2022 Code of Ethics incorporates IESBA changes to promote the role and mindset expected of professional accountants
Ann Buttery, Head of Ethics, ICAS Policy Leadership, explains the changes to the ICAS Code of Ethics which take effect from 1 January 2022.
ICAS is adopting a revised Code of Ethics with effect from 1 January 2022 to incorporate the International Ethics Standards Board for Accountants (IESBA) revisions to promote the role, mindset and behavioural characteristics expected of all professional accountants.
The ICAS Code of Ethics is substantively based on the IESBA Code of Ethics. In 2018, IESBA established a project to take forward the proposal to promote within the IESBA Code the ‘role and mindset’ expected of professional accountants. In October 2020, IESBA issued the revisions to its Code with an effective date of 31 December 2021.
The changes are being reflected in the ICAS Code of Ethics with effect from 1 January 2022.
Acting in the public interest
New provisions within Section 100 of the Code emphasise the wide-ranging role of professional accountants in society and the importance of the accountancy profession’s responsibility to act in the public interest. The skills and values that professional accountants bring to their work, and which underpin the public’s trust in the profession, are highlighted.
In paragraph 100.6 A1, the Code explains that compliance with the Code – upholding the fundamental principles and complying with the specific requirements – enables professional accountants to meet their responsibility to act in the public interest. In addition, the Code emphasises that professional accountants are expected to comply with the spirit, and not just the letter, of the Code. This is achieved by inclusion of the following text in paragraph 100.6 A2 “Complying with the Code includes giving appropriate regard to the aim and intent of the specific requirements.”
The fundamental ethics principle of ‘Professional behaviour’ also now highlights in paragraph R115.1 the requirement for professional accountants to “behave in a manner that is consistent with the profession’s responsibility to act in the public interest in all professional activities and business relationships.”
Integrity: Having the strength of character to act appropriately
In paragraphs 111.1 A1 and 111.1A2, new application material has been added to the fundamental ethics principle of ‘Integrity’ to emphasise that, for professional accountants, integrity includes having the strength of character to act appropriately when faced with challenging circumstances.
The Code now states:
“R111.1 A professional accountant shall comply with the principle of integrity, which requires an accountant to be straightforward and honest in all professional and business relationships.
111.1 A1 Integrity involves fair dealing, truthfulness and having the strength of character to act appropriately, even when facing pressure to do otherwise or when doing so might create potential adverse personal or organisational consequences. Fair dealing includes respecting values of equality, diversity and inclusion.
111.1 A2 Acting appropriately involves:
(a) Standing one’s ground when confronted by dilemmas and difficult situations; or
(b) Challenging others as and when circumstances warrant,
in a manner appropriate to the circumstances.
111.1 A3 It follows that a professional accountant’s advice and work must be uncorrupted by self-interest and not be influenced by the interests of other parties.”
This new material contains the substance of the concept of ‘moral courage’ which was first introduced into the ICAS Code of Ethics in November 2017. ‘Moral courage’ being regarded by ICAS as an enabler – an underpinning qualitative characteristic - which helps CAs to comply with the fundamental principles. This is discussed further in ICAS’ The Power of One publication – Moral Courage.
ICAS views this new IESBA material as reinforcing the message of moral courage and has retained moral courage as an enabler in paragraphs 110.2 A0 and 270.1 A1 of the Code so that these paragraphs will work together with the IESBA enhancements.
Recognising the impact of technology
The impact of technology is now explicitly recognised within two fundamental principles.
The fundamental ethics principle of ‘Objectivity’ at paragraph R112.1 now highlights the risk that over-reliance on technology could impair a professional accountant’s objectivity:
“R112.1 A professional accountant shall comply with the principle of objectivity, which requires an accountant to exercise professional or business judgement without being compromised by:
(b) Conflict of interest; or
(c) Undue influence of, or undue reliance on, individuals, organisations, technology or other factors.”
In addition, the application material for the fundamental ethics principle of ‘Professional competence and due care’ at paragraph 113.1 A2 has been amended to highlight the importance of ensuring knowledge is also up-to-date on technology-related developments and now states: “Maintaining professional competence requires a continuing awareness and an understanding of relevant technical, professional, business and technology-related developments.”
‘Automation bias’ is also acknowledged in new application material relating to bias in paragraphs 120.12 A1 to 120.12 A3 (see further discussion below).
IESBA has also established a Technology Task Force which is currently exploring in greater detail the impact of technology on the Code so further amendments to the Code in relation to technology can be expected in due course. Indeed, it is expected that IESBA will issue an exposure draft on proposed changes early in 2022. In addition, a separate IESBA Technology Working Group has also been established to help facilitate a wider review of the implications of new and emerging technologies. In June 2021, the Chartered Professional Accountants of Canada (CPA Canada), ICAS, and the International Federation of Accountants (IFAC) jointly released the first in a series of four thought leadership pieces to help guide financial professionals - Complexity and the professional accountant: Practical guidance for ethical decision-making.
