Dear Mr Siong
Technical Director,
International Ethics
Standards Board for Accountants,
Crowe Horwath International is delighted to
present a comment letter on the Exposure Draft Improving the Structure of the Code of Ethics for Professional
Accountants – Phase 1. Crowe Horwath International is a leading global
network of audit and advisory firms, with members in some 128 countries.
We welcome the Consultation Paper presented by
IESBA and the efforts that IESBA is making to improve the understandability and
usability of the Code. The presentation of the Code is much improved and the
project appears to be achieving its desired aims.
We observe that IESBA has to continue to support
the written word of the Code through other means of communication and
engagement in order to achieve the desire level of adoption, effective
implementation and consistent application.
IESBA should be collaborating with the IAASB to
ensure consistency between the Code and the IAASB’s Standards. We note the
comments in paragraph 19 of the Explanatory
Memorandum. As it will be several years before the IAASB’s Standards are
revised following the Enhancing Audit
Quality consultation, IESBA and IAASB should be working now to ensure
consistency between the Code and the IAASB’s Standards in their current form.
We address below the specific matters detailed
in the IESBA’s request for comments.
Refinements
to the Code
1. Do you
agree with the proposals, or do you have any suggestions for further
improvement to the material in the ED, particularly with regard to:
(a) Understandability, including the usefulness of the Guide to the
Code?
(b) The clarity of the relationship between requirements and application
material?
(c) The clarity of the principles basis of the Code supported by
specific requirements?
(d) The clarity of the responsibility of individual accountants and
firms for compliance with requirements of the Code in particular circumstances?
(e) The clarity of language?
(f) The navigability of the Code, including:
(i) Numbering and
layout of the sections;
(ii) Suggestions
for future electronic enhancements; and
(iii) Suggestions
for future tools?
(g) The
enforceability of the Code?
We agree with the proposals and consider
that they meet IESBA’s stated objective of improving the understanding and
usability of the Code.
In general, the Code is clear and well
structured. The identification of “requirements” with adjacent “application material”
is a welcome improvement in presentation that will assist both understanding
and use.
In the Explanatory
Memorandum, IESBA comments about the issues raised by users whose first
language is not English and when the Code has been translated. IESBA should use
its engagement with national regulators, standard setters and professional
bodies to demonstrate that the revised presentation is likely to address these
concerns. It would be helpful if IESBA publicly reported on this engagement,
demonstrating that progress has been made.
The restructured Code emphasizes the
importance of the “principles” basis. This is important and as the restructured
Code is implemented, IESBA should work with national regulators and standard
setters to make sure that the intent of the Code is maintained. National
application and enforcement has to preserve the principles based approach of
the Code.
The Code has to be supported by relevant
resources that assist practical application and professional education. Online
resources and webinars are needed. These have to be practical in approach,
using case studies and examples. Accountants from business and practice should
be involved in the preparation of these resources to help them reflect real
situations that are encountered.
2. Do you believe the restructuring will enhance the adoption of the
Code?
In principle yes, but the
adoption of the Code is influenced by many factors other than its structure and
presentation.
Where IESBA has concluded
that improvements to the Code will enhance adoption of the Code, then IESBA
should work with stakeholders to communicate the changes that have been made
and encourage that changes are made to the national approach to adoption. Stakeholders
are a broad group including regulators, standard setters, government, the
national accountancy profession, and international parties including the
networks of audit firms.
3. Do you believe that the restructuring has changed the meaning of the
Code with respect to any particular provisions? If so, please explain why and
suggest alternative wording.
We do not consider that the
restructuring has resulted in any changes that impact upon the meaning or
interpretation of the provision of the Code.
However, after the
restructured Code has been issued, IESBA should monitor the application of the
Code, and after an appropriate period prepare an impact analysis that
identifies whether, in practice, the meaning of any provisions has changed.
Other
Matters
4. Do you have any comments on the clarity and appropriateness of the
term “audit” continuing to include “review” for the purposes of the
independence standards?
“Audit” is a distinct
professional discipline and service, supported by comprehensive standards, and
subject in many jurisdictions to independent oversight and regulation. “Review”
is a separate activity and is best combined with “other assurance services” in
the Code.
5. Do you have any comments on the clarity and appropriateness of the
restructured material in the way that it distinguishes firms and network firms?
The distinction between
“firm” and “network firm” is a welcome inclusion in the restructured Code. The
approach taken in Section 401 is generally clear and the terminology used to describe
a “network firm” is appropriate.
Title
6. Is the
proposed title for the restructured Code appropriate?
We agree with the proposed
title for the restructured Code. The addition of the word “Standards” is
important.
We trust that our comments assist the IESBA in the project to restructure
the Code. We shall be pleased to discuss our comments further with you.
Kind regards
Yours sincerely
David Chitty
International Accounting and Audit Director