As business and world trade has grown remarkably in recent years, so has Financial, Accounting and Audit services. This is to be expected since as new companies are established or expand or even merge or acquired, they all require professional advice and support, tax and consultancy services as well as audit in order to comply with company law.
Audit can be described as "such an examination of the books, accounts and vouchers of a business, as shall enable the auditor to satisfy himself whether the Balance Sheet is properly drawn up, so as to give a true and fair view of the state of affairs of the business, and that the Profit and Loss account gives a true and fair view of the Profit or Loss for the financial period, according to the best of his information and the explanation given to him as shown by the books; and if not, in what respect he is not satisfied."(Ravinder Kumar et al., 2006, pp. 2).
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However audit does not give an exact explanation, according to Galanza audit might be looked at as a critical and methodical inspection of the accounting data and of any supporting documents or procedures for the reason of deciding the exactness and also trustworthiness of accounting statements and reports. 
"Auditing is concerned with the verification of accounting information to enable the expression of an opinion on the fairness of the presentation of the financial statements."(Galanza., 2002, pp. 1).
The objective of auditing involves the presentation of a report from the auditor of his opinion with regards to the fairness and truthfulness of financial statements in order to express and present his opinion to the owners / shareholders of the company. In addition, in the course of the audit, the auditing objective also includes the responsibility to disclose any fraud and errors, although it is not the auditor's responsibility to discover such fraud and errors in the ordinary course of an audit. For the auditor to be in a position to express a conclusive opinion on fraud and errors it would involve a specific engagement and detailed workload which normally falls outside the ''normal'' audit engagement. Finally the auditor shall make recommendations to the management on improvement in procedures to overcome such weaknesses that have been identified during the course of the audit.
Auditing involves three parties that might be connected in several ways. First of all, an auditor, the professional who has the qualification to perform and plan auditing in compliance with the regulations. Secondly, the client/organization which appoints the auditing company to perform the auditing. Finally, the company which will be audited, this may be a single legal entity or division or the whole group of the client.
An auditor's moral and ethical principles are required to be in full compliance with a formal set of ethical standards. Auditors are expected to perform at the highest standards of conduct and at the same time bearing in mind the public interest. Auditor's Ethical behavior is extremely important in maintaining the trust of the public in financial reporting and business practices and at him same time is the most important criteria for the good name of the accountancy profession. Thus the scope of the Code of Ethics is to encourage an ethical way of life in the worldwide profession of auditing.
The Institute's Code of Ethics, (the Code), offers its members ethical guidance which consequently assists them in meeting these obligations. The Code concerns all members, member firms, employees of member firms, students, affiliates, in any of their business and professional activities.
The Code is based on the International Federation of Accountants and it was issued in June 2005. The revision has now been completed and approved by Institute Council on 3rd May 2006. On 1st September 2006 the latest edition of the Code of Ethics came into effect. 
The IFAC Code of Ethics establishes the basic principles of ethics for any auditor and accountant and furthermore offers a conceptual framework for applying those principles. It is necessary for auditors and accountants to comply with this conceptual framework in order to spot any threats and apply safeguards, resulting in the auditors and accountants compliance with the terms of the basic principles. The Code includes five significant principles which direct the behaviour of the members.
Always on Time
Marked to Standard
Integrity is the first principle which requires every professional auditor to be transparent, genuine and honest in all his business and professional relationships. Nonetheless integrity has to do with truthfulness and fair dealing.
The second principle is Objectivity, which imposes an obligation on all auditors to insist on their professional decisions when prejudice (bias) arises or there is undue influence of others or when a conflict of interest occurs. Consequently, any issues that may influence in any way the professional judgement of the auditor or basically any matter that may give rise to bias must be kept aside.
Competence and Due Care Confidentiality is the third principle which obliges the auditors to offer their clients or employers full and discreet professional service by maintaining their qualified skill and knowledge at the highest level. In addition auditors must act carefully, thoroughly and on time in compliance with appropriate professional and technical standards whilst providing their professional services. Capable professional service involves the use of sound judgement in applying professional skill and knowledge in the performance of this kind of service. Nevertheless, there are two categories of professional service. First the achievement of professional competence and second the continuance of professional competence. A professional auditor should take action to ensure that individuals who work under the professional auditor's power have and shall continue to receive proper training and supervision.
The fourth principle is Confidentiality and demands that Auditors must respect and protect the confidentiality of information gained from their business and professional relationships and should not publicize such information to third parties unless of course they have the prior authority to do so or in the exceptional case where there is a legal obligation to disclose. The clients should have and expect to have the full confidence of their auditors that under no circumstances such client information would be disclosed. Finally, any information an auditor may have consequently gained from his business or professional relationships must not be used for his personal advantage.
It should be mentioned that Confidentiality must also be maintained after the end of the relationship between the client and the auditor.
Last but not least, Professional Behavior is the principle which motivates auditors to meet the terms of their engagement in compliance with the relevant law and regulations and not to indulge in any action that may harm the auditor's profession. Moreover, while trying to promote their work and themselves, auditors must not bring their profession into disrepute. Professional auditors must be honest and trustful and should not claim that their service and / or personal qualifications, or the experience they have gained is better than others. Auditors must also not disgrace references of others or comparisons to the others work. 
As said above, The Code is based on the (IFAC)', which was issued in 2005. ICAEW replaced it and reissued it in 2006 with some adjustments. Thus, Corporate Finance Advice and Agencies and Referrals were two new sections added.
