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IESBA Proposed Changes to the Code of Ethics: Application Material Relating to Professional Skepticism and Professional Judgment – Longer Term Project (Potential Amendments to Harmonized Rule of Professional Conduct, Rule 204) [Research]

Next steps:

The IESBA Task Force is considering the issue of a consultation paper related to this project, targeted for release in Q2 2018, seeking comment from stakeholders.

Last up­dated:

December 2017



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 commenters suggested that the IESBA should consider how its Code of Ethics should address professional skepticism beyond audit and other assurance engagements.

Many of those commenters expressed the view that professional skepticism should be relevant to all professional accountants (PAs) – not just PAs who perform audit and other assurance engagements. The suggestion that all PAs should exercise professional skepticism has also, independently, been actively promoted by others – in particular, the International Forum of Independent Audit Regulators (IFIAR) – as well as the Public Interest Oversight Board (PIOB), and a number of representatives of the IAASB and IESBA Consultative Advisory Groups (CAGs).

Some of those stakeholders are of the view that preparers and others in the financial reporting supply chain should also be required to exercise professional skepticism because “auditors cannot be expected to detect and resolve all problems as part of the audit and at the very end of the process.” It has also been suggested that professional skepticism might not be the right term for those PAs that are not performing audits, reviews, and other assurance engagements. Terms such as “critical mind-set” or “critical thinking" were considered but some stakeholders believed that these terms are too close in substance to professional skepticism, and could confuse PAs in the context of audit and other assurance engagements. Others urged IESBA to be cautious of unintended consequences that could arise depending on the path the task force decides to take. The Task Force is consider this and other paths.

For fur­ther de­tails, re­fer to the IESBA’s project summary.


Re­lated dis­cus­sions

Longer Term Project Re­lat­ing to Pro­fes­sional Skep­ti­cism and Pro­fes­sional Judg­ment - IESBA

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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