Introduction (270.1 to 270.2)
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270.1

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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270.2

Pressure exerted on, or by, a professional accountant might create an intimidation or other threat 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 (R270.3 to 270.3 A5)
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R270.3

A professional accountant shall not:

  • Allow pressure from others to result in a breach of compliance with the fundamental principles; or

  • Place pressure on others that the accountant knows, or has reason to believe, would result in the other individuals breaching the fundamental principles.

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270.3 A1

A professional accountant might face pressure that creates threats to compliance with the fundamental principles, for example an intimidation threat, when undertaking a professional activity. Pressure might be explicit or implicit and might come from:

  • Within the employing organization, for example, from a colleague or superior.

  • An external individual or organization such as a vendor, customer or lender.

  • Internal or external targets and expectations.

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270.3 A2

Examples of pressure that might result in threats to compliance with the fundamental principles include:

  • Pressure related to conflicts of interest:

    • Pressure from a family member bidding to act as a vendor to the professional accountant's employing organization to select the family member over another prospective vendor.

See also Section 210, Conflicts of Interest.

  • Pressure to influence preparation or presentation of information:

    • Pressure to report misleading financial results to meet investor, analyst or lender expectations.

    • Pressure from elected officials on public sector accountants to misrepresent programs or projects to voters.

    • Pressure from colleagues to misstate income, expenditure or rates of return to bias decision-making on capital projects and acquisitions.

    • Pressure from superiors to approve or process expenditures that are not legitimate business expenses.

    • Pressure to suppress internal audit reports containing adverse findings.

See also Section 220, Preparation and Presentation of Information.

  • Pressure to act without sufficient expertise or due care:

    • Pressure from superiors to inappropriately reduce the extent of work performed.

    • Pressure from superiors to perform a task without sufficient skills or training or within unrealistic deadlines.

See also Section 230, Acting with Sufficient Expertise.

  • Pressure related to financial interests:

    • Pressure from superiors, colleagues or others, for example, those who might benefit from participation in compensation or incentive arrangements to manipulate performance indicators.

See also Section 240, Financial Interests, Compensation and Incentives Linked to Financial Reporting and Decision Making.

  • Pressure related to inducements:

    • Pressure from others, either internal or external to the employing organization, to offer inducements to influence inappropriately the judgment or decision making process of an individual or organization.

    • Pressure from colleagues to accept a bribe or other inducement, for example to accept inappropriate gifts or entertainment from potential vendors in a bidding process.

See also Section 250, Inducements, Including Gifts and Hospitality.

  • Pressure related to non-compliance with laws and regulations:

    • Pressure to structure a transaction to evade tax.

See also Section 260, Responding to Non-compliance with Laws and Regulations.

  • Non-Authoritative Guidance
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270.3 A3

Factors that are relevant in evaluating the level of threats created by pressure include:

  • The intent of the individual who is exerting the pressure and the nature and extent of the pressure.

  • The application of laws, regulations, and professional standards to the circumstances.

  • The culture and leadership of the employing organization including the extent to which they reflect or emphasize the importance of ethical behavior and the expectation that employees will act ethically. For example, a corporate culture that tolerates unethical behavior might increase the likelihood that the pressure would result in a threat to compliance with the fundamental principles.

  • Policies and procedures, if any, that the employing organization has established, such as ethics or human resources policies that address pressure.

  • Non-Authoritative Guidance
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270.3 A4

Discussing the circumstances creating the pressure and consulting with others about those circumstances might assist the professional accountant to evaluate the level of the threat. Such discussion and consultation, which requires being alert to the principle of confidentiality, might include:

  • Discussing the matter with the individual who is exerting the pressure to seek to resolve it.

  • Discussing the matter with the accountant's superior, if the superior is not the individual exerting the pressure.

  • Escalating the matter within the employing organization, including when appropriate, explaining any consequential risks to the organization, for example with:

    • Higher levels of management.

    • Internal or external auditors.

    • Those charged with governance.

  • Disclosing the matter in line with the employing organization's policies, including ethics and whistleblowing policies, using any established mechanism, such as a confidential ethics hotline.

  • Consulting with:

    • A colleague, superior, human resources personnel, or another professional accountant;

    • Relevant professional or regulatory bodies or industry associations; or

    • Legal counsel.

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270.3 A5

An example of an action that might eliminate threats created by pressure is the professional accountant's request for a restructure of, or segregation of, certain responsibilities and duties so that the accountant is no longer involved with the individual or entity exerting the pressure.

Documentation (270.4 A1)
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270.4 A1

The professional accountant is encouraged to document:

  • The facts.

  • The communications and parties with whom these matters were discussed.

  • The courses of action considered.

  • How the matter was addressed.