The Staff of the International Ethics Standards Board for Accountants (IESBA) today released a questions and answers (Q&As) publication to explain key revisions to the non-assurance services (NAS) provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). Together with the recently issued fee-related revisions to the Code, the NAS revisions significantly strengthen the International Independence Standards by addressing public interest concerns about independence when firms provide NAS to their audit clients. The development of the Q&As has been informed by the IESBA’s deliberations in the project to revise the NAS provisions and extensive consultations with a wide range of stakeholders, including regulators and audit oversight bodies, the investor and corporate governance communities, national standard setters, firms and professional accountancy organizations.

The publication complements the Basis for Conclusions for the final NAS pronouncement and is intended to assist national standards setters, professional accountancy organizations, and professional accountants in public practice as they adopt and/or implement the revised NAS provisions. The Q&As will also assist other stakeholders, including regulators and audit oversight bodies, those charged with governance, investors, preparers, and academics and other educators better understand the key changes to the NAS provisions of the Code. These changes include the new requirements and guidance that:

• Prohibit a firm or a network firm from providing a NAS that might create a self-review threat to an audit client that is a public interest entity.
• Explain how firms are to determine when a self-review threat to independence might be created, including in relation to providing advice and recommendations to an audit client.
• Are relevant in applying the Code’s conceptual framework to identify, evaluate, and address threats to independence that might be created when an audit firm provides a NAS to an audit client.
• Enable and promote more robust communication and engagement about independence matters relating to NAS between audit firms and those charged with governance of public interest entities.

The revised NAS provisions are effective for audits of financial statements for periods beginning on or after December 15, 2022.

Click here to access the revised NAS provisions, and the other recently approved changes to the Code. 

The International Ethics Standards Board for Accountants (IESBA) has unanimously resolved to take timely action to develop fit-for-purpose, globally applicable ethics and independence standards as a critical part of the infrastructure needed to support transparent, relevant and trustworthy sustainability reporting. This recognizes the need to respond at pace to match the speed of transformation in the corporate reporting landscape. Demand for sustainability information has risen substantially and rapidly in recent years, and such information is increasingly used to support capital allocation or other decisions by investors, customers, current or potential employees, and other stakeholders. It also recognizes the essential role ethics and independence play in the production, reporting and assurance of sustainability information.

The IESBA has tasked its recently established Sustainability Working Group to develop a strategic vision to guide the IESBA’s standard-setting actions in relation to sustainability reporting and assurance. The Working Group will prepare a project plan by December 2022 as a launchpad for commencement of standard-setting work soon after. This work will proceed in tandem with the development of IFRS Sustainability Disclosure Standards by the International Sustainability Standards Board (ISSB), and sustainability-related International Standards on Assurance Engagements (ISAEs) by the International Auditing and Assurance Standards Board (IAASB). The IESBA recognizes the importance of coordinating this work closely with the ISSB and IAASB so that coherent, mutually reinforcing building blocks of standards can be put in place around the same time to support the necessary regulatory infrastructure for sustainability reporting.

“Sustainability has risen to the top of our strategic agenda as societal expectations have unquestionably changed towards the need for companies and organizations to pursue more sustainable business goals, capital has flowed in substantial waves towards Environmental, Social and Governance (ESG)-focused investments, and concerns about market integrity have triggered regulatory mobilizations and actions,” said IESBA Chair Gabriela Figueiredo Dias. “Time is of the essence and it is critical that the ethics standards pillar of the infrastructure be strong and ready to support the sustainability information supply chain. Stakeholder expectations are high and we are determined to take the necessary actions to meet the market needs.”

The IESBA has been proactively engaged in outreach to stakeholders to exchange views and insights on the emerging issues in sustainability reporting and assurance, and is actively involved in discussions with the International Organization of Securities Commissions (IOSCO) and the IAASB on coordinated plans and actions to respond to the developments.

