An SMP Perspective on Improving the Structure of the IESBA Code of Ethics for Professional Accountants

Raymond Cheng, Christopher Arnold | March 9, 2015 |

The International Ethics Standards Board for Accountants (IESBA, the Ethics Board) recently undertook a consultation as part of a project to improve the usability of the Code of Ethics for Professional Accountants (the Code), thereby facilitating its adoption, effective implementation, and consistent application. The Consultation, which closed for comment on February 4, aimed to solicit feedback on the board’s proposed approach to improving the clarity of its Code of Ethics for Professional Accountants (the Code) by revising its structure.


The IESBA has received feedback on the usability of the Code, including comments from regulators on enforceability challenges. Others have indicated difficulty with translation and comprehension due to the complexity and length of sentences throughout the Code. Results from the IFAC SMP Quick Poll found that the biggest barrier faced by small- and medium-sized practices (SMPs) in fully adhering to the Code was understanding its requirements.[1]

The IESBA researched the views of a broad range of stakeholders and found widespread support for changes to the Code. As a result, it developed the consultation, which included various matters for consideration:

  • Restructuring the Code to more clearly distinguish requirements from guidance;
  • Reorganizing the content of the Code, including rebranding the Code, or parts thereof, as international standards;
  • Identifying responsibility for compliance with the Code in particular circumstances; and
  • Simplifying the wording of the Code so that it can be more readily understood.

IFAC SMP Committee Response

The IFAC Small and Medium Practices (SMP) Committee has been supportive of the project since it was first included on the IESBA Work Plan, however, in its response to the Consultation, the committee raised some concerns on behalf of SMPs. The main points in the comment letter included:

  • Support for the approach taken by the IESBA and the general direction of the project;
  • Agreement with the proposal to clearly separate the requirements from guidance, as it should enhance users’ understanding of the specific prohibitions and make the Code more understandable. Cross-referencing the requirements to the related application guidance as proposed is essential, as well as the need to make clear that the requirements do not stand alone and the need to adopt the complete Code into laws and regulations;
  • One area for the IESBA to consider is more clearly differentiating the provisions applicable to public interest entities (PIEs) from those applicable to other entities, especially in respect to auditor independence. Many professional accountants throughout the world would find a clear overview of these differences helpful;
  • Separating standards on specific topics and rebranding the Code as the International Standards on Ethics would be a more onerous undertaking and suggest a move away from principles to a more rules-based approach. Rebranding the Code without developing a full set of such standards is unlikely to have a significant impact on improving its visibility and enforceability;
  • A robust definition of each key term used in the Code is essential for proper application by professional accountants;
  • The circumstances in SMPs are often very different to those in the largest firms. The Code needs to be clear as to the respective responsibilities of firms on the one hand and the individual professional accountants on the other, but it does not necessarily need to ensure that firms go as far as assigning the firm’s responsibilities to a particular individual. The key issue is that the particular ethical requirements are adhered to, not who is and who is not, assigned the responsibility;
  • An electronic code is a very helpful step forward and the improvements available with its development are welcomed; and
  • The needs of the SMP community should be at the forefront as the IESBA takes the project forward.

The Ethics Board will consider the input and feedback received for the approach as set out in the Consultation Paper during its meeting on April 13-15, 2015, and may expose a fully restructured Code or standards after its final meeting in 2015. A new restructured Code or standards would not be finalized until early 2017, with an effective date, at the earliest, one year later. It is likely that the Exposure Draft would seek input on an effective date to allow adequate time for adoption and effective implementation.

Join the Conversation

We would be keen to hear the views of professional accountants in SMPs and SMEs on the approach outlined by the IESBA. Please log in and comment below to share your thoughts on the proposals to improve the clarity of the IESBA Code of Ethics for Professional Accountants (the Code) by revising its structure and whether it will enhance its usability.

[1]    Note. In 2014, the IFAC SMP Quick Poll was rebranded as the IFAC Global SMP Survey. A press release covering the initial 2014 results was released on January 22, 2015. 


Raymond Cheng

IFAC SMP Committee Member and Ethics Task Force Chair

Raymond Cheng is the managing partner of HLB Hodgson Impey Cheng in Hong Kong, where he is responsible for managing the firm's overall practice and day-to-day operations. He also serves as a council member of HLB International. He specializes in corporate audits and IPOs and has extensive experience in auditing financial services companies. He served as an HKICPA council member since 2010 and is also deputy chair of the Ethics Committee. Mr. Cheng became a member of the Small and Medium Practices Committee in January 2015. See more by Raymond Cheng

Christopher Arnold


Christopher Arnold is a Director at the International Federation of Accountants (IFAC). He leads activities on contributing to and promoting the development, adoption and implementation of high-quality international standards, including the Member Compliance Program, Intellectual Property and Translations. Christopher is also responsible for IFAC’s SME (small- and medium-sized entities), SMP (small- and medium-sized practices) and research initiatives, which include developing thought leadership, public policy and advocacy. He was previously an Audit Manager for Deloitte and qualified as a professional accountant in a mid-tier accountancy practice in London (now called PKF-Littlejohn LLP). Christopher started his career as a Small Business Policy Adviser at the Association of Chartered Certified Accountants (ACCA).   See more by Christopher Arnold


Join the Conversation

To leave a comment below, login or register with


Thank you for your interest in our publications. These valuable works are the product of substantial time, effort and resources, which you acknowledge by accepting the following terms of use. You may not reproduce, store, transmit in any form or by any means, with the exception of non-commercial use (e.g., professional and personal reference and research work), translate, modify or create derivative works or adaptations based on such publications, or any part thereof, without the prior written permission of IFAC.

Our reproduction and translation policies, as well as our online permission request and inquiry system, are accessible on the Permissions Information web page.

For additional information, please read our website Terms of Use. ALL RIGHTS RESERVED.