International Ethics Standards Board for Accountants. Overview. Code of Ethics for Professional Accountants

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1 International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants Overview Sandrine Van Bellinghen IESBA Member Jan Munro IESBA Deputy Director

2 IESBA - Mission To serve the public interest Set high quality ethical standards, including independence Facilitate convergence of international and national standards Result = enhance quality of services and strengthen confidence in the accounting profession

3 IESBA Issues Code of Ethics for Professional Accountants The Code applies to individuals who are members of IFAC member bodies 155 member bodies in 124 countries 2.5 million accountants worldwide Members of the forum of firms agree to have policies and methodologies that conform to the Code for transnational audits

4 IESBA Board composition 18 members 9 practitioners/9non-practitioners Various countries represented Public Interest Oversight Board Observers Japanese Financial Securities Administrators European Commission Chair of IESBA s Consultative Advisory Board

5 Code of Ethics Part A All professional accountants Part B Professional accountants in public practice Part C Professional accountants in business

6 Fundamental Principles Integrity To be straight forward and honest in all professional and business relationships Objectivity To not allow bias, conflict of interest or undue influence of others to override professional or business judgments

7 Fundamental Principles Professional Competence and Due Care To maintain professional knowledge and skill at the level required to ensure competent professional services based on current developments in practice, legislation and techniques To act diligently in accordance with applicable technical and professional standards

8 Fundamental Principles Confidentiality To refrain from disclosing confidential information acquired as a result of professional and business relationships without proper and specific authority to disclose unless there is a legal or professional right or duty to disclose To refrain from using confidential information acquired as a result of professional and business relationships for personal advantage or the advantage of third parties

9 Fundamental Principles Professional behavior Obligation to comply with relevant laws and regulations and avoid any action that discredits the profession

10 Conceptual Framework Approach Threats and Safeguards

11 Conceptual Framework Approach Requires active consideration of issues Establishes basic principles Can be applied to differing circumstances Requires judgment rather than literal interpretations encouraged by a pure rules approach

12 Threats Self-interest Self-review Advocacy Familiarity Intimidation

13 Safeguards Two categories: Created by the profession, legislation or regulation In the work environment

14 Prohibitions When safeguards are never adequate

15 Part B Professional Accountants in Public Practice Professional Appointment Conflicts of Interest Second Opinions Fees and Other Types of Remuneration Marketing Professional Services Gifts and Hospitality Custody of Client Assets Objectivity All Services Independence Audit and Review Engagements Independence Other Assurance Engagements

16 Independence for Audit and Review Engagements Independence of mind and independence in appearance Public interest entities: additional provisions in Section 290 that reflect the extent of public interest in certain entities. Public interest entities include listed entities Documentation: conclusions regarding compliance with independence requirements, and substance of any relevant discussions that support those conclusions

17 Independence for Audit and Review Engagements cont d Financial interests Loans and guarantees Business relationships Family and personal relationships Employment with an audit client Temporary staff assignments

18 Independence for Audit and Review Engagements cont d Recent service with an audit client Serving as a director or officer of an audit client Long association of senior personnel (including partner rotation) with an audit client

19 Independence for Audit and Review Engagements cont d Provision of non-assurance services to audit clients Management responsibilities Preparing accounting records and financial statements Valuation services Taxation services Internal audit services

20 Independence for Audit and Review Engagements cont d Provision of non-assurance services to audit clients IT systems services Litigation support services Legal services Recruiting services Corporate finance services

21 Independence for Audit and Review Engagements cont d Fees Compensation and evaluation policies Actual or threatened litigation Reports that include a restriction on use or distribution

22 Part C Professional Accountants in Business Potential conflicts Preparation and reporting of information Acting with sufficient expertise Financial interests Inducements

23 Implementation Support Effective date January 1, 2011 some transitional provisions PowerPoint Presentations Short overview of requirements Comparisons with previous Code Template for analysis Upcoming questions and answers

24 New Projects Conflicts of Interest Definition of a conflict of interest Examples of conflicts Conflict identification, evaluation and management Timing

25 New Projetcs Responding to Suspected Fraud and Illegal Acts Challenging project Legislative and cultural differences Differences between accountants in practice and accountants in business When to disclose confidential information when not required by law Nature of items to be addressed, threshold for taking action, processes for responding Timing

26 Potential Project Inadvertent Violation Matters to be considered Purpose and scope Definition Magnitude Quality controls Safeguards Documentation Discussion with those charged with governance

27 Other Initiatives Adoption and implementation support Monitoring Outreach efforts Liaise with IFAC compliance advisory panel International convergence Use of the Code in a group audit situation How does Code compare to other jurisdictions Dialogue with regulators and national standard setters SMP/SME Working Group

28 International Federation of Accountants