ICAS Code of Ethics

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 to 31 December 2019).

ICAS Code of Ethics applicable from 1 January 2020

View the 2020 ICAS Code of Ethics (excluding part 5 - insolvency practitioners)

The 2020 Revised and Restructured ICAS Code of Ethics is divided into the following parts however any of them may be useful in relevant circumstances:

• Guide to the Code – non-authoritative guidance on how the Code is structured and how to use 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. Please note: The new Revised and Restructured Part 5 of the 2020 ICAS Code of Ethics for Insolvency Practitioners will be published in due course. The specific provisions for Insolvency Practitioners when performing insolvency or similar engagements within Part D of the Code (applicable from 1 January 2014) therefore continue to be applicable until further notice. The 2020 Revised and Restructured ICAS Code of Ethics is otherwise applicable to Insolvency Practitioners with effect from 1 January 2020.

Part D of the Code applies to Insolvency Practitioners.

Structure of the ICAS Code of Ethics

The ICAS Code of Ethics (the "Code") applies to all members of ICAS, affiliates, students, employees of a member firm or an affiliate, and member firms where relevant. These are referred to in the Code as "professional accountants ".

Professional accountants have a responsibility to take into consideration the public interest and to maintain the reputation of the accountancy profession. Personal self-interest must not prevail over those duties.

The Code helps professional accountants to meet these obligations by providing them with ethical requirements and application material. Failure to follow the Code may lead to a professional accountant becoming liable to disciplinary action as outlined in Chapter 13 of the ICAS Rules.

The Code establishes the five fundamental principles of professional ethics for all professional accountants:

1.Integrity
2.Objectivity
3.Professional competence and due care
4.Confidentiality
5.Professional behaviour

It provides a conceptual framework that professional accountants shall apply to ensure adherence to these fundamental principles.

The conceptual framework requires professional accountants to identify threats to compliance with the fundamental principles; evaluate the threats identified; and address the threats by eliminating or reducing them to an acceptable level. It requires professional accountants to exercise professional judgement; to remain alert for new information or changes to the facts or circumstances and re-evaluate if necessary; and to apply the “reasonable and informed third party test”.

The 2020 Revised and Restructured ICAS Code of Ethics

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 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

The Revised and Restructured ICAS Code of Ethics applies from 1 January 2020 (the “2020 Code”) and replaces the previous version of the ICAS Code of Ethics (the “2017 Code”) applicable from 1 November 2017 to 31 December 2019.

The 2020 Revised and Restructured ICAS Code is divided into the following parts. It is of note however that whilst the Code is grouped into these parts, professional accountants may find any of them of use in relevant circumstances.

Guide to the Code

The Guide to the Code is a valuable (non-authoritative) aid to assist all users navigate the Code. It provides helpful guidance on how the Code is structured and how to use the Code.

Part 1 - Complying with the Code, Fundamental Principles and Conceptual Framework (Sections 100 to 199)

Part 1 is applicable to all professional accountants. It includes discussion on the fundamental principles and the conceptual framework.

Part 2 - Professional Accountants in Business (Sections 200 to 299)

Part 2 sets out the additional material that applies to professional accountants in business (previously Part C in the 2017 Code).

Professional accountants in business include professional accountants employed, engaged or contracted in an executive or non-executive capacity in, for example:

• Commerce, industry or service
• The public sector
• Education
• The not-for-profit sector
• Regulatory or professional bodies

Part 2 is also applicable to individuals who are professional accountants in public practice when performing professional activities pursuant to their relationship with the firm, whether as a contractor, employee or owner.

Part 3 – Professional Accountants in Public Practice (Sections 300 to 399)

Part 3 provides additional material that applies to professional accountants in public practice when providing professional services (previously Part B in the 2017 Code).

It also applies to professional accountants in business in relevant circumstances.

Part 4 - International Independence Standards

Part 4 (previously Sections 290 and 291 in the 2017 Code) sets out additional material that applies to professional accountants in public practice when providing assurance services as follows:

• Part 4A – Independence for Audit and Review Engagements (Sections 400 to 899).
• Part 4B – Independence for Assurance Engagements Other than Audit and Review Engagements (Sections 900 to 999).

FRC Ethical Standard: Auditors undertaking an audit in the UK are required to comply with the requirements of the Financial Reporting Council's Ethical Standard. There is therefore no requirement on auditors undertaking an audit in the UK to also comply with Part 4A.

As well as applying to audits undertaken in accordance with ISAs (UK), the FRC’s Ethical Standard also applies to all other public interest assurance engagements that are undertaken in compliance with engagement standards issued by the FRC.

Part 5 – Insolvency Practitioners.

Part 5 applies to Insolvency Practitioners (Part D in the 2017 Code). Please note: The new Revised and Restructured Part 5 of the 2020 ICAS Code of Ethics for Insolvency Practitioners will be published in due course. The specific provisions for Insolvency Practitioners when performing insolvency or similar engagements within Part D of the Code (applicable from 1 January 2014) therefore continue to be applicable until further notice. The 2020 Revised and Restructured ICAS Code of Ethics is otherwise applicable to Insolvency Practitioners with effect from 1 January 2020.

Glossary

The Glossary is applicable to all professional accountants.

ICAS help-sheets

Relevant ICAS help-sheets providing additional explanatory material to the Code are referenced at the end of the related sections of the Code.

ICAS case studies

ICAS case studies provide additional guidance on how to use the Code.

