public and, second, at achieving orderly and courteous conduct within the profession. It is to these purposes that the Institute's rules are directed. *** Characteristics of a profession The rules of professional conduct presume the existence of a profession. Since the word "profession" has lost some of its earlier precision, through widespread application, it is worthwhile reviewing the characteristics which mark a calling as professional in the traditional sense. Much has been written on the subject and court cases have revolved around it. The weight of the authorities, however, identifies the following distinguishing elements: • • • • • • there is mastery by the practitioners of a particular intellectual skill, acquired by lengthy training and education; the traditional foundation of the calling rests in public practice – the application of the acquired skill to the affairs of others for a fee; the calling centres on the provision of personal services rather than entrepreneurial dealing in goods; there is an outlook, in the practice of calling, which is essentially objective; there is acceptance by the practitioners of a responsibility to subordinate personal interests to those of the public good; there exists a developed and independent society or institute, comprising the members of the calling, which sets and maintains standards of qualification, attests to the competence of the individual practitioner and safeguards and develops the skills and standards of the calling; there is a specialized code of ethical conduct, laid down and enforced by that society or institute, designed principally for the protection of the public;
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there is a belief, on the part of those engaged in the calling, in the virtue of interchange of views, and in a duty to contribute to the development of their calling, adding to its knowledge and sharing advances in knowledge and technique with their fellow members.

By these criteria chartered accountancy is a profession. It is essential to recognize that a profession does not cease to be a profession because a proportion of its members enter salaried private employment. These members continue to belong to the profession and to be subject to the rules of professional conduct. It should also be recognized that some members of the profession might acquire the required skills outside of public practice. Fundamental principles governing conduct The rules of professional conduct, as a whole, flow from the special obligations embraced by the chartered accountant. The reliance of the public, generally, and the business community, in particular, on sound and fair financial reporting and competent advice on business affairs – and the economic importance of that reporting and advice – impose these special obligations on the profession. They also establish, firmly, the profession’s social usefulness. To protect the public and to maintain the reputation of the profession, the rules apply, as appropriate, to members of the profession, students, and licensed firms of Chartered Accountants. [March 2010] The rules of professional conduct are derived from five fundamental principles of ethics – statements of accepted conduct whose soundness is, for the most part, self evident and are as follows: Professional Behaviour Members conduct themselves at all times in a manner which will maintain the good reputation of the profession and its ability to serve the public interest. In doing so, members are expected to avoid any action that would discredit the profession. [March 2010] While there are business considerations involved in the creation and development of a professional practice, a member’s practice should be based primarily upon a reputation for professional excellence. A member is expected to act in relation to other professional colleagues with the courtesy and consideration he or she would expect to be accorded by them. Integrity and Due Care Members perform professional services with integrity and due care. Members are expected to be straightforward, honest and fair dealing in all professional relationships. They are also expected to act diligently and in accordance with applicable technical and professional standards when providing professional services. Diligence
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includes the responsibility to act, in respect of an engagement, carefully, thoroughly, and on a timely basis. Members are required to ensure that those performing professional services under their authority have adequate training and supervision. Professional Competence Members maintain their professional skills and competence by keeping informed of, and complying with, developments in their professional standards. The public expects the accounting profession to maintain a high level of competence. This underscores the need for maintaining individual professional skill and competence by keeping abreast of and complying with developments in the professional standards and pertinent legislation in all functions where a member practises, or is relied upon because of his or her calling. Confidentiality Members have a duty of confidentiality in respect of information acquired as a result of professional, employment and business relationships and they will not disclose to any third party, without proper and specific authority, any such information, nor will they exploit such information to their personal advantage or the advantage of a third party. The principle of confidentiality includes the need to maintain the confidentiality of information within a member’s firm or employing organization. The disclosure of confidential information by a member may be required or appropriate where such disclosure is: • • • permitted or authorized by the client or employer; required by law; or permitted or required by a professional right or duty, when not prohibited by law.

Objectivity Members do not allow their professional or business judgment to be compromised by bias, conflict of interest or the undue influence of others. The public expects that members will bring objectivity and sound professional judgment to their professional services. It thus becomes essential that a member will not subordinate professional judgment to external influences or the will of others. The public interest in the objectivity of a member engaged to perform an assurance engagement or a specified auditing procedure requires that the member be, and be seen to be, free of influences which would impair the member’s objectivity. Accordingly, the rules specifically require a member who engages to perform an assurance or specified auditing procedures engagement to be independent. The ethical standard of independence requires the member to be and remain free of any influence, interest or relationship, in respect of the client's affairs, which impairs the member's professional judgment or objectivity or which, in the view of a reasonable observer, would impair the member's professional judgment or objectivity.
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As well, the rules specifically require that a member, before accepting or continuing an engagement, determine whether there is any restriction, influence, interest or relationship which, in respect of the proposed engagement, would cause a reasonable observer to conclude that there is or will be a conflict of interest. If there were to be such a conflict, the member is generally required to decline or discontinue the particular engagement unless there are accepted conflict management techniques which, with the informed consent of the affected client or clients, permit the member to accept or continue the engagement. With respect to both independence and conflicts of interest, the profession employs the criterion of whether a reasonable observer would conclude that a specified situation or circumstance posed an unacceptable threat to a member’s objectivity and professional judgment. Only then can public confidence in the objectivity and integrity of the member be sustained, and it is upon this public confidence that the reputation and usefulness of the profession rest. The reasonable observer should be regarded as a hypothetical individual who has knowledge of the facts which the member knew or ought to have known, and applies judgement objectively with integrity and due care. Ethical conflict resolution Circumstances may arise where a member encounters and is required to resolve a conflict in the application of the fundamental principles or compliance with the rules derived therefrom. When initiating a process for the resolution of an ethical conflict, a member should consider, either individually or together with others, as part of the resolution process, the following: • • • • • relevant facts; ethical issues involved; fundamental principles and rules applicable to the matter in question; established internal procedures; and alternative courses of action.

Having considered these issues, the member should determine the appropriate course of action that is consistent with the fundamental principles and rules identified as being pertinent. The member should also weigh the consequences of each possible course of action. If the matter remains unresolved, the member should consult with other appropriate persons within the firm or employing organization for help in obtaining resolution. Where a matter involves a conflict with, or within, an organization, a member should also consider consulting with those charged with governance of the organization, such as the board of directors or the audit committee. It would be in the best interests of the member to document the substance of the issue and details of any discussions held or decisions taken, concerning that issue. If a significant conflict cannot be resolved, a member may wish to obtain guidance on ethical issues without breaching confidentiality from the Institute or legal advisors. For example, a member may have encountered a fraud, the reporting of which could breach the member’s responsibility to respect confidentiality. The member is advised to consider obtaining legal advice to determine whether there is a requirement to report.
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If, after exhausting all relevant possibilities, the ethical conflict remains unresolved, the member should, where ethically possible, refuse to remain associated with the matter creating the conflict. The member may determine that, in the circumstances, it is appropriate to withdraw from the particular engagement team or assignment, or to resign altogether from the engagement, the firm or the employing organization in a manner consistent with the rules of professional conduct. Fiduciary duty Members have duties to their clients that arise from the nature of the relationships with the clients. Members have a professional duty to act with integrity and due care and a contractual duty to provide services as defined by the terms of the engagement. In certain cases, the relationship between a member and a client could also be one that the courts describe as a fiduciary relationship that gives rise to fiduciary duties. The concepts of fiduciary relationship and fiduciary duty are derived from the law of trusts. The obligations of a fiduciary can be onerous and the implications of being in breach of a fiduciary duty can be significant. In determining whether a fiduciary relationship does exist, a court will look at all of the factors but, in a professional engagement situation, will particularly focus on the purpose and nature of the service being provided; the extent of the reliance which the client places on the member; any lack of sophistication of the client; the vulnerability of the client to the influence of the member; and, the discretionary authority, if any, granted by the client to the member. The court will also consider the extent of the disclosure to the client of the member’s interest in the matter and whether the member has put himself or herself in a position of conflict or has an opportunity to receive a benefit unknown to the client. Courts have held that, absent other circumstances, an auditor is not a fiduciary in the typical financial statement audit engagement (in keeping with the standard statutory purpose). However, when a member of the audit firm provides non-audit advisory services to the audit client and when the criteria for a fiduciary relationship exist, the audit firm may be found to be a fiduciary. A service provider is more likely to be found to be a fiduciary in professional engagements such as forensic or investigative accounting and investment advisory services. Members must also note that a member who is an employee may, depending on the particular facts and circumstances, have a fiduciary relationship with his or her employer. If there is any question as to whether a fiduciary relationship exists, legal advice should be obtained. The specific duties that a court might find applicable to a fiduciary will vary depending on the particular facts and circumstances. In general, a fiduciary relationship requires the fiduciary to act in the utmost good faith on behalf of the client. As such, a fiduciary must not place himself or herself in a position where his or her interests conflict with that of the client; nor can a fiduciary profit from his or her position at the expense of the client. A fiduciary must use information obtained in confidence from a client only for the benefit of the client and must not use it for personal advantage or the benefit of another person. A fiduciary cannot act at the same time both for and against the same client and must make available
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to a client all of the information that is relevant to the client’s affairs, unless these requirements are modified with the client’s agreement. Other duties may be found to pertain but are less likely to apply to public accountants. It is important for members to recognize that not all fiduciary relationships give rise to all fiduciary duties. The terms of the engagement, including explicit provisions for the disclosure of potential conflicts and/or the use of institutional mechanisms to maintain confidentiality are fundamentally important to the nature of the relationship and the duties that a court will find to apply in a particular case. The responsibilities owed to an existing client are more comprehensive than the responsibilities owed to a former client. The responsibility owed to a former client is generally limited to the duty of confidentiality. Some, but not all, fiduciary duties are also professional obligations under the rules of professional conduct. The existence of professional obligations that are similar to fiduciary duties is not in and of itself determinative as to whether a fiduciary relationship exists between a member and his or her client. The rules require that members maintain confidentiality, refrain from taking undisclosed profits and avoid conflicts of interest in all client relationships. While the law recognizes that only certain professional engagements give rise to fiduciary duties, members must be aware that they are subject to the rules of professional conduct in all engagements. Personal character and ethical conduct The rules of professional conduct which follow are based on the principles expressed above in this Foreword. These principles have emerged out of the collective experience of the profession as it has sought, down the years, to demonstrate its sense of responsibility to the public it serves. By their commitment to honourable conduct, members of the Institute, throughout its history, have given particular meaning and worth to the designation "chartered accountant". They have done so by recognizing that rules of professional conduct, which are enforceable by sanctions, do not by their nature state the most that is expected of members, but simply the least – the rules thus define a minimum level of acceptable conduct. Ethical conduct in its highest sense, however, is a product of personal character – an acknowledgement by the individual that the standard to be observed goes beyond that of simply conforming to the letter of a list of prohibitions. APPLICATION OF THE RULES OF PROFESSIONAL CONDUCT • The rules of professional conduct apply to all members irrespective of the type of professional services being provided. Some rules have particular relevance to members engaged in the practice of public accounting. The rules and the guidance in this Foreword also apply, as appropriate, to students and, as discussed below, to licensed firms. Members and students not engaged in the practice of public accounting must observe these rules except where the wording of any rule makes it clear that it relates specifically to the practice of public accounting or there is a specific exception made in a particular rule.

