The International Federation of Accountants and the International Ethics Standards Board for Accountants have issued a revised Code of Ethics for Professional Accountants that strengthens the independence requirements of auditors.

Richard George

The revised code, which takes effect on Jan. 1, 2011, extends the independence requirements for audits of listed entities to all "public-interest entities," which are companies that are considered to be of significant public relevance. The new code also requires a cooling-off period before certain members of a firm can join public-interest audit clients in certain specified positions.

In addition, the revised code extends partner rotation requirements to all key audit partners. It strengthens some of the provisions related to the provision of non-assurance services to audit clients, and requires a pre- or post-issuance review if total fees from a public-interest audit client exceed 15 percent of the total fees of the firm for two consecutive years.

The code also now prohibits key audit partners from being evaluated on or compensated for selling non-assurance services to their audit clients.

“Strong and clear independence standards are vital to investor trust in financial reporting,” said IESBA chair Richard George in a statement. “The increase in trust and certainty that flow from familiarity with standards, including a common understanding of what it means to be independent when providing assurance services, will contribute immeasurably to a reduction in barriers to international capital flows.”

The International Federation of Accountants plans to work with member organizations in individual countries on aligning their national code of ethics with the newly revised international code. George emphasized that member organizations should focus on implementing the revised code of ethics as soon as possible. The IESBA plans to provide additional guidance and support in the months ahead.

For more information, visit www.ifac.org.