IFAC Adds International Ethics Rules to Post-Enron Equation
As if the U.S. auditor-independence rules weren’t complicated and controversial enough, the International Federation of Accountants (IFAC) has added new international ethics rules to the post-Enron equation.
According to an announcement made by IFAC last week, its updated Accountants Code of Ethics is intended to serve as a model for the national standard-setting bodies that establish ethical guidance for accountants in countries around the world.
Unlike the standards on ethics established by the American Institute of CPAs, IFAC’s Code is not just for external auditors. It consists of three sections:
- Part A – Applicable to all professional accountants, including tax practitioners.
- Part B – Applicable to professional accountants in public practice.
- Part C – Applicable to employed professional accountants.
It is not clear at this time whether any of the rules for external auditors impose stricter standards than current U.S. rules for independence and other areas of ethics. Nor is it clear what effect, if any, they might have on contemporary proposals for reform. The most notable reform proposals include major changes in the U.S. accounting profession’s self-regulatory processes recently announced by the Securities and Exchange Commission and a proposal for mandatory rotation of auditors soon to be considered by the U.K.'s Financial Services Authority.
The announcement follows closely on the heels of the well-publicized controversy over the role of auditor independence in the Enron meltdown, but the latest revision of IFAC’s Code is no kneejerk reaction. It has been in the works for months following issuance of an exposure draft in June 2001. The updated IFAC Code can be downloaded for free after a brief registration process.