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The term “professional services” also applies to members and students who are not engaged in the practice of public accounting. In this context, it includes those of a member’s activities where the public or his or her associates are entitled to rely on membership in the Institute as giving the member particular competence and requiring due care, integrity and an objective state of mind. Members are responsible to the Institute for compliance with these rules by others who are either under their supervision or share with them proprietary interest in a firm or other enterprise. In this regard, a member must not permit others to carry out on his or her behalf acts which if carried out by the member would place him or her in violation of the rules. Members and students who reside outside British Columbia continue to be subject to the rules of professional conduct in the province or provinces of membership. They may also be subject to the rules of the organized accounting profession in the jurisdiction in which they reside. Should the rules in two or more jurisdictions conflict, a member will, where possible, observe the higher or stronger of the conflicting rules and, where that is not possible, he or she will consider the ethical conflict guidance set out above.

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Principles governing the responsibilities of firms Licensed firms of chartered accountants, being comprised of members of the profession, have a responsibility which they share with their individual members to provide services that maintain the profession's reputation for competence and integrity. It is clear that the manner in which licensed firms conduct their affairs and provide services has an importance that goes well beyond the establishment of their individual reputations; it affects the public perception of the chartered accountancy profession as a whole. This broader responsibility requires that licensed firms be accountable to the profession and the public in respect of ethical conduct and professional competence. The accountability of licensed firms is formalized by bringing them within the authority of the rules of professional conduct in a manner that is similar to that for members but which also appropriately recognizes that the responsibility of licensed firms as business organizations differs in important respects from that of the individual members carrying on professional engagements on their behalf. The responsibility of licensed firms to the profession is fulfilled in the first instance by establishing, maintaining and upholding appropriate policies and procedures designed to ensure that their members provide professional services in a manner that complies with the standards of conduct and competence prescribed in these rules. The accountability of licensed firms is based on the recognition that the services they provide are carried out by members of the profession who, through their individual and collective actions and through the exercise of professional judgment, are expected at all times to comply with these rules and to adhere to the generally accepted standards of practice of the profession. Depending on the circumstances and the particular standard of competence or conduct, therefore, the accountability of a licensed firm for a failure to comply with the rules may be shared with a member or members of the licensed firm. It is acknowledged in this regard that a licensed firm cannot be held accountable for the conduct of its members who do not comply with these rules, where the licensed firm has done all
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that it could be reasonably expected to have done to ensure that such members do comply with the rules. A licensed firm will be held accountable, as an organization, for its professional conduct and standards in those instances where: • • the licensed firm has policies and/or procedures which are inconsistent with the rules; the breach of any rule by any member of the licensed firm is found to be related to the absence of quality control procedures or to the existence of quality control procedures that are inadequate for the type of practice in which it is engaged; the licensed firm is identified with a conduct or the provision of professional services that is in breach of the rules and it is unclear which member(s) within the licensed firm are responsible for such breach; the conduct that breaches the rules was authorised, initiated, implemented or condoned by the licensed firm prior to or at the time it takes place; the conduct that breaches the rules is condoned or concealed by the licensed firm after it learns of it; the licensed firm did not take appropriate action in response to becoming aware of any conduct that breaches the rules; or there are repeated instances of breaches of the rules by member(s) of the licensed firm.

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In keeping with the principle that licensed firms have a responsibility to maintain the good reputation of the profession, it is only appropriate in these circumstances that the licensed firm and the individual member(s) be the subject of investigation and disciplinary sanction. The inclusion of licensed firms within the authority of the rules does not presume that an investigation against a licensed firm automatically calls into question the character, competence or conduct of all of the members of the licensed firm. Indeed, there is an obligation on the part of those given responsibility for the enforcement of the profession's standards to ensure that any investigation of a licensed firm be restricted to those who should properly be the subject of the investigation and resulting disciplinary sanction. This involves recognizing that licensed firms may have many partners and/or offices and/or a number of departments or units within the offices, whether or not they are geographically distinct. In some circumstances, therefore, accountability for a failure to comply with the rules will rest solely with the individual partners of a licensed firm who had knowledge of the matter that is the reason for making charges against the licensed firm. In other circumstances, the accountability will rest with identifiable departments or units within a licensed firm, or with a licensed firm's executive committee, management committee or equivalent group. ***

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INTERPRETATION OF THE RULES OF PROFESSIONAL CONDUCT In interpreting the rules, they are to be read in the light of the Foreword to the rules and the definitions in and provisions of the bylaws of the Institute. The headings used in the rules are for convenience only and are not to be considered in construing or interpreting the rules. *** [April 2009]

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100 101 101

GENERAL Compliance with Bylaws, Regulations and Rules Members, students and licensed firms shall comply with the Accountants (Chartered) Act, the bylaws, regulations and rules of professional conduct of the Institute as they may be from time to time and with any order or resolution of the Council or Committees appointed by Council or officers of the Institute under the bylaws, rules, or the Accountants (Chartered) Act. Conviction of Criminal or Similar Offences A member, student or licensed firm who has been: (a) convicted of an offence of fraud, theft, forgery or tax evasion, or is convicted of an offence of conspiring or attempting to commit such offences; or (b) found guilty of violating the provisions of any securities legislation; or (c) convicted of any criminal or similar offence for conduct in or relating to their professional capacity, or for conduct in circumstances where there was reliance on their membership in or association with the Institute; or (d) discharged absolutely or upon conviction after pleading guilty to or being found guilty of an offence described in (a), (b), or (c) above shall promptly inform the Institute of the fact of the conviction, finding of guilt or discharge as the case may be, when the right of appeal has been exhausted or expired. Reporting Disciplinary Suspension or Cancellation of Membership, or Restriction of Right to Practise When, through the disciplinary process of another Provincial Institute, (a) a member's membership in that Provincial Institute is suspended or cancelled; or (b) a member’s or licensed firm’s right to practise is restricted by that Provincial Institute, the member or licensed firm shall promptly inform the Institute of the fact of the suspension, cancellation, or practice restriction. False or Misleading Applications A member or student or any person who applies to become a member or a student shall not sign or associate with any letter, report, statement or representation relating to the application for admission or re-admission to membership, or relating to the application for enrolment or re-enrolment as a student, which the applicant knows, or should know, is false or misleading.

102.1 102.1

102.2

102.2

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104 104.1

Requirement to Co-operate A member, student or licensed firm shall co-operate with the regulatory processes of the Institute. [March 2012] A member, student or licensed firm shall promptly reply in writing to any communication from the Institute in which a written reply is specifically required. [March 2012] Intimidation A member, student or licensed firm shall not threaten or intimidate: (a) a person who makes a complaint to the Institute, a witness, or any other person involved with a regulatory process of the Institute; or (b) an officer, staff member, volunteer or agent of the Institute acting on behalf of the Institute. [March 2012]

104.2

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STANDARDS OF CONDUCT AFFECTING THE PUBLIC INTEREST

201.1-4 Maintenance of Reputation of the Profession 201.1 A member, student or licensed firm shall act at all times in a manner which will maintain the good reputation of the profession and its ability to serve the public interest. Notwithstanding any other provisions of the bylaws or these rules of professional conduct, in the event a member, student or licensed firm is charged under Rule 201.1 on account of an offence referred to in Rule 102.1, when a certificate of conviction or certified copy of the original information or indictment as provided for in Rule 201.4 with respect to the offence set out in Rule 102.1 is filed with the Professional Conduct Enquiry Committee or Discipline Tribunal, there is a rebuttable presumption the member, student or licensed firm charged failed to maintain the good reputation of the profession and its ability to serve the public interest. Notwithstanding any other provisions of the bylaws or these rules of professional conduct, where a member or licensed firm is charged under Rule 201.1 on account of the membership of the member in another Provincial Institute being suspended or cancelled or having a restriction placed on the member’s or licensed firm's right to practise through the disciplinary process of another Provincial Institute, and a certified copy of the other Provincial Institute’s disciplinary decision and order is filed with the Professional Conduct Enquiry Committee or Discipline Tribunal, there is a rebuttable presumption that the member or licensed firm charged failed to maintain the good reputation of the profession and its ability to serve the public interest. In respect of any charge under the rules of professional conduct, a certificate of conviction by any competent court or a certified copy of the original information or indictment with the endorsement of the conviction thereon signed by the official having custody thereof, shall be sufficient evidence of the conviction; and, a certified copy of the original information or indictment with the endorsement of the discharge thereon, signed by the official having custody thereof, shall be sufficient evidence of the discharge. Advocacy Services Before accepting an engagement to act as an advocate, a member or licensed firm shall ensure that: (a) the service is not an assurance or specified auditing procedures engagement; (b) the advocacy role is apparent in the circumstances; (c) the position of the client is supportable; and (d) the position of the client can be argued or supported by the member or licensed firm without the member or licensed firm failing to comply with the independence standards required by Rules 204.1 to 204.8 for other services which the member has engaged to provide.

