These technology-related revisions will guide the ethical mindset and behavior of professional accountants in both business and public practice as they take advantage of the opportunities created by technology and adapt to new technology. Developed to remain relevant and applicable in the ever-evolving landscape of technology transformation, the revisions apply to the use of any technology, including to the extent possible, future technologies. 

The revisions, which were informed by extensive fact-finding and stakeholder outreach:

The International Ethics Standards Board for Accountants (IESBA) today released final revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) to address holistically the various independence considerations in an audit of group financial statements. The revisions also deal with the independence and other implications of the changes made to the definition of an engagement team in the Code to align with changes to the definition of the same term in the International Auditing and Assurance Standards Board’s (IAASB) International Standards on Auditing (ISAs) and International Standards on Quality Management (ISQMs).

“Group audits play a fundamental role in safeguarding the integrity of, and public trust in, the financial markets,” said Ms. Gabriela Figueiredo Dias, IESBA Chair. “For a long time, there was a vacuum in international standards addressing the independence of audit firms and individuals involved in group audits, leading to uncertainty and inconsistent practice around the world. This standard effectively closes that gap and responds in a timely manner to a public interest need for robust and clear requirements for independence in this important area.” 

Among other matters, the revisions:

• Strengthen and clarify the independence principles that apply to:
  • Individuals involved in a group audit, including those within, or engaged by, firms that audit components within a group.
  • ​​​​​​​Firms engaged in the group audit, including firms within and outside the group auditor firm’s network.
• ​​​​​​​Specify the need for, and content of, appropriate communication on independence matters between the group auditor firm and component auditor firms participating in the group audit.
• More explicitly set out the process to address a breach of an independence provision at a component auditor firm, reinforcing the importance of transparency and appropriate communication with those charged with governance of the group.
• Amend the definitions of the terms “engagement team” and “audit team” in the Code to recognize the different and evolving engagement team structures, and address the implications of those definitional changes.
• Provide guidance to facilitate the determination of who is included in an engagement team or an audit team.
• Revise the definitions of a number of existing terms and establish new defined terms with respect to independence in a group audit context.

​​​​​​​The development of the proposals has benefited from close coordination with the IAASB’s group audits and quality management projects.

The pronouncement will be effective for audits of financial statements and group financial statements for periods beginning on or after December 15, 2023, with early adoption permitted.

Global Webinar and Other Implementation Support

The IESBA will hold a global webinar on April 18, 2023 from 9:00 to 10:00 am Eastern Time, during which members of Task Force will explain the key revisions to the Code. Click here to register.

The recording of the webinar and other supporting materials, such as an IESBA Staff publication on Frequently Asked Questions, will be available on the IESBA’s website in due course.

These revisions to the Code Relating to the Definition of Engagement Team and Group Audits address holistically the various independence considerations in an audit of group financial statements.

The International Ethics Standards Board for Accountants (IESBA) witnessed an auspicious start to its March Board meeting with the announcement from the Abu Dhabi Accountability Authority (ADAA), host of the 5-day meeting, that it has adopted the 2022 edition of the IESBA International Code of Ethics for Professional Accountants (including International Independence Standards). The Code will be applicable to all entities subject to ADAA’s mandate for audits of financial statements for periods beginning on or after December 15, 2023.

ADAA is the ultimate authority responsible for promoting the principles of accountability, transparency, and integrity across all Abu Dhabi government entities and institutions, whether local or international, in which the Abu Dhabi government has a vested interest of over 25%.

“On behalf of IESBA, I applaud ADAA for this historic commitment to ethics and the public interest,” said Gabriela Figueiredo Dias, IESBA Chair. “IESBA’s ethics and independence standards could not fit better with ADAA’s mandate to work for the integrity and transparency of businesses within its remit. ADAA’s commitment to ensuring fair and transparent financial reporting and improving the quality of audit across all its subject entities will benefit immensely from its adoption of the Code.”

The Code has been further strengthened in several important areas in recent years, including provisions addressing the role and mindset expected of professional accountants, and auditor independence requirements in relation to the provision of non-assurance services to audit clients and fees. Above all, the Code places a responsibility on all professional accountants to act in the public interest. The strength and global acceptance of the Code are evident as it has been adopted or is used in over 130 jurisdictions, translated into about 40 languages, and adopted by the 34 largest international networks of accounting firms for transnational audits.

