APESB releases new Code of Ethics
- The revised standard governing the ethical behaviour of all Chartered Accountants – APES 110 Code of Ethics for Professional Accountants - has been issued by the Accounting Professional & Ethical Standards Board
- The revised standard incorporates the corresponding international standard which was revised in July 2009.
The Accounting Professional & Ethical Standards Board (APESB) has issued a revised APES 110 Code of Ethics for Professional Accountants. The changes are a consequence of the revision in July 2009 of the equivalent code from the International Ethics Standards Board for Accountants on which APES 110 is based. The Insitute now offers APES 110 training.
The new version of APES 110 can be downloaded from the APESB website (PDF). Members are encouraged to contact the Institute's Professional Standards Team on (02) 9290 5627 or firstname.lastname@example.org for assistance with any aspect of the new Code.
In summary the key changes between the revised version and the current version of APES 110 are:
Removal of alignment with Australian specific legislative requirements
In 2006 when the APESB initially implemented the IESBA Code in Australia, certain provisions were amended to align with Australian legislative requirements. For example, the time period after which auditor rotation is required in relation to the audit of listed entities was stated to be 7 years in the IESBA Code, but was amended in APES 110 to align with the 5 years specified in the Corporations Act.
In contrast to that approach, the APESB has not sought to align this revised Code with Australian legislative requirements, and has therefore removed references and paragraphs from the existing Code that incorporate Australian specific legislative requirements such as to the Corporations Act 2001 (particularly in relation to section 290 dealing with auditor independence) and privacy legislation (particularly in relation to section 140 dealing with confidentiality). The APESB has indicated that this was done “in order to achieve closer alignment with the IESBA Code”.
Following concerns raised in submissions on the Exposure Draft of the new Code, the APESB has now inserted footnotes into the Code to warn readers of the Code where a more stringent independence requirement is imposed by the Corporations Act 2001. This mechanism is intended to put readers on notice to refer to the Act, to assist in reducing potential contraventions of the independence requirements of the Act.
Structure of Independence requirements
Following the approach adopted in the IESBA Code, the provisions which deal with independence (which had been contained in a single Section 290 of APES 110) have been split into two sections:
- Section 290, dealing with Audit and Review Engagements; and
- Section 291, dealing with other Assurance Engagements.
A consequence of this approach is that, where a requirement applies to all forms of assurance engagements, it is stated in both Section 290 and 291, resulting in a certain amount of duplication between these two sections.
Greater consistency in drafting conventions has been adopted throughout the Code. In particular, the word “shall” has been adopted to indicate a mandatory requirement. The Code has also adopted consistent use of the terms, “consider”, “evaluate” and “determine”.
There are also changes to the wording used in the “conceptual framework approach” where safeguards must be applied, when necessary, to eliminate threats or reduce them to an “Acceptable Level”. Previously safeguards had to be considered if a threat was other than “clearly insignificant”. References to “clearly insignificant” have been removed and “Acceptable Level” has been defined.
Public Interest Entities (PIEs)
The Code introduces the IESBA’s concept of Public Interest Entities (PIEs) (which are defined to include listed entities). Particular auditor independence provisions apply in respect of PIEs. In conjunction with the issue of the new Code, the APESB has issued a Basis for Conclusions document, which sets out the APESB's consideration of what entities should fall within the definition of PIEs. APESB considered whether the definition of PIEs should be aligned with the AASB’s concept of Publicly Accountable Entity. They concluded that further work needs to be done to evaluate whether the AASB’s concept is suitable in the context of the Code, and will consider the definition of PIEs in the Australian context in 2011, prior to the provisions dealing with PIEs becoming effective from 1 January 2012.
Key Audit Partner
The Code contains the IESBA’s new defined term “Key Audit Partner” to whom, notably in the case of Public Interest Entities, the more restrictive independence requirements will apply. The APESB has indicated that “Firms will need to analyse which partners should be regarded as a Key Audit Partner with respect to each Audit Client”.
Inadvertent violations and multiple threats
Australian specific independence requirements in relation to inadvertent violations and multiple threats to independence have been included within sections 290 and 291.
The Code will become effective from 1 July 2011, although the provisions for PIEs and those newly within the definition of Key Audit Partners have a later effective date of 1 January 2012.
Article last updated 7 November 2013