201.2

201.3

201.4

201.5 201.5

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202.1 202.1 202.2 202.2 203 203

Integrity and Due Care A member, student or licensed firm shall perform professional services with integrity and due care. Objectivity A member or student shall perform professional services with an objective state of mind. [March 2010] Professional Competence A member shall sustain professional competence by keeping informed of, and complying with, developments in professional standards in all functions in which the member practises or is relied upon because of the member's calling.

Independence 204.1 204.1 Independence - Assurance and Specified Auditing Procedures Engagements A member or licensed firm who engages or participates in an engagement: (a) to issue a written communication under the terms of an assurance engagement; or (b) to issue a report on the results of applying specified auditing procedures; shall be and remain independent such that the member, the licensed firm and members of the licensed firm shall be and remain free of any influence, interest or relationship which, in respect of the engagement, impairs the professional judgment or objectivity of the member, the licensed firm or a member of the licensed firm or which, in the view of a reasonable observer, would impair the professional judgment or objectivity of the member, the licensed firm or a member of the licensed firm. Identification of Threats and Safeguards A member or licensed firm who is required to be independent pursuant to Rule 204.1 shall, in respect of the particular engagement, identify threats to independence, evaluate the significance of those threats and, if the threats are other than clearly insignificant, identify and apply safeguards to reduce the threats to an acceptable level. Where safeguards are not available to reduce the threat or threats to an acceptable level, the member or licensed firm shall eliminate the activity, interest or relationship creating the threat or threats, or refuse to accept or continue the engagement. Documentation A member or licensed firm who, in accordance with Rule 204.2, has identified a threat that is not clearly insignificant, shall document a decision to accept or continue the particular engagement. The documentation shall include the following information: (a) a description of the nature of the engagement; (b) the threat identified; (c) the safeguard or safeguards identified and applied to eliminate the threat or reduce it to an acceptable level; and

204.2 204.2

204.3 204.3

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(d) an explanation of how, in the member’s or licensed firm's professional judgment, the safeguards eliminate the threat or reduce it to an acceptable level. 204.4 Specific Prohibitions, Assurance and Specified Auditing Procedures Engagements In addition to complying with Rules 204.1, 204.2, 204.3, 204.5 and 204.6 a member or licensed firm shall comply with the following specific prohibitions: Financial interests (1) (a) A member or student shall not participate on the engagement team for an assurance client if the member or student, or the immediate family of the member or student, holds a direct financial interest or a material indirect financial interest in the client. (b) A member or student shall not participate on the engagement team for an assurance client if the member or student, or the immediate family of the member or student, holds, as trustee, a direct financial interest or a material indirect financial interest in the client. (2) A member or licensed firm shall not perform an audit or review engagement for an entity if the member, licensed firm or a network firm, has a direct financial interest or a material indirect financial interest in the entity. (3) A member or licensed firm shall not perform an audit or review engagement for an entity if a pension or other retirement plan of the licensed firm or network firm has a direct financial interest or a material indirect financial interest in the entity. (4) A member who is a partner of a licensed firm and who holds, or whose immediate family holds, a direct financial interest or a material indirect financial interest in an audit or review client shall not practise in the same office as the lead engagement partner for the client. (5) A member who is a partner or managerial employee of a licensed firm and who holds, or whose immediate family holds, a direct financial interest or a material indirect financial interest in an audit or review client shall not provide a non-assurance service to the client, unless the non-assurance service is clearly insignificant. (6) (a) A member or licensed firm shall not perform an audit or review engagement for an entity (the first entity) if the licensed firm or a network firm has a financial interest in a second entity, and the member knows that the first entity or a director, officer or controlling owner of the first entity also has a financial interest in the second entity, unless the respective financial interests of the licensed firm or network firm and the first entity, the director, officer or controlling owner of the first entity are immaterial and the first entity cannot exercise significant influence over the second entity. (b) A member or student shall not participate on an engagement team for an audit or review client if the member or student has a financial interest in an entity and the member or student knows that the client or a director, officer
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204.4

or controlling owner of the client also has a financial interest in the entity, unless the respective financial interests of the member or student and the client, the director, officer or controlling owner of the client are immaterial and the client cannot exercise significant influence over the entity. (7) (a) A member or licensed firm shall not perform an audit or review engagement for an entity if a partner or professional employee of the licensed firm owns, or such person’s immediate family owns, more than 0.1% of the securities of the entity or controls the entity. (b) A member who is a partner or professional employee of a licensed firm shall not own more than 0.1% of the securities of, or control, an audit or review client of the licensed firm. (8) A member or student shall not participate on the engagement team of an audit or review client if the member or student knows that his or her close family owns more than 0.1% of the securities of the client or controls the client. (9) A member or licensed firm shall not perform an assurance engagement for an entity that is not an audit or review client if the member or licensed firm holds: (i) a direct financial interest or a material indirect financial interest in the entity; or (ii) a material financial interest in another entity that has a controlling interest in the first entity. Loans and guarantees (10)(a) A member or licensed firm shall not perform an assurance engagement for a client if the licensed firm, or a network firm in the case of an audit or review client, has a loan from or has a loan guaranteed by the client, except when the client is a bank or similar financial institution and the loan or guarantee is immaterial to the licensed firm, the network firm, and the client, and the loan or guarantee is made under normal commercial terms and conditions and is in good standing. (b) A member or licensed firm shall not perform an assurance engagement for a client that is not a bank or similar financial institution if the licensed firm, or a network firm in the case of an audit or review client, has a loan to the client. (c) A member or licensed firm shall not perform an assurance engagement for a client if the licensed firm, or a network firm in the case of an audit or review client, guarantees a loan of the client. (11)(a) A member or licensed firm shall not perform an assurance engagement for a client if the licensed firm, or a network firm in the case of an audit or review client, has a loan from or has a loan guaranteed by: (i) an officer or director of the assurance client; or (ii) a shareholder of the assurance client who owns more than 10% of the equity securities of the client. (b) A member or licensed firm shall not perform an assurance engagement for a client if the licensed firm, or a network firm in the case of an audit or review client, has a loan to or guarantees a loan of: (i) an officer or director of the assurance client; or

ICABC RULES OF CONDUCT

17

Updated: March 2012

(ii) a shareholder of the assurance client who owns more than 10% of the equity securities of the client. (12)(a) A member or student who has a loan from or has a loan guaranteed by: (i) an assurance client, except a client that is a bank or similar financial institution where the loan or guarantee is made under normal commercial terms and conditions and the loan is in good standing, (ii) an officer or director of the client, or (iii) a shareholder of the client who owns more than 10% of the equity securities of the client, shall not participate on the engagement team for the client. (b) A member or student who has a loan to or guarantees the borrowing of (i) an assurance client that is not bank or similar financial institution; (ii) an officer or director of the client; or (iii) a shareholder of the client who owns more than 10% of the equity securities of the client shall not participate on the engagement team for the client. Close business relationships (13)(a) A member or licensed firm shall not perform an audit or review engagement for an entity if the licensed firm, or a network firm, has a close business relationship with the entity or its management unless the close business relationship is limited to a financial interest that is immaterial and the relationship is clearly insignificant to the licensed firm or network firm and the entity or its management, as the case may be. (b) A member or licensed firm shall not perform an assurance engagement that is not an audit or review engagement if the licensed firm has a close business relationship with the assurance client or its management unless the close business relationship is limited to a financial interest that is immaterial and the relationship is clearly insignificant to the licensed firm and the client or its management, as the case may be. (c) A member or student who has a close business relationship with an assurance client or its management shall not participate on the engagement team for the client unless the close business relationship is limited to a financial interest that is immaterial and the relationship is clearly insignificant to the member and the client or its management, as the case may be. Family and personal relationships (14) A member or student shall not participate on the engagement team for an assurance client if the member’s or student’s immediate family is a director or officer of the client or an employee of the client in a position to exert direct and significant influence over the subject matter of the engagement, or was in such a position during any period covered by the engagement. A member or student shall not participate on the engagement team for an audit client that is a reporting issuer if the member’s or student’s close family is in an accounting role or a financial reporting oversight role at the client, or was in such a position during any period covered by the engagement.
18 Updated: March 2012

(15)

