The International Ethics Standards Board for Accountants (IESBA) is proposing changes to its Code of Ethics for Professional Accountants (the IESBA Code) to provide additional guidance to professional accountants in business and in public practice concerning conflicts of interest, and to make revisions to provide more comprehensive guidance in identifying, evaluating, and managing conflicts of interest.
The IESBA approved this project in October 2009. It examined two sections of the IESBA Code that address conflicts—Section 220, for professional accountants in public practice, and Section 310, for professional accountants in business. In the IESBA’s view, the approach to be taken by a professional accountant in public practice and a professional accountant in business should be broadly similar. The proposal recognizes, however, that conflicts of interest will typically arise in different circumstances for accountants in public practice, particularly because a conflict of interest may arise from professional services provided by other members of the accountant's firm.
Ken Dakdduk, IESBA Chair, notes, “The proposed changes will provide more specific requirements and guidance for a professional accountant in applying the conceptual framework when identifying, evaluating, and managing conflicts of interest. This includes a clearer description of what is meant under the IESBA Code by the term ‘conflict of interest.’ The changes should assist professional accountants in early identification of a potential conflict of interest, and prompt accountants to evaluate their ability to be objective in that situation and meet the other fundamental principles in the IESBA Code. From the perspective of the public, timely identification of potential conflicts of interest can provide affected parties with more time to engage an alternative service provider.”
The proposed guidance also calls for professional accountants in business to be alert to interests and relationships that a reasonable and informed third party would be likely to conclude might compromise compliance with the fundamental principles. Further, the IESBA proposal would strengthen the guidance on threats created by compensation and incentive arrangements.
How to comment
The IESBA invites all stakeholders to comment on its proposals. To access the exposure draft and submit a comment, visit the IESBA website at www.ethicsboard.org. Comments on the exposure draft Proposed Changes to the Code of Ethics for Professional Accountants Addressing Conflicts of Interest are requested by March 31, 2012.
About the IESBA
The International Ethics Standards Board for Accountants (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. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.