23 November 2011

IESBA issues Proposed Changes to the Code of Ethics for Professional Accountants Related to Provisions Addressing a Breach of a Requirement of the Code

Johannesburg / 23 November 2011

The International Ethics Standard Board for Accountants (IESBA) released the Proposed Changes to the IFAC Code of Ethics for Professional Accountants Related to Provisions Addressing a Breach of a Requirement of the Code on 24 October 2011 for public comment.

The proposed changes to the IESBA Code include a requirement that a professional accountant take whatever actions that might be available as soon as possible to satisfactorily address the consequences of a breach of a provision of the Code. For a breach of an independence requirement in the IESBA Code, a detailed framework is provided setting out the action to be taken. Specifically, the proposed changes would require a firm to:

terminate, suspend, or eliminate the interest or relationship that caused the breach;
evaluate the significance of the breach and determine whether action can be taken to satisfactorily address the consequences of the breach;
communicate all breaches with those charged with governance and obtain their agreement with the proposed course of action; and
document the actions taken and all the matters discussed with those charged with governance and, if applicable, any relevant regulators.

Ken Dakdduk, IESBA Chairman, indicated in his communication that "The proposed changes to the IESBA Code should help to ensure that the significance of any breach of an independence requirement is discussed with those charged with governance, and that professional judgment is taken into account when taking action". The IESBA also recognises that "An auditor resignation due to an independence violation—regardless of the magnitude of the violation—has potential consequences to the company, its investors, and the capital markets. The proposed framework will guide accountants, auditors and those charged with governance, in determining whether resignation is an appropriate outcome or whether a different outcome can be supported. In addition, disclosure will enhance transparency, and the proposed documentation requirement adds a degree of rigor to the process that will be very useful."

How to Comment

As the IRBA Code of Professional Conduct for Registered Auditors adopted Parts A and B of the IFAC Code, this proposed change to the IFAC Code may affect amendments the CFAE may propose be made to the IRBA Code. Accordingly, we request any comments be submitted to the IRBA for consideration for our response to the IESBA by 16 January 2012 -1 week before the IESBA comment date deadline of 23 January 2012. Comments should be submitted by email to This e-mail address is being protected from spambots. You need JavaScript enabled to view it , in word format.

The proposed changes to the Code of Ethics are available in PDF and may be downloaded from the : IRBA website . Should you have any queries or experience any technical difficulties in downloading the documents please do not hesitate to contact the Standards Department at +27(0)87 940 8800 or send an email to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Alternatively, comments may be submitted directly to the IESBA through the IFAC website (www.ifac.org) using the "Submit a Comment" link on the Exposure Drafts and Consultation Papers at: www.ifac.org. Comments on the exposure draft are requested by 23 January 2012.

If you have any further questions please contact the Director: Standards at 087 940 8871. Should you have any further queries or experience any technical difficulties in downloading the documents please do not hesitate to contact the Standards Department at +27 (0)87 940 8800 or send an email to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Sandy van Esch
Director: Standards

Download the document in (Doc | PDF) format.

About the IRBA
The objective of the IRBA is to endeavour to protect the financial interests of the South African public and international investors in South Africa through the effective and appropriate regulation of audits conducted by registered auditors, in accordance with internationally recognised standards and processes.