The International Code of Ethics for Professional Accountants: Key Areas of Focus for SMEs and SMPs

In early April 2018, the IESBA released a completely rewritten and revamped Code of Ethics for professional accountants (PAs). Renamed “International Code of Ethics for Professional Accountants (including International Independence Standards(“the Code” or “the revised and restructured Code”), the Code will become effective in June 2019. It packages all substantive advancements in ethics and independence over the last four years into a single document and includes the new provisions relating to non-compliance with law and regulations (“NOCLAR”), which are already effective since July 2017, and the revised independence provisions relating to long association which comes into effect in December 2018.

Key Areas of Focus

The fundamental principles within the Code – integrity, objectivity, professional competence and due care, confidentiality and professional behavior – establish the standard of behavior expected of a professional accountant (PA) and it reflects the profession’s recognition of its public interest responsibility. Those fundamental principles as well as the categories of threats to them – self-review, self-interest, advocacy, familiarity and intimidation threats are unchanged. Also unchanged, are the overarching requirements to apply the conceptual framework to comply with the fundamental principles and where applicable, be independent. In addition to the structural revisions made to the entire Code, the substantive revisions include:

– An enhanced conceptual framework, which includes extensive revisions to “safeguards” throughout the Code that are better aligned to threats;

– Strengthened independence provisions regarding long association of personnel with audit clients;

– Strengthened provisions relating to offering and accepting of inducements, including gifts and hospitality that apply to both PAs in business (“PAIBs”) and PAs in public practice (“PAPPs”);

– Strengthened provisions dedicated to PAIBs, including:

*  A new section relating to pressure to breach the fundamental principles; and

* Revised provisions relating to the preparation and presentation of information.

– Clarifications about the applicability of PAIB provisions to PAPPs;

– New material to emphasize the importance of understanding facts and circumstances when exercising professional judgment; and

– New material to explain how compliance with the fundamental principles supports the exercise of professional skepticism in an audit or other assurance engagements.


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