Last week The International Ethics Standards Board for Accountants (IESBA) released a new Code of Ethics for professional accountants. The IESBA is the global independent standard-setting body that sets ethical standards, including auditor independence requirements for professional accountants. IESBA is one of the standard setting boards of the International Federation of Accountants (IFAC). IFAC is a global body for the accountancy profession which aims to strengthen the profession and contribute to the development of strong international economies.

The new code comes into effect in June 2019 and follows a period of extensive consultation worldwide; including three global roundtables to ensure that stakeholder feedback was heard and discussed.

IESBA is encouraging firms, regulators, standard setters and audit oversight bodies to increase awareness of the revised code and implement its provisions early on to assist practitioners to embed them into their practice sooner.

UK financial regulators, which are members of IFAC, will now commence the process of reviewing and revising their own codes so that they give effect to the changes made by IESBA. Those members are:

  • Association of Accounting Technicians (AAT);
  • Association of Chartered Certified Accountants (ACCA);
  • Chartered Institute of Management Accountants (CIMA);
  • Chartered Institute of Public Finance and Accountancy (CIPFA);
  • Institute of Chartered Accountants in England and Wales (ICAEW);
  • Institute of Chartered Accountants of Scotland (ICAS) and
  • Institute of Financial Accountants (IFA).

The revised code introduces a new structure which it is hoped will make it easier to navigate, use and enforce. Although the fundamental principles of ethics have not changed, the new code should give accountants greater clarity about dealing with ethical issues including those of independence.

The new code includes major revisions to the conceptual framework, which is used by professional accountants to identify, evaluate and address threats to compliance with the fundamental principles. The IESBA has summarised the key changes as follows:

  • Revised “safeguards” provisions better aligned to threats to compliance with the fundamental principles
  • Stronger independence provisions regarding longstanding association of personnel with audit clients
  • New and revised sections dedicated to professional accountants in business (PAIBs) relating to:
    • preparing and presenting information; and
    • pressure to breach the fundamental principles
  • Clear guidance for accountants in public practice that relevant PAIB provisions are applicable to them
  • New guidance to emphasise the importance of understanding facts and circumstances when exercising professional judgment and
  • New guidance to explain how compliance with the fundamental principles supports the exercise of professional scepticism in an audit or other assurance engagements.

Recent headlines in the auditing world have put organisations and accountants under the spotlight. It is often suggested that some organisations harbour a culture in which ethical dangers may not be fully recognised or addressed.

It is now for UK regulators and organisations to embrace the changes made by IESBA and to ensure that the new code is implemented properly. It is hoped that having a stronger code of ethics will lead to a shift in culture towards ethics-based conduct, governance and control frameworks. Whether, once implemented, this new code will reinforce a culture of accountability and ethical conduct by UK regulators, remains to be seen.