ICABC RULES OF CONDUCT

Employment with a reporting issuer audit client (16) A member or licensed firm shall not perform an audit engagement for a reporting issuer if a person who participated in an audit capacity in an audit of the financial statements of the entity performed by the member or licensed firm has accepted employment in a financial reporting oversight role with respect to the entity until a period of one year has elapsed from the date that the financial statements were filed with the relevant securities regulator or stock exchange. Recent service with an assurance client (17) A member or student shall not participate on an engagement team for an assurance client if the member or student served as an officer or director of the client or was an employee thereof in a position to exert direct and significant influence over the subject matter of the engagement during the period covered by the assurance report. Serving as an officer or director of an assurance client (18) A member or licensed firm shall not perform an assurance engagement for an entity if a member of the licensed firm serves as an officer or director for the entity. Serving as an officer or director of an audit or review client (19)(a) A member or licensed firm shall not perform an audit or review engagement for an entity if a member of a network firm serves as an officer or a director of the entity other than, in the case of an entity that is not a reporting issuer, serving as company secretary and the practice is specifically permitted under local law, professional rules or practice, and the duties and functions undertaken are limited to those of a routine and formal administrative nature. (b) A member or licensed firm shall not perform an audit engagement for a reporting issuer, or a related entity, if a member of the licensed firm or a network firm serves as an officer or a director of a related entity of the reporting issuer. Long association of senior personnel with a reporting issuer audit client (20)(a) (i) A member shall not continue as the lead engagement partner or the engagement quality control reviewer on an audit engagement of a reporting issuer for more than seven years in total, and shall not thereafter resume or assume either such role until a further five years [October 2010] have elapsed. (ii) In the case of an audit engagement of a reporting issuer that is a mutual fund, the lead engagement partner and the engagement quality control reviewer shall not thereafter resume or assume either such role with the reporting issuer or another mutual fund that is in the same mutual fund complex as the reporting issuer until a further five years have elapsed. (b) (i) A member, who is an audit partner on an audit engagement of a reporting issuer, other than an audit partner referred to in Rule 204.4(20)(a), who, during the engagement period, provides more than ten hours of assurance services in connection with the annual financial statements or the interim financial information of the reporting issuer or
ICABC RULES OF CONDUCT 19 Updated: March 2012

who is a subsidiary engagement partner with respect to the entity shall not continue in such role or roles for more than seven years in total and shall not thereafter perform the role of audit partner of the reporting issuer until a further two years have elapsed. (ii) In the case of an audit engagement of a reporting issuer that is a mutual fund, the audit partner shall not thereafter perform the role of audit partner of the reporting issuer or another mutual fund that is in the same mutual fund complex as the reporting issuer until a further two years have elapsed. [September 2005, effective January 1, 2006] Audit committee approval of services to a reporting issuer audit client (21) A member or licensed firm shall not provide a professional service to an audit client that is a reporting issuer, or to a subsidiary thereof, without the prior approval of the reporting issuer’s audit committee. Performance of management functions for an assurance client (22)(a) A member or licensed firm shall not perform an assurance engagement for an entity if, during the engagement period, a member of the licensed firm makes a management decision or performs a management function for the entity, including: (i) authorising, approving, executing or consummating a transaction; (ii) having or exercising authority on behalf of the entity; (iii) determining which recommendation of the member or licensed firm will be implemented; or (iv) reporting in a management role to those charged with governance of the entity. (b) A member or licensed firm shall not perform an audit or review engagement for an entity, if a member of a network firm, during either the period covered by the financial statements subject to audit or review or the engagement period, makes a management decision or performs a management function for the entity including any of the services listed in paragraph (22)(a)(i) to (iv); (c) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or review or the engagement period, a member of the licensed firm or a network firm, makes a management decision or performs a management function for the entity, or a related entity, including any of the services listed in paragraph (22)(a)(i) to (iv). Preparation of journal entries and source documents (23) A member or licensed firm shall not perform an audit or review engagement for an entity if, during either the period covered by the financial statements subject to audit or review or the engagement period, a member of the licensed firm or a network firm: (i) prepares or changes a journal entry, determines or changes an account code or a classification for a transaction or prepares or changes another accounting record without obtaining the approval of management of the entity; or
ICABC RULES OF CONDUCT 20 Updated: March 2012

(ii) prepares a source document or originating data, or makes a change to such a document or data. Preparation of accounting records and financial statements for a reporting issuer audit client (24) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or a network firm provides accounting or bookkeeping services related to the accounting records or financial statements to be audited including: (i) maintaining or preparing the entity’s, or related entity’s, accounting records; (ii) preparing the financial statements or preparing financial statements which form the basis of the financial statements on which the audit report is provided; or (iii) preparing or originating source data underlying such financial statements, unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during the audit of such financial statements. In determining whether such a conclusion is reasonable, there is a rebuttable presumption that the results of the accounting or bookkeeping services will be subject to audit procedures. Provision of valuation services to a reporting issuer audit client (25) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or a network firm, provides a valuation service to the client or the related entity, unless it is reasonable to conclude that the results of that service will not be subject to audit procedures during the audit of the financial statements. In determining whether such a conclusion is reasonable, there is a rebuttable presumption that the results of the valuation service will be subject to audit procedures. Provision of actuarial services to a reporting issuer audit client (26) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or network firm, provides an actuarial service to the client or a related entity, unless it is reasonable to conclude that the results of that service will not be subject to audit procedures during the audit of the financial statements. In determining whether such a conclusion is reasonable, there is a rebuttable presumption that the results of the actuarial service will be subject to audit procedures.

ICABC RULES OF CONDUCT

21

Updated: March 2012

Provision of internal audit services to a reporting issuer audit client (27) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or network firm, provides an internal audit service to the client or a related entity, that relates to the client’s, or the related entity’s, internal accounting controls, financial systems or financial statements unless it is reasonable to conclude that the results of that service will not be subject to audit procedures during the audit of the financial statements. In determining whether such a conclusion is reasonable, there is a rebuttable presumption that the results of the internal audit service will be subject to audit procedures. Provision of IT system services to a reporting issuer audit client (28) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or network firm provides financial information systems design or implementation services and the services involve: (i) directly or indirectly operating, or supervising the operation of, the entity’s or a related entity’s information system, or managing the entity’s or a related entity’s local area network; or (ii) designing or implementing a hardware or software system that aggregates source data underlying the financial statements or generates information that is significant to the entity’s or a related entity’s financial statements or other financial information systems taken as a whole; unless it is reasonable to conclude that the results of these services will not be subject to audit procedures during an audit of the financial statements. In determining whether such a conclusion is reasonable, there is a rebuttable presumption that the results of the financial information systems design and implementation services will be subject to audit procedures. Provision of expert services to a reporting issuer audit client (29) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or network firm, provides an expert opinion or other expert service for the entity or a related entity, or for a legal representative thereof, for the purpose of advocating the entity’s or related entity’s, interest in a civil, criminal, regulatory, administrative or legislative proceeding or investigation. Provision of legal services to an audit or review client (30) A member or licensed firm shall not perform an audit or review engagement for an entity if, during either the period covered by the financial statements subject to audit or review or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or network firm provides a legal service to the entity in the resolution of a dispute or litigation in circumstances
ICABC RULES OF CONDUCT 22 Updated: March 2012

where the matters in dispute or subject to litigation are material in relation to such financial statements. Provision of legal services to a reporting issuer audit client (31) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or network firm, provides a legal service to the entity or a related entity. Human resource services for a reporting issuer audit client (32) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, the member, the licensed firm, a network firm or a member of the licensed firm or network firm, provides any of the following services to the entity or a related entity: (i) searching for or seeking out prospective candidates for management, executive or director positions; (ii) engaging in psychological testing, or other formal testing or evaluation programs; (iii) undertaking reference checks of prospective candidates for an executive or director position; (iv) acting as a negotiator or mediator on the entity’s behalf with respect to employees or future employees with respect to any condition of employment, including position, status or title, compensation or fringe benefits; or (v) recommending or advising the entity or a related entity to hire a specific candidate for a specific job. Provision of corporate finance and similar activities to an assurance client (33)(a) A member or licensed firm shall not perform an assurance engagement for an entity if, during the engagement period, the licensed firm, or a member of the licensed firm, provides any of the following services to the entity: (i) promoting, dealing in or underwriting the entity’s securities; (ii) making investment decisions on behalf of the entity or otherwise having discretionary authority over the entity’s investments; (iii) executing a transaction to buy or sell the entity’s investments; or (iv) having custody of assets of the entity, including taking temporary possession of securities purchased by the entity. (b) A licensed firm shall not perform an audit or review engagement for an entity if a network firm, during either the period covered by the financial statements subject to audit or review or the engagement period, provides any of the services listed in paragraph (33)(a)(i) to (iv) to the entity. (c) A licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or review or the engagement period, a member of the licensed firm or a network firm, provides any of the services listed in paragraph (33)(a)(i) to (iv) to a related entity of the reporting issuer.

