COVID-19: Ethics and Independence Considerations
It is an ongoing process that demands commitment, courage, and a willingness to stand alone when necessary. The new guidance is the latest in a series of resources to help members get to grips with the changes from 1 July, including webpages outlining each area of change, a webinar and a podcast. Additional resources and tools, including additional Staff Q&As are being developed and will soon be added. Stakeholders, including SMEs and SMPs may request permission (log in required) to reproduce or translate the Code and the related resources and tools. Where possible, duplicative material is avoided; complex sentence structures are simplified; and passive voice, legalistic and archaic terms are avoided. The Code includes a Glossary with descriptions and definitions of terms which have a specific meaning.
Course provider
Independence in accounting is not just a professional requirement; it is the cornerstone of trust that upholds the entire profession. Without it, the credibility of financial reporting and the confidence of all stakeholders in the financial system would be severely undermined. It is a value that must be zealously guarded and continuously nurtured to ensure the ongoing reliability and relevance of the accounting profession. The AICPA Professional Ethics Executive Committee (PEEC) monitors the IESBA’s standard-setting activities and may propose updates to the AICPA Code of Professional Conduct accordingly.
Professional accountants and those who oversee and regulate their work are better positioned to protect investors and other users of financial information, the public interest, and the accounting profession. Widespread and timely adoption and implementation by firms, national standard setters, policymakers, IFAC member bodies, and others will significantly advance the global accounting profession and support their commitment to the public interest. Require the firm to review the RE list prior to entering into relationships or interests that may impact independence, e.g., engagements to perform nonaudit services or certain fee arrangements. If applicable legal or professional requirements warrant, the firm should take the required action(s) on a timely basis. To further enhance understanding and application of ethical standards, the ASB provides interpretive Ethics And Independence guidance and case studies.
Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code
This occurs when an auditor’s financial or personal interests conflict with their professional responsibilities. For example, if an auditor holds shares in a company they are auditing, their judgment may be influenced by their desire to protect their investment. To address this threat, auditors should disclose any financial interests they have in the audited entity and consider divesting such interests to eliminate the conflict of interest. Objectivity is another essential principle that demands auditors to exercise impartiality and independence of mind. It means auditors should not allow personal bias, conflicts of interest, or undue influence to compromise their professional judgment.
2.4 GAO Independence Standards
This webinar provides a comprehensive overview of ethical principles and independence standards in accounting and auditing. Participants will explore the importance of ethics, the structure of the Code of Ethics, and key fundamental principles such as integrity, objectivity, and confidentiality. The Code now explains how compliance with the fundamental principles supports the exercise of professional skepticism by illustrating this linkage in the context of an audit of financial statements.
Independence in this context goes beyond the absence of conflicts of interest; it embodies the ethical fortitude to stand firm against pressures, both overt and subtle, that might compromise one’s professional judgment. Educating for Ethical Independence is a multifaceted endeavor that requires a blend of theoretical knowledge, practical application, and a robust moral compass. In the realm of accounting ethics, independence is not merely a virtue but a foundational pillar that upholds the integrity and reliability of financial reporting. However, there are instances where this independence is compromised, leading to significant ethical dilemmas and financial repercussions.
Automated and AI-Driven Auditing
- Professional accountants and those who oversee and regulate their work are better positioned to protect investors and other users of financial information, the public interest, and the accounting profession.
- Her key skills include Auditing, Preparation of financial statements under International Financial Reporting Standards (IFRS), Technical accounting advisory and training.
- IESBA Consultative Advisory Group Chair Kristian Koktvedgaard describes the role of the IESBA CAG in the development of the revised and restructured Code of Ethics.
- By doing so, auditors can effectively evaluate the evidence and arrive at unbiased conclusions.
- A personal violation could result from a covered person’s spouse owning stock in an audit client or having a prohibited loan whereas a violation by the firm might involve performance of prohibited advisory services, a contingent fee arrangement, or failure to obtain audit committee pre-approval.
It provides auditors with a set of guiding principles that help maintain integrity, objectivity, competence, confidentiality, and professional behavior. By adhering to these ethical standards, auditors contribute to the continued trust and confidence in the auditing profession, ensuring it remains a pillar of accountability in the business world. The framework for establishing ethical standards consists of various components that work together to ensure auditors adhere to the highest ethical principles. One such component is the code of Professional conduct, which outlines the fundamental principles that auditors must follow. These principles include integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. The Auditing Standards Board (ASB) plays a crucial role in ensuring the independence of auditors.
