Ethics

The Financial Reporting Council (FRC) has issued a consultation proposing important changes to the UK's Ethical and Auditing Standards. The FRC proposes to set more stringent ethical rules for auditors, in response to findings from recent audit enforcement cases and from audit inspections. In response to feedback from investors, the FRC also proposes to enhance the quality and content of auditors' reports in order to improve transparency about what is found in the course of an audit. Key changes proposed include:   A clearer and stronger 'objective, reasonable and informed third-party test' which requires audit firms to consider whether a proposed action would affect their independence from the perspective of public interest stakeholders rather than another auditor. This is supported by additional material to encourage a wide-ranging assessment, which considers both the spirit and the letter of the standard; Enhancing the authority of the Ethics Partner function within audit firms, in order to ensure firm wide focus on ethical matters and the public interest, and to require reporting to those charged with governance where an audit firm does not follow the Ethics Partner's advice; The list of prohibited non-audit services that auditors of Public Interest Entities (PIEs) can provide to audited bodies has been replaced with a much shorter list of permitted services, all of which are 'closely related' to an audit or required by law and/or regulation. No other services can be provided; and The requirement for the auditors of all UK-listed entities to include in their published auditor's reports the performance materiality threshold used in the audit. Further detailed amendments to individual standards clarify the auditor's responsibilities when considering whether the bodies they have audited are compliant with relevant laws and regulations, and when checking there are no material misstatements in the 'other information' companies include in their annual financial reports (other than the financial statements which are subject to audit). The FRC recognises that there are a number of concurrent reviews of the UK audit market, including an Independent Review by Sir Donald Brydon looking at the quality and effectiveness of audit. These proposals are not intended to pre-empt the outcome of those reviews, or the direction of future government policy. They are focused on improving current Ethical and Auditing Standards in the light of experience since the last major revision in 2016, to drive up the quality of audits being carried out in the UK, and to continue to promote public confidence in audit.   Consultation on Revisions to Ethical and Auditing Standards 2019 (PDF) Supporting documents Revised Ethical Standard and Exposure Draft (PDF) Changes to the International Standards on Auditing (UK) and International Standard on Quality Control (UK) - Exposure Drafts (PDF) Glossary of Terms (Auditing and Ethics) (PDF) The consultation period closes at 5pm on Friday 27 September 2019.   Stephen Haddrill, the FRC's Chief Executive, said: "Recent corporate failures and the FRC's own enforcement work has shown that Standards need to be strengthened. Our audit inspections and enforcement activity continue to identify a lack of professional scepticism and independence as being key points of failure when things go wrong. The UK will only continue to attract high-quality global investment if investors have confidence in the independence of auditors and the means to have a better understanding of the critical judgements those auditors make. Our changes will strengthen and clarify ethical requirements in the public interest." Published: 15 July 2019.   Source: The Financial Reporting Council.

Jul 19, 2019
Ethics

Ireland’s largest accountancy body, Chartered Accountants Ireland has welcomed the launch of a new, profession-wide ethics research report examining ethical awareness, challenges and concerns of professional accountants in Ireland and Northern Ireland. The report can be downloaded here: Ethics Research Report 2019 The recently completed research was sponsored by the Chartered Accountants Ireland Education Trust and carried out by independent researchers Dr Eleanor O’Higgins and Mr Matt Kavanagh.   The report shows that there is strong recognition of the need for ethical conduct in the profession and in business, and indicates a growing awareness of ethical issues in the accounting profession.  In terms of ethical decision making, respondents stressed that there should be an awareness of the accountant’s obligation to society. There was general agreement that ethics should be an intrinsic part of organisational culture in both business and practice. The Institute’s Head of Ethics and Governance, Níall Fitzgerald, drew attention to the value of the research insights. “This is not a tick the box exercise; this is about developing real and practical supports on ethics for professional accountants and by extension for the wider business community and society. The new, open access ‘Ethics Resource Centre’ on Chartered Accountants Ireland’s website is a central hub for current and future supports on ethics for our members.” Minister for Business, Enterprise and Innovation Heather Humphreys thanked the researchers for their work on this important project. “The findings of this important piece of research give an honest appraisal of ethics in the accountancy profession. We are all too familiar with the impact of decisions where short-term considerations overcame due care and integrity and we are still dealing with the consequences. Society looks to professionals like accountants to adhere to the highest standards without fear or favour, and we trust the professional bodies concerned will implement all the recommendations.” Chartered Accountants Ireland President, Feargal McCormack described the findings as “a candid discussion on the ethical landscape in our profession.” He commented: “Ethics is part of the accountant’s DNA, they are dealing with ethical judgements on a daily basis, so we’re happy that this research places a spotlight on this important issue, for the good of our profession and in the wider public interest. “We welcome this report and the recommendations, which will assist us in better understanding, supporting and facilitating our members in meeting expected professional standards and responding appropriately to ethical dilemmas they may encounter throughout their careers.  We take the findings seriously and we look forward to engaging with the recommendations and reporting back to members on progress.” Ends Reference: Brendan O’Hora, Director of Communications, Chartered Accountants Ireland M: 086 2432428, brendan.ohora@charteredaccountants.ie Note to editors: Today’s research surveyed over 2,100 professional accountants in Ireland, and was conducted by independent researchers Dr Eleanor O’Higgins and Mr Matt Kavanagh.  The aim of the research was to gain insight into ethical awareness, challenges and concerns facing professional accountants in Ireland, the types of ethical dilemmas they observe and how they interact with their professional body’s codes of ethics. About Chartered Accountants Ireland Chartered Accountants Ireland is Ireland’s largest and longest established professional body of accountants founded in 1888. The Institute, which is an all-island body, currently represents over 27,000 members around the world, including 5,000 in Northern Ireland.  The Chartered Accountants Ireland Brexit Action Group coordinates extensive lobbying and public information activities to help its members North and South of the border prepare for the departure of the UK from the EU.

