IESBA plans standards for firm culture, governance

The International Ethics Standards Board for Accountants plans to tackle a standard-setting project on accounting firm culture and governance in response to the findings in a new report.

The goal is to develop a culture and governance framework that promotes, supports and reinforces a high standard of ethical behavior by a firm’s leadership, other partners, and staff across all of the firm’s services. That way it will develop a reputation as a highly ethical firm, avoiding the risks of unethical behavior and strengthening public trust and confidence in all its services.

The report highlights the critical role of ethical culture and governance in addressing issues of unethical behavior within accounting firms. An IESBA working group on firm culture and governance did outreach and research last year and found some of the main drivers of an ethical firm culture include ethical leadership, transparent accountability mechanisms and governance frameworks that embed ethical values across all service lines. The report stresses the importance of transparent and ethical leadership, firm-wide accountability mechanisms and independent input. Performance incentives should align with ethical behavior, continuous ethics education, and a culture of open discussion and challenge.  

Based on the working group’s conclusions and recommendations, the standard-setting project plans to develop a principles-based culture and governance framework for accounting firms that promotes, supports and reinforces a high standard of ethical behavior across all their professional services.

As part of this initiative, the IESBA intends to develop non-authoritative materials to raise awareness about the importance of ethical behavior in accounting firms and support firms with guidance on embedding ethics into their strategies and operations. These will also help involve other stakeholders who might contribute to developing an ecosystem for highly ethical accounting firms.

The IESBA plans to host a series of in-person and virtual global roundtables in March and April to gather input from a wide array of stakeholders. The in-person roundtables will be held in New York City; Melbourne, Australia; Brussels, Belgium; and Kuala Lumpur, Malaysia. Further details will be announced in the future.

“Ethics is foundational to the work of all accounting firms and all the professionals therein,” said IESBA chair Gabriela Figueiredo Dias in a statement Tuesday. “It is their gateway to public trust in their professional services. I commend the working group on tabling a comprehensive report, identifying the key areas of focus we will be probing carefully and systematically, in collaboration with stakeholders, as we seek to develop a global framework for culture and governance for firms. It is our strong conviction that this framework will enable firms to be highly ethical firms consistently, strengthening their resilience against risks of unethical behavior, maintaining a good reputation, and ensuring their long-term sustainability to serve clients, investors, other stakeholders and the public interest.”

The issue of accounting firm culture and governance is a strategic priority for the IESBA after a series of high-profile cases of unethical behavior in accounting firms in several parts of the world in recent years. The cases have led to negative consequences for individual accountants and their firms in multiple jurisdictions.