Pending finalization of the IESBA’s plan of work for sustainability-related ethics and independence standard-setting, IESBA Staff will issue in the near term guidance to draw the attention of professional accountants and other market participants to the fundamental principles and key provisions of the IESBA’s International Code of Ethics for Professional Accountants (including International Independence Standards) that already apply broadly to sustainability reporting and assurance.

About IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA’s mission is to serve 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 Code).

Countries around the world are searching for ways to shift capital investments into activities that support the transition to a more sustainable, low-carbon economy. To finance that massive change, investors and regulators are looking to the sustainable debt market as an important vehicle in raising funds to finance projects that advance environmental, social and governance (ESG) objectives.

“Trust and confidence in this relatively new, still evolving, and rapidly expanding market is critical,” said Kevin Dancey, CEO of the International Federation of Accountants (IFAC). “Like any financial innovation, there are challenges. Smart regulation, standardization and external verification or assurance are needed to protect investor interests, mitigate the risk of greenwashing and enhance transparency. Verifying the details of these bond programs—both pre-issuance and in the form of annual updates for investors—is an essential part of maintaining integrity. The accountancy profession can help drive progress.”

A new, comprehensive study that delves into the challenges and opportunities that exist in the sustainable debt market – Navigating the sustainable debt market: Enhancing credibility in an evolving market – is the result of a collaborative effort by IFAC and Chartered Professional Accountants of Canada (CPA Canada), who recruited PwC Canada to conduct the underlying research.

While the sustainable debt market has evolved significantly over the last few years, the study identified a number of issues that need to be addressed for the benefit of all capital market participants. These challenges include: the proliferation of voluntary, market-driven guidance; lack of a common understanding of what projects and activities qualify as “green” or “sustainable”; and inconsistent reporting, impact measurement, external review and assurance practices.

“Sustainability is increasingly being integrated into business, investment and financing decisions,” said Pamela Steer, president and CEO, CPA Canada. “Serving the public interest is core to the global accounting profession. It has a critical role to play in advancing sustainable finance. Collectively, the profession will continue to advocate for better policy, regulation and standards in this area and the study will help inform the dialogue.”

As part of the overall push to make sustainability front and centre for business, IFAC and CPA Canada welcome the establishment of the International Sustainability Standards Board (ISSB) by the IFRS Foundation. Globally accepted sustainability standards will enhance the credibility of ESG disclosures by improving their consistency and comparability and this will help mitigate some of the challenges identified in the report.

About CPA Canada
Chartered Professional Accountants of Canada (CPA Canada) works collaboratively with the provincial, territorial and Bermudian CPA bodies, as it represents the Canadian accounting profession, both nationally and internationally. This collaboration allows the Canadian profession to champion best practices that benefit business and society, as well as prepare its members for an ever-evolving operating environment featuring unprecedented change. Representing more than 220,000 members, CPA Canada is one of the largest national accounting bodies worldwide. cpacanada.ca

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 180 members and associates in over 130 jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.

The global accountancy profession is on a journey—along with investors, companies, regulators and other stakeholders—toward a unified, coherent, global and authoritative standard-setting process for reporting on sustainability information.

IFAC welcomes the establishment of the International Sustainability Standards Board (ISSB), as well as jurisdiction or regional initiatives that can contribute toward the creation of a global system for consistent, reliable and assurable sustainability disclosure. 

In a joint statement today, IFAC joins with leading capital markets participants—PRI (Principles for responsible Investment) and WBCSD (World Business Council for Sustainable Development)—in calling for simplicity and alignment in the standard-setting process.  At this critical juncture, regulatory and standard-setting fragmentation must be avoided through efforts to align key concepts, terminologies, and metrics upon which disclosure requirements are built.

Read the statement on IFAC's website or download the PDF here.

