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The IESBA will look to tighten its code and step up its leadership role in a new three-year strategy to address recurring failures in the profession.
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Global ethics body to probe firm culture amid accounting ‘trust crisis’
15 April 2024
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10 minute read
Accounting is facing a “global trust crisis” in the wake of high-profile failures, the global ethics standard-setter says, vowing to review firm culture and tightening “limited” rules in a new strategy document.
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The International Ethics Standards Board for Accountants (IESBA) said in its three-year Strategy and Work Plan 2024-27 released last week that it was a matter of public interest to prioritise ethics.
Without explicitly referring to PwC’s actions in Australia, it said “Public trust in the accountancy profession continues being buffeted by recurring high-profile corporate failures and ethical lapses in firms.”
“A number of these events have resulted in government inquiries, significant regulatory penalties and other significant adverse consequences,” the document read, raising questions about “whether firms have the right culture, governance and tone at the top to drive ethical behaviour consistently across all their professional activities.”
The IESBA’s code forms the basis of accounting ethics rules in over 130 jurisdictions, including Australia. As a result, IESBA chair Gabriela Figueiredo Dias said the body would be “proactively positioning [itself] as a part of the solution for the global trust crisis.”
“The IESBA believes it should take a leadership role as a global ethics standard-setter in addressing the topic of firm culture and governance as a strategic priority during this new strategy period,” the document said.
A new work stream would be tasked with fact-finding, research and stakeholder engagement to analyse the root causes behind a culture that pressures accountants into acting unethically.
The work group will also consider whether the IESBA code needs strengthening to bring governance to the fore. Currently, it said the code “only deals with ethical culture and tone at the top within organisations in a limited way.”
The IESBA said it would also “continue to promote the importance of ethics within firms” by highlighting the profession’s responsibility to act in the public interest.
The global spotlight on accounting ethics is largely the result of Australia's Accounting Professional and Ethical Standards Board's (APESB) work, which raised the issue with the IESBA last year.
The APESB confirmed in a statement in February that its submission to the global body in July promoted the review of the code and that APESB CEO and IESBA member, Channa Wijesinghe, would lead the work stream.
APESB chair Nancy Milne said: “We are pleased that the IESBA agrees with our view and has included a project on firm culture and governance as a strategic priority in its 2024-2027 Strategy and Work Plan.”
The IESBA’s three-year strategy document also outlined a plan to extend its code of ethics to capture anyone who performed similar work as accountants. Specifically, it said it would look to hold all preparers of sustainability information to account in light of greenwashing concerns.
“This strategic focus recognises that it is in the public interest for these individuals to be subject to the same high ethics standards to promote public trust in the activities they perform, irrespective of whether they belong to a professional body or their industry background,” it said.
A work stream will also examine whether the IESBA should update its code to account for the rapidly changing and expanding role of CFOs “beyond just managing the balance sheet”.
Meanwhile, the IESBA’s sister board, the International Auditing and Assurance Standards Board (IAASB), also released a three-year strategy for “enhancing consistency and quality of audit and assurance standards worldwide”.
The global audit rulemaker said its priorities would be supporting the adoption of its sustainability reporting standards, and updating rules on topics such as audit evidence, materiality and reviews of interim financial information.
It also planned on completing existing projects such as strengthening going concern rules, which involved reinforcing the importance of auditors exercising “professional scepticism” when assessing going concerns and improving reporting requirements.
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