Advanced Auditing, Assurance and Professional Ethics · Professional Ethics & Liabilities of Auditors

Fundamental Principles of the ICAI Code of Ethics

Updated 5 October 2026 · Fact-checked

The ICAI Code of Ethics rests on five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. To solve a question, identify the facts, name the principle at risk, classify the threat, judge if it is at an acceptable level, then apply safeguards or decline the work.

Understand Fundamental Principles of the ICAI Code of Ethics

A chartered accountant is trusted because users believe the work is honest and unbiased. The Code of Ethics turns that trust into rules. It starts with five fundamental principles that apply to every member, in practice or in service.

Integrity means being straightforward and honest. Objectivity means not letting bias, conflict of interest or undue influence override your judgment. Professional competence and due care means keeping your knowledge current and acting diligently as per technical and professional standards. Confidentiality means not disclosing information acquired through professional work without proper authority, and not using it for personal advantage. Professional behaviour means complying with law and avoiding conduct that discredits the profession.

The Code does not list every situation. Instead it gives a conceptual framework. You must identify threats to compliance, evaluate whether they are at an acceptable level, and address them. Acceptable level means a reasonable and informed third party would conclude that compliance with the principles is not compromised.

The Code groups threats into five types. Self-interest: your financial or other interest influences judgment. Self-review: you must evaluate your own earlier work or that of your firm. Advocacy: you promote a client's position so far that objectivity suffers. Familiarity: a close relationship makes you too sympathetic or trusting. Intimidation: pressure, real or perceived, deters you from acting objectively.

If a threat is not at an acceptable level, you apply safeguards to eliminate or reduce it. If none work, you decline or end the engagement or relationship. Safeguards come from the profession, law or regulation, from the client's own systems, and from the firm's own systems. Always check the edition and the exact wording in your study material for details.

Key rules to remember

Five fundamental principles: Integrity + Objectivity + Professional competence and due care + Confidentiality + Professional behaviour; Write all five in any answer on the Code. Each should be tied to the facts.
Five categories of threats: Self-interest, Self-review, Advocacy, Familiarity, Intimidation; Remember: self-interest, self-review, advocacy, familiarity, intimidation (a mnemonic such as SSAFI). Name the threat before discussing safeguards.
Conceptual framework steps: Identify threats → Evaluate (acceptable level?) → Address (eliminate, safeguard or decline); Use this as the skeleton of every case answer.
Acceptable level test: Reasonable and informed third party would conclude compliance is not compromised; This is an objective test, not your own comfort.
Self-interest vs self-review: Self-interest = your own gain at stake; Self-review = judging your own earlier work; This pair is the most commonly confused.

How to solve Fundamental Principles of the ICAI Code of Ethics questions

Use the same sequence for any scenario or theory question on the fundamental principles and the conceptual framework.

1Read the facts and underline the relationship, interest, service or pressure involved.
2Name the fundamental principle or principles at risk, usually objectivity, integrity or confidentiality.
3Classify the threat as self-interest, self-review, advocacy, familiarity or intimidation. Give the reason from the facts.
4Judge whether the threat is at an acceptable level using the reasonable and informed third party test.
5If not acceptable, suggest safeguards that fit the threat, such as a different team, an independent review, disclosure to those charged with governance, or withdrawal.
6If no safeguard works or the Code prohibits the situation, conclude that you should decline or resign.
7State a clear conclusion in one line, in provision, facts, conclusion form.

Quickest way: Principle, threat, safeguard, conclusion in four lines

When to use it: Use this for case-scenario MCQs and short written parts when time is tight.

Spot the trigger word: fee, loan, shares, relative, own work, pressure, advocate.
Map it: own gain is self-interest; own work is self-review; taking sides is advocacy; closeness is familiarity; threat or pressure is intimidation.
Pick the principle that is hit, mostly objectivity.
Write the safeguard or the decision to decline, then a one-line conclusion.

