2002-04-15
[re-sent 2002-04-22]

The Chief Executive Officer
PricewaterhouseCoopers Inc
South Africa

Attention : Mr Colin Beggs

Dear Mr Beggs

Codes of Professional Conduct in regard to Provision of Professional Services

PwC Adherence to Codes of Conduct

Below is an extract of the Code of Professional Conduct of the South African Institute of Chartered Accountants provided for your convenient reference.

From its definitions and contents, this code is obviously applicable to members of the accountancy profession, as well as to associates.

PricewaterhouseCoopers Inc (PwC) is primarily an accountancy firm, but also provides consultation, forensic and legal or quasi-legal services.

Could you please advise me whether all PwC's partners and employees, or at least its professional partners and employees, are required in terms of their service obligations at PwC to abide by this code of conduct, or does this only apply to your partners and employees who are members of the South African Institute of Chartered Accountants.

If this code only applies to your partners and employees who are members of the South African Institute of Chartered Accountants, is there a similar code, either external or internal to PwC, for non-accountancy professional partners and employees. If so, what is this code(s)?

Are PwC partners and employees required to adhere to these codes for all types of assignments, including, but not limited to, external audit, internal audit, consultation services, "outsourced" services and "insourced" services; or are there circumstances where adherence is not required?

Conflicts of Interest

Do PwC in general and specifically PwC South Africa have formal conflict of interest rules and regulations? If so, what are these rules and regulations and can these be provided to us?

What are PwC's tests for conflict of interest before engaging in any of these services?

What are PwC's internal resolution mechanisms for conflict of interest?

What are PwC's external reporting requirements for conflict of interest?

Who in PwC South Africa takes corporate responsibility for conflict of interest matters involving non-accountancy partners and employees of PwC South Africa?

As we are currently reviewing this matter and as we believe it reasonable to believe that PwC should have all this information readily at hand, we further believe it reasonable to request that you provide us with this information by the end of this working week, i.e. close of business on Friday 2002-04-19. I respectfully bring to your attention Clause B.29(q) of the By-Laws of the South African Institute of Chartered Accountants.

Yours sincerely

R.M. Young
Managing Director

[letter transmitted by email - valid without signature]

The South African Institute of Chartered Accountants

Code of Professional Conduct

Issued January 1998

Section 2

Integrity and Objectivity

The principles of integrity and objectivity impose the obligation on all members, associates and students to be fair, honest and free of conflicts of interest, prejudice and bias.

Members, associates and students serve in many different capacities and there is an obligation on them to apply these principles, even at the sacrifice of personal advantage, whether they are in commerce, in industry, in academic situations, in the public sector or in public practice. Regardless of service or capacity, members, associates and students should protect the integrity of their professional services, maintain objectivity, and avoid any subordination of their judgement by others.

Relationships or interests, whether direct or indirect, which could adversely influence, impair or threaten his capacity to act with integrity and objectivity should be avoided. A member, associate or student should not accept or provide gifts or similar favours which could impair his integrity or objectivity.

Members, associates and students will be exposed to situations which involve the possibility of pressures being exerted on them. These pressures may impair their integrity and objectivity. It is impracticable to define and prescribe all such situations where these possible pressures exist, but reasonableness should prevail in identifying relationships that are likely to, or appear to impair a member's, associate's or student's integrity and objectivity.

Section 3

Conflicts of Interest

A member, associate or student should be and appear to be free of any influence, interest or relationship, whether direct or indirect which might be regarded, whatever its actual effect, as being incompatible with integrity, objectivity and, in the case of a member or associate in public practice, independence.

A member, associate or student should be constantly alert to the possibility of a conflict of interest.

The member, associate or student should consider the facts and circumstances before deciding whether or not his integrity and objectivity would be impaired by accepting the engagement or continuing in the position.

Such conflicts may arise in a wide variety of ways, ranging from the relatively trivial dilemma to the extreme case of fraud and similar illegal activities. It is not possible to attempt to itemise a comprehensive check list of potential cases where conflicts of interest might occur.

It should be noted that an honest difference of opinion between a member, associate or student and another party is not in itself an ethical issue.

It is recognised, however, that there can be particular factors which occur when the responsibilities of a member, associate or student may conflict with internal or external demands of one type or another.

Hence:

(a) There may be the danger of pressure from an overbearing supervisor, manager, director or partner; or when there are family or personal relationships which can give rise to the possibility of pressures being exerted upon them. Indeed, relationships or interests which could adversely influence, impair or threaten a member's, associate's or student's integrity should be discouraged.

(b) A member, associate or student may be asked to act contrary to technical and/or professional standards.

(c) A question of divided loyalty as between the member's, associate's or student's superior and the required professional standards of conduct could occur.

(d) Conflict could arise when false, misrepresenting, or misleading statements or information is released or published which may be to the advantage of the employer or client and which may or may not benefit the member, associate or student as a result of such publication.

Where a member, associate or student has reason to believe that his or his employee's involvement in an assignment would possibly cause a conflict of interest, he should immediately disclose this fact.

Where it is clear that a material conflict of interest exists, a member, associate or student should decline to act.

Where a member, associate or student considers that it would be possible to act objectively, the engagement may be accepted provided:

(a) the nature of the conflict is fully explained to each party for whom the member, associate or student will be acting; and

(b) the parties agree in writing that the member, associate or student may act.

In applying standards of ethical conduct, members, associates or students may encounter problems in identifying unethical behaviour or in resolving an ethical conflict. When faced with significant ethical issues, members, associates or students not in public practice should follow the established policies of the employing organisation to seek a resolution of such conflict.

If those policies do not resolve the ethical conflict, the following should be considered:

(a) Review the conflict problem with the immediate superior. If the problem is not resolved with the immediate superior and the member, associate or student determines to go to the next higher managerial level, the immediate superior should be notified of the decision. If it appears that the superior is involved in the problem, the member, associate or student should raise the issue with the next higher level of management. When the immediate superior is the Chief Executive Officer (or equivalent) the next higher reviewing level may be the Executive Committee, Board of Directors, Non_Executive Directors, Trustees, Partners' Management Committee or shareholders.

(b) Seek counselling and advice on a confidential basis with an independent advisor or appropriate and senior member or associate of the Institute to obtain an understanding of possible courses of action. If considered necessary, advice should be sought from the Advisory Panel of the Institute.

(c) If the ethical conflict still exists after fully exhausting all levels of internal review, the member, associate or student, as a last resort, may have no other recourse on significant matters, such as fraud, than to resign from the employing organisation, and to submit a memorandum setting out the reasons for resigning to an appropriate representative of that organisation.