IFAC SMP Committee Response to IESBA Exposure Draft

The IFAC Small and Medium Practices (SMP) Committee submitted this comment letter to the International Ethics Standards Board for Accountants in response to its Exposure Draft, Proposed Revisions to the Code Pertaining to the Offering and Acceptance of Inducements. The Committee believes that the initial objective of the ED in strengthening the provisions in extant Part C to assist professional accountants in better dealing with the offering and accepting of inducements while complying with the fundamental principles, in particular the principles of integrity, objectivity and professional behavior should be commended.

However, in its final iteration, it appears that the proposals are far more rules-based than the current threats and safeguards (principles-based) approach in other parts of the Code of Ethics for Professional Accountants. The Committee believes that while the concept of “improper intent” is generally well understood on an intuitive level, it is less suitable to make such a distinction in a global Code. Cultural differences do have a role and intentions by their nature can never be fully known to anyone other than the intender (unless they have been openly expressed). The Committee remains concerned about the level of detail in the revised inducement provisions, which in combination with possible expectations on the part of regulators, could lead to overly onerous documentation—in particular for those working in small- and medium-sized practices.