Today, the Staff of the International Ethics Standards Board for Accountants (IESBA) released the report, Benchmarking International Independence Standards Phase 1 Report: Comparison of IESBA and US SEC/PCAOB Frameworks. The publication details the findings of a study comparing the provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code)—in particular the independence provisions applicable to audits of financial statements of public interest entities (PIEs)—with the relevant rules of the U.S. Securities and Exchange Commission (SEC) and the US Public Company Accounting Oversight Board (PCAOB).

“Considerable advances have been made in recent years to strengthen the International Independence Standards, further reinforcing the important role of the independent audit to the integrity of financial markets worldwide,” said IESBA Chair Gabriela Figueiredo Dias. “This timely benchmarking analysis answers many questions we have received and provides much insight into how the provisions in the Code compare with those of a major jurisdiction like the U.S., and will ultimately instill greater public confidence in the robustness of the Code.”

The IESBA launched the benchmarking study to promote awareness and further adoption of the Code. Without making judgments as to the relative merits of the two independence frameworks, the report highlights the similarities and key differences between the Code and the U.S. SEC and PCAOB rules in areas of greatest interest to stakeholders, including the permissibility of non-assurance services to audit clients, fees, long association with an audit client, and business and financial relationships. The IESBA will consider the findings of the benchmarking analysis in developing its 2024-2027 Strategy and Work Plan.

Alongside the detailed report, the IESBA Staff has published an abridged report that provides an overview of the main similarities and differences, as well as an additional publication with further information on the background and objectives of the initiative.  

Learn more on the IESBA website.

As the global voice of the accountancy profession, IFAC has supported a global system for delivering consistent, comparable and assurable sustainability information. Such disclosure must become a core component of the corporate reporting ecosystem that helps stakeholders assess objectives and progress towards addressing the climate crisis and other important environmental, social, and governance matters. European Sustainability Reporting Standards can play an important part in aligning global and jurisdictional-specific goals.

IFAC supports the view that sustainability disclosure requirements should be developed to capture and measure what really matters and to facilitate adoption and implementation in an internationally compatible manner. Alignment between global and jurisdiction-specific requirements, to the extent possible, is key for companies who operate across national borders, who compete for capital globally, and who are working towards a more sustainable future.  

IFAC CEO Kevin Dancey said “Collectively, we have an historic opportunity to embrace equivalency and interoperability in sustainability initiatives around the world, to leverage the work of existing high-quality sustainability frameworks, and to avoid costly regulatory fragmentation and complexity. Toward this end, IFAC strongly supports the ISSB’s recently announced working group that will establish dialogue for enhanced compatibility between the ISSB’s recent exposure drafts and ongoing jurisdictional initiatives like that of the European Union.”

The European Commission’s ambitious Corporate Sustainability Reporting Directive seeks to put sustainability-related reporting on the same footing as traditional financial reporting—addressing what sustainability information must be reported and requiring its assurance, among other important elements that can enhance corporate reporting.  We hope this important work ultimately contributes to—and amplifies the impact of—an emerging global sustainability disclosure system. 

Learn more about IFAC’s support for a global approach to sustainability-related disclosure on the IFAC website.

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 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.

IMA^® (Institute of Management Accountants), CalCPA (California Society of Certified Public Accountants), and IFAC (International Federation of Accountants) today released its “Diversifying Global Accounting Talent: Actionable Solutions for Progress” report. As a joint effort, the report assesses the deeply rooted issues inhibiting progress in diversity, equity, and inclusion (DE&I) within the accounting profession and offers actionable solutions to close the gap in DE&I.

The capstone in a series of regional DE&I research studies, the report exposes key factors contributing to the underrepresentation of diverse people in the profession, and particularly at leadership levels, in focus regions (Asia-Pacific, Europe and the Mediterranean, Middle East and North Africa, and North America – the U.S.). Three key catalysts for action toward DE&I progress are presented: the current state of DE&I in accountancy, the responsibility to protect the public interest, and demands for sustainable business information around DE&I.

