There is not necessarily a ‘best’ time for change – but the best way to advance forward is together. The recent and notable actions of the three PAOs in Indonesia — the Institute of Indonesia Chartered Accountants (IAI), the Indonesian Institute of Certified Public Accountants (IAPI) and the Indonesian Institute of Management Accountants (IAMI) —to adopt and implement the International Ethics Standards Board for Accountants (IESBA) International Code of Ethics for Professional Accountants exemplifies this sentiment.

As IFAC and the ASEAN Federation of Accountants (AFA) members, both IAI and IAPI understand the importance of implementing international standards and best practices to enhance the competence and capacity of accountants, and the quality of financial information, at the national level. IAMI shares the same convictions. Together with the Ministry of Finance’s Finance Profession Supervisory Center (Pusat Pembinaan Profesi Keuangan or PPPK), the three PAOs have an obligation to regulate and maintain the quality of qualified accountants according to regional standards, as defined under the ASEAN Mutual Recognition Agreement on Accountancy Services; monitor and discuss international developments that impact the profession; and ensure the Indonesian profession remains globally relevant and competitive in today’s vastly evolving environment.

Previously, each of our PAOs had an established Code of Ethics that was directly relevant and applicable to its particular membership composition, serving to guide professional, public, and practicing accountants as they provide their professional services.  During a review of the existing system, we noted fundamental challenges with applying multiple, tailored Codes. The journey to a unified Code of Ethics between our three organizations is one underpinned by communication and collaboration. While our organizations are clearly distinct and independent, a key to our success is our strong cultural connections and working relationships, including cooperation between councils, staff, and members as well as the PPPK.

The Challenge

Overall, there is a shared understanding among stakeholders and the public that any ethical violation by an accountant is a breach of the Code(s). But with separate Codes, an accountant may be deemed guilty of ethical violation under one of the Codes, but not under the other(s). If there is no form of national-level recourse and consistency to prevent the individual from providing all services, public trust in the credibility and integrity of the profession could be significantly undermined, and the PAOs’ public interest remit questioned. The same risk exists (and can be exacerbated) when the national PAOs have different approaches to investigation and discipline.

Journey to a Unified Code

As a member of the G20, Indonesia is committed to monitoring and addressing high-quality international standards relevant to the profession. The decision to adopt and implement a unified Code signals all three PAOs’ commitment to address localized challenges and create a strong, cohesive, and credible accountancy profession that serves business, government, and the public.

In its 2019 International Standards: Global Status Report, IFAC noted that globally the national standard-setting process can be a resource intensive endeavor. This was true for our context as well – there was a need to enhance the efficiency of our standard-setting process. Through enhanced collaboration, our PAOs are able to draw upon collective resources to achieve a common objective that would best serve the public interest – a unified Code of Ethics.

Toward the end of 2018, the three PAOs initiated discussions and, with full support from PPPK, agreed to adopt the 2018 IESBA Code via the Memorandum of Understanding on Cooperation for the Development of the Accountancy Profession in Indonesia.

A working group comprising experts from the three PAOs was established to take forward the planning and development of the unified Code. Over nine months, the group followed an established due process, including translation of the Code into Bahasa Indonesia; held education and training for members and stakeholders; and facilitated enhanced coordination among PAOs, especially around quality assurance reviews and investigation and discipline processes which are priorities in the next phases of implementation.

The unified Code was issued in 2019 under two different names: Kode Etik Akuntan Indonesia, and Kode Etik Profesi Akuntan Publik.

Focusing on Implementation

We knew there were potential challenges in rolling out our unified Code. Communication and education are key in providing accountants—many of whom are members of more than one PAO—a clear and consistent message about the Code and its application at the national level. Therefore, we held a range of informative sessions with members and key stakeholders.

A significant amount of work is being done to familiarize regulators with the Code’s requirements, since there remains a lack of consistency with some national regulations, for example, on audit partner rotation. Where relevant, PAOs publish supporting documents and/or guidance, such as Q&As. IAPI published a document to bridge the gap between the Code and a particular provision in existing regulations.

Our unified Code is also now embedded into syllabuses for national professional qualifications and in our continuing professional development offerings.

Key Takeaways

What have we learned from this experience that might help other PAOs worldwide?

1) Communication is key. It is the foundation of a sustainable, coordinated, and unified approach. It serves to bring stakeholders along on the journey and secure their buy-in.

2) Put the collective interest first. PAOs can be at varying stages of development and the approaches considered and taken must be according to PAO capacity. PAOs can support each other in achieving the greater objective.

3) Sharing is caring. The journey is a continuous learning experience between our PAOs, members, stakeholders, and the public. Getting and keeping everyone on board early will help significantly during implementation.

4) Establish internal mechanisms. It is important to institutionalize the adoption and implementation process within a PAO’s governance arrangements by involving the relevant committees. Establishing a working group was helpful to drive the process internally.

5) Each jurisdiction is unique. A balance must be struck between adopting the Code as a universal standard and introducing a highly tailored version thereof. Targeted stakeholder engagement and advocacy is required to minimize the extent to which the final Code departs from the international standard and secure compliance with key national regulations. 

What’s Next? 

We continue to build member and stakeholder awareness of the Code and its impact on individual accountants and the national profession via publications, education, and development activities. Public participation is emphasized as this is a valuable source of input to our PAOs’ efforts in monitoring member conformance with the Code. 

Importantly, the three PAOs, supported by PPPK, are committed to periodically updating the Code. This year we began a process to update the Code to align with the IESBA’s revisions around the role and mindset expected of professional accountants, issued in October 2020 and effective December 2021, which we know is especially important in these times of rapid economic, societal, and technological changes.

This article was authored jointly by the three Professional Accountancy Organizations (PAOs) in Indonesia (IAI, IAPI, and IAMI).