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  • The Role of Ethics in Restoring Confidence

    Article for Member Bodies English

    Jörgen, in an IFAC News interview from last August when you became the first independent chair of the International Ethics Standards Board for Accountants [IESBA], you indicated that the board has a clear role to play in responding to the global financial crisis, specifically in terms of helping to restore the reputation of the profession. Since the crisis, regulators and other policy makers have been actively exploring ways to enhance audit quality, including measures to increase the transparency of the audit process and to further safeguard auditor independence. At the same time, we have continued to witness a number of high profile accounting frauds in some jurisdictions. Some have said that the global financial crisis has led to a crisis of confidence in the accountancy profession. How can the IESBA’s Code of Ethics for Professional Accountants [the Code] help to restore the reputation of the profession?

    JH: While the profession has not received as much criticism as the rating agencies and banks in relation to the global financial crisis, the profession is certainly not viewed as favorably as it was five years ago and there is still much work to be done. What many people outside of IFAC’s membership may not know is that professional accountants are committed to abiding by strict ethical requirements—the Code presents an internationally robust and comprehensive set of rules and guidelines for professional accountants. However, some accountants may choose not to follow the rules, and therein lies the problem. A relatively small number of accountants commit fraud, but that’s all you hear about in the news, and they end up hurting not only those directly involved, but the reputation of the entire profession.

    What can be done about that?

    JH: By increasing awareness of the Code and continuing to develop credible, reasonable solutions, we hope that the general public will come to realize that professional accountants are committed to acting ethically and in the public interest, and that fraudulent accountants constitute a small minority.

    In some jurisdictions, the ethical requirements in the Code have been written into laws and regulations. However, there are some other incentives to follow the Code, regardless of legal requirements. It is in the best interests of all professional accountants, as members of a highly regarded and trusted profession, to help maintain the reputation of the profession. There are always going to be pressures—from management or potential financial gain, for instance—to stretch or break the rules. The Code includes guidance for professional accountants on how to deal with those situations. We expect that they will choose to do the right thing. Another motivator for firms and individuals to self-enforce the Code is that abiding by the Code can help them improve the consistency of their services and meet the high expectations of clients and employers.

    How can the Code help in this way?

    JH: As a global set of standards, the Code establishes a recognized benchmark for consistent ethical behavior by professional accountants worldwide. Clients and employers are rightly entitled to expect that professional accountants will act with integrity and objectivity, exhibit appropriate competence, due care, and professional behavior, and abide by the duty of confidentiality in carrying out their roles and responsibilities. Ethics standards can help professional accountants understand and meet their clients’ and employers’ expectations and therefore better serve them.

    Do you agree that some of the recent accounting scandals that made headline news such as Olympus in Japan and ERA Mining Machinery Ltd in China were caused by compromised ethics?

    JH: First, I should say that I, of course, do not have all of the information surrounding the cases you mention. Much of the information comes from the media. However, even when the news sources are highly respected, they may get the facts wrong or give incomplete coverage of events. While it looks like poor ethics played a role, I think it would be oversimplifying what happened to say that those scandals were caused mainly by a failure of the professional accountants involved to comply with ethics standards. To fully identify the causes would require a deep understanding of the particular facts and circumstances and the complexities of what occurred. At the same time, there is no doubt that those cases have hurt the standing of the profession in many jurisdictions. But it is important to distinguish between legal and ethical issues. Scandals usually become headlines because of suspected illegal activity—but acting illegally is of course very unethical.

    Do you believe that ethics is something that cannot be taught, that it is inherent to each individual?

    JH: I think most people have a personal code of conduct that they follow and it’s probably determined by how they were brought up, the morals and beliefs that were instilled in them from a young age, etc. I feel that ethical conduct is part of a person’s moral upbringing, so yes, part of it is inherent.

    However, codes and rules in general, help the individual to adhere to ethical principles by supporting their intent to act ethically and guiding them in applying general ethical principles with concrete examples. The IESBA Code sets out the fundamental principles, a conceptual framework, and specific prohibitions. All professional accountants must be aware of the parts of the Code or their member body’s Code that are relevant to their work, which will be of help to them when they are facing issues of an ethical nature.