Inquiring Mind – a new requirement for all professional accountants
A new requirement is introduced for all professional accountants to have an ‘inquiring mind’ when identifying, evaluating and addressing threats to the fundamental principles. Paragraph R120.5 now states:
“When applying the conceptual framework, the professional accountant shall:
(a) Have an inquiring mind;
(b) Exercise professional judgement; and
(c) Use the reasonable and informed third party test described in paragraph 120.5 A6.”
This represents the need to consider the source, relevance and sufficiency of information obtained taking into account the nature, scope and outputs of the professional activity being undertaken and being open and alert to a need for further investigation or other action. Application material in relation to ‘having an inquiring mind’ is provided in paragraphs 120.5 A1 to 120.5 A3.
The Code now also highlights at paragraph 120.5 A3 the distinction between the requirement for all professional accountants to have an ‘inquiring mind’ from the audit term ‘professional scepticism’. Professional accountants performing audits, reviews and other assurance engagements are, in addition to having an ‘inquiring mind’, required to exercise professional scepticism, which includes a critical assessment of audit evidence.
As noted earlier, new application material is now provided in paragraphs 120.12 A1 to 120.12 A3 to highlight the importance of being aware of conscious or unconscious bias when applying the conceptual framework. The Code now includes a list of helpful examples to assist professional accountants recognise when bias could be a threat to their professional judgement, including in relation to technology (‘automation bias’).
The importance of giving proper due consideration to bias is discussed in the 2016 ICAS research publication Shades of Grey: Directors’ Dilemmas which analyses 34 ethical dilemmas covering six areas commonly experienced by company directors.
New application material is also inserted in paragraphs 120.13 A1 to 120.13 A3 to highlight the importance of an ethical organisational culture. Paragraph 120.13 A2 states:
“The promotion of an ethical culture within an organisation is most effective when:
a)Leaders and those in managerial roles promote the importance of, and hold themselves and others accountable for demonstrating, the ethical values of the organisation;
b)Appropriate education and training programs, management processes, and performance evaluation and reward criteria that promote an ethical culture are in place;
c)Effective policies and procedures are in place to encourage and protect those who report actual or suspected illegal or unethical behaviour, including whistle-blowers; and
d)The organisation adheres to ethical values in its dealings with third parties.”
The new provisions are in line with the themes of ICAS’ The Power of One business ethics initiative, recognising the importance of individual ethical leadership within organisations. The Power of One Organisational culture and values publication echoes the sentiments in the new provisions highlighting the importance of a culture of ‘doing the right thing’.
The new application material recognises that it is imperative that leaders of organisations set the appropriate ‘tone at the top’ and that they, and management, lead by example, but also that professional accountants at all levels have an important role to play in embedding a culture of ethics within their own particular sphere of influence in an organisation. There is also recognition that it is important that the criteria upon which the remuneration of individuals is based promotes an ethical culture.
The new provisions in the Code also highlight the importance of speak up mechanisms within organisations. As discussed in the ICAS research Speak Up? Listen Up? Whistleblow? which documented the real-life experiences of ICAS Members when encountering ethical dilemmas, being able to speak up is an important part of an effective organisational culture, allowing issues to be dealt with at the earliest opportunity before they escalate.
ICAS ethics resources
ICAS is committed to providing ethics resources and support to its Members. Since 2015, ICAS has published a series of publications, guidance and resources as part of the Power of One initiative which are all available on icas.com.
In November 2020, to mark the fifth anniversary of The Power of One, ICAS issued second editions of its series of publications on ethical leadership:
- Ethics -The Power of One
- The Power of One – Personal responsibility and ethical leadership
- The Power of One – Moral Courage
- The Power of One – Personal Reputation
- The Power of One – Organisational culture and values
- The Power of One – The CA and the organisation
- The Ethical Journey – The Right, the Good and the Virtuous
ICAS also offers the following:
- guidance on conflict of interest;
- an ethical decision making framework;
- ethics videos;
- case studies, including CAs’ real-life ethical dilemmas featured within the ICAS research publication Speak up? Listen Up? Whistleblow?; and
From 1 January 2021, compulsory ethics CPD is introduced for all ICAS Members. This does not involve compulsory attendance at courses or the purchase of material – it could simply mean some reading of ethics-related material available online. In addition to ICAS’ own ethics resources as noted above, other websites provide useful sources of information as explained here.
If you have an ethical query, including a query on the provisions within the Code of Ethics in relation to values of equality, diversity and inclusion, ICAS offers an ethics helpline service.
ICAS is also partnered with whistleblowing charity Protect to provide Members and Students with access to an independent, confidential helpline. This service offers free advice regarding whistleblowing and speaking up.