“The voices of more than 8,000 study participants across the globe issued a call-to-action to the profession’s leaders: a call for recommended solutions and intentional, collective action to affect greater change,” said Jeff Thomson, CMA, CSCA, CAE, IMA president and CEO.

The report generated an inventory of more than 70 actionable DE&I practices, each mapped to relevant United Nations’ Sustainable Development Goals, and reflects input from dozens of leaders representing millions of accountants who can implement those practices. It offers recommended steps needed to remedy the lack of equity and inclusion as a path to improving diversity. While expanded efforts have energized DE&I, there is often a disconnect between perceived progress among leaders and progress truly felt and realized by the staff or profession at large.

“By collaborating through shared resources and efforts, leaders can learn from one another and yield long-lasting solutions,” said Denise LeDuc Froemming, CPA, CAE, president and CEO at CalCPA. “So, we are humbled and honored to be accompanied by more than 60 professional accountancy organizations who join us as DE&I advocates for progress and commit to collective action.”

The authors classified their actionable practices into two main categories: attract diverse talent and retain and promote the diverse talent. Leaders must welcome and value diverse employees to sustain the accounting workforce in the years to come.

Kevin Dancey, CEO at IFAC, said: “Professional accountants are bound by ethical commitments, which should extend into DE&I efforts. The solutions recommended in this report can and should be leveraged by professional accountants and leaders across the profession, to move our workplaces around the world toward a culture of belonging and fulfill our obligation to protect the public interest.”

View the full report here.

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 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.

About IMA^® (Institute of Management Accountants)
IMA^® is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA^® (Certified Management Accountant) and CSCA^® (Certified in Strategy and Competitive Analysis) programs, continuing education, networking, and advocacy of the highest ethical business practices. Twice named Professional Body of the Year by The Accountant/International Accounting Bulletin, IMA has a global network of about 140,000 members in 150 countries and 350 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe and Middle East/India. For more information about IMA, please visit www.imanet.org.

About CalCPA
CalCPA traces its heritage to 1903 when the California State Society of Certified Public Accountants was organized. In 1909, it merged with two other state CPA associations to form CalCPA. CalCPA serves more than 43,000 members in public practice, private industry, students, academia and government, and has 14 chapters across California. CalCPA also offers more than 1,400 live courses, conferences, webcasts and on-demand self-study courses annually.

The Technology Working Group of the International Ethics Standards Board for Accountants (IESBA) is pleased to announce the members of the recently established IESBA Technology Experts Group (TEG).

Experienced in using and implementing technology, TEG members will act as a “sounding board” to the IESBA’s Technology Working Group, providing advice and other input to help inform the Working Group’s fact-finding work and deliverables. 

The TEG will be chaired by IESBA Member and Chair of the Technology Working Group, Mr. Brian Friedrich. TEG members are:

• Jason Bradley, Financial Reporting Council, United Kingdom
• Mary Breslin, Verracy, North America
• Danielle Cheek, MindBridge AI, North America
• Muhammad Fahad Riaz, Maglytic, Middle East
• Clinton Firth, Ernst & Young, Middle East and North Africa
• William Gee, PricewaterhouseCoopers, Mainland China and Hong Kong
• Loreal Jiles, Institute of Management Accountants, North America
• Mario Malouin, Université du Québec en Outaouais, North America

The TEG is expected to hold its first meeting before the IESBA’s June 2022 Board Meeting. The TEG will receive technical staff support from Jon Reid, Senior Technical Manager at the Australian Accounting Professional & Ethical Standards Board (APESB), a member of the IESBA-National Standard Setters liaison group.

About the IESBA’s Technology Initiatives 

The IESBA is progressing multiple technology workstreams in a coordinated manner. This includes:

• The development of technology-related revisions to the Code so that it remains relevant and fit for purpose as technology advances (the Technology project). On February 18, 2022, the IESBA released its Exposure Draft: Proposed Technology-related Revisions to the Code with a comment period until June 20, 2022.
• Fact finding to identify and assess the potential impact of technology on the behavior of professional accountants and the applicability of the Code in relation to ethics and independence.
• The development of technology-related thought leadership and other materials in relation to ethics and independence for professional accountants and the wider stakeholder community.

