ICAS response to IESBA’s strategy consultation
Ann Buttery, Head of Ethics, ICAS Policy Leadership, provides a summary of our response to the International Ethics Standards Board for Accountants (IESBA’s) consultation paper on its proposed strategy and work plan (SWP), 2024–27.
The IESBA sought views on its four proposed strategic themes and related actions:
- Enhancing trust in sustainability reporting and assurance.
- Strengthening the code or responding in other ways in areas beyond sustainability reporting and assurance.
- Further enhancing the diversity of stakeholder perspectives and the global operability and acceptance of the IESBA’s standards.
- Widening the influence of the IESBA’s standards through a continued focus on adoption and implementation.
The IESBA also sought opinions on potential new workstreams to be considered for the strategy period.
In summary, we agree with the IESBA that it should primarily be focusing on progressing and completing ongoing projects in a timely manner, particularly its sustainability workstreams. Additionally seeking to enhance the level of input from the wider stakeholder community; promoting further adoption of the code; and undertaking post-implementation reviews. However, we believe that, with the exception of sustainability matters and completion of other existing projects, IESBA should have a ‘slow down’ period for now in terms of creating new provisions to the code.
Our main comments within our response on each of the above themes are;
Enhancing trust in sustainability reporting and assurance
(i) Role of the accountancy profession
Given the growth in the disclosure of sustainability information and increasing calls for assurance to be provided on such information, we believe that it is of high importance that the IESBA should focus on standard-setting in relation to sustainability reporting and assurance in the next strategy period. This should also be supported by non-authoritative material as appropriate.
Although we note the IESBA’s intention that its sustainability workstreams will cover the whole spectrum of sustainability matters, in order to be clear to users that this is the case, we suggest that the new provisions within the code would benefit from examples covering a range of sustainability-related matters i.e. across the full environmental, social and governance (ESG) spectrum. This would mean capturing not just climate-related matters within the “E”, but other environmental matters such as nature and biodiversity, as well as social and governance elements of the “S” and the “G”.
(ii) Involvement of other assurance service providers
There is a wide range of professional firms outside the accountancy profession that are providing assurance services with respect to sustainability information. And although the code governs professional accountants in public practice’s (PAPPs) ethical conduct and independence on assurance engagements, IESBA recognised that it appears that there are currently no comprehensive or globally accepted standards which govern the ethical conduct and independence of these other assurance service providers, or standards as comprehensive as those in the IESBA code. As such, the IESBA approved a new sustainability project in December 2022 to develop profession-agnostic ethics and independence standards for sustainability assurance, as well as ethics standards for sustainability reporting.
We believe that the public interest would be best served by having the same or equivalent ethics and independence standards applied to all parties providing assurance on sustainability-related information. However, we have concerns about how, in practice, the IESBA will be able to expand the scope of the code to cover assurance providers other than PAPPs. We believe this can only be achieved if assurance providers other than PAPPs are required by respective jurisdictional regulators to adhere to the IESBA code of ethics or equivalent standards.
Therefore, we agree with the IESBA that obtaining the support or endorsement of its new standards addressing sustainability reporting and assurance, as well as the related but a broader standard addressing the use of experts, from global regulators and oversight bodies and other key jurisdictional bodies is key to IESBA being able to expand the scope of the code to cover assurance providers other than PAPPs in practice. All the accountancy profession itself can do is highlight its professional standards to the regulatory and investment communities. It would then be for local regulators to determine whether they need to put in place requirements to cover others external to the accountancy profession.
(iii) Extending the code to others
If the IESBA is successful in extending the code to others providing assurance services on sustainability, then perhaps this could also be considered to ensure a level playing field for other areas. For example, the requirements of the code might also be extended to others providing tax planning services for example, lawyers etc. We do however appreciate that there would be a need to involve other bodies to achieve this particular goal – the IESBA would need to develop a strategy for regulatory support around the globe.
Strengthening the code or responding in other ways in areas beyond sustainability reporting and assurance
We believe that other than in relation to sustainability matters, and completion of other existing projects, the IESBA should have a ‘slow down’ period for now in terms of creating new provisions to the code. We agree with the IESBA that there is a need to instead primarily focus on progressing and completing ongoing projects in a timely manner, particularly the sustainability workstreams.
We’re in agreement with the IESBA that they should continue their ongoing monitoring function on technology developments (particularly given the speed of change in this area, and for example, the concerns around privacy and the use of data by AI), but also other emerging issues or developments other than those related to sustainability and technology.
We note that there currently appears to be no plans to carry out a post-implementation review of the technology-related revisions to the code (which become effective in December 2024) in the period 2024-27 and suggest that, given the speedy developments in AI, it might be better to schedule this earlier.
A potential activity for the IESBA outside of standard setting would be to highlight to key stakeholders, for example, members of the monitoring group, that the non-compliance with laws and regulations (NOCLAR) provisions in isolation are not sufficient but rather supporting measures need to be put in place by other bodies to complement these provisions. Jurisdictions need to ensure that they have in place, or put in place, appropriate mechanisms to provide adequate protection to individuals (including professional accountants) who are placed in a situation where they are considering reporting a matter of non-compliance in the public interest.
Further enhancing the diversity of stakeholder perspectives and the global operability and acceptance of the IESBA’s standards
We agree that the IESBA should seek to enhance the level of input from parts of its stakeholder community it has not historically heard from to any significant extent, particularly investors and those charged with governance (TCWG). Particularly in the context of sustainability assurance, it will be important for the IESBA to engage with assurance service providers that are outside the accountancy profession if it is to achieve the goal of developing profession-agnostic ethics, including independence, standards that are widely accepted.
We also agree that coordination with the International Auditing and Assurance Standards Board (IAASB) and International Sustainability Standards Board (ISSB), and Global Sustainability Standards Board (GSSB) and having proactive engagement with the global regulatory and oversight community, is important.
Widening the influence of the IESBA’s standards through a continued focus on adoption and implementation
We note that as per the IESBA’s ‘Report of IESBA accomplishments – 2020-21’: “As of December 2021, the 2018 edition of the code is being used in almost 90 of the 136 IFAC member jurisdictions… In addition, several other jurisdictions have stated plans to consider adoption”. Our stance is that the IESBA should be promoting further adoption of the code, devoting attention to those countries that have not yet implemented the restructured code. This could take place during outreach discussions, and be coordinated with IFAC, and it may be necessary to specifically target certain jurisdictions. The support of the monitoring group in promoting the need for jurisdictions to adopt the IESBA code would be beneficial in this regard.
We also agree with the IESBA regarding conducting post-implementation reviews to assess how effectively the implementation of the IESBA’s recently issued standards meets the original objectives for developing them, and to identify any need for further enhancements. In particular, it would appear that a significant number of IFAC member jurisdictions have not yet adopted the restructured code. In light of this, we suggest that the post-implementation review of the restructured code should be a priority.
Potential work streams under consideration
The IESBA provided a list of topics that it may consider as potential future workstreams in the 2024-27 strategy period.
As noted earlier, we believe that other than in relation to sustainability matters, the IESBA should have a ‘slow down’ period for now in terms of creating new provisions to the code. However, of the topics noted by the IESBA, ‘custody of data’ might be the primary one to warrant further consideration as there may be significant consequences, including reputational damage, to an employing organisation or client if data is lost, misappropriated, misused, improperly manipulated or subject to unauthorised access.
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