New Code of Ethics
ICAEW Council has approved the adoption from 1 January 2020 of a revised ICAEW Code of Ethics. Full version is available here.
Additional support material about the new code is available, including: overviews of the key requirements; documents indicating the source of the new code paragraphs; further discussion on the changes referred to below, including NOCLAR; and a helpsheet on corporate finance.
Background to the change
The revised ICAEW code is based on that issued in April 2018 by the International Ethics Standards Board for Accountants (IESBA)
As a member of the International Federation of Accountants, ICAEW is committed to internationalisation of standards and to the adoption of at least the provisions of the IESBA code. ICAEW’s code comprises the IESBA code together with a significant number of additional paragraphs (signified in italics). This add-on material is included in the ICAEW code where the IESBA code is considered to offer insufficient discussion on a topic or, occasionally, its requirements are insufficiently robust.
To minimise disruption to members ICAEW is accumulating changes to the IESBA Code and issuing them only where there is substantive change or significant improvement available rather than having annual updates. Although IESBA has made a number of changes in recent years, ICAEW has not regarded them as having been changes of substance. Therefore, apart from some minor amendments to reflect changes to UK law in respect of investment and audit regulation, ICAEW code has not been changed since the beginning of 2011, when an updated ICAEW code came into effect to reflect a significantly revised 2009 IESBA code.
Restructured IESBA code and ICAEW adoption
The intent behind the restructured IESBA code issued in April 2018 has been not to change the substance of the requirements but to re-present them to improve navigation and clarity. Some key features of the restructuring include:
- A more consistent approach to each section, including separating the material into requirement paragraphs and related application material;
- Reordering material, dividing larger sections and including more sub headings;
- Simplifying the more complex sentences;
- Changing numbering to clarify the intent of each paragraph, and to allow for further changes without having to renumber existing material; and
- Introducing a ‘guide to the code’ to explain how it works.
ICAEW has been involved in the IESBA restructuring work, both directly and as a consultee. The restructured IESBA Code is a considerable improvement for users in terms of ease of use and navigation, and the organisation is adopting it as the basis of the 2020 ICAEW code. At the same time ICAEW is picking up changes made by IESBA since the 2011 revision.
Approach to add-on material
ICAEW is taking the opportunity to streamline the add-on material where possible.
- Much of the add-on material is concerned with additional discussion of matters in the IESBA code, and does not lead to additional requirements. IESBA has enhanced discussion in many areas of its code since the add-ons were originally included in the code. In these areas ICAEW is deleting the now-superseded add-on material as being superfluous. Remaining add-on material of a purely descriptive nature, where still relevant and useful, is being moved to help sheets and cross referenced.
- The existing Section 221 on Corporate Finance is being moved to a helpsheet.
- Cross references to useful regulatory material or helpsheet/FAQ material are being retained or introduced, by way of footnote. This is to assist members in identifying the significant amount of additional guidance available to them on the website and elsewhere.
- There are a number of areas where the add-on material results in additional requirements over and above those in the IESBA code. These add-on requirements are being retained.
IESBA changes now being included in the ICAEW code
The changes to the IESBA code since the last ICAEW revision fall into three categories:
- Sections revised to add additional discussion, but where, after allowing for existing ICAEW add-on material, the substance of the requirements has not changed for ICAEW members. Such sections, cover conflicts of interest, breaches of the code, inducements and material for professional accountants in business;
- Some detailed amendments to the auditor independence provisions of section 290. The changes have little impact on most of ICAEW members as they relate principally to audit work: in the UK members carrying out audits are required to apply the FRC Ethical Standard rather than the detailed provisions of what is now Part 4A of the ICAEW code.
- New sections on non-compliance with law and regulation (‘NOCLAR’). NOCLAR, in essence, requires an accountant suspecting a business-related illegal act to consider whether it is likely to be inconsequential: if it is not, they should raise it internally within the client or employer (to the extent reasonable, taking account of the accountant’s role). If the accountant does not consider that it has been dealt with properly, the accountant should disclose externally to an appropriate authority if the accountant thinks it is in the public interest to do so. While the IESBA code has been silent on the matter hitherto, the ICAEW code has, for some years, included add-on material giving specific permission to breach confidentiality where the member considers it to be in the public interest. As far as ICAEW is concerned therefore, the NOCLAR provisions are a matter of additional guidance on the interim stages to be adopted rather than a fundamentally new requirement.
As noted above, the intent behind the revised code is not to change the underlying requirements that members need to follow but to make those requirements easier to locate and understand. However, in the unlikely event that the revised ICAEW code applicable from 1 January 2020 would result in different ethical requirements under a particular circumstance than the ICAEW code applicable prior to that date, the requirements of the extant code may be applied to assignments or engagements commend prior to 1 January 2020.