Wael Abdul Qader, Acting Head of Monitoring and Auditing Sector at ADAA, said: “We announce the full adoption of the standards set by the International Ethics Standards Board for Accountants. The standards will be applicable to preparers of financial information and financial statement auditors of Abu Dhabi Government Entities as part of our efforts to promote the principles of transparency, integrity and accountability and elevate the quality of audit.”

The IESBA meeting will continue all week. In the days ahead, the IESBA will continue deliberating strategic issues on its project to develop ethics and independence standards for sustainability reporting and assurance as well as in a related project addressing the use of experts by professional accountants in both business and public practice. Among other agenda items, the IESBA is also expected to finalize a consultation paper on its strategy and work plan for 2024-2027.

For more information about the ADAA's announcement, contact ADAACommunication@adaa.gov.ae.

For more information about the IESBA March meeting, including how to register to observe, click here.  

About the IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA serves the public interest by setting ethics standards, including auditor independence requirements, which seek to raise the bar for ethical conduct and practice for all professional accountants through a robust, globally operable International Code of Ethics for Professional Accountants (including International Independence Standards).

The IESBA believes a single set of high-quality ethics standards enhances the quality and consistency of services provided by professional accountants, thus contributing to public trust and confidence in the accountancy profession. The IESBA sets its standards in the public interest with advice from the IESBA Consultative Advisory Group (CAG) and under the oversight of the Public Interest Oversight Board (PIOB).

I’m Gabriela Figueiredo Dias, Chair of IESBA. It is an honor to join you today in my first address to IFAC’s Council.

My first 10 months with the IESBA have been very busy. 

But I would like to begin by stressing, on behalf of the entire Board, how seriously we take our responsibility to protect and advance the global accountancy profession’s Code of Ethics.

We see the IESBA’s ethics and independence standards as one of the greatest assets of the profession, one that makes the profession unique, and the framework that ties professional accountants to always act in the public interest.

Ethics has a crucial importance to the profession. Actually, the IESBA Code underpins the profession’s reputation. Your reputation.

It is the basis for trust in all that the profession does. And “You only have trust once.”

Let me therefore assure you that we understand the full importance and impact of our decisions as the global ethics standard setter.

The key question then is – How do we intend to handle this asset?

Well, some will say the priority is to protect it, to defend it.

That is valid of course.

Others, however, will say that an asset like this should continue to be nurtured, to grow, adapt and evolve in the changing and dynamic world we live in.

For me, the answer is both. A balanced approach. A purposeful one, focused on making a positive impact in the society.

Why? Ethics is a behavioral construct for professional accountants in service of businesses and the wider society. But businesses and societal expectations evolve.

Therefore, so must the IESBA Code.

At the same time, the Code has proven itself in many ways – so, we must retain its operability and durability.

As a former securities markets regulator, concerned about investor protection, I am aware of the importance of an ethical culture and leadership and of high-quality corporate information prepared and assured in accordance with the strongest ethics standards.

Given all this, what is critical as we move ahead in ethics standard setting?

I believe we must anchor to a clear vision.

That vision must speak to the heart of the profession, the expectations of stakeholders, and to the dynamics of today as well as tomorrow. The vision must revolve around reinforcing…re-igniting …trust

What does it take to be “recognized and accepted as the ‘linchpin to public trust”?

I see three critical drivers:

Critical Driver One: an unwavering focus on the areas of greatest opportunity, or threat, and a commitment to act with agility and impact.

Right now, that opportunity is sustainability.

The international regulatory community has recognized the IESBA’s critical role in the future of sustainability standard setting.

In September, IOSCO and the FSB have publicly recognized the IESBA’s critical role in the future of sustainability standard setting, urging us to develop profession-agnostic sustainability ethics standards to complete the infrastructure needed for transparent, relevant, and trustworthy sustainability reporting.

There is actually global appreciation that the IESBA Code sets the high ethical bar needed to underpin confidence in corporate information. Based on that experience and demonstrated relevance, the IESBA is particularly well positioned to also set the ethics standards needed to support trust in sustainability information.

We are conscious of the urgency of an integrated approach to sustainability, where all professionals, sectors and organizations play a role.

Therefore, we have committed publicly to developing timely, fit-for-purpose ethics and independence standards for sustainability reporting and assurance, usable by any provider, in coordination with the International Sustainability Standards Board (ISSB) and, of course, our close friends at the IAASB.

The world is aligning… Ethics is being recognized as an equal pillar and an enveloping element of the infrastructure, besides reporting and assurance standards.

Critical Driver Two: a commitment to foster a community of active stakeholders, both inside and outside of the accountancy profession.

