Cracking the code of ethics for professional accountants

The Code provides accountants with a framework and guidance on how to behave ethically.

The operative date of the restructured Code of Ethics for Professional Accountants (The Code) is fast approaching. The changes are mandatory from 1 January 2020, although early adoption of the code is permitted.

At a glance

  • The GFC drove a push for more direct and enforceable requirements in the Code of Ethics for Professional Accountants.
  • Although there are several structural and substantive changes to the code, its five fundamental principles remain the same.
  • The enhanced conceptual framework enables members to assess threats, ethical challenges and potential safeguards that can be applied.

CPA Australia’s policy adviser for ethics and professional standards Josephine Haste CPA asked Channa Wijesinghe FCPA, CEO of the Accounting Professional and Ethical Standards Board (APESB), about key changes for members of the Australian accounting bodies.

The changes to the Code are the most extensive in approximately 20 years. What is the global context for these changes?

After the global financial crisis (GFC), there was a global push for the code’s requirements to be direct and more enforceable from a regulatory perspective, particularly for auditor independence requirements.

GFC-related ethical failures and more recent audit failures in the UK demonstrate it is vital for the accounting profession to follow the code and to behave ethically. The code provides accountants with a framework and guidance on how to achieve this.

Is the Australian Code (APES 110) harmonised with the International Code as issued by the International Ethics Standards Board for Accountants (IESBA)?

The Australian Code (APES 110) is harmonised with the IESBA Code, and, if complied with, will also ensure compliance with the IESBA Code. The IESBA Code applies in more than 120 countries and it is important for Australian standards to be consistent with global standards to facilitate global commerce and flows of capital.

However, the APESB has included Australian-specific requirements and guidance. These paragraphs deal with the Australian environment, such as the definition of a Public Interest Entity (PIE). This will help accountants identify PIEs in Australia, which have stricter auditor independence requirements.

What are the key structural changes to the restructured code and why were they considered necessary?

There were several structural and other substantive changes to the code, but the five fundamental principles and five threats to those fundamental principles remain unchanged.

The code’s core is still the same.

However, the structure of the code has now been changed to separate the mandatory requirements from the related guidance.

A new guide on how to use the restructured code is in four main parts.

The five principles and five threats to those fundamental principles remain unchanged. The code’s core is still the same.

Part 1 includes the fundamental principles and the conceptual framework; part 2 has requirements and guidance applicable to members in business; part 3 applies to members in public practice; and part 4 contains the auditor independence requirements.

The relocation of the members in business section from the previous part C to part 2 means that the sections relevant to members in business are now more easily accessible at the beginning of the code. About 70 per cent of accountants belong to this category.

How has the conceptual framework changed and why is the framework important?

The conceptual framework provides members with a systematic approach on how to identify, evaluate and address threats to the five fundamental principles of the code. It is a framework that allows members to assess ethical challenges created by threats and whether there are safeguards they can apply to deal with these threats. It does force accountants to ask the question, “How would my actions stand up against my obligation to comply with the fundamental principles?”.

The enhanced framework requires members to remain alert to new information and changes in facts and circumstances, including the use of the reasonable and informed third-party tests and the need to exercise professional judgement.

It requires a change in mindset as the code recognises that not all threats can be addressed by applying safeguards. There are three ways in which a member can deal with threats that are not at “an acceptable level”: (i) by eliminating the circumstances that are creating the threats; (ii) by applying safeguards; or (iii) by declining or ending the activity or service.

How will the restructured code affect other APESB standards and pronouncements?

The APESB has issued a restructured code with interactive PDF features. The interactive PDF features include dynamic links and pop-up definitions to facilitate users navigating the 200+ pages of the code.

As the code underpins all APESB’s pronouncements, we have embarked on a major project to revise the other 20 pronouncements to align them with the restructured code.

APESB technical staff will also be incorporating these PDF features into all the revised pronouncements to be issued this year. 

Where can members find more information on the restructured code?

Information on the restructured code is available for CPA Australia members on our website. Members can also access recent presentations on the restructured code on the website, and keep up to date on professional standards by downloading the APESB app, subscribing to our e-newsletter, or by following us on LinkedIn.

CPA Australia webinar: CPA Australia resource: Recent webinars on the Restructured Code and international developments in ethics and professional standards are available. Watch now.

Stay in touch

CPA Australia’s policy team welcomes feedback and comments. Visit the policy pages for more details about our submissions, plus information about open consultations and the latest policy bulletins and newsletters.


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November 2019
November 2019

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