ICABC RULES OF CONDUCT

23

Updated: March 2012

Pricing (34) A member or licensed firm shall not provide an assurance service for a fee that the member or the licensed firm knows is significantly lower than that charged by the predecessor member or firm, or contained in other proposals for the engagement, unless the member or licensed firm can demonstrate: (i) that qualified members of the licensed firm have been assigned to the engagement and will devote the appropriate time to it; and (ii) that all applicable assurance standards, guidelines and quality control procedures have been followed. Compensation of audit partners of a reporting issuer audit client (35) A member or licensed firm shall not perform an audit engagement for a reporting issuer if, during either the period covered by the financial statements subject to audit or the engagement period, an audit partner who is on the engagement team for the reporting issuer or a related entity earns or receives compensation based on the audit partner procuring any engagement that is not an assurance engagement from the reporting issuer or a related entity, unless the member or the licensed firm has fewer than five audit clients that are reporting issuers and fewer than ten partners. Gifts and hospitality (36) A member or student who participates on an engagement team for an assurance client and the member’s or student’s licensed firm shall not accept a gift or hospitality, including a product or service discount, from the client or a related entity, unless the gift or hospitality is clearly insignificant to the member, student or the licensed firm, as the case may be. 204.5 204.5 Members Must Disclose Prohibited Interests And Relationships A member or student who has a relationship or interest, or who has provided a professional service, that is precluded by this Rule shall advise in writing a designated partner of the licensed firm of the interest, relationship or service. A member or student who has been assigned to an engagement team for an assurance client shall advise, in writing, a designated partner of the licensed firm of any interest, relationship or activity that would preclude the person from being on the engagement team. 204.6 204.6 Licensed Firms To Ensure Compliance by Partners and Professional Employees A licensed firm that performs an assurance engagement shall ensure that members of the licensed firm do not have a relationship or interest, do not perform a service and remain free of any influence that would preclude the licensed firm from performing the engagement pursuant to Rules 204.1, 204.2, 204.4 or 204.7. Independence: Insolvency Engagements A member or licensed firm who engages or participates in an engagement to act in any aspect of insolvency practice, including as a trustee in bankruptcy, a liquidator, a receiver or a receiver-manager, shall be and remain independent such that the member, licensed firm and members of the licensed firm shall be and shall remain free of any influence, interest or relationship which, in respect of
24 Updated: March 2012

204.7 204.7

ICABC RULES OF CONDUCT

the engagement, impairs the professional judgment or objectivity of the member, licensed firm or member of the licensed firm or which, in the view of a reasonable observer, would impair the professional judgment or objectivity of the member, licensed firm or member of the licensed firm. 204.8 204.8 Disclosure of Impaired Independence A member or licensed firm engaged in the practice of public accounting or any related business or practice, who provides a service not subject to the requirements of Rules 204.1 to 204.7, shall disclose any activity, interest or relationship which, in respect of the engagement, would be seen by a reasonable observer to impair the member’s or licensed firm’s independence such that the professional judgment or objectivity of the member, licensed firm or member of the licensed firm would appear to be impaired, and such disclosure shall be made in the member’s or licensed firm’s written report or other written communication accompanying financial statements or financial or other information and the disclosure shall indicate the nature of the activity or relationship and the nature and extent of the interest. [April 2009, March 2010]

Definitions For the purposes of Rules 204.1 to 204.8 and these definitions, and the related Council Interpretations: “accounting role” means a position in which a person may or does exercise more than minimal influence over: (a) the contents of the financial statements; or (b) anyone who prepares the financial statements. “assurance client” means an entity in respect of which a member or licensed firm has been engaged to perform an assurance engagement. “assurance engagement” means an assurance engagement as contemplated in the CICA [March 2011] Handbook – Assurance. “audit client” means an entity in respect of which a member or licensed firm has been engaged to perform an audit of the financial statements. In the application of Rule 204.4(1) to (12) “audit client” includes its related entities, and the reference to an assurance client, a client or an entity that is an audit client shall be read as including all related entities of the assurance client, client or entity, as the case may be. [September 2005, effective January 1, 2006] “audit committee” means the audit committee of the entity, or if there is no audit committee another governance body which has the duties and responsibilities normally granted to an audit committee. “audit engagement” means an engagement to audit financial statements as contemplated in the CICA Handbook – Assurance. [March 2011] “audit partner” means a person who is a partner in a licensed firm or a person who has equivalent responsibility, other than a specialist or technical partner or equivalent who consults with others on the engagement team regarding technical or industry-specific issues, transactions or events, who is a member of the audit engagement team having responsibility for decision-making on significant auditing, accounting, and reporting matters that affect the financial statements, or who maintains regular contact with management and the audit committee, and includes the following: (a) the lead engagement partner; (b) the engagement quality control reviewer;

ICABC RULES OF CONDUCT

25

Updated: March 2012

(c) another partner who, during the engagement period, provides more than ten hours of assurance services in connection with the annual financial statements or interim financial information of the client; and (d) a subsidiary entity engagement partner. “clearly insignificant” means trivial and inconsequential. “close family” means a parent, non-dependent child or sibling. “direct financial interest” means a financial interest: (a) owned directly by and under the control of an individual or entity (including those managed on a discretionary basis by others); (b) beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has control; (c) owned through an investment club or by a private mutual fund in which the individual participates in the investment decisions. “engagement quality control reviewer”, often referred to as reviewing, concurring or second partner, means the audit partner who, prior to issuance of the audit report, evaluates the significant judgments made by the lead engagement partner and other persons on an engagement team, the conclusions reached in formulating the audit report and other significant matters that have come to the partner’s attention. “engagement team” means: (a) each member of the licensed firm participating in the assurance engagement; (b) all other members of the licensed firm who can directly influence the outcome of the assurance engagement, including: (i) those who recommend the compensation of, or who provide direct supervisory, management or other oversight of, the assurance engagement partner in connection with the performance of the assurance engagement. For the purposes of an audit engagement this includes those at all successively senior levels above the lead engagement partner through to the licensed firm’s chief executive officer; (ii) those who provide consultation regarding technical or industry-specific issues, transactions or events for the assurance engagement; and (iii) those who provide quality control for the assurance engagement; and (c) in the case of an audit client, all persons in a network firm who can directly influence the outcome of the audit engagement. “financial interest” includes a direct or indirect ownership interest in an equity or other security, debenture, loan or other debt instrument of an entity, including rights and obligations to acquire such an interest and derivatives directly related to such interest. “financial reporting oversight role” means a position in which a person may or does exercise influence over: (a) the contents of the financial statements; or (b) anyone who prepares the financial statements. “fund manager” means, with respect to a mutual fund, an entity that is responsible for investing the mutual fund’s assets, managing its portfolio trading and providing it with administrative and other services, pursuant to a management contract. [September 2005, effective January 1, 2006] “immediate family” means a spouse (or equivalent) or dependant. “indirect financial interest” means a financial interest beneficially owned through a collective investment vehicle such as a mutual fund, estate, trust or other intermediary over which the beneficial owner has no control. “lead engagement partner” means the audit partner having primary responsibility for an audit or review engagement.
ICABC RULES OF CONDUCT 26 Updated: March 2012

“market capitalization” in respect of a particular fiscal year means the average market price of all outstanding listed securities and publicly traded debt of the entity measured at the end of each of the first, second and third quarters of the prior fiscal year and the yearend of the second prior fiscal year. “member of a licensed firm” or “member of the licensed firm”, as the case may be, means a person, whether or not a member or a member of a Provincial Institute, who is: (a) a sole practitioner; (b) a partner, professional employee or student of the licensed firm; (c) an individual engaged under contract by the licensed firm to provide services that might otherwise be provided by a partner or professional employee of the licensed firm; (d) an individual who provides to the licensed firm services which are referred to in Rule 204.1 and includes any corporate or other entity through which the individual contracts to provide such services; or (e) a retired partner of the licensed firm who retains a close association with the licensed firm. “mutual fund” means a mutual fund that is a reporting issuer. [September 2005, effective January 1, 2006] “mutual fund complex” means a mutual fund that has : (a) the same fund manager as a client; (b) a fund manger that is controlled by the fund manager of a client; or (c) a fund manager that is under common control with the fund manager of a client. [September 2005, effective January 1, 2006] “network firm” means an entity under common control, ownership or management with a licensed firm, or any entity that a reasonable observer who has knowledge of the facts would conclude to be part of a licensed firm nationally or internationally. A network firm does not include an entity that constitutes a related business or practice, as defined, in Canada. “office” means a distinct sub-group of a firm, whether organized on geographical or practice lines. “partner” includes a person with a proprietary interest in a licensed firm. “related entity” means any of the following: (a) in the case of a client that is a reporting issuer, an entity: (i) over which the client has control; (ii) that has control over the client; or (iii) that is under common control with the client, including the client's parent company and any subsidiaries; (b) in the case of a client that is not a reporting issuer, an entity: (i) over which the client has control; (ii) that has control over the client provided the client is material to such entity; or (iii) that is under common control with the client provided that such entity and the client are both material to the controlling entity; (c) in any case, an entity over which a client has significant influence, unless the entity is not material to the client; and (d) in any case, an entity that has significant influence over a client, unless the client is not material to the entity. [September 2005, effective January 1, 2006] “reporting issuer” for the purposes of Rule 204.4 means an entity that is a reporting issuer within the meaning of Bylaw 100, other than an entity that has, in respect of a particular fiscal year, market capitalization and total assets that are each less than $10,000,000, subject to the following:

ICABC RULES OF CONDUCT

27

Updated: March 2012

(a) an entity that becomes a reporting issuer by virtue of the market capitalization or total assets becoming $10,000,000 or more in respect of a particular fiscal year shall be considered to be a reporting issuer thenceforward unless and until the entity ceases to have its shares, units or debt quoted, listed or marketed in connection with a recognized stock exchange or the entity has remained under the market capitalization or total assets threshold for a period of two years; (b) in the case of a period in which an entity makes a public offering: (i) the term “market capitalization” shall be read as referring to the market price of all outstanding listed securities and publicly traded debt measured using the closing price on the day of the public offering, and (ii) the term “total assets” shall be read as referring to the amount of total assets presented on the most recent financial statements prepared in accordance with generally accepted accounting principles included in the public offering document; and (c) in the case of an entity that does not have listed securities or publicly traded debt, the definition of reporting issuer shall be read without reference to market capitalization. [September 2005, effective January 1, 2006] “review client” means an entity in respect of which a member or licensed firm conducts a review engagement. In the application of Rule 204.4(1) to (12) “review client” includes its related entities, and the reference to an assurance client, a client or an entity that is a review client shall be read as including all related entities of the assurance client, client or entity, as the case may be. [September 2005, effective January 1, 2006] “review engagement” means an engagement to review financial statements as contemplated in the CICA Handbook – Assurance. [March 2011] “specified auditing procedures engagement” means an engagement to perform specified auditing procedures as contemplated in the CICA Handbook – Assurance. [March 2011] “subsidiary entity engagement partner” means the lead engagement partner for an audit engagement related to the annual financial statements or interim financial information of an entity that is a subsidiary or joint venture of an audit client and whose assets or revenues constitute 20% or more of the assets or revenues of the audit client’s respective consolidated assets or revenues. “total assets” in respect of a particular fiscal year means: (a) the amount of total assets presented on the third quarter of the prior fiscal year’s financial statements prepared in accordance with generally accepted accounting principles that are filed with a relevant securities regulator or stock exchange; or (b) in the case of an entity that is not required to file quarterly financial statements, the amount of total assets presented on the annual financial statements of the second previous fiscal year prepared in accordance with generally accepted accounting principles that are filed with a relevant securities regulator or stock exchange. [September 2005, effective January 1, 2006] Effective Date And Transitional Provisions Rules 204.1 to 204.8 shall take effect, no later than: (a) for an assurance engagement in respect of a particular reporting period of a client, for the first reporting period commencing after December 31, 2003; and (b) for any other assurance engagement and an engagement to issue a report of the results of applying specified auditing procedures where the engagement is commenced after December 31, 2003, subject to the following transitional provisions, as may be applicable.
ICABC RULES OF CONDUCT 28 Updated: March 2012

