• New staff publication explains how proportionality is built into the IESBA Code.
• Designed to support small and medium practices in applying the Code with confidence.
• Presented at the EFAA Annual Conference in Dublin as part of IESBA’s SMP engagement.

The International Ethics Standards Board for Accountants (IESBA) has released a guide to its approach to proportionality in the ethics and independence standards in the IESBA Code. The publication entitled “Proportionality of the IESBA Code” aims to support all professional accountants, and especially small and medium practices (SMPs), in understanding how the Code maintains a universal high ethical bar while employing proportionality mechanisms embedded in its design.

The publication is meant to underscore that while ethics is not proportionate, the Code is. Every professional accountant is required to uphold the same five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. The Code, however, adopts a proportionate approach to how professional accountants meet these principles in practice. The same proportionate approach is applied to independence for professional accountants and firms in an audit or assurance context.

Proportionality is a defining feature of the Code's design, embedded through its principles-based approach, its building-blocks architecture, and its scalable conceptual framework.

The publication explains how these proportionality mechanisms work in practice across three key dimensions:

1. The Code’s conceptual framework, which requires professional accountants to identify, evaluate, and address threats to the fundamental principles and, where applicable, to independence, is inherently scalable. It does not prescribe a uniform approach to identifying and evaluating threats; it requires careful consideration of the relevant facts and circumstances, including interests and relationships;
2. The Code’s building-blocks architecture, which means that practitioners apply only the parts of the Code relevant to their role and the professional activities or services they perform, avoiding unnecessary burden while preserving rigor;
3. Clearly differentiated provisions, especially regarding the Code’s independence standards, which are calibrated to the level of public interest at stake, with more stringent requirements applying only where the level of public interest in the engagement and the public reliance on the information are highest.

“The question we hear most often from SMPs is not whether they support ethics, but whether the Code was built with them in mind. The answer is yes – and this publication makes that visible,” said Gabriela Figueiredo Dias, IESBA Chair. “Proportionality is not a shortcut. The Code sets a universal ethical standard and trusts professional accountants to lean on its proportionality mechanisms with judgment in applying it in their context.”

Supporting Small and Medium Practices

The guide was presented for the first time at the European Federation of Accountants and Auditors for SMEs (EFAA) Annual Conference in Dublin, where IESBA Chair Gabriela Figueiredo Dias delivered the opening keynote of a panel dedicated to ethics and proportionality in the IESBA Code. EFAA represents over 400,000 accountants, auditors, and tax advisors across 15 European countries, the vast majority of them in SMPs.

SMPs constitute the dominant part of the global accountancy profession. According to the latest IFAC Global SMP Survey, 64% of SMP practitioners worldwide are sole practitioners or in practices of two to five partners and staff. They are the primary professional service providers to small and medium enterprises (SMEs), which represent 99.8% of all enterprises in the European Union and more than 65% of jobs in the non-financial business sector. At the same time, SMPs operate under significant commercial and regulatory pressure, often without the dedicated compliance infrastructure available to larger firms. The publication is designed to support SMP practitioners in navigating the Code with clarity and confidence, by making visible the proportionality mechanisms that have always been part of its design.

With the release of the guide, the IESBA reaffirms its broader commitment to supporting the adoption and implementation of the Code, including through its June 2025 decision to focus on practical support for practitioners and not issue any significant new standards before 2027.

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 high-quality, international ethics (including independence) standards as a cornerstone to ethical behavior in business and organizations, and to public trust in financial and non-financial information that is fundamental to the proper functioning and sustainability of organizations, financial markets and economies worldwide.

Along with the International Auditing and Assurance Standards Board (IAASB), the IESBA is part of the International Foundation for Ethics and Audit (IFEA). The Public Interest Oversight Board (PIOB) oversees IESBA and IAASB activities and the public interest responsiveness of the standards.

Contact Information:

Rui Peres Jorge 
Director, Strategy and Communications 
International Ethics Standards Board for Accountants (IESBA) 
ruiperesjorge@ethicsboard.org | Direct: +351 966-301-383

Zsolt Bobis 
Lead, Communications 
International Ethics Standards Board for Accountants (IESBA) 
zsoltbobis@ethicsboard.org

More and more, SME clients are turning to their accountants not just for compliance, but for insights, clarity, and strategic partnership as uncertainty, competition, and complexity continue to shape their business environments. As a result, many practitioners find themselves asking: “How do I move from tax and reporting to deeper advisory services without feeling like a salesperson?”

Today, the International Federation of Accountants (IFAC) released the third and final installment in its three-part publication series to help small- and medium-sized practices (SMPs) implement the International Auditing and Assurance Standards Board’s (IAASB) suite of quality management standards. Installment Three: Monitoring and Remediation provides tips and guidance for the practical implementation of the monitoring and remediation of a firm’s system of quality management.  

Installment Three addresses: 

• The factors driving the nature, timing and extent of the monitoring activities. 
• The scope and outcome of monitoring activities to establish a feedback loop for continuous improvement.   
• Establishing a framework for evaluating findings, identifying deficiencies, and evaluating the severity and pervasiveness of deficiencies, which includes investigating root causes.   
• Responding to identified deficiencies and communication about monitoring and remediation.  
• The ongoing evaluation of the system of quality management.   

Installment Three includes multiple documentation aids covering annual monitoring and evaluation of the system of quality management, cyclical inspection of completed audits and other engagements and a monitoring and remediation report to assist practitioners. It also continues the case study introduced in the previous installments. 

Installment One of the series addressed the mindset change the new standards require and the shift in focus from quality control to quality management. Installment Two covered development of an implementation plan for quality management.  