    Can you give us a brief update on what the IESBA has going on right now?

    JH: We recently released final revised provisions in the Code that address conflicts of interest, breaches of a requirement of the Code, and the Code’s definition of the term “engagement team.” The changes will be effective in 2014.

    These projects were closely followed by a number of stakeholders from the regulatory community, and I was pleased that we were able to effectively engage with them through different forums. I was also pleased that we were able to successfully coordinate with the International Auditing and Assurance Standards Board [IAASB] in finalizing our project on the definition of engagement team, as this project was closely linked to the IAASB’s project to revise its International Standard on Auditing 610, Using the Work of Internal Auditors.

    In relation to our current agenda, we had our first deliberation at our last meeting regarding the significant comments to our Exposure Draft on responding to a suspected illegal act, our most important project. Certainly, there are a number of challenging issues that respondents have raised. We will work diligently, systematically, and thoroughly through all the responses as we determine a way forward. We also discussed a number of new projects and initiatives at our March meeting.

    See more information on the March 2013 Meeting Page, which includes the meeting highlights and a podcast summary. 

    Caption
    IESBA Chair Jörgen Holmquist

    Interview with IESBA Chair Jörgen Holmquist

  • 2013 Handbook of the Code of Ethics for Professional Accountants

    Previous edition; superseded by the current edition.

    The IESBA handbook contains the entire Code of Ethics for Professional Accountants, effective January 1, 2011. The 2013 edition includes the three final pronouncements—addressing a breach of a requirement of the Code, conflicts of interest, and the definition of "engagement team"published in March 2013 (effective dates in 2014). It replaces the 2012 edition of the IESBA handbook.

    The handbook is available in print for US $60.00 (plus shipping & handling). Order print copies using the Purchase button.

    IESBA
    English
  • IESBA eNews April 2013

    New York, New York Spanish

    Gracias por registrarse para recibir el eNews del Consejo de Normas Internacionales de Ética para Contadores (IESBA). Esta edición del eNews del IESBA ofrece un resumen de decisiones tomadas durante la junta del IESBA llevada a cabo en marzo 11-13 de 2013, en Nueva York, Estados Unidos. Referirse a la Página de la junta para visualizar los puntos destacados de la junta, incluyendo un resumen en versión podcast y documentos de la agenda. 

     

    1. Respondiendo a un Acto Ilegal Sospechado
    2. Asociación de Personal Directivo (incluyendo Rotación de Socios) con un Cliente de Auditoría
    3. Revisión de la Parte C del Código
    4. Estructura del Código
    5. Definición de Los Encargados del Gobierno Corporativo
    6. Asuntos Emergentes y Alcance
    7. Servicios Diferentes al Aseguramiento
    8. Próximas Juntas
    9. Directriz Reglamentaria de la CE vs. Código del IESBA: la FEE Compara los Requerimientos de Independencia
    10. El IESBA está Contratando
    11. Manual IESBA 2013
    12. Congreso Mundial de Contadores 2014 se Llevará a Cabo en Roma; Oportunidades de Patrocinio Disponibles

     

    1. Respondiendo a un Acto Ilegal Sospechado

    El IESBA consideró los comentarios de más de 70 replicantes al Borrador de Consulta (ED), Respondiendo a un Acto Ilegal Sospechado. Entre los temas abarcados, se incluyó: la divulgación de un acto ilegal sospechado a la autoridad adecuada; la divulgación al auditor externo, con la expectativa de divulgación a la autoridad adecuada; la prueba de información e intensificación del “interés público”; el requerimiento para confirmar o disipar la sospecha; los tipos de actos ilegales a ser revelados; y la interacción de la norma propuesta con las Normas Internacionales de Auditoría (NIAs).  

    El IESBA continuará considerando los temas claves y las acciones futuras durante su junta de Junio de 2013.

