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IESBA Proposed Changes to the Code of Ethics: Role and Mindset Expected of Professional Accountants (Potential Amendments to Harmonized Rule of Professional Conduct, Rule 204) [Completed]

Effective Date:

These revisions to the Code relating to the role and mindset of professional accountants are ef­fec­tive De­cem­ber 31, 2021, with early adop­tion per­mit­ted.

Last up­dated:

October 2020

Overview

Har­mo­nized provin­cial Rule 204 sets out the Cana­dian pro­fes­sion’s stan­dards that en­sure Char­tered Pro­fes­sional Ac­coun­tants (CPAs) main­tain au­di­tor in­de­pen­dence dur­ing en­gage­ments they un­der­take or par­tic­i­pate in. It sets the stan­dards and re­quire­ments CPAs must main­tain as part of their pro­fes­sional con­duct. Ethics stan­dards adopted by Cana­dian provin­cial bod­ies are cre­ated in align­ment with the Code of Ethics for Pro­fes­sional Ac­coun­tants is­sued by the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA).  Hence, changes to the IESBA Code of Ethics will need to be re­flected in Rule 204.

This Longer Term Pro­fes­sional Skep­ti­cism Pro­ject (PS LT) was de­vel­oped out of the re­lated Pro­fes­sional Skep­ti­cism - Short Term Pro­ject (the PS ST pro­ject). In re­ply­ing to the ex­po­sure draft (ED) from the PS ST pro­ject, some com­mentators sug­gested that the IESBA should con­sider how its Code of Ethics should ad­dress pro­fes­sional skep­ti­cism be­yond au­dit and other as­sur­ance en­gage­ments.

As part of the PS LT pro­ject, on July 31, 2019, the IESBA is­sued pro­posed changes to the Code of Ethics (the Code) to pro­mote the role and mind­set ex­pected of all pro­fes­sional ac­coun­tants. The Ex­po­sure Draft, "Pro­posed Re­vi­sions to Pro­mote the Role and Mind­set Ex­pected of Pro­fes­sional Ac­coun­tants", puts for­ward changes that will fur­ther strengthen the Code. Com­ments were re­quested by Oc­to­ber 31, 2019.

The revisions explicitly recognize that the accountancy profession is entrusted with public confidence in the wide-ranging roles it plays in society and that such confidence is based on the skills and values it brings to its professional activities. Importantly, they reaffirm the profession’s responsibility to act in the public interest and the fundamental role of the Code in meeting that responsibility.

Among other matters, the revisions:

  • Reinforce aspects of the principles of integrity, objectivity and professional behavior;
  • Raise behavioral expectations of all professional accountants through requiring them to have an inquiring mind as they undertake their professional activities;
  • Emphasize the importance of accountants being aware of the potential influence of bias in their judgments and decisions; and
  • Highlight the supportive role the right organizational culture can play in promoting ethical conduct and business.

Re­view the press re­lease and Ex­po­sure Draft on the IESBA's web­site and for fur­ther de­tails about the PS LT pro­ject, re­fer to the IESBA’s pro­ject sum­mary.

At its meet­ing on June 8-12 and 15, 2020, the IESBA unan­i­mously ap­proved the final re­vi­sions to the Code aris­ing from this pro­ject and, following the Public Interest Oversight Board approval, on October 5, 2020, the IESBA issued these revisions to the Code to better promote the role and mindset expected of all professional accountants.

Other de­vel­op­ments

October 2020

On October 5, 2020, the IESBA issued the final revisions to the Code in respect of this project.