Our relevance and the impact of our outputs depend on the diversity of our stakeholders, on the intensity of our outreach to them, and on our openness to address their needs and their inputs.

As an example, coordinating with the IAASB and the ISSB, and engaging with national standard setters, jurisdictional bodies, and others, is for us an essential instrument of work and progress.

Doing with the others, and not in spite of them, is our motto and our safeguard against irrelevance.

Finally,

Critical Driver Number Three: Relentless agility and prioritization.

Prioritization in delivering on our promises and ensuring quality.

Prioritization in observing trends, changes and transformation, incorporating it in our reflections and work, and being agile in doing the necessary adjustments.

And prioritization in the transformation of the Board as it implements the Monitoring Group recommendations. 

With all this in mind, if you are asking… how can we help?

I will tell you how:

Please prioritize the adoption and implementation of the IESBA Code in your own jurisdictions, including the future sustainability ethics standards.

IFAC has been a great partner in adoption and implementation support. I have seen this firsthand during my first year here, and I applaud Kevin and his team.

Please also continue to help us communicate the relevance and importance of ethics in the accountancy profession, and walk the talk.

Continue to promote and engage with us on our exposure drafts and other dialogue opportunities.

What you do with this great asset, the IESBA’s global ethics standards, and how you advance it in your own communities, matters for the IESBA’s ethics standards to be the linchpin of public trust.

My full report is in your material, it is rich with details. I welcome any comments or questions while we are together in Mumbai.

This Staff Alert highlights the ethical implications arising from the wide-ranging economic sanctions many jurisdictions have imposed on Russia and certain Russian entities and individuals as well as Belarus, and the related ethical responsibilities of PAIBs and PAPPs under the Code. It also highlights:

The International Ethics Standards Board for Accountants (IESBA) and International Auditing and Assurance Standards Board (IAASB) welcome today’s announcement from the International Organization of Securities Commissions (IOSCO) of its support and encouragement for the IAASB’s and IESBA’s work on developing standards relating to assurance of sustainability-related information. The IAASB and IESBA acknowledge that stakeholders are increasingly seeking assurance of sustainability-related information and that it is important to respond to market demands with robust standards applicable to all sustainability assurance providers.

IAASB Chair Tom Seidenstein said: “There is a clear need for ongoing dialogue and collaboration to ensure sustainability reporting, assurance, and regulation develop in a cohesive manner to provide decision-useful information to stakeholders. We are pleased to have IOSCO’s support for our ongoing work to enhance sustainability assurance standards and look forward to continuing our strong, fruitful relationship with IOSCO and others.”

IESBA Chair Gabriela Figueiredo Dias said: “Ethics standards, including independence requirements, are foundational to public trust in the assurance of sustainability-related information. It is crucial and in the public interest that all assurance providers, whether or not they are from the accountancy profession, adhere to the same high bar of ethical behavior and independence when engaged in such assurance work. We have given high priority to bringing to market fit-for-purpose ethics and independence standards in this area and look forward to close coordination with IOSCO and IAASB on this journey.”

The IAASB meets this week to continue discussions and vote on its sustainability assurance project proposal to develop an overarching standard for assurance engagements on sustainability. The standard will provide a global baseline for all professional assurance providers providing assurance on any sustainability information being reported, if the preconditions necessary for effective assurance are met.

The IESBA meets this week to consider possible approaches to standard setting in relation to sustainability assurance and sustainability reporting, recognizing that professional accountants in business play a “first line of defense” role in preparing and presenting trustworthy sustainability information. The IESBA will also consider the applicability of its standards to assurance providers outside of the accountancy profession. The IESBA anticipates approving a project plan by December 2022.

The IAASB and IESBA will continue to closely collaborate with IOSCO and other regulatory and standard-setting bodies to inform the development of robust standards that foster independent, high-quality engagements and globally consistent practices.

About the IAASB
The International Auditing and Assurance Standards Board develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

About the IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA serves the public interest by setting ethics standards, including auditor independence requirements, which seek to raise the bar for ethical conduct and practice for all professional accountants through a robust, globally operable International Code of Ethics for Professional Accountants (including International Independence Standards).

The IESBA believes a single set of high-quality ethics standards enhances the quality and consistency of services provided by professional accountants, thus contributing to public trust and confidence in the accountancy profession. The IESBA sets its standards in the public interest with advice from the IESBA Consultative Advisory Group (CAG) and under the oversight of the Public Interest Oversight Board (PIOB).