     

    2. Asociación de Personal Directivo (incluyendo Rotación de Socios) con un Cliente de Auditoría 

    El IESBA recibió una actualización sobre el proyecto de revisión de las largas provisiones de asociación incluidas en la Sección 290 del Código de Ética para Contadores Profesionales (el Código) a fin de garantizar que continúan proporcionando una protección contra la familiaridad y las amenazas de auto-interés que surgen de la larga asociación con el cliente de auditoría. Entre otros asuntos, el IESBA abarcó el enfoque para la investigación de las provisiones sobre la rotación de socios en los territorios principales y el sondeo de las opiniones de las partes interesadas sobre las amenazas asociadas con la asociación.

     

    3. Revisión de la Parte C del Código

    El IESBA aprobó una propuesta para iniciar un proyecto de revisión de la Parte C del Código que considera a los Contadores Profesionales en Empresas (PAIB) a fin de garantizar que las provisiones de la Parte C del Código son sólidas y adecuadas. La Fase I del proyecto revisará las Secciones 300, 320, 330, y 340 del Código. Particularmente, esta fase se enfocará en la presión aplicada por los superiores y demás para dedicarse a actos ilegales y poco éticos, la responsabilidad de los PAIB en la producción de estados financieros que representen de manera fiel los aspectos económicos de las transacciones, y demás asuntos relacionados. La fase II del proyecto abarcará la Sección 350, la cual está relacionada con pagos fáciles y sobornos. El IESBA desarrollará más a fondo el proyecto en su junta de Junio de 2013.

     

    4. Estructura del Código

    El IESBA consideró términos de referencia y un informe de estatus inicial del grupo de trabajo creado para asesorar al Consejo sobre las maneras en que se puede mejorar la lectura, el entendimiento y el acceso al Código. Entre otros asuntos, el IESBA debatió sobre los objetivos, el alcance y los tiempos de la iniciativa, al igual que el enfoque frente al trabajo. El consejo acordó que era necesario reflexionar cuidadosamente sobre la distinción a hacer entre las opciones que se podrían considerar a corto plazo y aquellas que se podrían considerar a largo plazo y que permitirían una revisión más sólida de la estructura del Código. El consejo solicitó al grupo de trabajo explorar estas opciones y emprender la investigación para definir el camino a seguir.   

     

    5. Definición de los Encargadosdel Gobierno Corporativo

    El IESBA tomó en cuenta los comentarios recibidos sobre su Borrador de Consulta acerca de un cambio propuesto en relación con la definición del término “encargados del gobierno”. En principio, el IESBA acordó modificar la definición propuesta debido a los comentarios de los replicantes. El IESBA considerará la definición final para aprobación en su junta de Junio 2013, luego de analizarlo con su Grupo Consultivo Asesor (CAG) en la revisión de comentarios que se llevará a cabo en Abril 2013.

     

    6. Asuntos Emergentes y Alcance

    El IESBA acordó crear un Grupo de Trabajo sobre Asuntos Emergentes y Alcance con el fin de asesorar el consejo sobre asuntos emergentes y desarrollos internacionales de relevancia para el trabajo del IESBA y para la estrategia de alcance del consejo. El IESBA revisará borradores de términos de referencia para el Grupo de Trabajo en su junta de Junio 2013.

     

    7. Servicios Diferentes al Aseguramiento

    El IESBA recibió una breve actualización sobre el enfoque de la Fuerza de Trabajo frente a la recopilación de información para fines de definición del alcance del proyecto. El IESBA considerará la información recopilada y las propuestas de la Fuerza de Trabajo en cuanto al alcance del proyecto en la junta del IESBA en junio de 2013.

     

    8. Próximas Juntas

    Las juntas del IESBA y del CAG del IESBA son abiertas al público. El CAG del IESBA realizará su nueva junta en Nueva York, Estados Unidos el 10 de Abril de 2013. La próxima junta del IESBA se llevará a cabo en Nueva York, el 10-12 de junio, 2013.

    Para mayor información e inscripción para participar como observador en la junta del IESBA o del CAG del IESBA, favor visitar las páginas Juntas del IESBA o Juntas del CAG del IESBA, respectivamente. 

