Ethics, the IESBA Code, and Proportionality
(as prepared for delivery)
Ladies and Gentlemen, good morning!
I would like to begin by expressing my sincere gratitude to EFAA and to its President, Salvador Marín, for the invitation to be here today.
Salvador, your leadership of EFAA, and the consistent, constructive voice you and your organization bring to the conversations that shape the role and future of the profession, are genuinely valued at IESBA. Thank you.
It is a great pleasure to be with you here in Dublin. And I want to say that from the outset: this is not a courtesy. I mean it in a specific sense.
The people in this room lead the organizations that connect global ethical standards to the daily reality of hundreds of thousands of professional accountants across Europe. Your space is, in the most direct sense, where the Code meets the world. That makes this conversation one of the most important things I have in my role as IESBA Chair.
I am also happy to share with you and make the first presentation of a new resource that we believe can make a genuine difference to the practitioners your organizations serve: a new staff publication on proportionality of the IESBA Code.
But before I come to that, I want to spend a few minutes on the environment we are all navigating, because context matters, and because I think we owe each other an honest account of where things stand.
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Ethics and independence are not external obligations imposed on professional accountants. They are constitutive of what the profession is and the trust it delivers.
The professional accountant’s value proposition rests entirely on a single word: trust. Trust in the information they prepare or assure. Trust in the judgment they bring to complex situations. Trust in the advice they provide to clients. Trust that, when it matters, they will do the right thing, even when it costs something.
That has not changed. And it will not.
What has changed is the environment in which that trust must be earned and protected.
We are living through a period of compounding pressures. Geopolitical fragmentation is pulling regulatory frameworks in different directions, creating inconsistency when consistency matters most. Artificial intelligence transforms how information is produced, analyzed and assured, often faster than the profession’s capacity to understand and manage its ethical implications. Economic uncertainty is intensifying commercial pressures on firms of every size.
In this environment, ethical judgment is not easier. It is harder. The stressors are not new in kind — commercial pressure, conflicts of interest, the temptation of small compromises that each seem manageable — but they are new in intensity, in frequency, and in the speed with which they compound.
This is precisely why ethics matters more, not less. Uncertainty, deregulation or the reinforced focus on competitiveness does not suspend the obligation to act in the public interest. It amplifies it. The compass does not change when the conditions get rougher. But we do need to make sure that every professional accountant can hold it, read it, and use it.
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Let me say something that I think is worth stating plainly, because it is not always reflected in the discussions.
SMPs are not a secondary constituency. They are not a niche. They are the dominant part of the global accountancy profession.
IFAC today represents more than 3 million professional accountants worldwide, and the majority of accountancy practices they belong to are small and medium-sized. According to the latest IFAC Global SMP Survey, dated 2018, 64% of SMP practitioners globally are either sole practitioners or in practices of two to five partners and staff. Here in Europe EFAA represents over 400,000 accountants, auditors and tax advisors across 15 European countries, the vast majority of them in SMPs. That is the constituency we are talking about. That is the profession, in its dominant form.
And the clients they serve are the backbone of the economy. According to European Commission´s latest figures, SMEs represent 99.8% of all enterprises in the EU. They employ more than 85 million people, account for more than 65% of jobs in the non-financial business sector and generate more than half of the EU’s business economy value added. They are the real economy. And SMPs are their most important and most trusted professional service providers.
There is something specific about this relationship that matters for our conversation today. The trust an SMP holds with its clients is personal and proximate in a way that is qualitatively different from the institutional relationship between a large company and a large firm. An SMP partner often knows the owner of the client business personally. They have been with the client for years, sometimes decades.
That relationship is built on individual ethical commitment, renewed daily. There is no compliance team to defer to. No in-house legal counsel to run it by. The ethical judgment is personal and immediate.
This is a form of professional responsibility that deserves recognition. And it carries real weight in the world.
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The IESBA listens carefully to SMPs and their representative bodies, including EFAA and the IFAC SMP Advisory Group. Let me name what we have heard, because precision matters more than general empathy.
The pace of regulatory and standards change is overwhelming. Even for large firms, let alone for a sole practitioner or a three-partner practice that also has to run the business, serve clients, and attract the next generation of talent. Keeping up with new regulations consistently ranks among the top challenges SMPs face, with 61% of European SMPs ranking it in the top three.