March 2020

  • At its meet­ing on March 16-18, 2020, the IESBA con­sid­ered the sig­nif­i­cant is­sues and com­ments raised by re­spon­dents to the Ex­po­sure Draft (ED) and a first-read draft of the Task Force’s post-ED pro­pos­als. Among other mat­ters, the IESBA con­sid­ered the Task Force’s re­sponses to stake­hold­ers’ com­ments seek­ing clar­i­fi­ca­tion of the mean­ing of pub­lic in­ter­est in re­la­tion to the pro­fes­sional ac­coun­tant’s re­spon­si­bil­ity to act in the pub­lic in­ter­est in pro­posed re­vised Sec­tion 100 and Sub­sec­tion 115 of the Code; re­fine­ments to the pro­posed re­quire­ment to have an in­quir­ing mind when ap­ply­ing the con­cep­tual frame­work; and ad­di­tional en­hance­ments to the pro­posed ap­pli­ca­tion ma­te­r­ial that high­lights the risk of bias and the im­por­tance of or­ga­ni­za­tional cul­ture. The IESBA will con­sider a sec­ond-read draft of the Task Force’s pro­pos­als with a view to fi­nal­iz­ing the re­vi­sions to the Code in June 2020.

July 2019

  • On July 31, 2019, the IESBA is­sued pro­posed changes to the In­ter­na­tional Code of Ethics for Pro­fes­sional Ac­coun­tants (in­clud­ing In­ter­na­tional In­de­pen­dence Stan­dards) to pro­mote the role and mind­set ex­pected of all pro­fes­sional ac­coun­tants. The Ex­po­sure Draft, "Pro­posed Re­vi­sions to Pro­mote the Role and Mind­set Ex­pected of Pro­fes­sional Ac­coun­tants", puts for­ward changes that will fur­ther strengthen the Code. Com­ments are re­quested by Oc­to­ber 31, 2019.

Sep­tem­ber 2018

  • At its meet­ing in Sep­tem­ber 2018, tak­ing into ac­count the round­table in­put, the re­sponses re­ceived on the CP, and the ad­vice of its Con­sul­ta­tive Ad­vi­sory Group (CAG), the IESBA ap­proved a pro­ject pro­posal, Pro­mot­ing the Role and Mind­set Ex­pected of Pro­fes­sional Ac­coun­tants. The ob­jec­tive the pro­ject is to en­sure, through the de­vel­op­ment of Part 1 of the Code and other ap­pro­pri­ate ma­te­r­ial, that the Code pro­motes the role, mind­set and be­hav­ioral char­ac­ter­is­tics ex­pected of all pro­fes­sional ac­coun­tants when per­form­ing their pro­fes­sional ac­tiv­i­ties. 

May 2018

  • On May 14, 2018, the IESBA re­leased its con­sul­ta­tion pa­per, "Pro­fes­sional Skep­ti­cism – Meet­ing Pub­lic Ex­pec­ta­tions". Com­ments are re­quested by Au­gust 15, 2018.

 

Related discussions

Pro­mot­ing the Role and Mind­set Ex­pected of Pro­fes­sional Ac­coun­tants - IESBA

June 2020

At its meet­ing on June 8-12 and 15, 2020, the IESBA unan­i­mously ap­proved re­vi­sions to the Code aris­ing from the pro­ject ad­dress­ing the role and mind­set ex­pected of pro­fes­sional ac­coun­tants. Key re­vi­sions in­clude: (i) a re­newed em­pha­sis on ac­coun­tants’ re­spon­si­bil­ity to act in the pub­lic in­ter­est; (ii) en­hance­ments to the de­scrip­tions of the fun­da­men­tal prin­ci­ples of in­tegrity, ob­jec­tiv­ity, pro­fes­sional com­pe­tence and due cause, and pro­fes­sional be­hav­ior; (iii) a new re­quire­ment for ac­coun­tants to have an in­quir­ing mind when ap­ply­ing the Code’s con­cep­tual frame­work; and (iv) new ap­pli­ca­tion ma­te­r­ial to high­light the im­pact of bias in ex­er­cis­ing pro­fes­sional judg­ment and ap­ply­ing the con­cep­tual frame­work. Sub­ject to Pub­lic In­ter­est Over­sight Board ap­proval, the fi­nal pro­nounce­ment is ex­pected to be is­sued by Oc­to­ber 2020 and will be ef­fec­tive De­cem­ber 31, 2021, with early adop­tion per­mit­ted.