Prior to joining the IESBA, Ms. Jules was a Senior Technical Manager at the International Auditing and Assurance Standards Board, and before that an Assistant Chief Auditor at the U.S. Prior to her career in standard-setting, Ms. Jules held various audit and professional practice positions, including as an Assurance Manager at Grant Thornton, LLP. In finalizing the material relating to professional skepticism, the IESBA signaled the need for further work to respond to broader concerns identified by some of its stakeholders and the PIOB. In this regard, the IESBA has summarized these issues as well as options for a way forward in a May 2018 Consultation Paper, Professional Skepticism – Meeting Public Expectations (CP). Specifically, the CP explores the behavioral characteristics comprised in the concept of professional skepticism; whether all PAs should be required to apply those behavioral characteristics; and whether, and if so how, the Code should be revised to describe those behaviors.
Irrespective of the technology used, professional accountants must comply with requirements in the International Code of Ethics for Professional Accountants, (including International Independence Standards). In a well-documented case, an auditing firm went beyond their role as an independent auditor and actively advocated for the client’s interests in a legal dispute. This advocacy threat compromised the firm’s independence and raised concerns about their objectivity. This example highlights the importance of auditors maintaining a clear distinction between their role as independent auditors and any other roles they may assume.
- Independence goes beyond simply adhering to the rules and regulations; it requires auditors to maintain an objective mindset throughout the entire auditing process.
- Members of the Forum of Firms must demonstrate their commitment to adhere to and promote the consistent application of high-quality audit practices worldwide, as detailed in the Forum of Firms Constitution.
- Designed for auditors, accountants, finance professionals, and compliance officers, this webinar equips participants with the knowledge to uphold ethical standards and navigate complex professional challenges.
- Additionally, participating in peer review programs allows auditors to receive feedback from their peers, ensuring that they are adhering to the highest standards of independence and quality.
Practice resources
The enhanced conceptual framework more prominently features the requirement for all PAs to remain alert for new information, or changes to facts and circumstances in applying the conceptual framework. It also explains that once a PA becomes aware of new information or changes to facts and circumstances that might impact whether a threat has been eliminated or reduced to an acceptable level, the PA should evaluate and address that threat accordingly. The enhanced conceptual framework also emphasizes that PAs are required to exercise professional judgment and use the concept of the RITP test in all three stages of applying the conceptual framework. Extensive revisions have been made to the conceptual framework to strengthen and clarify how all PAs are required to identify, evaluate and address threats to the fundamental principles and where applicable, be independent. SMPs should especially take note of the clarifications relating to how PAs should address threats, including the new requirement for PAs to “stand back” and think about whether the overall conclusion made or actions they have taken are appropriate to resolve the issue. The IESBA’s top-to-bottom evaluation of the code led to an enhanced structure, tighter language, and more precise guidance that is now clearer.
Real-world examples highlight the importance of objectivity and independence and the consequences of failing to uphold these principles. Regulators are increasing disclosure requirements related to conflicts of interest, ensuring that any potential biases or dependencies are transparently disclosed to stakeholders. IESBA Chair Stavros Thomadakis explains key enhancements of the revised and restructured Code before looking ahead to future revisions to the Code and explaining why IESBA chose to propose them now. IESBA Chair Stavros Thomadakis gives an overview of Non-Assurance Services (NAS) and Fee-related provisions in addition to explaining why IESBA focused on public interest entities when making the revisions to the Code. The revised NAS provisions replace Section 600 of the Code and include conforming and consequential revisions to Sections 400, 525, 900 and 950. ACCA Singapore is currently offering a special subsidy to active members, affiliates and students so as to support them in their professional development.
These laws are complemented by professional standards set forth by bodies like the American institute of Certified Public accountants (AICPA) and the Financial Reporting Council (FRC) in the UK, which provide detailed directives on maintaining independence in both fact and appearance. Maintaining independence is a crucial aspect of upholding professional ethics in the field of auditing. Independence ensures that auditors can perform their duties objectively and without any bias, ultimately enhancing the credibility of financial statements. However, auditors often face various threats to their independence, which can compromise the integrity of their work. In this section, we will explore some common threats to independence and discuss strategies for addressing them.