Talent is scarce and the skills gap is real. Over half of European SMPs report difficulty attracting next-generation professionals. The skills they most need — around technology, sustainability, advisory services — are precisely those hardest to find and most expensive to develop.
The commercial pressure is constant. Fee pressure. Client retention pressure. The blurring of roles between trusted advisor and assurer. The accumulation of small accommodations that each seem defensible but that, taken together, can erode the independence and judgment (and the reputation) that the entire professional relationship depends on.
We have heard this. And we are responding with three concrete commitments.
First: in June 2025, the IESBA made a formal decision to issue no new significant standards before 2027. This is a strategic pause – a recognition that robust standards require real-world application to drive change. The profession needs time to absorb, implement and learn. We are using that time to focus on supporting the standards that exist, through tailored guidance, practical tools, implementation monitoring, and stronger coordination with professional bodies.
Second: we are deepening our engagement with SMPs as a specific constituency, not as part of a generic stakeholder consultation, but deliberately and specifically. This meeting is part of that commitment, as is our strengthened engagement with the IFAC SMP Advisory Group.
Third: we are launching a new resource specifically designed to help SMPs navigate the Code with confidence: a practical staff publication on proportionality of the IESBA Code. Something the profession has needed for a long time, and that we are proud to be putting in your hands today.
All going well, this will be the first of other future initiatives we may develop to help and support the SMP supporting the public interest. That we may even consider developing together.
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Ladies and gentlemen,
“Ethics is not proportionate. The Code is.”
Let me take a moment with this statement, because it is one of the most important things I want to do with you today.
Ethics is not proportionate. Every professional accountant – a sole practitioner or a senior partner at a global firm – is required to uphold the same five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. There is no reduced standard for smaller practices. There is no SMP version of ethics. The bar is the same. This is non-negotiable, and it is right that it is so.
But the Code is proportionate. And that distinction matters enormously.
We often hear references to the hundreds of pages in our Code. But the IESBA Code is not a monolith that every accountant must carry in its entirety, and it is not a system designed around the work of a large, listed company and then scaled down as an afterthought for everyone else. Proportionality is not a concession. It is not a compromise. It is built into the DNA of the Code’s design.
What the publication we are launching today does is make that visible — clearly, accessible, and practically.
At the heart of the Code is the conceptual framework: the tool to support professionals in identifying, evaluating and addressing threats to compliance with the fundamental principles. What matters for SMPs is that this framework is inherently scalable.
What does that mean in practice? It means that the level of effort when it comes to identifying and evaluating an ethical threat is determined by the nature and complexity of the situation. For example, for an SMP compiling a financial report for a small owner-managed client, the evaluation of any identified threats will be much simpler and more straightforward than for a firm undertaking a complex cross-border valuation for a listed entity.
The Code explicitly recognizes this. In a small practice serving closely held clients, applying the conceptual framework will rely more on an intimate knowledge of the client, and less on considering the impact of formal policies and procedures. That is not a lower standard. That is the Code recognizing reality and working with it.
Think about a self-review threat in the context of a tax service provided to an audit client. A straightforward tax return preparation for a private, less complex entity creates a very different level of self-review threat than a tax advisory service on a complex restructuring involving significant subjective judgments for a public interest entity. The Code does not apply the same response to both. That is proportionality working as it should.
The test the Code applies — the reasonable and informed third party test — asks whether an impartial, knowledgeable person, understanding the full facts and circumstances, would conclude that the professional accountant has acted appropriately. That test works for a sole practitioner just as well as for an engagement partner at a large firm.
The second dimension of proportionality is structural. The Code is built in layers — what we call a building-blocks approach — and not every layer applies to every professional.
Part 1 — the fundamental principles and the conceptual framework — applies to everyone. That is the universal foundation. But from there, the Code branches based on what you actually do.
A professional accountant working as the financial director of an owner-managed company applies Parts 1 and 2. A practitioner providing bookkeeping or compilation services applies Parts 1 and 3. The more stringent independence standards in Part 4A — with their detailed requirements around partner rotation, non-assurance services, and network firm independence — apply only when audit or review engagements are involved. The most demanding provisions within Part 4A apply specifically where the audit client is a public interest entity.