Additional information about the IESBA’s technology workstreams is available on the IESBA’s website.

The International Ethics Standards Board for Accountants (IESBA) will hold a series of three global virtual roundtables to obtain stakeholder feedback on matters it is considering relating to the development of an ethics standard addressing the provision of tax planning and related services by professional accountants in business (PAIBs) and professional accountants in public practice (PAPPs).

In recent years, much public attention has focused on the topic of tax planning and related services, notwithstanding the legality of the tax mitigation schemes, structures or transactions to achieve desired tax outcomes. Questions have been raised regarding the ethical implications for integrity and professional behavior, among other fundamental ethics principles, when PAIBs are involved in developing or implementing tax strategies that are perceived as “aggressive,” or when PAPPs provide advice to their clients on such strategies. The issue is of such major public interest significance that it has been discussed on the G20 agenda.

In light of the public concerns, the IESBA committed in its Strategy and Work Plan 2019-2023 to understand and address the ethical implications of “aggressive tax planning” as it relates to the role of PAIBs and PAPPs. Following fact finding, the IESBA initiated a project aimed at developing a principles-based framework to guide PAIBs’ and PAPPs’ ethical conduct when providing tax planning services to their employing organizations and clients, respectively.

Save the dates! The roundtables will be held virtually during these sessions:

• Monday April 25, 11 am-3 pm EDT
• Tuesday April 26, 8 am-12 pm EDT
• Thursday April 28, 12 am-4 am EDT

Would you like to attend?

As space is limited, attendance will be by invitation only. Register your interest at TPRoundtables@ethicsboard.org by March 31, 2022, indicating your name, job title, organization, location and session. An invitation will follow shortly!

Who should attend?

Members of the investor and corporate governance communities, preparers of financial statements, regulators including tax authorities, international organizations, national standards setters, accountancy firms including tax practitioners, professional accountancy organizations, other professions involved in providing tax planning and related services (e.g., the legal profession), and academics.

About IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA’s mission is to serve 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 Code).

The International Ethics Standards Board for Accountants (IESBA) today released for public comment the Exposure Draft Proposed Revisions to the Code Relating to the Definition of Engagement Team and Group Audits.

The proposed revisions establish provisions that comprehensively address independence considerations for firms and individuals involved in an engagement to perform an audit of group financial statements. The proposals also address the independence implications of the change in the definition of an engagement team―a concept central to an audit of financial statements―in the International Auditing and Assurance Standards Board’s (IAASB) International Standard on Auditing (ISA) 220, Quality Management for an Audit of Financial Statements.

“Auditor independence, in fact and in appearance, is fundamental to public trust and confidence in the financial statement audit, which in turn plays a major role in safeguarding the integrity of the financial system,” said IESBA Chair Ms. Gabriela Figueiredo Dias. “These proposals bring much needed clarifications and reinforcement in an area of auditor independence that can be especially challenging, given that many audits are performed for the largest and most complex groups around the world. I wish to acknowledge the close coordination with, and support of, the IAASB in developing those proposals.”

Among other matters, the proposals:

• Establish new defined terms and revise a number of existing terms, including for application with respect to independence in a group audit context.
• Clarify and enhance the independence principles that apply to:
  • Individuals involved in a group audit.
  • Firms engaged in the group audit, including firms within and outside the group auditor firm’s network.
• More explicitly set out the process to address a breach of an independence provision at a component auditor firm, including reinforcing the need for appropriate communication between the relevant parties and with those charged with governance of the group.
• Align a number of provisions in the Code to conform to changes in the IAASB’s Quality Management standards.

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

How to Comment 

The IESBA invites all stakeholders to comment on the ET-GA ED by visiting the IESBA’s website. Comments are requested by May 31, 2022.

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).