Proposed Revised Code of Ethics for Professional Accountants
Proposed Revised Code of Ethics for Professional Accountants
Comments from ACCA
December 2004
ACCA welcomes this opportunity to respond to the exposure draft Proposed Revised Code of Ethics for Professional Accountants issued by the International Federation of Accountants' Ethics Committee. IFAC has made it easier for respondents to comment on proposed changes by including the full text of the Code. Although comments are not currently being sought on the totality of the section of the Code dealing with independence, ACCA believes that IFAC should review that section to ensure that it continues to be relevant and to be seen to be relevant in the aftermath of financial scandals (such as Enron and Parmalat) that have happened since its issue.
Answers to specific questions
Are the changes to conform to the Assurance Framework appropriate and clear?
We agree that changes are necessary because the Code took its definition of an assurance engagement from an IAASB document that is in effect superseded by the Assurance Framework . We believe that further steps could be taken to make the Code more usable as a stand-alone document. At present, it is necessary to refer also to the Assurance Framework and to the International Standard on Quality Control 1 to properly appreciate the meaning of certain terms. These could be included in the definitions section of the Code in a way that makes it clear that they are defined in other authoritative pronouncements.
The Assurance Framework draws a distinction between �subject matter' and �subject matter information'. This has had a considerable impact on the Code and we believe that the requirements are now more difficult to understand. We believe that the judgement of users would be better informed if, for example, the reasons for the requirements of paragraph 290.10 were fully explained. We have recently written separately to the Chair of the Ethics Committee drawing attention to our response to an IAASB exposure draft on due process and working procedures. In that response, we suggest that all new pronouncements to be accompanied by a �basis of conclusions' document. We believe that such an approach could be used by the Ethics Committee to improve clarity without the need to include too much additional material in the Code itself.
Is it appropriate that the individual responsible for the engagement quality control review in the audit of a listed entity be subject to the same rotation requirements as the engagement partner?
There exists a wide variation in roles played by individuals responsible for the engagement quality control review in the audit of a listed entity. In general, however, such individuals adopt an independent stance to their work and do not interact directly with client management. Objectively, the need for safeguarding familiarity threats is less than for the engagement partner.
We nevertheless agree with the introduction of this requirement in respect of listed entities as it demonstrates a high level of commitment to maintaining independence.
The introduction of a requirement for rotation to be carried out in the same manner as for the engagement partner may prove logistically difficult for smaller auditing firms or where the client is in a specialised industry. We agree, therefore, with the inclusion of the specific guidance at paragraph 290.155 in relation to this issue.
Is the effective date appropriate?
In view of the nature of these changes, we accept that a commencement date of 31 December 2005 is appropriate.