     

    9. Directriz Reglamentaria de Auditoría de la CE vs. el Código del IESBA: la FEE Compara los Requerimientos de Independencia

    En un estudio emitido en Febrero 2013, la Fédération des Experts Comptables Européens (FEE) comparó las provisiones en los marcos de Estados Unidos sobre la independencia del auditor (Directriz Reglamentaria de Auditoría de 2006 y la Recomendación de 2002 sobre la Independencia Reglamentaria de Auditoría en los Estados Unidos) y las provisiones de independencia incluidas en el Código IESBA.

    Entre otros asuntos, el estudio reveló que el Código es más sólido en relación con las auditorías de entidades de interés público. En particular, el Código incluye provisiones estrictas para los servicios diferentes a la auditoría y que son incompatibles con la provisión de servicios de auditoría. El estudio reveló igualmente que el Código abarca otros asuntos que podrían ser considerados e incluidos en una ley futura de auditoría en la UE.

     

    10. El IESBA está Contratando

    El IESBA busca actualmente un gerente técnico para su equipo de trabajo ubicado en Nueva York. Los candidatos calificados deben contar con experiencia a nivel de gerente o alto gerente en la práctica profesional, en un organismo contable profesional, una oficina de auditoría del sector público, o similar. Para una descripción completa del cargo, las competencias y la experiencia requeridas, referirse a la página Trabajando en la IFAC. Los candidatos calificados pueden enviar su hoja de vida a jobs@ifac.org.

     

    11. Manual IESBA 2013

    El IESBA está desarrollando el Manual 2013 del Código de Ética para Contadores Profesionales. Éste contendrá los pronunciamientos finales que abarcan los incumplimientos de las provisiones en el Código y los conflictos de interés, al igual que la definición revisada del término “equipo de auditoría.” El Manual 2013 será publicado en el segundo trimestre de 2013. Para acceder a la edición actual, referirse al Manual IESBA 2012.

     

    12. Congreso Mundial de Contadores 2014 se Llevará a Cabo en Roma; Oportunidades de Patrocinio Disponibles  

    El Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) será anfitrión del siguiente Congreso Mundial de Contadores (WCOA) en Roma, Italia en el 2014. Titulado Visión 2020: Aprendiendo del Pasado, Creando el Futuro, el WCOA 2014 se realizará en Noviembre 10-13 en el  Auditorium Parco della Musica. Más de 4,000 profesionales del mundo entero se reunirán en este evento de la IFAC que se lleva a cabo cada cuatro años. El WCOA 2014 analizará el pasado y explorará la evolución de la profesión contable y mirará hacia el futuro a fin de presentar las innovaciones que moldearán el futuro de la profesión.

    El WCOA ofrece igualmente una plataforma a fin que las organizaciones y firmas adapten sus proyectos y visiones a través de diferentes oportunidades de patrocinio. Para mayor información, contactar a info@wcoa2014rome.com o Dimarco@wcoa2014rome.com.

    Spanish Version

  • IESBA eNews: April 2013

    New York, New York English

    Thank you for signing up to receive eNews from the International Ethics Standards Board for Accountants (IESBA). This edition of IESBA eNews provides a summary of decisions made at the IESBA’s meeting held March 11-13, 2013, in New York, USA. See the Meeting Page for the meeting highlights, including a podcast summary, and agenda papers.

    IN THIS ISSUE:

    1. Responding to a Suspected Illegal Act
    2. Long Association of Senior Personnel (Including Partner Rotation) with an Audit Client
    3. Review of Part C of the Code
    4. Structure of the Code
    5. Definition of Those Charged with Governance
    6. Emerging Issues and Outreach
    7. Non-Assurance Services
    8. Next Meetings
    9. EC Statutory Audit Directive vs. IESBA Code: FEE Compares Independence Requirements
    10. IESBA is Hiring
    11. 2013 IESBA Handbook
    12. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

     

    1. Responding to a Suspected Illegal Act

    The IESBA considered the significant comments received from over 70 respondents on its Exposure Draft (ED), Responding to a Suspected Illegal Act. Topics discussed included: disclosure of a suspected illegal act to an appropriate authority; disclosure to the external auditor; right with an expectation to disclose to an appropriate authority; the “public interest” reporting test and escalation threshold; the requirement to confirm or dispel the suspicion; types of suspected illegal acts to be disclosed; and the interaction of the proposed standard with the International Standards on Auditing (ISAs).

