International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants Overview Sandrine Van Bellinghen IESBA Member Jan Munro IESBA Deputy Director
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
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
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
Code of Ethics Part A All professional accountants Part B Professional accountants in public practice Part C Professional accountants in business
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
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
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
Fundamental Principles Professional behavior Obligation to comply with relevant laws and regulations and avoid any action that discredits the profession
Conceptual Framework Approach Threats and Safeguards
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
Threats Self-interest Self-review Advocacy Familiarity Intimidation
Safeguards Two categories: Created by the profession, legislation or regulation In the work environment
Prohibitions When safeguards are never adequate
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
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
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
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
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
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
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
Part C Professional Accountants in Business Potential conflicts Preparation and reporting of information Acting with sufficient expertise Financial interests Inducements
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
New Projects Conflicts of Interest Definition of a conflict of interest Examples of conflicts Conflict identification, evaluation and management Timing 2010-2012
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 2010-2013
Potential Project Inadvertent Violation Matters to be considered Purpose and scope Definition Magnitude Quality controls Safeguards Documentation Discussion with those charged with governance
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
International Federation of Accountants www.ifac.org