Common mistakes in Fundamental Principles of the ICAI Code of Ethics

Mixing up self-interest and self-review threats
Both arise from the firm's own dealings with the client, so they look alike.
Fix: Ask whose result is being judged. If you are checking your own firm's earlier work, it is self-review. If money or an interest is at stake, it is self-interest.
Listing the principles without applying them
Students memorise definitions and stop.
Fix: Link each principle to a fact in the case and state what went wrong.
Suggesting safeguards for a situation that the Code prohibits outright
Students assume every threat can be safeguarded.
Fix: If a threat is too significant, the only answer is to decline or end the engagement. Say so clearly.
Treating confidentiality as absolute
The word suggests there is never any exception.
Fix: Note that disclosure is allowed where permitted by law and authorised by the client, or where there is a legal or professional duty or right to disclose.
Ignoring the acceptable level test
Students jump straight to safeguards.
Fix: First state whether a reasonable and informed third party would find compliance compromised. Only then discuss safeguards.
Confusing the Code of Ethics with professional misconduct provisions in the Act
Both deal with member conduct.
Fix: Keep them apart. The Code sets principles and the framework. The Chartered Accountants Act schedules define misconduct and are studied separately.

Worked examples

Example 1

CA Meera is statutory auditor of Alpha Ltd. Her firm also prepared the company's books of account during the year, and her audit team now has to audit those same books. Identify the threat, the principle at risk and a response.

Show the solution

Fact: the firm prepared the books, and the same firm audits them.
Principle at risk: objectivity, because she would be assessing her own firm's work.
Threat: self-review, since the result of earlier work by the firm is being evaluated.
Acceptable level: a reasonable and informed third party would doubt independence, so this is not at an acceptable level.
Law: Section 144 of the Companies Act, 2013 prohibits a statutory auditor from providing accounting and book-keeping services to the company it audits (and to its holding company or subsidiary). This is not a judgment call.
Response: the firm cannot be the auditor and also provide book-keeping to the same company. It must stop the book-keeping service, or else not accept or continue the audit.

Answer: Self-review threat to objectivity. Section 144 of the Companies Act, 2013 prohibits the auditor from providing book-keeping services to the audited company. The firm cannot hold both roles, so it must stop the service or not accept or continue the audit.

Example 2

CA Ravi audits Beta Ltd. His brother holds a small shareholding in Beta, and the managing director has hinted that Ravi's firm may lose the engagement if he questions a sensitive related party transaction. Identify the threats and what Ravi should do.

Show the solution

Fact 1: a family member holds shares, which creates a family interest in the client.
Fact 2: the managing director threatens to remove the firm if Ravi raises questions.
Threat 1: self-interest or familiarity, since a close family member has a financial interest in the entity, which may bias judgment.
Threat 2: intimidation, since pressure is applied to deter him from acting objectively.
Principles at risk: objectivity and integrity.
Response: Ravi should evaluate whether the interest is significant. He should communicate the pressure to those charged with governance, document the matter and proceed objectively. If threats cannot be reduced to an acceptable level, he should decline or resign.

Answer: Self-interest or familiarity threat from the family shareholding, plus an intimidation threat from the managing director. He must act with integrity and objectivity, use safeguards such as reporting to those charged with governance, and withdraw if the threats remain unacceptable.

Exam tips

Always name the threat type in words. Marks are often tied to correct classification.
In case MCQs, look for the one fact that changes the answer, such as the fee, a relative or an earlier service.
Write answers in provision, facts, conclusion form and keep the conclusion to one clear line.
Quote section or clause numbers only when you are certain of them, such as Section 144 for prohibited services. Explaining the principle correctly earns the marks.
Revise the exact wording of the five principles from your edition of the Code before the exam.

Practice questions from Professional Ethics & Liabilities of Auditors

Fundamental Principles of the ICAI Code of Ethics in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Fundamental Principles of the ICAI Code of Ethics: frequently asked questions

What are the fundamental principles of the ICAI Code of Ethics?

They are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. They apply to all members. Every ethics question can be tested against them.

What is the difference between self-interest and self-review threats?

A self-interest threat arises when a financial or other interest of the member or firm could influence judgment. A self-review threat arises when the member must evaluate the result of earlier work done by themselves or their firm.

What is the conceptual framework in the Code?

It is a three-step approach: identify threats to the fundamental principles, evaluate whether they are at an acceptable level, and address them with safeguards or by declining. It helps when the Code has no specific rule for a situation.

Can confidential information ever be disclosed?

Yes, in limited cases. Examples are disclosure permitted by law and authorised by the client, or disclosure required by law or in defence of a professional right or duty. Always check the conditions in the Code.