Introduction (220.1 to 220.2)
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Professional accountants are required to comply with the fundamental principles and apply the conceptual framework set out in Section 120 to identify, evaluate and address threats.

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Preparing or presenting information might create a self-interest, intimidation or other threats to compliance with one or more of the fundamental principles. This section sets out specific requirements and application material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

General (220.3 A1 to 220.4 A1)
  • Non-Authoritative Guidance
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220.3 A1

Professional accountants at all levels in an employing organization are involved in the preparation or presentation of information both within and outside the organization.

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220.3 A2

Stakeholders to whom, or for whom, such information is prepared or presented, include:

  • Management and those charged with governance.

  • Investors and lenders or other creditors.

  • Regulatory bodies.

This information might assist stakeholders in understanding and evaluating aspects of the employing organization's state of affairs and in making decisions concerning the organization. Information can include financial and non-financial information that might be made public or used for internal purposes.

Examples include:

  • Operating and performance reports.

  • Decision support analyses.

  • Budgets and forecasts.

  • Information provided to the internal and external auditors.

  • Risk analyses.

  • General and special purpose financial statements.

  • Tax returns.

  • Reports filed with regulatory bodies for legal and compliance purposes.

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220.3 A3

For the purposes of this section, preparing or presenting information includes recording, maintaining and approving information.

  • Non-Authoritative Guidance
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When preparing or presenting information, a professional accountant shall:

  • Prepare or present the information in accordance with a relevant reporting framework, where applicable;

  • Prepare or present the information in a manner that is intended neither to mislead nor to influence contractual or regulatory outcomes inappropriately;

  • Exercise professional judgment to:

    • Represent the facts accurately and completely in all material respects;

    • Describe clearly the true nature of business transactions or activities; and

    • Classify and record information in a timely and proper manner;

  • Not omit anything with the intention of rendering the information misleading or of influencing contractual or regulatory outcomes inappropriately.

  • Avoid undue influence of, or undue reliance on, individuals, organizations or technology; and

  • Be aware of the risk of bias.

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220.4 A1

An example of influencing a contractual or regulatory outcome inappropriately is using an unrealistic estimate with the intention of avoiding violation of a contractual requirement such as a debt covenant or of a regulatory requirement such as a capital requirement for a financial institution.

Use of Discretion in Preparing or Presenting Information (R220.5 to 220.6 A2)
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Preparing or presenting information might require the exercise of discretion in making professional judgments. The professional accountant shall not exercise such discretion with the intention of misleading others or influencing contractual or regulatory outcomes inappropriately.

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220.5 A1

Examples of ways in which discretion might be misused to achieve inappropriate outcomes include:

  • Determining estimates, for example, determining fair value estimates in order to misrepresent profit or loss.

  • Selecting or changing an accounting policy or method among two or more alternatives permitted under the applicable financial reporting framework, for example, selecting a policy for accounting for long-term contracts in order to misrepresent profit or loss.

  • Determining the timing of transactions, for example, timing the sale of an asset near the end of the fiscal year in order to mislead.

  • Determining the structuring of transactions, for example, structuring financing transactions in order to misrepresent assets and liabilities or classification of cash flows.

  • Selecting disclosures, for example, omitting or obscuring information relating to financial or operating risk in order to mislead.

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When performing professional activities, especially those that do not require compliance with a relevant reporting framework, the professional accountant shall exercise professional judgment to identify and consider:

  • The purpose for which the information is to be used;

  • The context within which it is given; and

  • The audience to whom it is addressed.

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220.6 A1

For example, when preparing or presenting pro forma reports, budgets or forecasts, the inclusion of relevant estimates, approximations and assumptions, where appropriate, would enable those who might rely on such information to form their own judgments.

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220.6 A2

The professional accountant might also consider clarifying the intended audience, context and purpose of the information to be presented.

Relying on the Work of Others (R220.7 to 220.7 A1)
  • Non-Authoritative Guidance
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A professional accountant who intends to rely on the work of other individuals, either internal or external to the employing organization, or other organizations shall exercise professional judgment to determine what steps to take, if any, in order to fulfill the responsibilities set out in paragraph R220.4.

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220.7 A1

Factors to consider in determining whether reliance on others is reasonable include:

  • The reputation and expertise of, and resources available to, the other individual or organization.

  • Whether the other individual is subject to applicable professional and ethics standards.

Such information might be gained from prior association with, or from consulting others about, the other individual or organization.

Addressing Information that Is or Might be Misleading (R220.8 to 220.9 A1)
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When the professional accountant knows or has reason to believe that the information with which the accountant is associated is misleading, the accountant shall take appropriate actions to seek to resolve the matter.

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220.8 A1

Actions that might be appropriate include:

  • Discussing concerns that the information is misleading with the professional accountant's superior and/or the appropriate level(s) of management within the accountant's employing organization or those charged with governance, and requesting such individuals to take appropriate action to resolve the matter. Such action might include:

    • Having the information corrected.

    • If the information has already been disclosed to the intended users, informing them of the correct information.

  • Consulting the policies and procedures of the employing organization (for example, an ethics or whistle-blowing policy) regarding how to address such matters internally.

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220.8 A2

The professional accountant might determine that the employing organization has not taken appropriate action. If the accountant continues to have reason to believe that the information is misleading, the following further actions might be appropriate provided that the accountant remains alert to the principle of confidentiality:

  • Consulting with:

    • A relevant professional body.

    • The internal or external auditor of the employing organization.

    • Legal counsel.

  • Determining whether any requirements exist to communicate to:

    • Third parties, including users of the information.

    • Regulatory and oversight authorities.

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If after exhausting all feasible options, the professional accountant determines that appropriate action has not been taken and there is reason to believe that the information is still misleading, the accountant shall refuse to be or to remain associated with the information.

  • Non-Authoritative Guidance
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220.9 A1

In such circumstances, it might be appropriate for a professional accountant to resign from the employing organization.

Documentation (220.10 A1)
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220.10 A1

The professional accountant is encouraged to document:

  • The facts.

  • The accounting principles or other relevant professional standards involved.

  • The communications and parties with whom matters were discussed.

  • The courses of action considered.

  • How the accountant attempted to address the matter(s).

Other Considerations (220.11 A1 to 220.11 A3)
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220.11 A1

Where threats to compliance with the fundamental principles relating to the preparation or presentation of information arise from a financial interest, including compensation and incentives linked to financial reporting and decision making, the requirements and application material set out in Section 240 apply.

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220.11 A2

Where the misleading information might involve non-compliance with laws and regulations, the requirements and application material set out in Section 260 apply.

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220.11 A3

Where threats to compliance with the fundamental principles relating to the preparation or presentation of information arise from pressure, the requirements and application material set out in Section 270 apply.

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December 2021

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This version of the eCode incorporates revisions to the Code to promote the role and mindset expected of professional accountants.

Revisions to the Code to promote the role and mindset expected of professional accountants will be effective as of December 31, 2021. Early adoption will be permitted


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