1. Provision of non-assurance services The non-assurance services referred to in Rule 204.4(22) to (33) do not include a service that has not been completed before January 1, 2004 where: (i) There exists on December 31, 2003 a binding contract for the member or licensed firm to provide the service; (ii) The provision of the service is completed before January 1, 2005; and (iii) The provision of the service by the member or licensed firm would not have contravened the provisions of Rule 204.1 as it read prior to January 1, 2004. 2. Prior approval of audit and non-audit services Rule 204.4(21) shall come into effect at the earlier of the following dates: (i) when Multilateral Instrument 52-110, which requires pre-approval by the audit committee of all non-audit services to be provided to the reporting issuer or to its subsidiaries, becomes a rule enforced by the relevant securities regulator; and (ii) when the audit client has policies and procedures in place that require pre-approval by the audit committee of all non-audit services to be provided to the reporting issuer or to its subsidiaries. 3. Employment relationships The reference to employment in Rule 204.4(16) shall not apply to an employment relationship entered into by a person before January 1, 2004. 4. Compensation of audit partners Rule 204.4(35) shall not apply to the compensation of an audit partner in respect of the fiscal period of the audit partner’s licensed firm that includes December 31, 2003. 5. Audit partner rotation Notwithstanding the requirements of Rule 204.4(20): (i) A lead engagement partner may continue in that role for a particular client up to and including the second fiscal year of the client commencing after December 31, 2003, notwithstanding that such partner has completed five or more years in that role, or in the role of engagement quality control reviewer, before that second fiscal year; (ii) An engagement quality control reviewer may continue in that role for a particular client up to and including the third fiscal year of the client commencing after December 31, 2003, notwithstanding that such partner has completed five or more years in that role, or in the role of lead engagement partner, before that third fiscal year; (iii) A partner referred to in Rule 204.4(20)(b) may continue in the particular role for up to seven years after December 31, 2003 notwithstanding that such partner has completed seven or more years in that role before the fiscal year of the particular client commencing after December 31, 2003; (iv) A member may commence the role of lead engagement partner for a particular client prior to the end of the client’s second fiscal year commencing after December 31, 2003, and may continue in that role for five years, notwithstanding the number of years, if any, that the member was previously the engagement quality control reviewer for the particular client.

ICABC RULES OF CONDUCT

29

Updated: March 2012

6. Auditors of reporting issuers Any reference in Rules 204.1 to 204.8 to a “reporting issuer” does not include an entity that would not have been a “listed entity” under the definition of that term as it read on December 31, 2005, until the first reporting period commencing after December 31, 2005, and the references in paragraphs 1 to 5 of these transitional provisions to “2003”, “2004” and “2005”, as they apply to the Rules affecting or in relation to such an entity, shall be read as “2005”, “2006” and “2007” respectively. [September 2005, effective January 1, 2006] 205 205 False or Misleading Documents and Oral Representations A member, student or licensed firm shall not (a) sign or associate with any letter, report, statement, representation or financial statement which the member, student or licensed firm knows, or should know, is false or misleading, whether or not the signing or association is subject to a disclaimer of responsibility, nor (b) make or associate with any oral report, statement or representation which the member, student or licensed firm knows, or should know, is false or misleading. Compliance with Professional Standards A member or licensed firm engaged in the practice of public accounting shall perform professional services in accordance with generally accepted standards of practice of the profession. A member who has responsibility for the preparation or approval of the general purpose financial statements of an entity shall ensure those financial statements are presented fairly in accordance with generally accepted accounting principles or such other accounting principles as may be required in the circumstances. A member who, as a member of an entity’s audit committee or board of directors, is required to participate in the review or approval of the entity’s general purpose financial statements by such committee or board, shall carry out that responsibility with the care and diligence of a competent chartered accountant, enhanced by the skills and knowledge derived from the member’s own career. Unauthorised Benefits A member or student shall not, in connection with any transaction involving a client or an employer, and a licensed firm shall not, in connection with any transaction involving a client, hold, receive, bargain for, become entitled to or acquire, directly or indirectly, any fee, remuneration or benefit for personal advantage or for the advantage of a third party without the knowledge and consent of the client or employer, as the case may be.

206 206.1

206.2

206.3

207 207

ICABC RULES OF CONDUCT

30

Updated: March 2012

208.1-5 Confidentiality of Information 208.1 A member, student or licensed firm shall not disclose any confidential information concerning the affairs of any client, former client, employer or former employer except: (a) when properly acting in the course of carrying out professional duties; (b) when such information should properly be disclosed for purposes of Rules 211.1 or 302.1 to 302.3; (c) when such information is required to be disclosed by order of lawful authority or, in the proper exercise of their duties, by the Council, or any committee appointed thereby, or any subcommittee of any committee; (d) when justified in order to defend the member, student or licensed firm or any associates or employees of the member, student or licensed firm, as the case may be, against any lawsuit or other legal proceeding or against alleged professional misconduct or in any legal proceeding for recovery of unpaid professional fees and disbursements, but only to the extent necessary for such purpose; or (e) when the client, former client, employer or former employer, as the case may be, has consented to such disclosure. 208.2 A member, student or licensed firm shall not use confidential information of any client, former client, employer or former employer, as the case may be, obtained in the course of professional work for such client or employer (a) for the advantage of the member, student or licensed firm, (b) for the advantage of a third party, or (c) to the disadvantage of such client or employer without the knowledge and consent of the client, former client, employer or former employer. 208.3 A member or licensed firm engaged to perform a particular service may contract for the services of a person not employed by the member or licensed firm to assist in the performance of that service, provided the member or licensed firm first obtains the written agreement of that person to carefully and faithfully preserve the confidentiality of any information acquired for the purposes of the engagement and not to make use of such information other than as shall be required in the performance of such services. Rules 208.1 and 208.3 shall not be construed to prohibit disclosure of information to the Professional Conduct Enquiry Committee, the Practice Review and Licensing Committee, Council, or any officer or employee of the Institute acting on their behalf, in connection with a practice review or an investigation into the competence, fitness to practise, or professional conduct of a member, student or licensed firm, or proceedings related thereto. A member, student or licensed firm shall attend to assist Council, the Professional Conduct Enquiry Committee, the Practice Review and Licensing Committee, and the Discipline Tribunal when required and shall produce any books, papers and

208.4

208.5

ICABC RULES OF CONDUCT

31

Updated: March 2012

records in their possession, custody or control which may be required from time to time. 209 Borrowing from Clients [March 2010] 209.1 A member, student or licensed firm shall not, directly or indirectly, borrow from or obtain a loan guarantee from a client unless either (a) the loan or guarantee has been made under normal commercial terms and conditions, and (i) the client is a bank or similar financial institution whose business includes lending money to the public, or (ii) the client is a person or entity, a significant portion of whose business is the private lending of money; or (b) (i) in the case of a member or student, the client is a family member or an entity over which a family member exercises significant influence; or (ii) in the case of a licensed firm, the client is a family member of a partner or shareholder of the licensed firm or an entity over which a family member of a partner or shareholder of the licensed firm exercises significant influence. 209.2 Rule 209.1 does not apply to: (a) the financing of a bona fide business venture between a member, student or licensed firm and a client that is not an assurance client; (b) amounts received from a client as a retainer or as a deposit on account of future services to be provided by the member, student or licensed firm; or (c) a loan received from a member’s or student’s employer. [March 2011] 209.3 For purposes of Rule 209.1, a client includes a person or entity who has, within the previous two years, engaged the member or licensed firm to provide a service and who relies on membership in or licensure by the Institute as giving the member or licensed firm particular competence to provide that service.