Corporate Finance Advice involves any dangers to objectivity and conflicts of interest. It consists of four different sections, first of all general corporate finance advice, second, marketing and underwriting or placing securities for the client, thirdly, acting as a consultant in relation to takeovers and mergers and finally acting as sponsor or nominated adviser under the Listing Rules and the AIM rules respectively.3
Auditors must be aware of and also comply with the up-to-date regulatory and legislative measures plus professional guidance governing corporate finance assignments. Several examples which are included in the list of Statutory and Other Regulatory and Professional Requirements (as at 1 August 2006) are: First of all, the City Code on Takeovers and Mergers (the City Code). Second, AIM authority's Nominated Adviser Eligibility Criteria.
It is vital for professional auditors to act in accordance with the City Code on Takeovers and Mergers in respect of all related takeover transactions which involve companies ruled by the City Code and are supposed to treat the City's Code general principles as the main practice guidance in respect of any additional takeover transactions.
Auditors that offer an employer or a client corporate finance advice must from the outset give emphasis to the regulatory and legislative responsibilities which will be applied to the employer or client. Auditors must ensure the employer or client, if it is necessary, take legal advice. Auditors must understand the importance of their own responsibilities in accordance with the professional ethical guidance. Finally, the Admission and Disclosure Standards of the London Stock Exchange.
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Agencies and Referrals is the second adjustment that has been introduced to the new 'Code of Ethics'. It is necessary for auditors to evaluate any risks and threats in order to alliance with the essential principles and also to apply safeguards, when they refer or establish agency arrangements or receive referred work. A referral includes an auditor's formal request in the professional relationship with the client, which includes advice on choosing a potential professional adviser. It may possibly also include any other informal request, in spite of the fact that there might be an existing relationship. When making a referral, a duty of care should occur. The level of duty and care differs according to the situations, as well as if the provision or else, exchange of information was requested or not. Cases which anticipate more duty of care are sensibly expected to be within an auditor's knowledge or where a fee is charged. Furthermore, an auditor is necessary to look at this with the client's or enquirer's viewpoint and what their expectations would be of what an auditor would be likely to be familiar with. For instance, when the fees of the referral are received, or else when it's about finance or a professional service referred, the enquirer can logically consider the auditor's knowledge. Any inadequacy of knowledge on the part of the auditor or the client would need to be explained. Moreover when the enquiry is not related with professional or finance service referral and no referral charge would be considered, it is then probable to assume that the enquiry made is personal unless conditions recommend differently.
When a referral is about to be made, the disclosure of knowledge restriction should be well thought out. An auditor is supposed to think if it might be in his concern for that kind of information limits to be disclosed in writing, according to the situation. Aspects which an auditor might need to think when taking such decisions are first of all the nature of the professional relationship with the enquirer. Then, the circumstances in which the enquiry is made, whether it is personal or professional, formal or informal. Furthermore, the context of the personal relationship, does the client know that the auditor is a qualified accountant and is he advising him as a respected professional? Moreover, the extent of enquiry and also whether a referral is considered. Finally, an auditor might need to consider the enquirer's expectations.
A referral occurs when an auditor doesn't have the skill and/or resource to take on the possible engagement. Subsequently, the auditor will have inadequate knowledge and therefore would not be in position to completely assess if the third party is the best option otherwise not. This limitation is expected in the majority of referrals, and the base of the referral will differ. Though, the auditor might consider the fitness for purpose of the third party to identify the clients' needs. When making such considerations, the auditor should take into account the professional or regulatory status of the prospective referee; also the auditor is not usually expected to make extra enquiries about the perspective referee and can make the evaluation supported on what he already knows.
An auditor should not be related with the third party, for instance a family relationship, if there is a family relationship then there are obvious self interests therefore the relationship must be disclosed.
When an auditor attempts the establishment of an agency, it is significant that the conditions of the agency contract must not have need of exclusive referral of all the clients in spite of of suitability.
Auditors must also bear in mind, before accepting an agency, to avoid coming into financial arrangements with another supplier for the reason of self interest. Furthermore before accepting appointment as an auditor of another company, where the auditor is the agent, he should think if the agency constitutes a material business relationship.
Auditors should not in any case perform their practices in a kind of way which gives the impression that they are principles rather than agents.
Furthermore auditors must think of the following when bearing in mind referrals of investment business: If the agency is allowable by regulation and also if the class of the third party investment business provider is well-matched with the obligation to give objective advice. 
Non compliance with the Code of Ethics can devastate a company's personal and corporate status. Often, the biggest damage is caused by an individual's unethical actions; therefore a company's reputation is protected by complying with the Code of Ethics. A lack of care concerning process problems to the outside world might cause a company to fail to meet the terms of the Code of Ethics. That kind of non compliance results in the company seeming to be unconcerned on focusing on the appropriate compliance, which relates once more to reputation.
Nowadays, the behavior, professionalism, objectivity and actions of auditors as well as their professional and personal characteristics come under the daily scrutiny of the business world and of the business and financial media. Accordingly, the auditors are now faced with bigger ethical challenges than ever before. For many years the fundamental basics of the Code of Ethics in the auditing profession stayed unaffected, however in today's highly complicated world of finance, ethical judgments are daily issues and therefore might have a far greater impact on auditor's reputation. This new state of affairs requires and demands that the auditor should strictly apply the principles of the Code of Ethics otherwise failure to comply may endanger the auditor's respectability, objectivity and integrity and this could severely damage the auditor himself as well as his image in the eyes of the public at large. Evidently, the development of ethics in the audit and accounting profession has changed and will continue to influence the behavior and the nature of auditing. It is therefore fair to state that Code of Ethics is not only important to the auditor but it is also an absolute must for every auditor to comply in order to safeguard his role and his future standing as a valuable independent professional and a highly valuable service provider.