Monday, July 28, 2014

2014 Handbook of the Code of Ethics for Professional Accountants

On 17 July 2014, IESBA published the 2014 edition of the Handbook of the Code of Ethics for Professional Accountants. This handbook replaces the 2013 edition. It contains the following changes to the Code :

  • Definition of “Those Charged with Governance”. The IESBA has revised the definition of the term “those charged with governance” to more closely align it with that in the International Auditing and Assurance Standards Board (IAASB)’s International Standard on Auditing (ISA) 260, Communication with Those Charged with Governance. The IESBA also added a new paragraph 100.25 and made a change to paragraph 290.28 to clarify that a subgroup of those charged with governance of an entity, such as an audit committee, may assist the governing body in meeting its responsibilities. The revised definition of “those charged with governance” and related changes to the Code are effective on July 1, 2014. The changes were published on the IESBA website in September 2013.
  • Conforming Changes to Part A of the Code Based on Newly Defined Term “Professional Activity”. Conforming changes have been made to paragraphs 100.5 (c), 100.9, 100.12 (b), 120.2, 130.1 (b), and 130.6 based on the newly defined term “professional activity” arising from changes to the Code addressing conflicts of interest, which the IESBA issued in March 2013.

The Code of Ethics for Professional Accountants contains three parts. PART A – GENERAL APPLICATION OF THE CODE, establishes the fundamental principles of professional ethics for professional accountants and provides a conceptual framework that professional accountants shall apply to :

  1. Indentify threats to compliance with the fundamental principles;
  2. Evaluate the significance of the threats identified; and
  3. Apply safeguards, when necessary, to eliminate the threats or reduce them to an acceptable level.

A professional accountant shall use professional judgment in applying this conceptual framework.

PART B – PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE and PART C – PROFESSIONAL ACCOUNTANTS IN BUSINESS, these two parts of the Code describe how the conceptual framework applies in certain situations. They provide examples of safeguards that may be appropriate to address threats to compliance with the fundamental principles. They also describe situations where safeguards are not available to address the threats, and consequently, the circumstance or relationship creating the threats shall be avoided.

Part B applies to professional accountants in public practice. While Part C applies to professional accountants in business. Professional accountants in public practice may also find Part C relevant to their particular circumstances.

The use of the world “shall” in this Code imposes a requirement on the professional accountant or firm to comply with the specific provision in which “shall” has been used. Compliance is required unless an exception is permitted by this Code.

The handbook is available at : IFAC webpage