Conflict of interest guidance

ICAS has issued guidance on conflict of interest (March 2019) providing details of best practice on how to apply the existing provisions on conflict of interest within the ICAS Code of Ethics.

2017 ICAS Code of Ethics

The 2017 ICAS Code of Ethics (the “2017 Code”) is effective from 1 November 2017 to 31 December 2019.  The revisions to the 2017 Code which were approved by Council and applied from 1 November 2017 were:

1.  Non-compliance with laws and regulations (NOCLAR)

The introduction of the IESBA content on what a professional accountant should do if they encounter actual or suspected “Non-Compliance with laws and Regulations (NOCLAR)” at their client or employer (Sections 225 and 360 of the Code respectively).

Laws and Regulations

The laws and regulations which are relevant to the professional accountant for the purposes of the NOCLAR guidance are those which have a direct impact on material items in the financial statements, or are fundamental to the organisation’s operations.

The NOCLAR provisions in the Code do not take precedence over local laws and regulations regarding the reporting of actual or suspected non-compliance with laws and regulations. If there is a conflict between local legislation and the provisions of the Code, the professional accountant must adhere to local legislation. Therefore, CAs must always be aware of the disclosures that could amount to “tipping-off” under the UK Anti-Money Laundering laws and regulations.

NOCLAR framework

The underlying principle of NOCLAR is the same for all professional accountants i.e. they should respond to an issue and not turn a blind eye. However, NOCLAR has different requirements depending on the particular role and level of seniority of the professional accountant. Four categories of professional accountant are distinguished and specific steps are identified for each. The classifications are:

• Auditors
• Other Professional Accountants in Public Practice (PAPP)
• Senior-level Professional Accountants In Business (PAIB)
• Other Professional Accountants In Business

Greater responsibility is placed on auditors and senior-level professional accountants in business.

Further guidance on implementing NOCLAR is available via the IESBA website.

2.  Moral courage

An amendment to Section 100.5 of the ICAS Code to establish that “Moral Courage” is an enabler – an underpinning qualitative characteristic -  which helps CAs to comply with the fundamental principles:

Moral courage

"In order to ensure compliance with the fundamental principles, an underpinning qualitative characteristic required of the professional accountant is the ‘courage’ to act morally. ‘Courage’ for the professional accountant is the need to act in accordance with the fundamental principles, especially in situations where there is a risk of suffering adverse personal consequences.

"There is a need for the professional accountant to confront ethical dilemmas with courage. When facing an ethical dilemma, the professional accountant needs to have the courage to acknowledge the dilemma, to make a reasoned judgement as to the ethical action required to resolve the dilemma, and then to act accordingly."

Further information is available here.

3. Other conforming amendments

There are also certain other conforming amendments which are not seen as substantial.

Structure of the 2017 Code of Ethics

The Code establishes the five fundamental principles of professional ethics for all professional accountants:

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behaviour

It provides a conceptual framework that professional accountants shall apply to ensure adherence to these fundamental principles.

This conceptual framework requires professional accountants to use their professional judgement to identify and evaluate threats to compliance with the fundamental principles, and then apply safeguards to eliminate the threats, or reduce them to an acceptable level.

For convenience, the 2017 Code is split into four sections; however, any of them may be useful in relevant circumstances:

• Part A applies to all members.
• Part B applies to members in practice.
• Part C applies to members in business.
• Part D of the Code (applicable from 1 January 2014) applies to insolvency practitioners. The revisions made in 2014 in relation to Part D are highlighted below.

FRC Ethical Standard

Auditors undertaking an audit in the UK, and professional accountants undertaking other public interest assurance engagements in compliance with the engagement standards issued by the FRC, are required to comply with the requirements of the Financial Reporting Council's Ethical Standard.

Exercising a right of lien helpsheet

A lien help sheet is available in the regulation section of icas.com. This helpsheet aims to provide guidance to Members in practice on the exercise of a right to lien, highlighting the practical and ethical issues which need to be considered.

2014 ICAS Code of Ethics

The following revisions to the Code applied from 1 January 2014:

1. Section 241 of the Code 'Agencies and Referrals' has been revised to reflect the changes made in respect of independent and restricted advice re referring work to financial advisers. Further information is available on the FCA website.


2. At sections 110 and 320 of the Code, a statement has been included to reflect the legislative change which states that accounts of micro-entities will satisfy the true and fair review requirement if they contain the information specified by the 'The Small Company (Micro-Entities' Accounts) Regulations 2013'. Therefore, there is a possibility that accounts could be deemed to be 'true and fair' but also misleading. Therefore, for the avoidance of doubt the following statement has been inserted:
   "In relation to accounts prepared under 'The Small Companies (Micro-Entities' Accounts) Regulations 2013', accounts which satisfy the 'true and fair' view requirement of this Statutory Instrument cannot be held to be misleading."


3. References to various regulatory bodies have been updated.


4. In Part D of the Code, which relates to Insolvency Practitioners, the only revision is that the Joint Insolvency Committee has removed the second sentence of paragraph 400.3 following a recent decision. This is illustrated below. The text included in bold has been removed from the Code.
   
   400.3 It is this Code, and the spirit that underlies it, that governs the conduct of Insolvency Practitioners. Failure to observe this Code may not, of itself, constitute professional misconduct, but will be taken into account in assessing the conduct of an Insolvency Practitioner.