IESBA: Revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards)

May 31, 2023

The International Ethics Standards Board for Accountants (IESBA) made final revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) which comprehensively address various independence considerations in an audit of the group financial statements. The revisions also refer to the independence and other consequences of changes made to the definition of the engagement team in the Code to align with changes to the definition of the same term in the International Auditing and Assurance Standards Board’s (IAASB) International Standards on Auditing (ISAs) and International Standards on Quality Management (ISQMs).

“Group audits play a fundamental role in safeguarding the integrity of, and public trust in, the financial markets,” said Ms. Gabriela Figueiredo Dias, IESBA Chair. “For a long time, there was a vacuum in international standards addressing the independence of audit firms and individuals involved in group audits, leading to uncertainty and inconsistent practice around the world. This standard effectively closes that gap and responds in a timely manner to a public interest need for robust and clear requirements for independence in this important area.”

In addition, the revisions:

  • Strengthen and clarify the independence principles that apply to:
    • Individuals involved in a group audit, including those within, or engaged by, firms that audit components within a group;
    • Firms engaged in the group audit, including firms within and outside the group auditor firm’s network;
  • Specify the need for, and content of, appropriate communication on independence matters between the group auditor firm and component auditor firms participating in the group audit;
  • More explicitly set out the process to address a breach of an independence provision at a component auditor firm, reinforcing the importance of transparency and appropriate communication with those charged with governance of the group;
  • Amend the definitions of the terms “engagement team” and “audit team” in the Code to recognize the different and evolving engagement team structures and address the implications of those definitional changes;
  • Provide guidance to facilitate the determination of who is included in an engagement team or an audit team;
  • Revise the definitions of a number of existing terms and establish new defined terms with respect to independence in a group audit context.

Сlose coordination with IAASB group audits and quality management projects contributed to the development of proposals.

The revisions will be effective for audits of financial statements and group financial statements for periods beginning on or after December 15, 2023, with early adoption permitted.

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