Jan 31, 2019
Ethics

Feargal McCormack, President of Chartered Accountants Ireland. From 12 to the 18 November 2018, Chartered Accountants Ireland marks Trustees' Week to acknowledge the work of charity trustees. Chartered Accountants Ireland is pleased to add our voice to others involved and supporting the charity and not-for-profit sector, including The Charities Regulator and The Charities Commission for Northern Ireland. It also gives our profession the chance to recognise and express our gratitude to all those who volunteer their time as trustees across the island of Ireland. The week ahead will see some fantastic initiatives from a number of organisations that will showcase the work of charity trustees. Foremost amongst these will be the Good Governance Awards in Dublin on 15 November, and the 2018 Leadership & Good Governance Awards takes place on 22 November in Stormont. Also, this week the Institute notes and welcomes the launch of the Charities Governance Code by the Charities Regulator in the Republic of Ireland. The Code, available here, aims to be proportionate (therefore relevant for every charity operating in Ireland) and to facilitate the better administration, management and governance of charitable organisations. It is important to recognise good governance and more importantly to recognise the people that are responsible for putting it into practice. Chartered Accountants Ireland led with our own Good Governance Conference 'Charities and not-for-profit boards – Inspiring ethics and governance' in Dublin and Belfast in September this year, when we had the opportunity to meet over 200 professionals working in, for, or as a trustee in this important sector. Importance of Good Governance In 2018, Chartered Accountants Ireland produced its own publication, 'Concise Guide of Ethics and Governance for the charity and not-for-profit sector', which is available to download from our Ethics Resource Centre here. One of the core messages of our guide is that a good governance framework in a charity or not-for-profit organisation promotes the organisations purpose while emphasising transparency and accountability. While laws, regulations and standards command basic governance requirements, it is in the organisation’s interests to ensure that their governance framework is effective and fit for purpose. When reflecting on the governance framework of your organisation, the guide advises that trustees and others have regard to the following: To ensure sufficient independent oversight, is there a clear delineation between the governance of the organisation, i.e. the trustees, and management of the organisation? Is there a clear and transparent organisational structure that is publically available, including short bio and background on trustees and senior management? Regardless of level of simplicity or complexity, are there transparent procedures in relation to selection and appointment of trustees? Is there some form of evaluation of trustees and senior management in the organisation in addition to evaluation of the overall board? Is there a mechanism for identifying, responding to and recording risks affecting the organisation? Are there mechanisms to ensure the flow of information to and from the board and adequate controls to ensure the integrity of this information? What are the internal and external financial reporting milestones and are there any independent audit or other assurance requirements? Role of Chartered Accountants Ireland in the charity and not-for-profit sector Members of our profession are held in high regard by charity and not-for-profit boards and evidence suggests that there is a demand for those with accounting and governance expertise.  Therefore, with Trustees' Week in mind, we encourage members with this expertise and an interest in the sector, to get involved and make a difference. Members of our profession have always been accountable and are held to a high standard in application of their professional knowledge. On that basis we are proud of our members who commit their time to promote good ethics and governance as trustee of a charity and not-for-profit organisation. We would like to remind members that Chartered Accountants Ireland is here to support you in your role with various expert publications including books, guides, as well as toolkits used by accounting practices and advisors to the sector, in addition to courses and member support services such as enquiry helplines etc. Finally, on behalf of Council, Chief Executive and staff, we congratulate all involved in Trustees' week and for the great work that takes place in this sector all year round. 

Nov 08, 2018