ACCA - The global body for professional accountants

Professional ethics is about your obligation to the public. As a professional, whether a doctor, lawyer, engineer or accountant, you will have been tested and accepted by your profession and, therefore, you are required to accept and support your professions public interest obligations.

Professional ethics for accountants comes from the The International Ethics Standards Board for Accountants (IESBA). This is one of the Standards Setting Boards located within the International Federation of Accountants (IFAC). 

International Ethics Standards Board for Accountants (IESBA)

The IESBA Code of Ethics for Professional Accountants is arranged in three parts:

  • Part A - General Application of the Code
  • Part B - Professional Accountants in Public Practice
  • Part C - Professional Accountants in Business

Part A contains over-arching principles that should be considered paramount.

There are many different ethical theories and several different schools of thought. Each individual’s ethics will usually relate to a combination of ethical theories, and are unlikely to conform to just one theory. The majority of accountants and student accountants will aspire to high ethical standards, and will accept the Social Contract theory, whereby there is agreement within a group of people to abide by the rules in order to stay within that group. But one of the criticisms of the Social Contract theory is that everyone in the group must agree with the rules. With this in mind, the IESBA Code places emphasis on principles, rather than narrow rules. Fundamental principles are set out in broad terms, ensuring that the vast majority of member bodies (and their millions of members worldwide) can endorse them.

The ACCA Code of Ethics and Conduct is based on the IESBA Code, and the fundamental principles set out by ACCA are the same as those of IESBA. The IFAC Statement of Membership Obligations 4 requires IFAC member bodies to adopt an ethical code no less stringent than the IESBA Code. ACCA achieves this by adopting the IESBA Code in its entirety, while adding text specific to ACCA members and students.

Financial Reporting Council (FRC)

The Ethical Standards issued by the FRC relate to auditing and reporting in the Uk and Republic of Ireland. In contrast, the ACCA Rulebook is applicable to all ACCA members, students and firms. The FRC Ethical Standards recognise the specific nature of an audit engagement, with the emphasis on the independence and objectivity of the auditor. The major provisions of Ethical Standard 1 (ES1) include the following:

  • The firm should establish policies and procedures to ensure that the firm and senior members of the audit team act with integrity, objectivity and independence.
  • These procedures should be monitored in a manner appropriate to the size and nature of the firm.
  • If the firm has more than three partners, one should be designated the ‘ethics partner’, having responsibility for the adequacy of the firm’s policies and procedures, their compliance with the FRC Ethical Standards and relevant communication within the firm.

The FRC Ethical Standards (last updated when the Auditing Practices Board was still in existence) have been criticised for being over prescriptive.  However, ES1 states:

‘Whenever a possible or actual breach of an Auditing Practices Board (APB) Ethical Standard, or of policies and procedures established pursuant to the requirements of an APB Ethical Standard, is identified, the audit engagement partner, in the first instance, and the ethics partner, where appropriate, assesses the implications of the breach, determines whether there are safeguards that can be put in place or other actions that can be taken to address any potential adverse consequences and considers whether there is a need to resign from the audit engagement’.

This approach is similar to ACCA’s (and IESBA's) Conceptual Framework approach for resolving ethical challenges. ES1 continues by requiring auditors to identify threats to objectivity and independence, and actively assess their significance.  Procedures (safeguards) must be applied in order to reduce any identified threats to an acceptable level. 

The FRC categorises the various threats as follows:

  • Self-interest
  • Self-review
  • Management
  • Advocacy
  • Familiarity (or trust)
  • Intimidation.

These are not inconsistent with ACCA's (and IESBA's) framework of threats and safeguards.

Last updated: 4 Aug 2014