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.

-Rosemary Schlank

You may like these other stories...

The Public Company Accounting Oversight Board (PCAOB) on Tuesday adopted a new auditing standard and amendments in three areas of the audit that could pose an increased risk of material misstatement in company financial...
Read more from Larry Perry here and in the Today’s World of Audits archive.In my last article, I presented an overview of one of the first steps in the preplanning phase of an audit engagement: reviewing prior year...
Read more from Larry Perry here and in the Today’s World of Audits archive.AU-C Section 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks (SPFs),...

Already a member? log in here.

Upcoming CPE Webinars

Oct 22This webinar will include discussions of important issues in AU-C 800, Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30Many Excel users have a love-hate relationship with workbook links.
Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.