The International Ethics Standards Board for Accountants has proposed tougher rules to discourage accountants from providing misleading financial information about businesses.
IESBA, which operates under the auspices of the International Federation of Accountants, released for public comment on Tuesday an exposure draft of the new rules,
The proposals respond to the need for more robust and practical guidance to help professional accountants in business deal with two matters on which they most often seek assistance in practice: their responsibility to produce financial reports that are faithful representations of the economics of transactions, and the pressure to breach fundamental ethical principles.
“PAIBs [professional accountants in business] play an important role in the financial reporting supply chain, and they may encounter pressure to act unethically,” said interim IESBA chair Wui San Kwok in a statement. “The proposed guidance will help them understand what their options are and therefore better support them in fulfilling their responsibility to act in the public interest. The proposal also clarifies that when preparing financial information, exercising discretion—for example, when selecting an accounting method—in a manner that is intended to mislead is not acceptable.”
Among the proposed changes are more complete and explicit guidance regarding accountants’ responsibilities when presenting information; strengthened guidance on how an accountant can disassociate from misleading information; an expanded description of pressure that may lead to a breach of the principles in the Code of Ethics for Professional Accountants along with practical examples to illustrate different kinds of situations in which such pressure might arise; and new guidance to help business accountants identify and respond to pressure that could result in a breach of fundamental principles.
The Ethics Board is also proposing several related changes to other areas within Part C of the Code of Ethics.
“The development of this enhanced guidance reflects a rebalancing of the board’s focus to be more inclusive of PAIBs, a very large and important part of the accountancy profession,” said IESBA technical director Ken Siong. “It will serve to remind PAIBs of some of the fundamental ethical principles by which they should be guided in their different roles within their organizations, and with which they must comply.”
IESBA is asking all those with an interest in international ethics standards for the accountancy profession to respond to the exposure draft. The board is also encouraging national and regional professional accountancy organizations to share the exposure draft and ask their members and employees to participate.
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