210.1-4 Conflict of Interest 210.1 A member or licensed firm engaged in the practice of public accounting or in a related business or practice shall, before accepting any professional engagement, determine whether there is any restriction, influence, interest or relationship which, in respect of the proposed engagement, would cause a reasonable observer to conclude that there will be a conflict as contemplated by Rule 210.2. Subject to the provisions of Rule 210.3, a member, student or licensed firm shall not accept, commence or continue any engagement to provide professional services to any client in circumstances where a reasonable observer would conclude that the member, student or licensed firm: (a) is in a position or has placed any person in a position where any of their interests conflicts with the interest of a client; or

210.2

ICABC RULES OF CONDUCT

32

Updated: March 2012

(b) is in a position where the duty owed to one client creates a professional or legal conflict with the duty owed by the member, student or licensed firm to another client. 210.3 Where the acceptance of a proposed engagement would result in a conflict under Rule 210.2 or where a previously unidentified conflict under Rule 210.2 arises or is discovered in the course of an existing engagement or engagements, the member or licensed firm must decline the proposed engagement, or withdraw from all existing engagements that are affected, unless: (a) (i) the member or licensed firm is able to rely upon conflict management techniques that are generally accepted and the use of such techniques will not breach the terms of an engagement with or duty to another client; (ii) the member or licensed firm informs all affected clients of the existence of the conflict and the techniques that will be used to manage it; and (iii) the member or licensed firm obtains the consent of all affected clients to accept or continue the engagement or engagements; or (b) the affected clients have knowledge of the conflict and their consent for the member or licensed firm to accept or continue the engagement is implied by their conduct, in keeping with common commercial practice. 210.4 For purposes of Rules 210.2 and 210.3, a client includes any person or entity for whom the member, student or licensed firm, or any other person engaged in the practice of public accounting or a related business or practice in association with the member, student or licensed firm, provides or is engaged to provide a professional service.

211.1-2 Duty to Report Breach of Rules of Professional Conduct 211.1 A member or licensed firm shall promptly report to the Professional Conduct Enquiry Committee any information concerning an apparent breach of these rules of professional conduct or any information raising doubt as to the competence, reputation or integrity of a member, student, or applicant or licensed firm, unless such disclosure would result in (a) the breach of a statutory duty not to disclose, (b) the reporting of information by a member or licensed firm exempted from this rule for the purposes and to the extent specified by Council, (c) the loss of solicitor-client privilege, (d) the reporting of a matter that has already been reported, or (e) the reporting of a trivial matter. A member or licensed firm who is required to report under Rule 211.1 and who is engaged, or is in consultation with a view to being engaged, with respect to a civil or criminal investigation need not report to the Professional Conduct Enquiry Committee any information obtained in the course of such engagement or consultation concerning an apparent breach of these rules of professional conduct or any information raising doubt as to the competence, reputation or integrity of a member, student, applicant or licensed firm until such time as

211.2

ICABC RULES OF CONDUCT

33

Updated: March 2012

(a) the client has consented to the release of the information, (b) the member or licensed firm becomes aware that the information is known to third parties other than legal advisors, or (c) it becomes apparent to the member or licensed firm that the information will not become known to third parties other than legal advisors. 212.1 212.1 Handling of Trust Funds and Other Property A member or student who, or a licensed firm that, receives, handles or holds money or other property as a trustee, receiver or receiver/manager, guardian, administrator/manager or liquidator shall do so in accordance with the terms of the engagement, including the terms of any applicable trust, and the law relating thereto and shall maintain such records as are necessary to account properly for the money or other property; unless otherwise provided for by the terms of the trust, money held in trust shall be kept in a separate trust bank account or accounts. Handling Property of Others A member, student or licensed firm in the course of providing professional services shall handle with due care any entrusted property.

212.2 212.2

213.1-2 Unlawful Activity 213.1 A member, student or licensed firm shall not knowingly associate with any unlawful activity. A member, student or licensed firm shall not provide services to a client if doing so would contravene any statute of the Province of British Columbia. Fee Quotations A member or licensed firm shall not quote a fee for any professional engagement unless adequate information has been obtained about the engagement. Contingent Fees A member or licensed firm engaged in the practice of public accounting or in a related business or practice shall not offer or engage to perform a professional service: (a) for a fee payable only where there is a specified determination or result of the service; or (b) for a fee the amount of which is to be fixed, whether as a percentage or otherwise, by reference to the determination or result of the service; where the service is (c) one in respect of which professional standards or rules of conduct require that the member or licensed firm be and remain free of any influence, interest or relationship which, in respect of the engagement, impairs the member's professional judgment or objectivity or which, in the view of a reasonable observer, would impair the professional judgment or objectivity of the member, licensed firm, or a member of the licensed firm; or (d) a compilation engagement.
34 Updated: March 2012

213.2 214 214

215 215.1

ICABC RULES OF CONDUCT

215.2

Rule 215.1 does not apply to a professional service for a fee fixed by a court or other public authority or to a professional service in respect of any aspect of insolvency practice, including acting as a trustee in bankruptcy, a liquidator, a receiver, or a receiver-manager. Other than in respect of an engagement described in Rule 215.1 a member or licensed firm engaged in the practice of public accounting or in a related business or practice may offer or engage to perform a professional service for a fee payable only where there is a specified determination or result of the service, or for a fee the amount of which is to be fixed, whether as a percentage or otherwise, by reference to the determination or result of the service, provided: (a) the fee arrangement does not constitute an influence, interest or relationship which impairs or, in the view of a reasonable observer, would impair the professional judgment or objectivity of the member, licensed firm, or a member of the licensed firm, in respect of an engagement described in Rule 215.1(c); or (b) the fee arrangement is not one which influences, or in the view of a reasonable observer would influence, the result of a compilation engagement performed by the member, licensed firm, or a member of the licensed firm for the same client; and (c) the client has agreed in writing to the basis for determining the fee before the completion of the engagement. Payment or Receipt of Commissions or Other Compensation Other than in relation to the sale and purchase by a member or licensed firm of an accounting practice, a member or licensed firm engaged in the practice of public accounting or a student while employed by a member or licensed firm engaged in the practice of public accounting, shall not directly or indirectly pay to any person who is not an employee of the member or licensed firm or who is not a public accountant a commission or other compensation to obtain a client, nor shall the member, student or licensed firm accept directly or indirectly from any person who is not a public accountant a commission or other compensation for a referral to a client of products or services of others. Advertising and Promotion A member or licensed firm may advertise or seek publicity for the member’s or licensed firm's services, achievements or products and may seek to obtain new engagements and clients by various means, but shall not do so directly or indirectly, in any manner (a) which the member or licensed firm knows, or should know, is false or misleading, or which includes a statement the contents of which the member or licensed firm cannot substantiate; (b) which makes unfavourable reflections on the competence or integrity of the profession or any member or licensed firm; or (c) which otherwise brings disrepute on the profession. [April 2009]

215.3

216 216

217.1 217.1

ICABC RULES OF CONDUCT

35

Updated: March 2012

217.2 217.2

Solicitation Notwithstanding Rule 217.1, a member or licensed firm shall not, either directly or through a party acting on behalf of and with the knowledge of the member or licensed firm, solicit, in a manner that is persistent, coercive or harassing, any professional engagement. Endorsements A member or licensed firm may advertise or endorse any product or service of another person or entity that the member or licensed firm uses or otherwise has an association with, provided the member or licensed firm has sufficient knowledge or expertise to make an informed and considered assessment of the product or service. However, in doing so, (a) the member or licensed firm must act with integrity and due care; (b) the member or licensed firm must be satisfied that the endorsement (i) is not false or misleading, and does not include a statement the contents of which the member or licensed firm cannot substantiate, (ii) does not make unfavourable reflections on the competence or integrity of the profession or any member or licensed firm, and (iii) does not otherwise bring disrepute on the profession; and [April 2009] (c) when associating the CA designation with an endorsement, the member or licensed firm must conduct sufficient appropriate procedures to support the assertions made about the product or service.

217.3 217.3

218 218

Retention of Documentation and Working Papers A member or licensed firm shall retain for a reasonable time period such working papers, records or other documentation which reasonably evidence the nature and extent of the work done in respect of any professional engagement.

ICABC RULES OF CONDUCT

36

Updated: March 2012

300 -

RELATIONS WITH FELLOW MEMBERS AND WITH NON-MEMBERS ENGAGED IN PUBLIC ACCOUNTING Rescinded Rescinded Communication with Predecessor A member or licensed firm shall not accept an engagement with respect to the practice of public accounting or the public practice of a function not inconsistent therewith, where the member or licensed firm is replacing another member, licensed firm or other accountant or accounting firm recognized by statutory authority in British Columbia, without first communicating with such person or firm and enquiring whether there are any circumstances that should be taken into account which might influence the decision whether or not to accept the engagement.

301.1 301.2 302.1 302.1

302.2-3 Reply By Incumbent 302.2 The incumbent member or licensed firm shall respond promptly to the communication referred to in Rule 302.1. A member or licensed firm responding to a communication pursuant to Rule 302.2 shall inform the possible successor if suspected fraud or other illegal activity by the client was a factor in the member's or licensed firm's resignation or if, in the member's or licensed firm's view, fraud or other illegal activity by the client may have been a factor in the client's decision to appoint a successor. Cooperation with Successor Accountant A member or licensed firm shall upon written request of the client and on a timely basis, supply reasonable and necessary client information to the member’s or licensed firm's successor, except where a member or licensed firm chooses to withhold such information pending the resolution of any outstanding accounts. Such cooperation is required with any successor accountant, including a nonmember. [February 2012] Transfer of Client's Records A predecessor member or licensed firm on an engagement shall cooperate with the successor on the engagement. The predecessor shall transfer promptly to the client or, on the client’s instructions, to the successor, all property of the client which is in the predecessor's possession, except where the predecessor exercises the right to place a lien on all or a portion of the records pending resolution of any outstanding accounts. Such property shall be transferred in the medium in which it is maintained by the predecessor, or such other medium that is mutually agreeable, that will facilitate a timely and efficient transfer which best serves the client’s interests. Ordinarily, when electronic copies of the property of the client are readily available, the client’s interests will be best served when such information is
37 Updated: March 2012

302.3

303.1 303.1

303.2 303.2

ICABC RULES OF CONDUCT

provided as electronic data, rather than in printed form, provided that supplying the information in such a form will not violate licensing, copyright or similar legal agreements or proprietary rights. [February 2012] 304 304 Joint Engagements A member or licensed firm who accepts any engagement jointly with another member or licensed firm shall accept joint and several responsibility for any portion of the work to be performed by either; no member or licensed firm shall proceed in any matter within the terms of such joint engagement without due notice to the other member or licensed firm.

