The International Ethics Standards Board for Accountants is proposing a set of revisions in the ethics code for engagement teams working on audits of group financial statements.
The proposed revisions, which would be made to the International Code of Ethics for Professional Accountants, would establish provisions to address independence considerations for firms and individuals involved in an engagement to perform an audit of group financial statements. The proposals also deal with the independence implications of the change in the definition of an engagement team ― a concept that’s central to an audit of financial statements ― in the International Auditing and Assurance Standards Board’s International Standard on Auditing 220, Quality Management for an Audit of Financial Statements.
Among other things, the proposals would:
- Set up new defined terms and revise a number of existing terms, including for application with respect to independence in a group audit context.
- Clarify and enhance the independence principles that apply to individuals involved in a group audit, as well as firms engaged in the group audit, including firms within and outside the group auditor firm’s network.
- More explicitly detail the process for addressing a breach of an independence provision at an auditing firm, reinforcing the need for appropriate communication between the relevant parties and with those who have been charged with governance of the group.
- Align a number of provisions in the ethics code to conform to changes in the IAASB’s quality management standards.
“Auditor independence, in fact and in appearance, is fundamental to public trust and confidence in the financial statement audit, which in turn plays a major role in safeguarding the integrity of the financial system,” said IESBA chair Gabriela Figueiredo Dias in a statement Monday. “These proposals bring much needed clarifications and reinforcement in an area of auditor independence that can be especially challenging, given that many audits are performed for the largest and most complex groups around the world. I wish to acknowledge the close coordination with, and support of, the IAASB in developing those proposals.”
IESBA is asking for feedback on the exposure draft of the proposed revisions by May 31, by visiting its website.
Separately, IESBA teamed up Tuesday on a new ethics publication with CPA Canada, the Institute of Chartered Accountants of Scotland and the International Federation of Accountants on Identifying and mitigating bias and mis- and disinformation. It’s the third publication in a four-part thought-leadership series looking at the impact of rapid technological change on ethical leadership and the accounting profession. The new installment discusses the impact that bias and mis- and disinformation have on trust and objective decision-making.
“Professional accountants are trusted as a source of reliable and objective information, but they are not immune to the dangers of bias, mis- and disinformation that challenge objectivity and make it difficult to assess information and make competent decisions,” said lead authors Brian and Laura Friedrich in a statement. “They need to be diligent in applying professional skepticism and an inquiring mind to ensure they help combat these issues, in line with their public interest responsibilities.”
The document follows up on the two previous installment, Technology is a double-edged sword with both opportunities and challenges for the accountancy profession and Complexity and the professional accountant: Practical guidance for ethical decision-making, and stems from a roundtable event, “Ethical Leadership in an Era of Complexity and Digital Change,” that CPA Canada, ICAS and IFAC jointly hosted in 2021. The fourth publication in the series will focus on mindset and enabling skills.
The publication is available on the IFAC Knowledge Gateway and IESBA’s Technology: Ethics & Independence Considerations page.