This matters practically and significantly. The vast majority of SMP practitioners — those who do not perform audits of listed companies or credit institutions — are not required to engage with the full weight of the independence standards. The Code is not asking them to. They carry the parts that are relevant to what they do. That is proportionality in design, not in aspiration.
The publication we are launching today maps this architecture clearly. It helps practitioners answer the question: given what I do and who I serve, what does the Code actually ask of me? Not in the abstract, but for the specific professional activities they perform.
Where independence requirements do apply, the Code calibrates their intensity to the level of public interest at stake.
The independence standards for audit and review engagements in Part 4A are more stringent than those for other assurance engagements in Part 4B. Within Part 4A, the most demanding requirements – including specific prohibitions, partner rotation requirements, and certain restrictions on non-assurance services – apply only where the client is a public interest entity, for example, a listed company, a bank, an insurer.
For the majority of SMP audit clients – private companies, owner-managed businesses, small cooperatives – these heightened requirements do not apply. The Code imposes rigor proportionate to the trust that society requires in the information being reported. Where that trust is highest, the standard is highest. Where the engagement is less complex and the public interest dimension more limited, the framework is correspondingly less stringent.
This is not a weakening of independence. It is a recognition that independence requirements should be calibrated to the circumstances they are designed to protect.
One more dimension deserves specific mention, because it speaks directly to one of the most common concerns we hear from practitioners: documentation.
The Code does not generally impose documentation requirements except in specific circumstances. What matters is capturing the substance of key judgments, considerations and conclusions — not maintaining the kind of formal compliance record-keeping designed for large firm audit processes. The emphasis is on the effectiveness of the ethical judgment in the most significant circumstances, such as when responding to non-compliance with laws and regulations (NOCLAR) in an audit engagement.
Demonstrating compliance with the Code requires honest, thoughtful, well-reasoned professional judgment, documented proportionately to the significance and complexity of the situation. Ethics does not require a compliance team. It requires a professional. And that is exactly what the people this room represents have trained, qualified, and committed to being.
I have walked you through the key dimensions of proportionality that this publication addresses. You will not have had time to read it yet — so let me close with an invitation. We will be very happy to receive your comments, your suggestions, and your ideas on how to improve and continue updating it.
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Ladies and gentlemen, let me close with a thought about scale and ambition.
Individually, an SMP does not represent systemic risk in the way a globally significant firm does. That is one of the realities proportionality reflects, and rightly so.
But collectively, SMPs are something else entirely. Their aggregate reach into the real economy — through hundreds of thousands of client relationships, across every sector, every region, every jurisdiction — means that the ethical quality of their work is not a local matter. It is a global one. The trust that markets, investors, regulators and citizens place in financial and non-financial information flows, in no small part, through the practices represented in this room.
The impact of the IESBA Code on the world does not depend solely, or even primarily, on how it is applied at the largest firms. It depends on how it is understood, embedded, and lived by the broad mass of professional accountants who make up the profession. That is you. That is the organizations your members lead.
So, I want to end not with reassurance but with a call to ambition.
Yes, keeping up with the ethics bar is demanding. Yes, the environment is harder than it was. Yes, there are real pressures — on resources, on talent, on time — that make the task more difficult. But the response to those difficulties should not be to set expectations lower. It should be to raise them. To be ambitious about the role that professional accountants play in society. To see ethics not as a compliance burden but as the distinctive mark of the profession — the mark that distinguishes a professional accountant from any other provider of financial services.
The IESBA is committed to that ambition. The proportionality publication we are launching today, our deepened engagement with EFAA and the IFAC SMP Advisory Group, the tools and resources we are developing — all of these are part of a sustained commitment to ensuring that global ethical standards work for the entire profession, not just its most visible segment.
The organizations in this room have a central role to play in that. You are the transmission belt between the Code and the people who must apply it. Your capacity to explain, support, train and equip your members is not just operationally important. It is ethically important. The profession’s credibility depends on what happens in the smallest offices as much as in the largest.
We cannot do this without you. And we look forward to doing it with you.
Thank you.