The International Ethics Standards Board for Accountants^® (IESBA^®, the Ethics Board) today announced completion of the major first phase of its strategic project to restructure its Code of Ethics for Professional Accountants™ (the Code). In addition, it also released new proposals that will enhance and complete the fully restructured Code with strengthened ethics requirements for accountants.

The outcome of the first phase is a new structure and drafting convention, as well as a major restructured portion of the Code. The IESBA’s overall restructuring efforts are intended to result in a Code that is more understandable and easier to use, thereby facilitating its adoption and effective implementation globally. At the same time, the IESBA has agreed revisions to a number of provisions pertaining to safeguards in the Code, including enhancements to the conceptual framework of “threats and safeguards.”

The IESBA now enters the final stage of this project. Comprised of three Exposure Drafts (EDs), this final stage sets out new proposals that:

• Restructure select sections of the Code, including recently finalized provisions addressing accountants’ response to non-compliance with laws and regulations (NOCLAR), long association of audit firm personnel with an audit or assurance client, and ethical issues that professional accountants in business (PAIBs) often face (Structure ED-2);
• Revise the safeguards-related provisions in the independence sections of the Code pertaining to non-assurance services provided to audit and other assurance clients (Safeguards ED-2); and
• Clarify the applicability of PAIB provisions to professional accountants in public practice (Applicability ED).

“The board has committed to timely delivery of the restructured Code,” said IESBA Chairman Dr. Stavros Thomadakis. “This major upgrade will lead not only to a Code that is more understandable and easier to use but also to a more robust Code with important substantive improvements in many areas, including auditor independence. These goals ultimately underpin the public interest role of the global accountancy profession.”

The IESBA is targeting December 2017 for completion of this work to restructure and strengthen the Code. The restructured Code, which will be renamed International Code of Ethics for Professional Accountants (including International Independence Standards), will contain significant new requirements and revised provisions that the IESBA has already finalized, including:

• A greater emphasis on compliance with the fundamental principles in the Code;
• Clarified and strengthened provisions regarding application of the conceptual framework, including safeguards;
• A strengthened partner rotation regime for audits of public interest entities;
• Provisions addressing accountants’ responsibilities regarding NOCLAR;
• More comprehensive provisions addressing PAIBs’ responsibilities when preparing or presenting information; and
• New requirements and guidance for PAIBs regarding pressure to breach the fundamental principles.

“Close coordination among the board’s various Task Forces has been critical to achieving this important milestone on the journey to a restructured and strengthened Code,” noted IESBA Technical Director Ken Siong. “The board is grateful to its Consultative Advisory Group and other stakeholders who have provided input and advice to the board in charting its course to this stage.”

Highlights of the main improvements to date, including details of how the different work streams are being coordinated and related timelines, are set out in the January 2017 IESBA Update.

The IESBA has also made available on its website the restructured and revised portions of the Code it has agreed to so far. These, together with a staff-prepared compilation of the proposed restructured Code, Basis for Conclusions documents, mapping tables, and other resources, are intended to support stakeholders’ timely adoption and implementation efforts, and consideration of the EDs.

How to Comment

The Ethics Board invites all stakeholders to comment on the EDs. To access the EDs and submit a comment, visit the Ethics Board’s website at www.ethicsboard.org/restructured-code.

Comments on Safeguards ED-2 and the Applicability ED are requested by April 25, 2017. Comments on Structure ED-2 are requested by May 25, 2017.

About the IESBA

The International Ethics Standards Board for Accountants is an independent standard-setting board that develops and issues, in the public interest, high-quality ethical standards and other pronouncements for professional accountants worldwide. Through its activities, the IESBA develops the Code of Ethics for Professional Accountants, which establishes ethical requirements for professional accountants. The structures and processes that support the operations of the IESBA are facilitated by IFAC. Please visit www.ethicsboard.org for more information, and follow us on Twitter @Ethics_Board.

About IFAC^®

IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing approximately 3 million accountants in public practice, education, government service, industry, and commerce.

The IESBA Update summarizes the second and final phase of the board's Structure of the Code project. The aim of the project is to comprehensively review the structure and drafting of the IESBA Code of Ethics for Professional Accountants™ (the Code) to enhance its understandability and usability, thereby facilitating its adoption, effective implementation, consistent application, and enforcement.

The Basis for Agreement in Principle documents summarize the feedback received from respondents to Structure ED-1 and Safeguards ED-1. They explain the rationale for the IESBA’s decisions in agreeing in principle the text of Phase 1 of the Structure and Safeguards projects.

The agreed-in-principle text contains:

Approved by the IESBA at its March 2016 meeting, the changes strengthen the Code's Part C provisions addressing the responsibilities of professional accountants in business (PAIB) when preparing or presenting information. They also provide new requirements and guidance for PAIBs regarding pressure to breach the fundamental principles.

Approved by the IESBA at its December 2016 meeting, the changes to provisions addressing long association of personnel with an audit or assurance client contain a number of substantive improvements, including a strengthened partner rotation regime for audits of public interest entities.

James Barbour is Director, Policy Leadership, at the Institute of Chartered Accountants of Scotland (ICAS), where he oversees the areas of Audit and Assurance, Ethics and Financial Reporting. He is also responsible for the ICAS Ethics Board and is the lead on all matters connected with The Power of One initiative. Mr. Barbour qualified as a CA in 1996 and worked in general practice (primarily audit) with one of Scotland’s largest independent firms before joining ICAS in 1999.

Mr. Barbour is a member of Accountancy Europe (AE)’s Professional Ethics and Competencies Working Group, and the ICAS representative at the AE Members’ Assembly. He is a member of the UK Government’s stakeholder group for the implementation of EU Audit legislation and a former member of the stakeholder group involved in the implementation of the EU Accounting Directive.

Mr. Barbour regularly represents ICAS at meetings with standard-setting bodies, government bodies, regulators, and others concerning various business and technical issues, such as audit and assurance, corporate reporting, ethics, and Brexit. He is also a member of the UK Financial Reporting Council’s Audit Technical Advisory Group and an Honorary Professor in the Adam Smith Business School at the University of Glasgow.

Hironori Fukukawa became a member of the International Ethics Standards for Accountants in January 2017. He was nominated by the Japanese Institute of Certified Public Accountants (JICPA).

Prof. Fukukawa is a Professor of Accounting at Hitotsubashi University, Japan. He earned a bachelor’s degree, a master’s degree and a PhD (accounting) from Hitotsubashi University. He was a Fulbright Visiting Scholar at the University of Southern California from 2003 to 2004. He served as the Vice Dean of the Graduate School of Commerce and Management of Hitotsubashi University (2014–2016).

His research interests include auditors’ risk assessments and audit planning decisions, the effects of professional skepticism on auditors’ judgment and decision making, and audit market and audit pricing issues. He has published research articles in several academic journals including: Auditing: A Journal of Practice & Theory, Abacus, International Journal of Auditing, and International Journal of Approximate Reasoning.