Making ethics count

Setting ethics standards for 2.5 million accountants globally is a crucial role performed by the International Ethics Standards Board for Accountants (IESBA). In this article, Ken Siong, Technical Director for the IESBA gives us the lowdown

Why are global ethics standards important for the accountancy profession?
Ethics is the foundation on which public trust in the accountancy profession is built. It enhances the reputation of the profession and helps to maintain trust and confidence with users of financial information and others who rely on the activities or services of professional accountants.

A single set of globally applicable, high-quality ethics standards is important as it establishes a recognized benchmark for the quality and consistency of services provided by professional accountants throughout the world. It helps to minimize confusion and complexity that may be created by divergent national standards, and facilitates a level playing field for professional accountants around the world, both in public practice and in business. As a globally recognized benchmark, the Code sets a high expectation for ethical conduct by professional accountants. It also helps to guide them in fulfilling their responsibility to act in the public interest.

What is the IESBA?
The International Ethics Standards Board for Accountants (IESBA) is an independent standard-setting body that develops the Code of Ethics for Professional Accountants (the Code). The objective of the IESBA is to serve the public interest by setting high-quality ethics standards for the approximately 2.5 million professional accountants who are members of IFAC member bodies. The Code applies to all types of professional accountants, whether they work in public practice, in business or education, or in the public sector.
The structures and processes that support the operations of the IESBA are facilitated by IFAC.

When was the IESBA set up?
In 1977, IFAC formed the International Ethics Committee, which later became the independent International Ethics Standards Board for Accountants in 2006.

How does it work?
The IESBA consists of an independent chair and 17 board members from around the world, of whom no more than nine are practitioners and no fewer than three are public members (individuals who are expected to reflect, and are seen to reflect, the wider public interest).
The IESBA follows a rigorous due process, which is critical to ensuring that the views of those affected by its standards and interpretations are thoroughly considered. This process includes extensive research, board deliberation, and public consultation at key stages of each standard’s development. To pass a new pronouncement or changes to the Code, the affirmative votes of at least 12 of the IESBA members present at a board meeting are required.

The IESBA’s standard-setting arrangement has a number of elements designed to ensure and protect the independence of the board. The most important of these is formal, independent, public interest oversight: the Public Interest Oversight Board (PIOB) has authority over key elements of the standard-setting structure and process. Threats to the independence of the IESBA are further safeguarded by the involvement of the IESBA’s Consultative Advisory Group (CAG) and official observers in the standard-setting process.

How have the ethics standards developed since the IESBA began?
In forming the International Ethics Committee in 1977, IFAC deemed it essential to establish an international Code of Ethics to recognize the responsibilities of the accountancy profession and to promote harmonization of ethics standards for the profession around the world. Since then, the Code has developed with the growth of the profession and the evolution of the environment in which professional accountants work, both in public practice and in business. In addition to the Code now being adopted or used in 100+ jurisdictions, the 27 largest global networks of accounting firms have agreed to have their policies and methodologies conform to the Code for transnational audits.

For recently completed and active projects to amend and strengthen the Code in a rapidly changing global environment, see IESBA Projects.

How does the IESBA tackle the issue of ethics being interpreted differently in different markets?
The Code is based on principles, as opposed to rules. This is critically important to its being globally operable as it means that professional accountants have to think carefully about the ethical principles that apply in specific circumstances and to exercise sound professional judgment in determining the appropriate behavior and action.

In consistently working with and listening to a very wide and diverse group of stakeholders that provide input to the standard-setting process, we believe that fundamentally there are no cultures where ethical values conflict with the principles in the Code. Nevertheless, the IESBA’s overriding aim is to issue ethics standards that are clear and capable of consistent application globally. In this regard, an essential part of the process of setting the standards is proactive consultation with stakeholders around the world as the extent and diversity of input help to contribute to the quality of the standards and minimize the potential for misinterpretation.

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