De­cem­ber 3, 2019

  • At its meet­ing on De­cem­ber 3-6, 2019, the IESBA noted high­lights of the sig­nif­i­cant com­ments re­ceived from re­spon­dents to its Ex­po­sure Draft. As of De­cem­ber 2019, the IESBA has re­ceived a to­tal of 46 com­ment let­ters. The IESBA will un­der­take a full re­view of the com­ments re­ceived and the Task Force’s re­vised pro­pos­als at its March 2020 meet­ing with a view to ap­prov­ing the fi­nal pro­nounce­ment in June 2020.

June 17, 2019

  • At its meet­ing on June 17-19, 2019, the IESBA ap­proved for ex­po­sure pro­posed re­vi­sions to the Code aimed at pro­mot­ing the role, mind­set and be­hav­ioral char­ac­ter­is­tics ex­pected of all pro­fes­sional ac­coun­tants. The Ex­po­sure Draft is ex­pected to be re­leased by the end of July 2019 and will be open for pub­lic com­ment for 90 days.

March 11, 2019

  • At its meet­ing on March 11-13, 2019, the IESBA con­sid­ered pro­posed changes to the Code to pro­mote the role, mind­set and be­hav­ioral char­ac­ter­is­tics ex­pected of all pro­fes­sional ac­coun­tants. Among other mat­ters, the IESBA con­sid­ered (i) a new In­tro­duc­tion to the Code set­ting out the role of the ac­coun­tancy pro­fes­sion and clar­i­fy­ing the link­age be­tween (a) the pro­vi­sions of the Code, and (b) the be­hav­iors and ap­proach to pro­fes­sional ac­tiv­i­ties ex­pected of pro­fes­sional ac­coun­tants in act­ing in the pub­lic in­ter­est; (ii) a pro­posed en­hance­ment to the de­scrip­tion of the fun­da­men­tal prin­ci­ple of ob­jec­tiv­ity; (iii) how best to re­in­force the im­por­tance of the con­cept of “re­solve” when fac­ing chal­leng­ing sit­u­a­tions; (iv) prop­erly rec­og­niz­ing the in­te­gral role of a “ques­tion­ing mind­set” when ex­er­cis­ing pro­fes­sional judg­ment; and (v) high­light­ing the im­por­tance of an aware­ness of the risk of bias in its dif­fer­ent forms when ap­ply­ing the con­cep­tual frame­work. At its June 2019 meet­ing, the IESBA will con­sider a re­vised draft of the pro­posed changes to the Code with a view to ap­prov­ing them for ex­po­sure.

De­cem­ber 3, 2018

  • At its meet­ing on De­cem­ber 3-5, 2018, the IESBA dis­cussed pre­lim­i­nary Task Force pro­pos­als for en­hance­ments to the Code, in­clud­ing: (i) a draft in­tro­duc­tion at the front of the Code set­ting out the role of pro­fes­sional ac­coun­tants in so­ci­ety, their re­spon­si­bil­ity to act in the pub­lic in­ter­est and the over­ar­ch­ing ob­jec­tive ex­pected of them; and (ii) pro­posed re­vi­sions to Sec­tions 100 and 120 re­lat­ing to or­ga­ni­za­tional cul­ture and tone at the top, and the ex­er­cise of pro­fes­sional judg­ment. The IESBA will con­sider a re­vised draft of the pro­posed changes to the Code and fur­ther pro­pos­als re­lat­ing to other el­e­ments of the pro­ject scope, in­clud­ing po­ten­tial new ap­pli­ca­tion ma­te­r­ial in sup­port of the fun­da­men­tal prin­ci­ples and new ma­te­r­ial ad­dress­ing bias, pres­sure and other im­ped­i­ments, at its March 2019 meet­ing. 

