Changes to the ICAS Code of Ethics - Restructuring
Ann Buttery reports on some of the main changes to the ICAS Code of Ethics, which take effect from 1 January 2020.
ICAS is adopting a new Revised and Restructured Code of Ethics with effect from 1 January 2020 which replaces the previous version (applicable from 1 November 2017).
The ICAS Code of Ethics is substantively based on the International Ethics Standards Board for Accountants (IESBA) Code of Ethics.
IESBA has undertaken a project to completely redesign its Code of Ethics. IESBA’s intention behind this restructuring of the Code was not to fundamentally change the substance of the Code, but to improve its clarity thereby making it more user friendly.
The main changes in the Code are in the following areas:
- The structure of the Code
- An enhanced conceptual framework
- Safeguards – a revised definition
- Inducements (including gifts and hospitality) – inclusion of a new intent test
- New and revised sections for Professional Accountants in Business (PAIBs) on pressure to breach the fundamental principles and preparation and presentation of information
- Documentation, including written confirmation of fee arrangements.
- Objectivity – loans and guarantees with clients
This article focuses on highlighting some of the changes to the structure of the Code and the new and revised sections to assist PAIBs. Separate articles discuss the other main changes to the Code noted above.
Structure of the Code
The 2020 Revised and Restructured ICAS Code of Ethics is now divided into the following parts:
- Guide to the Code
- Part 1 - Complying with the Code, Fundamental Principles and Conceptual Framework - applicable to all Professional Accountants (Sections 100 to 199)
- Part 2 – applicable to Professional Accountants in Business (Sections 200 to 299)
- Part 3 – applicable to Professional Accountants in Public Practice (Sections 300 to 399)
- Part 4 – International Independence Standards
- Part 5 – applicable to Insolvency Practitioners
Guide to the Code
There is now an invaluable “Guide” at the start of the Code. This is not authoritative however provides a very helpful introduction to the Code and how to use it, and ICAS commends it as a first “port of call” for all users of the Code.
Professional accountants in public practice (PAPPs) – Applicability of Parts 2 and 3
Previously Part C of the Code related to Professional Accountants in Business (PAIB). In order to emphasise that the Code is applicable to all professional accountants, and not just those in public practice, the provisions relating to PAIBs have now been elevated to Part 2 of the Code.
Whilst the provisions in the Code are grouped into parts applicable to professional accountants in business, public practice, and insolvency respectively, professional accountants may find any of them of use in relevant circumstances.
Requirements clarified
The Code is broken down into sections which address specific topics. Each section has been reorganised into a more logical format with requirements now being more clearly distinguished from guidance within the section.
Each section of the Code is now structured as follows:
● Introduction
- Explains the content in the specific section but also highlights the overarching requirement to comply the fundamental ethics principles and the conceptual framework.
● Requirements and Application Material
- Requirements - highlighted in bold and designated by the letter “R” - establish general and specific obligations which professional accountants must adhere to. In most cases, the word “shall” is used when there is a requirement of the Code.
- Application material – designated by the letter “A” - provides context, explanations, suggestions for actions or matters to consider, illustrations and other guidance to assist in complying with the requirements.
ICAS help-sheets, guidance and case studies
Relevant ICAS help-sheets and guidance providing additional explanatory material to the Code are referenced at the end of the related sections of the Code. ICAS case studies will also provide additional guidance on how to use the Code.
New and revised sections for PAIBs on pressure to breach the fundamental principles and preparation and presentation of information
Pressure to breach the fundamental principles (Section 270)
There is a new section devoted to providing direction to professional accountants in business (PAIBs) on how to deal with pressure to breach the fundamental principles. Pressure was discussed across various parts of the previous Code however this section now provides more detailed support in one place.
PAIBs must not allow pressure from others, or place pressure on others, which would result in a breach of the fundamental principles. This pressure may come from within, or external to, the organisation.
“R270.3 A professional accountant shall not:
(a) Allow pressure from others to result in a breach of compliance with the fundamental principles; or
(b) Place pressure on others that the accountant knows, or has reason to believe, would result in the other individuals breaching the fundamental principles.
270.3 A1 Pressure might be explicit or implicit and might come from:
- Within the employing organization, for example, from a colleague or superior.
- An external individual or organization such as a vendor, customer or lender.
- Internal or external targets and expectations.”
Preparation and presentation of information (Section 220)
The section of the Code for professional accountants in business (PAIBs) relating to the “Preparation and presentation of information” has been extended.