305.1-2 Communication of Special Engagements to Incumbent 305.1 A member or licensed firm engaged in the practice of public accounting shall, before commencing any engagement for a client for which another member or licensed firm is the duly appointed auditor or accountant, first notify such auditor or accountant of the engagement, unless the client makes an unsolicited request, [March 2011] evidenced in writing, that such notification not be given. Rule 305.1 applies only where the services to be provided under the terms of the engagement are included in the practice of public accounting. Responsibilities on Accepting Engagements A member or licensed firm who accepts an engagement, whether by referral or otherwise, from a client of a member or licensed firm who has a continuing professional relationship with that client shall not take any action which would tend to impair the position of the other member or licensed firm in the ongoing work with the client. Responsibilities on Referred Engagements A member or licensed firm receiving an engagement for services by referral from another member or licensed firm shall not provide or offer to provide any additional services to the referred client without the consent of the referring member or licensed firm; the interest of the client being of overriding concern, the referring member or licensed firm shall not unreasonably withhold such consent.

305.2 306.1 306.1

306.2 306.2

ICABC RULES OF CONDUCT

38

Updated: March 2012

400 – 401 401

ORGANIZATION AND CONDUCT OF A PROFESSIONAL PRACTICE Practice Names A member or licensed firm shall engage in the practice of public accounting, or in the public practice of any function not inconsistent therewith, only under a name or style which (a) is not misleading, (b) is not self-laudatory, (c) does not contravene professional good taste, and (d) has been approved in a manner specified by the Council. Use of Descriptive Style Subject to Section 15(3) of the Act and Rule 402.2, the practice of public accounting shall be carried on under the descriptive style of "chartered accountant(s)" unless it forms part of the firm name. Regardless of the functions actually performed, the use of “chartered accountant(s)” as part of the firm name or as a descriptive style, in offering services to the public, shall be regarded as carrying on the practice of public accounting for the purposes of these rules of professional conduct. Proprietary Interest with Non-Members Notwithstanding Rule 402.1, each office in British Columbia of any firm engaged in the practice of public accounting and composed of one or more members sharing proprietary interest with other public accountants who are not professional colleagues shall not practise under the style of “chartered accountant(s)”. Association with Firms A member shall not associate in any way with any firm practising as chartered accountants in British Columbia unless the firm is a licensed firm which is entitled to use the designation "Chartered Accountant" under Section 15(2) of the Act. Operation of Members' Offices Each office in British Columbia of any member or licensed firm engaged in the practice of public accounting shall be under the personal charge and management of a member who shall normally be accessible to meet the needs of clients during such times as the office is open to the public. Office by Representation A member or licensed firm engaged in the practice of public accounting shall not hold out or imply that the member or licensed firm has an office in any place where the member or licensed firm is in fact only represented by another public accountant who is not a professional colleague or a firm of public accountants who are not professional colleagues and, conversely, a member or licensed firm engaged in the practice of public accounting who only represents a public accountant who is not a professional colleague or a firm of public accountants who are not professional colleagues, shall not hold out or imply that the member or

402.1 402.1

402.2 402.2

403 403

404 404

405 405

ICABC RULES OF CONDUCT

39

Updated: March 2012

licensed firm maintains an office for such public accountant or such firm of public accountants. 406 406 Member Responsible for a Non-Member in Practice of Public Accounting A member or licensed firm engaged in the practice of public accounting who is associated in such practice with a non-member shall be responsible to the Institute for any failure of such non-member, in respect of such practice, to abide by the rules of professional conduct of the Institute and in the application of this rule, the rules of professional conduct are deemed to apply as if such non-member were a member.

407.1-4 Related Business or Practice, and Member Responsible for Non-Member in Such Business or Practice 407.1 The rules of professional conduct, except Rule 402.1, shall apply to a member or licensed firm carrying on a related business or practice as if it were the practice of public accounting. A member or licensed firm engaged in a practice of public accounting to which another business or practice is related, or engaged in such related business or practice, shall be responsible to the Institute for any failure of a non-member who is associated with such related business or practice and who is under the member's or licensed firm's management or supervision or with whom the member or licensed firm shares proprietary or other interest in such related business or practice to comply with the rules of professional conduct. In the application of this rule, the rules of professional conduct are deemed to apply as if such related business or practice were the practice of public accounting and such non-member were a member. A member may associate with a related business or practice as a proprietor, as a partner, or as a director, officer or shareholder of a corporation and may associate with a non-member for this purpose. A related business or practice shall not be designated "chartered accountant(s)" or "public accountant(s)". Association of Member with Non-Member in Public Practice A member or licensed firm shall not associate in any way with a non-member in a practice of public accounting, or in a related business or practice, unless: (1) such association maintains the good reputation of the profession and its ability to serve the public interest; and (2) such business or practice establishes and maintains policies, procedures and arrangements suitable for ensuring: (a) that every such non-member is knowledgeable of and complies with (i) the Institute's governing legislation, bylaws, regulations and rules of professional conduct; and

407.2

407.3

407.4 408 408

ICABC RULES OF CONDUCT

40

Updated: March 2012

(ii) the ethical and other regulations applicable to members of a recognized professional organization or regulated body of which the non-member is a member; and (b) that no style or presentation or communication is used which implies that the non-member is a member. 409 409 Practice of Public Accounting in Corporate Form A member or licensed firm shall not associate in any way with any corporation engaged in Canada or Bermuda in the practice of public accounting, except to the extent permitted in clauses (1), (2), (3), (4) or (5) of this rule: (1) A member or licensed firm may engage to provide to the corporation, but not on behalf of the corporation, any of the services included in the definition of "practice of public accounting". (2) A member, other than a member engaged in the practice of public accounting, may associate with a corporation which provides taxation services involving advice, counsel or interpretation provided such services are only a small part of the corporation's activities. (3) A member or licensed firm may associate with a corporation engaged in the practice of public accounting in British Columbia provided such corporation is licensed in accordance with Section 14.1 of the Act and Part 6 of the Bylaws. (4) A member or licensed firm may associate with a corporation engaged in the practice of public accounting in a province or territory of Canada other than British Columbia, or in Bermuda, if the corporation is recognized and approved for such practice by the applicable Provincial Institute and the corporation does not engage in the practice of public accounting in British Columbia. (5) A licensed firm to which Rule 402.2 applies, or a member holding a proprietary interest in that firm, may associate with a corporation engaged in the practice of public accounting in British Columbia that holds the proprietary interest in the firm of one or more public accountants who are not professional colleagues, if the corporation is recognized and approved for such practice by the competent regulatory authority for such public accountants in British Columbia. [October 2010] Without limiting the generality of the foregoing, a corporation shall be deemed to be engaged in the practice of public accounting even though the corporation provides a service included in the definition of "practice of public accounting" only to another member or firm engaged in the practice of public accounting or to a public accountant.

ICABC RULES OF CONDUCT

41

Updated: March 2012

500 –

RULES OF PROFESSIONAL CONDUCT APPLICABLE ONLY TO LICENSED FIRMS Licensed Firm’s Maintenance of Policies and Procedures for Compliance with Professional Standards A licensed firm shall establish, maintain and uphold appropriate policies and procedures designed to ensure that its services are performed in accordance with generally accepted standards of practice of: (a) the profession, including the Recommendations and Requirements, as appropriate, set out in the CICA Handbook, and (b) the particular business or practice, provided that such standards are not lower than or inconsistent with the generally accepted standards of practice of the profession in which case the generally accepted standards of the profession must be followed. [March 2011] Licensed Firm's Maintenance of Policies and Procedures A licensed firm shall establish, maintain and uphold appropriate policies and procedures designed to ensure that, in the conduct of the practice, the members and students of the Institute who are associated with the licensed firm and any other employees of the licensed firm or other persons with whom the licensed firm contracts to carry out its professional services comply with the Rules of Professional Conduct, and in particular: (a) conduct themselves in a manner which will maintain the good reputation of the profession and its ability to serve the public interest; (b) perform their professional services with objectivity, integrity and due care; (c) comply with the independence requirements of the Institute; (d) comply with the conflict of interest requirements of the Institute; (e) sustain their professional competence and keep informed of and comply with developments in professional standards in all functions in which they practise or are relied on because of their calling; (f) ensure only authorised individuals have access to and can authorise the release of financial and confidential information relating to clients; (g) do not sign or associate themselves with any letter, report, statement, representation or financial statement which they know or should know is false or misleading, whether or not the signing or association is subject to a disclaimer of responsibility, or make or associate themselves with any oral report, statement or representation which they know or should know is false or misleading; (h) ensure that partners or others who are not professional colleagues, such as head office personnel, (i) cannot supersede decisions of members relating to the performance of client engagements within the definition of the practice of public accounting, and (ii) are familiar with and comply with the Act, Bylaws and Rules of Professional Conduct of the Institute; and (i) ensure that members of the licensed firm who are members of other professional associations comply with those associations' bylaws and codes of ethics. [March 2010]
42 Updated: March 2012

501

501

502 502

ICABC RULES OF CONDUCT

503 503

Association with Firms A licensed firm engaged in the practice of public accounting shall not associate professionally with any other firm practising as chartered accountants in British Columbia unless that other firm is a licensed firm which is entitled to use the designation "Chartered Accountant" under Section 15(2) of the Act.

ICABC RULES OF CONDUCT

43

Updated: March 2012