Sep­tem­ber 17, 2018

  • At its meet­ing on Sep­tem­ber 17 - 20, 2018, the IESBA con­sid­ered the feed­back from re­spon­dents to the May 2018 con­sul­ta­tion pa­per (CP) Pro­fes­sional Skep­ti­cism – Meet­ing Pub­lic Ex­pec­ta­tions, and the in­put from the four global round­ta­bles held in June and July 2018 in Wash­ing­ton, DC, U.S.A.; Paris, France; Tokyo, Japan; and Mel­bourne, Aus­tralia. Tak­ing into ac­count the round­table in­put, the re­sponses re­ceived on the CP, and the ad­vice of its Con­sul­ta­tive Ad­vi­sory Group (CAG), the IESBA ap­proved a pro­ject pro­posal, Pro­mot­ing the Role and Mind­set Ex­pected of Pro­fes­sional Ac­coun­tants. The ob­jec­tive the pro­ject is to en­sure, through the de­vel­op­ment of Part 1 of the Code and other ap­pro­pri­ate ma­te­r­ial, that the Code pro­motes the role, mind­set and be­hav­ioral char­ac­ter­is­tics ex­pected of all pro­fes­sional ac­coun­tants when per­form­ing their pro­fes­sional ac­tiv­i­ties. The IESBA plans to con­sider is­sues and ini­tial Task Force pro­pos­als at its De­cem­ber 2018 meet­ing.

June 18, 2018

  • At its meet­ing on June 18-20, 2018, the IESBA re­ceived a pre­lim­i­nary re­port on the Wash­ing­ton DC and Paris round­ta­bles held in June 2018. The Pro­fes­sional Skep­ti­cism Work­ing Group also briefed the Board on its ac­tiv­i­ties since the re­lease of the con­sul­ta­tion pa­per.  Two more round­ta­bles will be held – at Tokyo on July 12 and in Mel­bourne on July 16. The Board will re­view a full analy­sis of the round­table in­put at its meet­ing in Sep­tem­ber 2018.

March 12, 2018

  • At its meet­ing on March 12-14, 2018, the IESBA con­sid­ered a “first-read” draft con­sul­ta­tion pa­per deal­ing with longer-term is­sues con­cern­ing the topic of pro­fes­sional skep­ti­cism, fol­low­ing the fi­nal­iza­tion in De­cem­ber 2017 of en­hanced ap­pli­ca­tion ma­te­r­ial ad­dress­ing pro­fes­sional judg­ment and pro­fes­sional skep­ti­cism in the short term. Among other mat­ters, the con­sul­ta­tion pa­per ex­plores the be­hav­ioral char­ac­ter­is­tics com­prised in pro­fes­sional skep­ti­cism, whether all pro­fes­sional ac­coun­tants should ap­ply these be­hav­ioral char­ac­ter­is­tics, and whether the Code should be fur­ther de­vel­oped as a re­sult. The IESBA asked the Work­ing Group to pre­sent the fi­nal draft con­sul­ta­tion pa­per for IESBA ap­proval at a tele­con­fer­ence sched­uled for May 4, 2018

Dec 4, 2017

  • At its meet­ing on De­cem­ber 4-8, 2017, the IESBA re­ceived an up­date from its Pro­fes­sional Skep­ti­cism Work­ing Group re­gard­ing its longer-term pro­fes­sional skep­ti­cism ini­tia­tive. In this re­gard, the IESBA con­sid­ered a ten­ta­tive di­rec­tion for­ward re­gard­ing de­vel­op­ment of a con­sul­ta­tion pa­per that would seek stake­holder views on a pro­posed ap­proach to the ques­tion. Among other mat­ters, the con­sul­ta­tion pa­per would ex­plore the spe­cific be­hav­iors that the pub­lic ex­pects of all pro­fes­sional ac­coun­tants, and whether to elab­o­rate on the re­la­tion­ships be­tween those be­hav­iors and the fun­da­men­tal prin­ci­ples. The IESBA broadly sup­ported the pro­posed di­rec­tion and asked that the Work­ing Group pre­sent a draft of the con­sul­ta­tion pa­per for con­sid­er­a­tion at the March 2018 IESBA meet­ing.

 

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