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Changes to the Code Addressing Conflicts of Interest



To revise Sections 220, Conflicts of Interest, and 310, Potential Conflicts, of the Code to establish more specific requirements and provide more comprehensive guidance to support professional accountants in public practice and professional accountants in business, respectively, in identifying, evaluating and managing conflicts of interest.

Task Force progress / Board discussions to date

The IESBA Consultative Advisory Group (CAG) discussed a draft project proposal at its September 2009 meeting.

  • At its October 2009 meeting, the IESBA approved a project proposal to provide additional guidance to professional accountants when dealing with conflicts of interest.
  • At its June 2010 meeting, the IESBA had a first discussion of the project, including the scope of the project and the possible elements of a definition of a conflict of interest.
  • At its November 2010 meeting, the IESBA considered the types of conflicts of interest that would be addressed by this guidance. The IESBA also discussed examples of conflicts of interests that had been developed by the Task Force.
  • At its February 2011 meeting, the IESBA reached the following tentative decisions:
  • A description of a conflict of interest, rather than a definition, would be included in the Code.
  • Guidance would be structured in the following order―description, examples, reasonable and informed third party test, identifying/evaluating significance, and safeguards.
  • The project scope should be expanded to include guidance on ethical behavior in Section 320.
  • That it may be appropriate to require disclosure and consent in all cases, as opposed to being one of several safeguards.
  • Interest/relationship of network firms should be considered if a firm has reason to believe it creates a conflict.
  • The guidance will apply to firms as well as individuals.  Since the term "professional accountant" includes "the firm," it is not necessary to specifically refer to the "firm" in the guidance.  

The IESBA CAG discussed the project at its March 2011 meeting

At its June 2011 meeting, the IESBA considered:

·          A revised description of a conflict of interest.

·          The proposed draft Sections 220 and 310.

·          Proposed changes to Sections 320 and 340.

·          A draft impact analysis.


The IESBA CAG discussed the project at its September 2011 meeting


At its October 2011 meeting, the IESBA approved an exposure draft that:

·          Includes a description of circumstances that might create a conflict of interest;

·          Requires professional accountants to take into account whether or not a reasonable and informed third party, weighing all the specific facts and circumstances available to the accountant at that time, would be likely to conclude that compliance with the fundamental principles is compromised; and

·          Develops guidance on the nature of safeguards that may be available to manage conflicts of interest.


The exposure draft also proposes certain conforming amendments to Sections 320, Preparation and Reporting of Information, and Section 340, Financial Interests.


The exposure draft was issued in December 2011, with a 90 days comment period.


At its June 2012 meeting, the IESBA discussed significant comments included in the exposure draft responses.

The IESBA reached tentative conclusions on the following matters:

·          That the description of a conflict of interest should be redrafted to provide a linkage between the professional activity and the matters that are in conflict, thus making it clear that a conflict of interest is not created merely because the interests of two clients are in conflict.

·          That the guidance on managing conflicts of interest, and obtaining and documenting consent, could be clarified by addressing  disclosure and consent separately and providing additional guidance on the types of consent - general, explicit, and implied.


The IESBA CAG discussed the project at its September 2012 meeting.

Concluding Steps

At its December 2012 meeting, the IESBA approved the changes to the Code addressing conflicts of interest as a final standard. The final standard was released in March 2013 on the IESBA website after the Public Interest Oversight Board confirmed that due process had been followed in the project. The changes will be effective on July 1, 2014. A Basis for Conclusions provides background to the project, main comments received on the exposure draft, and the IESBA’s conclusions regarding these comments in developing the final standard.