    The IESBA will continue its consideration of key issues and future actions at its June 2013 meeting.

     

    2. Long Association of Senior Personnel (Including Partner Rotation) with an Audit Client

    The IESBA received an update on the project to review the long association provisions in Section 290 of the Code of Ethics for Professional Accountants (the Code) to ensure that they continue to provide robust and appropriate safeguards against the familiarity and self-interest threats arising from long association with an audit client. Among other matters, the IESBA discussed the approach to research into the partner rotation provisions in major jurisdictions and canvassing the views of stakeholders on the threats associated with long association.

     

    3. Review of Part C of the Code
    The IESBA approved a proposal to commence a project to review Part C of the Code addressing professional accountants in business (PAIBs) to ensure that the provisions in that part of the Code are robust and remain appropriate. Phase I of the project will review Sections 300, 320, 330, and 340 of the Code. This phase will, in particular, address pressure by superiors and others to engage in unethical or illegal acts, the responsibility of PAIBs to produce financial reports that are faithful representations of the economics of transactions, and associated matters. Phase II of the project will address Section 350, which is related to facilitation payments and bribes. The IESBA will discuss the project further at its June 2013 meeting.

     

    4. Structure of the Code

    The IESBA considered draft terms of reference for, and an initial status report from, the working group formed to advise the Board on ways to improve the readability, understandability, and accessibility of the Code. Among other matters, the IESBA discussed the objectives, scope, and timing of the initiative, as well as the approach to the work. The board agreed that careful thought should be given to distinguishing clearly between options that could be considered on a short term basis and longer term options that could address a more fundamental review of the structure of the Code. The board asked the working group to explore these options and to undertake the research to support the way forward.

     

    5. Definition of Those Charged with Governance

    The IESBA considered significant comments received on its ED of a proposed change to the definition of the term “those charged with governance.” The IESBA agreed in principle to amend the proposed definition in the light of respondents’ significant comments. The IESBA will consider the final definition for approval at its June 2013 meeting after consulting with its Consultative Advisory Group (CAG) on the meaningful ED comments in April 2013.

     

    6. Emerging Issues and Outreach

    The IESBA agreed to the establishment of an Emerging Issues and Outreach Working Group to advise the board on emerging issues and international developments of relevance to the IESBA’s work, and on the board’s strategy for outreach. The IESBA will consider draft terms of reference for the Working Group at its June 2013 meeting.

     

    7. Non-Assurance Services

    The IESBA received a brief update on the Task Force’s approach to information gathering for purposes of scoping out the project. The IESBA will consider the information gathered and the Task Force’s proposals regarding the scope of the project at the June 2013 IESBA meeting.

     

    8. Next Meetings

    Meetings of the IESBA and the IESBA CAG are open to the public. The IESBA CAG will next meet in New York, USA on April 10, 2013. The next IESBA meeting will be held in New York, USA, on June 10–12, 2013.

    For more information and to register to attend an IESBA or IESBA CAG meeting as an observer, visit IESBA Meetings  or IESBA CAG Meetings respectively.

     

    9. EC Statutory Audit Directive vs. IESBA Code: FEE Compares Independence Requirements

    In a study released in February 2013, the Fédération des Experts Comptables Européens (FEE) compared provisions in the EU frameworks on auditor independence (the 2006 Statutory Audit Directive and the 2002 Recommendation on Statutory Auditor’s Independence in the EU) and the Independence provisions of the IESBA Code.

    Among other matters, the study found that the Code is more robust with respect to audits of public interest entities.  In particular, the Code includes strict provisions for those non-audit services that are incompatible with the provision of audit services. The study also found that the Code tackles other matters that may be considered for inclusion in future EU audit legislation.

