What’s New in the International Code of Ethics for Professional Accountants
As professionals in the accounting and financial sectors, it’s important to stay updated with the latest international ethics and independence standards. The International Ethics Standards Board for Accountants (IESBA) has released the 2023 edition of the International Code of Ethics for Professional Accountants (including International Independence Standards). This edition includes several key changes that you need to know about, and some future updates that are on the horizon.
Here’s a breakdown of what’s new and why it matters.
Changes to the Engagement Team and Group Audits
Starting from December 15, 2023, IESBA has made some changes to how engagement teams and group audits are defined. These changes help make sure that everyone involved in auditing group financial statements is following the same rules.
What’s Important:
Engagement Team Definition: Now, everyone who works on an audit, no matter where they are or who they work for, is considered part of the engagement team. This means everyone must meet the same ethical standards.
Group Audit Team Definition: Similar updates apply to group audits, making sure that all auditors involved in a group audit are held to the same standards, whether they are in the main audit firm or working with a related company.
These changes make it clear who is responsible for what during an audit, helping to maintain the quality and independence of the audit process.
End of the Long Association Rule
One big change in the 2023 edition of the Code is the removal of the rule that allowed some exceptions for auditors who had been with the same client for a long time (called the “jurisdictional provision”). This rule will no longer apply for audits starting on or after December 15, 2023.
Why This Matters:
This change means that auditors who have been with the same client for many years will now need to rotate out more regularly to keep their independence and objectivity intact.
Updated Definitions for Public Interest Entities (PIEs) and Audit Clients
Starting from December 15, 2024, IESBA has expanded the list of entities that need to follow stricter independence rules, known as Public Interest Entities (PIEs). There’s also an early adoption option, so firms can start applying these rules sooner if they wish.
Key Updates:
Publicly Traded Entity: The term “listed entity” is now replaced with “publicly traded entity,” broadening the scope of which companies are considered PIEs and need to follow stricter rules.
Transparency Requirement: Firms now need to publicly state if they are applying these stricter independence rules, adding more transparency to their practices.
These updates ensure that more companies are held to higher ethical standards, especially those that are important to the public.
Technology-Related Changes
With technology playing a bigger role in accounting, IESBA has introduced new guidelines, effective December 15, 2024, to help accountants use technology ethically and responsibly.
What You Should Know:
Ethical Use of Technology: The new rules guide how to use technology in a way that aligns with ethical standards, especially when it comes to data management and IT services.
Protecting Confidentiality: The updated rules emphasize the importance of keeping client information secure, especially with the increased use of technology.
These changes are designed to help accountants navigate the challenges and opportunities that come with new technologies, while still maintaining high ethical standards.
Conclusion
As the world of accounting continues to change, it’s essential to stay informed about these updates. The 2023 edition of the International Code of Ethics brings significant changes that will impact our work as business accountants. By understanding and applying these changes, we can continue to provide valuable services to our clients while upholding the highest ethical standards.
CIBA is here to support you as you navigate these changes. We’ll continue to provide resources and guidance to help you implement these updates smoothly.
