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Contributing to international standards’ development and adoption are core elements of IFAC’s strategy for small- and medium-sized practices (SMPs) and, therefore, the IFAC SMP Committee’s annual work plan. To help ensure the stability, relevance and proportionality of standards to SMPs and their small- and medium-sized entity clients, IFAC and the committee dedicate significant resources to providing regular and timely input to both the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants (IESBA) (see previous Gateway article for more details on our input).

The SMP Committee recently responded to three IESBA Exposure Drafts (EDs) on proposed changes to the Code of Ethics for Professional Accountants and application materials on the extension of Part C of the extant Code to professional accountants in public practice (PAPPs), further revisions on safeguards, and improving the structure of the Code.

Extension of Part C to Accountants in Public Practice

The IESBA believes it is possible for accountants in public practice to find themselves in ethically problematic circumstances that do not involve clients and, hence, face the same issues and ethical dilemmas as professional accountants in business. Accordingly, the IESBA seeks to clarify the circumstances in which the provisions in extant Part C should also apply to public practice.

The SMP Committee generally supported the IESBA’s objectives and its holistic approach to clarify that the requirements and application material applies to those in public practice. Key points in the response included:

  • Concern that accountants in public practice may continue to think that Part C of the Code is not applicable to them. In addition, the contention that the proposed approach would not impose an undue burden on accountants in public practice may not be accurate. The IESBA should consider an awareness campaign and develop communication messages to inform all professional accountants.
  • The proposed requirement paragraphs R120.4 and R300.5 need to clarify that significance and possible frequency of occurrence may play a role in determining whether the threat to an individual accountant in public practice’s compliance with the fundamental principles had exceeded an acceptable level. The use of more examples in this respect would be helpful.


The Safeguards – Phase 2 ED continued the work from the first phase with the objective of enhancing a more robust conceptual framework with more explicit requirements and application material to explain how to identify, evaluate and address threats to compliance with the fundamental principles. This enhanced conceptual framework:

(a) Explicitly states that a professional accountant is required to address threats to compliance with the fundamental principles by eliminating them or reducing them to an acceptable level.

(b) Clarifies the safeguards in the extant Code and excludes others that the IESBA determined were inappropriate or ineffective.

(c) Includes some new requirements to assist professional accountants in evaluating and addressing threats. Specifically, in evaluating threats, professional accountants are required to consider new information or changes in facts and circumstances.

Key comments from the SMP Committee included:

  • Whilst the ED includes many requirements expressed more clearly, there are also instances where proposed revisions means that certain sections would become invariably longer with repetition introduced.
  • The notion of independence as an enabler of objectivity as opposed to as an end in itself could have been given more thorough consideration from an SME audit/review perspective. The circumstances and, thus, public interest perspectives of many SMEs may differ considerably. What constitutes an appropriate degree of independence, and especially independence in mind, will also differ from one assignment to another.
  • The IESBA should clarify what the requirement in R600.8 for the auditor to “ensure” is intended to mean in practical terms. The material detailing the personal attributes (skill, knowledge and experience) of a designated individual could be moved to application material instead.
  • There are significant concerns about the proposal to extend the provisions on recruitment services in the Code currently applicable to public interest entities to all audits. If the auditor is involved in the recruiting process (e.g., selecting various candidates) but not in making a management decision, the threat is not of the magnitude that the IESBA proposal implies.


The third ED was on the new structure of the revised Code, which mainly comprises the restructuring of the text of the remainder of the extant Code that was not included in the earlier Phase 1 (see previous article on the committee’s response to Phase 1 and to the initial consultation). The proposals included:

  • Increased prominence of the requirement to comply with the fundamental principles and apply the conceptual framework;
  • Increased clarity of responsibility—more clearly enabling identification, where relevant, of a firm’s responsibilities and, together with firms’ policies and procedures, professional accountants’ responsibilities; and
  • Increased clarity in drafting—simpler and shorter sentences, simplifying complex grammatical structures, increased use of the active voice, and avoiding legalistic and archaic terms.

Key comments from the SMP Committee included:

  • Continued support for the IESBA’s approach and the general direction of the project.
  • The Code should always prioritize attainment of ethical behavior through the application of principles rather than mere prescription. For a global code, this will assist wider compliance rates as it allows the Code to work in conjunction with various national requirements.
  • There are a number of areas that require further consideration by the IESBA, for instance, clarification of responsible party, repeated reference to the overall requirement, drafting inconsistencies, and delineation of requirements and application material.
  • Concern that the proposed effective date may not provide SMPs with sufficient time to be able to review the new Code, understand the implications, and formulate policy changes at the firm level, as well as influence staff behavior. In addition, there will be significant challenges for IFAC member organizations’ translators. IESBA should seriously consider a minimum time frame of 24 months for the effective date after approval instead of the proposed 18 months.

The needs of the SMP and SME communities will always be at the forefront as far as the SMP Committee is concerned. The SMP Committee looks forward to continued engagement with IESBA to deliver a global code that should be a pride of the profession. With the IESBA planning to issue the restructured Code by end of 2017 and a final adoption date in mid or late 2019, professional accountancy organizations and SMPs will need to start planning for adoption and implementation in the very near future.

Johnny Yong

Head of Capital Market & Assurance, MIA

Johnny Yong is head of capital market and assurance at the Malaysian Institute of Accountants (MIA). He was previously a technical manager with IFAC. Prior to his role at IFAC, he was a partner of a training provider in Malaysia, specializing in provision of training to accounting firms and for accountants in general. He qualified as an accountant following his articleship with BDO Malaysia and also lead MIA's public practice department.

Robyn Erskine

Robyn is a partner in Brooke Bird, a specialist restructuring insolvency and turnaround firm located in Melbourne Australia and has been actively involved in the public practice sector for over 30 years.

In January 2015, Robyn was appointed to the International Federation of Accountants (IFAC) Small and Medium Practices Committee on the nomination of CPA Australia and Chartered Accountants Australia and New Zealand. She is currently the Deputy Chair of the SMPC and the Chair of its Ethics Task Force.

Robyn is a director of CPA Australia having been appointed to the board in 2017.  She has served on CPA Australia’s Victorian Division and Victorian Public Practice Committee and in 2014 Robyn was awarded the Henry Fox Award for outstanding service to Public Practice in Victoria.

In 2011 Robyn became the first female to be appointed as the National President of the Insolvency Practitioners Association of Australia, now known as the Australian Restructuring Insolvency and Turnaround Association (ARITA) and served as a director of ARITA until May 2019. In 2017 Robyn was awarded Life Membership to ARITA for long, dedicated and distinguished service to ARITA and the Profession.

Robyn is a current councilor of the Australian Institute of Credit Management’s Victorian Tasmanian Division.