     

    10. IESBA is Hiring

    The IESBA is searching for a technical manager to join its staff team based in New York. Qualified candidates should have experience at the manager or senior manager level in professional practice, a professional accounting body, the office of a public sector auditor, or similarFor a complete job description and required skills and experience, see Working at IFAC. Qualified candidates should send a resume to jobs@ifac.org

     

    11. 2013 IESBA Handbook

    The IESBA is developing the 2013 Handbook of the Code of Ethics for Professional Accountants. It will contain the final pronouncements addressing breaches of provisions in the Code and conflicts of interest, and the revised definition of “engagement team.” The 2013 Handbook is expected to be released in the second quarter of 2013. For the current edition, see 2012 IESBA Handbook.   

     

    12. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

    The next World Congress of Accountants (WCOA) will be hosted by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) in Rome, Italy in 2014. Themed 2020 Vision: Learning from the Past, Building the Future, the 2014 WCOA will be held November 10-13 at the Auditorium Parco della Musica. More than 4,000 professionals from all over the world will convene at this IFAC event, which is held every four years. WCOA 2014 will look back to explore the evolution of the accountancy profession and forward to showcase the innovations that will shape the future of the profession.

     

    The WCOA also provides a global platform for organizations and firms to share their projects and visions via various sponsorship opportunities. For more information, please contact info@wcoa2014rome.com or Dimarco@wcoa2014rome.com.

  • IESBA Strengthens Key Sections of Code of Ethics for Professional Accountants

    New York, New York English

    The International Ethics Standards Board for Accountants (IESBA) today released strengthened provisions in its Code of Ethics for Professional Accountants (the Code) to address conflicts of interest and a breach of a requirement of the Code. It also released amendments to the definition of the term “engagement team” in the Code.

    Conflicts of Interest

    Recognizing the ethical questions and challenges that can arise from conflicts of interest, the IESBA has revised the Code to establish more specific requirements and provide more comprehensive guidance to support professional accountants in identifying, evaluating, and managing such conflicts. The revisions affect professional accountants both in public practice and in business, taking into account the different circumstances in which they work. There is now a clearer explanation of what a conflict of interest means under the Code. The changes also are aimed at better enabling professional accountants to identify potential conflicts of interest early for timely action to be taken by the affected parties. Importantly, the new requirements are intended to stimulate professional accountants to evaluate whether they can remain objective in those circumstances and abide by the other fundamental ethical principles in the Code.

    Breach of a Requirement of the Code

    Reflecting its view that any breach of a provision of the Code is a matter that must be treated very seriously, the IESBA has strengthened the Code with respect to a professional accountant’s actions when encountering such a breach. In particular, the revisions to the Code establish a robust framework for addressing a breach of an independence requirement in the Code. They include requiring a firm to:

    • Terminate, suspend, or eliminate the interest or relationship that caused the breach;
    • Evaluate the significance of the breach and determine whether action can be taken and is appropriate in the circumstances to satisfactorily address the consequences of the breach;
    • Communicate all breaches with those charged with governance and obtain their concurrence that action can be, or has been, taken to satisfactorily address the consequences of the breach; and
    • Document, among other matters, the action taken and all the matters discussed with those charged with governance.

    Definition of Engagement Team

    In conjunction with the International Auditing and Assurance Standards Board (IAASB)’s release today of its International Standard on Auditing (ISA) 610 (Revised 2013), Using the Work of Internal Auditors, the IESBA is also releasing amendments to the definition of “engagement team” in the Code. The amendments clarify the relationship between internal auditors providing direct assistance on an external audit (“direct assistance”) and the meaning of an engagement team under the Code.

    “A hallmark of professional accountants is their acceptance of their duty to act in the public interest,” said IESBA Chair Jörgen Holmquist. “The changes to the Code addressing conflicts of interest and a breach of a requirement of the Code raise the bar even higher and will, I believe, contribute to further strengthening of public trust in the profession.” He also added, “In relation to the engagement team definition, while the amendments to the definition address a perception that the Code and the revised ISA are in conflict with respect to direct assistance, it is important to make clear that the board is not requiring or encouraging external auditors to use direct assistance.”

    The changes will be effective in 2014; see the individual pronouncements for details. Early adoption is permitted. The revised pronouncements will be printed in the 2013 Handbook of the Code of Ethics for Professional Accountants due out in the second quarter.

    About the IESBA
    The IESBA 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.

    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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

     

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