This series joins IFAC’s collection of available resources that support quality management implementation, including webinars, articles and videos, as well as the IAASB first-time implementation guides, all of which are available at ifac.org/qualitymanagement. 

This publication series and other resources like it underscore IFAC’s commitment to supporting SMPs and empowering them to provide the best possible service to their clients. IFAC acknowledges and appreciates feedback from IFAC’s Small and Medium Practices Advisory Group and Forum of Firms representatives in the development of the series. 

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 more than 135 jurisdictions, representing millions of professional accountants in public practice, education, government service, industry, and commerce. 

The International Federation of Accountants (IFAC) has submitted a comment letter to the International Auditing and Assurance Standards Board (IAASB) on its Exposure Draft for the proposed amendments to Standards resulting from revisions to the definitions of  listed entity and public interest entity (PIE) in the IESBA Code. 

IFAC appreciates the efforts of the IAASB in working with the IESBA to harmonize definitions and terminology in this important area and is broadly supportive of the proposed changes. Within our response we raise several challenges: 

• Existing expectations gaps could be compounded by language implying that standards should be required to meet heightened stakeholder expectations for PIEs.   
• Further clarity needs to be provided about the extent of work the auditor is required to carry out to identify PIEs that are not labelled as such by law, regulation, or other requirements.  
• The extension of the requirement to provide written confirmation of auditor independence to those charged with governance should also set clearer timings for when this should take place.  
• Considering the level of activity that will be needed for implementation, the proposed 18 to 24-month period following approval of these amendments might not be sufficient. 

IFAC will remain engaged with the IAASB’s consultation process until the publication of a final standard and supporting guidance materials. 

The International Federation of Accountants (IFAC) has submitted a comment letter to the International Auditing and Assurance Standards Board (IAASB) on its exposure draft for proposed revisions to ISA 240, which covers fraud.

IFAC supports the IAASB’s focus on fraud, but the proposals raise several concerns for the global profession. Any approach to these issues should reflect the fact that the primary responsibility for preventing and detecting fraud rests with management. Extant requirements within the standard provide an effective basis for dealing with the auditor’s responsibilities in relation to fraud, so the IAASB should take an evidence-based approach to amendments, ensuring that any changes in approach that increase costs for auditors and clients can be justified through added value.

Some of the proposals may lead to a widening of the existing expectation gap—especially the changes related to transparency in the auditor’s report. The proposed requirements may also result in extra work and effort on all audits regardless of whether specific fraud risks have been identified, and without corresponding increases in value. The resulting approach might not be practical or cost effective for many audits and is unlikely to make a meaningful difference to audit quality in many cases.  

IFAC will remain engaged with the IAASB’s consultation process until the publication of a final standard and supporting guidance materials.

The International Federation of Accountants (IFAC) has submitted a comment letter to the International Ethics Standards Board for Accountants (IESBA) on its exposure draft for proposed revisions to the IESBA Code relating to the use of external experts.

External experts can improve the quality of reporting and assurance. They are an important resource, especially for small- and medium-sized practices, where there is often less in-house specialist knowledge. Standards in this area should not discourage the use of experts, and any requirements should be clear—and consistent with the corresponding reporting and assurance standards.

IFAC’s response highlights the potential that proposed revisions could undermine the quality of reporting and assurance engagements by creating inappropriate barriers to the use of external experts. Proposals for subjective evaluation of competence, capability, and objectivity could prevent the use of experts based on perceived, rather than meaningful, challenges to ethical behavior. New requirements for information gathering in some areas appear excessive and impractical. The exposure draft also has notable inconsistencies in approach and terminology with the International Auditing and Assurance Standards Board's (IAASB) proposed International Standard on Sustainability Assurance (ISSA) 5000.

IFAC will remain engaged with the IESBA’s consultation process until the publication of a final revision and supporting guidance materials.

The International Federation of Accountants (IFAC) has submitted a comment letter to the International Ethics Standards Board for Accountants (IESBA) on its exposure draft for the proposed revisions to the Code of Ethics related to sustainability.

The global business community and the accountancy profession are making a significant transformation with respect to sustainability disclosures. The IESBA has an important role, like other standard setters, in this transformation.

IFAC appreciates the significant resources and effort the IESBA has devoted to this important project. However, the actions of standard setters, regulators, and policy makers must be undertaken and calibrated with priority for both being an effective influence on the sustainably transformation and bringing along relevant stakeholders in the business community, including the accountancy profession, on the journey. It is important for the IESBA to be a positive influence in this transformation through the creation of practical, easily understandable, and sufficiently flexible standards.

IFAC has raised three key areas in which the IESBA can enhance the practicality of implementation:

• Reduce complexity and call for transparency from practitioners with respect to relevant, jurisdiction-specific sustainability assurance oversight, as well as enforcement where they conduct engagements.
• Remove barriers to financial statement auditors providing sustainability assurance to the same client.
• Revise or remove proposed requirements related to value chain considerations.

IFAC will remain engaged with the IESBA’s consultation process until the publication of a final standard and supporting guidance materials.

The Fast Future With IFAC is a conversational podcast series about small- and medium-sized practices (SMPs) adapting to the rapidly changing global economy.

Episode Seven features excerpts from a presentation to IFAC's SMP Advisory Group by Paul Gisby, Director, Professional Services at Accountancy Europe.

This episode is the first in a three-part series on talent management.

Click below or visit IFAC's iTunes podcast channel to listen to this episode.

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IFAC welcomes this comprehensive review of IFRS for small- and medium-sized enterprises (SMEs). In principle, we support alignment of IFRS for SMEs with full IFRS Standards. As a basic standard-setting principle we believe the concepts that underpin IFRS and IFRS for SMEs should be the same, notwithstanding that their application may need to be modified to address user needs and capacity constraints of SMEs.