Review of Part C of the Code
This is an active project
Objective(s) of project
The objective of the project is to review Part C to ensure that its provisions remain appropriate and are robust.
The scope of the project encompasses Part C and its relationship with other parts of the Code.
In February 2012, the IESBA established a Working Group to study reported accounting irregularities at certain companies and determine whether Part C should be strengthened to better promote ethical behavior by PAIBs. In addition, Part C had received less attention than other parts of the Code in recent years and, therefore, the IESBA considered that a review of the Part C provisions would be timely.
To understand the ethical issues about which PAIBs contact their member bodies, the Working Group undertook in Q2 2012 a survey of a number of IFAC member bodies with large proportions of PAIBs in their memberships. This survey identified a list of issues for the IESBA’s potential consideration. To prioritize the issues identified, the Working Group undertook in Q3 2012 a broader survey of IFAC member bodies.
On the basis of the input from those surveys as well as from the IESBA CAG, the Working Group identified a number of key recommendations for a review of Part C that were presented at the December 2012 IESBA meeting. The IESBA agreed to the recommendations and commissioned the working group to develop a project proposal.
Task Force progress / Board discussions to date
At its March 2013 meeting, the IESBA approved a project to review Part C of the Code. Phase I of the project will review Sections 300, 320, 330 and 340 of the Code. This phase will, in particular, address pressure by superiors and others to engage in unethical or illegal acts, the responsibility of PAIBs to produce financial reports that are faithful representations of the economics of transactions, and associated matters. Phase II of the project will address Section 350, which is related to facilitation payments and bribes.
The IESBA CAG considered the project proposal at its April 2013 meeting.
At its June 2013 meeting the IESBA considered issues in the project to review Part C of the Code addressing professional accountants in business (PAIBs). Topics discussed included: the application of Part C to all professional accountants and pressure. The IESBA agreed to defer consideration of matters relevant to professional accountants in public practice in this project until after PAIB-specific issues have been addressed by the board.
At its September 2013 meeting the IESBA discussed a straw man of a proposed new section to the Code to address the topic of pressure from superiors and others to engage in unethical or illegal acts, and related issues. Amongst other matters, the IESBA discussed the scope of the guidance and the application of the threats and safeguards approach to the topic.
At its December 2013 the IESBA considered issues and Task Force proposals regarding a revised Section 320 of the Code addressing the preparation and reporting of information. Among other matters, the IESBA discussed a proposal to strengthen the requirement to prepare or present information fairly, honestly and in accordance with relevant professional standards; whether to deal separately with management and external information in Section 320; and whether to prohibit professional accountants in business from preparing or presenting misleading financial information that complies with the applicable reporting framework.
At its April 2014 meeting the IESBA considered issues and Task Force proposals regarding a revised Section 320 of the Code addressing the preparation and reporting of information, and a proposed Section 370 of the Code addressing pressure to breach the fundamental principles. Among other matters, the IESBA discussed possible guidance to help professional accountants in business (PAIBs) better understand their responsibilities regarding the issues of misuse or abuse of discretion under the applicable reporting framework, and transaction-based misrepresentation. The IESBA also provided input on proposed guidance to help PAIBs address the issue of pressure from superiors and others to breach the fundamental principles.
At its July 2014 meeting the IESBA considered proposed changes to Section 320 of Part C of the Code addressing the topic of preparation and reporting of information, and a proposed new Section 370 addressing the topic of pressure by superiors and others to breach the fundamental principles. Among other matters, the IESBA discussed Task Force proposals addressing the misuse of discretion in a reporting framework to mislead. The IESBA also provided input on the construct and content of the proposed Section 370.
The IESBA will consider revised drafts of the proposed Sections 320 and 370, and related enhancements to other sections of Part C, with a view to approval for exposure at its October 2014 meeting.
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