General comments
- The IESBA should not lose focus on the principles-based approach, although there may, at any time, be a need to update interpretation of the principles or the examples provided by the Code of Ethics for Professional Accountants ('the Code').
- ACCA welcomes the plan for a period of stability during which no new independence requirements will be 'developed and take effect'. This plan is referred to again in the next section of this response document.
- The exposure draft notes the importance of continuing convergence of ethical standards globally and communication with national standard setters and regulators among others. We suggest that these should, in fact, be the areas of greatest focus during a period when significant changes to the Code itself should be questioned and subjected to rigorous impact analysis.
Specific questions
1. Are the IESBA's priorities for the years 2010–2012 appropriate? If not, why not and how should the priorities be amended?
ACCA welcomes the plan for a period of stability during which no new independence requirements will be 'developed and take effect'. In fact, we would go further and suggest that the IESBA should not initiate any developments in this area, regardless of when they might take effect, unless there is an urgent need to respond to unforeseen circumstances. Any other changes in relation to the Code should take the form of additional explanations and examples, as necessary, rather than the amendment of existing sections of the Code or new prescriptive requirements.
As stated on page 1 of this response, ACCA believes that the continuing convergence of ethical standards globally, and effective communication with national standard setters and regulators should be the areas of greatest focus during the three years covered by the work plan.
While not developing new independence requirements, we suggest that there is a need for further discussion of independence and the provision of non-audit services. The considerations in this respect will be very different between firms of different sizes.
2. Are the standard setting projects that will be undertaken for the years 2010–2012 appropriate? If not, why not and which projects should be added or deleted and why?
The draft work plan explains why a project on the related entity concept in audits of collective investment vehicles is sufficiently important to be included. ACCA is content with the inclusion of this project, provided the guidance issued is proportionate, well referenced to the principles-based approach, and does not detract from the focus of the IESBA during the period being considered by the work plan.
The other two proposed developments are relevant to practices and other entities of all sizes, and so we are in favour of adding practical guidance to the Code in respect of dealing with conflicts of interest and responding to fraud and illegal acts. These are areas where the ACCA Code of Ethics and Conduct already has guidance. However, we would urge the IESBA to only develop guidance that enhances the understanding of professional accountants globally and is proportionate. Care should be taken not to alter existing requirements set out in the form of fundamental principles.
ACCA would support a future project on the ethical requirements for accountants in public practice providing non-assurance services, particularly with focus on the compilation of financial statements and accompanying reports. We would be keen to see such a project being considered once the IAASB has advanced its project on reviews and compilation engagements. The IESBA will be aware of current projects of the International Auditing and Assurance Standards Board to revise standards for reviews and compilations and other assurance engagements. We suggest that the operation of the Code be considered in relation to such engagements to ensure that proportionate, 'think small first' thinking is applied to informing the IAASB on ethical considerations and developing appropriate guidance.
3. Are there any specific initiatives that the IESBA should undertake to promote or assist in adoption and implementation of the Code? If so, please be as specific as possible.
There should be a debate on global ethical issues. The IESBA must beware of imposing the ethical values of one culture on other cultures. It might explore the possibility of establishing a global understanding of ethics. This should be borne in mind when developing the contents of the ethics toolkit. It is also relevant to the development of guidance in respect of fraud and illegal acts.
Care should be taken to ensure that initiatives undertaken to assist in adoption and implementation of the Code are relevant and effective. Research should be undertaken to determine what resources professional accountants and member bodies require, and how effective the existing tools and resources have been.
We welcome the specific proposal that the IESBA will consult with the SMP Committee on issues relevant to small and medium-sized entities, with the objective of understanding the challenges of adoption and implementation of the Code. Greater focus on independence requirements relevant to SMPs might lead to valuable guidance material (existing outside of the Code), similar in nature to the Practice Notes issued by the Auditing Practices Board in the UK and Ireland. In particular, the IESBA might consider a document similar to Practice Note 26, but focusing on the practical issues faced by smaller practices in respect of ethical considerations.
4. Are there any specific initiatives that the IESBA should undertake in relation to the needs of professional accountants in SMP and SME environments and those in developing nations? If so, please be as specific as possible.
As stated above, there should be more focus on the development of independence guidance for SMPs. We also recommend a debate on global ethical issues, to include the feasibility of establishing a global understanding of ethics.