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IESBA completes first major phase of Code of Ethics restructure

Restructuring the international Code of Ethics enters its final stage as its first phase is completed, announced the International Ethics Standards Board for Accountants (IESBA).

On 24 January the IESBA announced that the final stage would consist of three new Exposure Drafts (EDs), proposals to enhance the fully restructured code with strengthened ethics requirements for accountants.

The double-stage restructure programme, set for completion in December 2017, intends the Code to become more effective for global implementation.

Stavros Thomadakis, IESBA chairman, said: “The timely major upgrade of the Code will lead not only to it being more understandable and easier to use, but also more robust with important improvements in many areas, including auditor independence.”

The new proposals (EDs) select sections of the Code including; the length of association between audit firm personnel with an audit or assurance client, and the provisions addressing accountants’ response to non-compliance with laws and regulations.

A number of safeguard provisions in the code will be revised, relating to non-assurance services provided to audit and other assurance clients, to enhance the “threats and safeguards” framework. The new code will also clarify the applicability of professional accountants in business (PAIB) provisions to the professional accountants in public practice.

Adam Harper, director of strategy and professional standards at the Association of Accounting Technicians (AAT), said: “The development of the Code is welcomed and the proposed restructure will help with transparency on requirements, so that they are distinguished from guidance. It will also have a greater emphasis on compliance with the fundamental Code principles, and it will strengthen the partner rotation regime for audits of public interest entities.”

The Code has been restructured to affect provisions addressing accountants’ responses to non-compliance with laws and regulations (NOCLAR). This means that when a member encounters a suspected fraud or illegal act, the matter should be reported internally. Where it is assessed as public interest to disclose the information, they may do so without breaching confidentiality ethics.

Harper added: “The AAT already has a provision in its Code of Professional Ethics which allows disclosure of professional duty or right to disclose in the public interest, and is not prohibited by law. IESBA’s emphasis on public interest issues will only serve to increase confidence in the profession, particularly in present conditions.”

The Code will be renamed the International Code of Ethics for Professional Accountants (including International Independence Standards).

Highlights of the main improvements, including details and related timelines, are set out in the January 2017 IESBA Update. The Ethics Board invites all stakeholders to comment on the EDs, structure by 25 May 2017, and safeguards by 25 April 2017 through the website.

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