On the recommendation of the Auditing Standards and Ethics Committee (the Committee), the Council of the Institute in its 387th meeting held on July 19-20, 2024 has adopted the Code of Ethics for Chartered Accountants (Revised 2024), effective from January 01, 2026.
Background
The Institute is a member of International Federation of Accountants (IFAC) and has been adopting the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants (IESBA) of IFAC since 2000. IESBA is an independent standard-setting board, responsible for developing an internationally appropriate and recognized code of ethics for professional accountants.
The Institute’s existing ‘Code of Ethics for Chartered Accountants (Revised 2019) (ICAP Code of Ethics 2019)’ is based on IESBA’s 2018 Edition of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the IESBA Code of Ethics).
In September 2023, the IESBA issued the 2023 Edition of the IESBA Code of Ethics. The revised IESBA Code of Ethics has replaced the earlier version of the IESBA issued Code of Ethics for Professional Accountants.
The Institute’s Code of Ethics for Chartered Accountants (Revised 2019)
Adoption due process
The Committee undertook a complete review of the 2023 IESBA Code of Ethics for updating and revising the extant ICAP Code of Ethics 2019. The Committee made few necessary changes in the 2023 IESBA Code of Ethics to develop the Code of Ethics for Chartered Accountants (Revised 2024) (revised ICAP Code of Ethics 2024). These changes were necessary to align the ethical requirements with the provisions of the Chartered Accountants Ordinance, 1961 and relevant local laws.
The draft of the revised ICAP Code of Ethics 2024 was exposed to the members for their comments through Circular No. 12/2023 (dated December 29, 2023). Moreover, as part of due process, the Institute also organized seminars on the draft ICAP Code of Ethics 2024, in Karachi, Lahore and Islamabad. Members from Karachi, Lahore, Islamabad and other cities participated in these seminars.
Significant changes of the revised ICAP Code of Ethics 2024
Summary of key changes includes the following:
- The revisions to Parts 1 and 2 of the Code (Section 100, 110, 120, 220 and glossary) which promote the role and mindset expected of chartered accountants.
- New Section 325 ‘Objectivity of an Engagement Quality Control Reviewer and Other Appropriate Reviewers’ and Section 405 on ‘Group Audits’ have been added.
- The revisions relating to the definitions of ‘Engagement Team’, ‘audit client’ and ‘group audit client’.
- Revised definition of a public interest entity (PIE) which, among other matters, specifies a broader list of PIE categories, including a new category “publicly traded entity” to replace the category of “listed entity.”
- The revisions to Fee-Related Provisions (Section 400) and Non-Assurance Services (NAS) (Section 600) to strengthening requirements including:
- New prohibitions on firms for providing a NAS to PIE audit client and specify the circumstances in which firms and network firms may or may not provide a NAS to an audit client.
- Strengthened provisions to address fee dependency at the firm level.
- New provisions to stimulate greater public transparency about fees paid by PIE audit clients.
- New provisions to promote robust engagement between auditors and those charged with governance of PIEs about independence matters relating to NAS and fees.
- Technology-related revisions in all four parts of the revised ICAP Code.
- In paragraph 604.27A2 of the revised Code the word “public” has been deleted from the term “Tribunal or Court”. This revision was a result of the IESBA’s Non-Assurance Services (NAS) project to mitigate advocacy threat and also with the aim to broaden the scope and applicability of the guidance to encompass all types of tribunals and courts rather than limiting it to public ones only.
- The ISQM standards related conforming amendments to the overall Code of Ethics.
- The revisions to Part 4B of the Code to reflect the terms and concepts used in the ISAE 3000 (Revised).
The full text of the ‘ICAP Code of Ethics for Chartered Accountants (Revised 2024)’ can be accessed at: https://www.icap.net.pk/icap-code-of-ethics-2024
Effective Date
The revised ICAP Code of Ethics 2024 is effective from January 01, 2026. This Code replaces the extant ICAP Code of Ethics 2019.
Transitional provision relating to audit firm acting as an advocate for the audit client before a Tribunal
Paragraphs R604.25 to 604.27 on ‘Resolution of Tax Matters Including Acting as an Advocate Before a Tribunal or Court’ of the revised Code requires that a firm or a network firm is not allowed to provide tax services to an audit client (both PIE and other than PIE) that involve assisting in the resolution of tax disputes if the services involve acting as an advocate for the audit client before a Tribunal or Court. However, firms can continue providing advisory role to audit clients for the matters that are being heard before a Tribunal or Court (paragraph 604.27A1).
In order to facilitate the implementation of this change and to provide smooth transition to this requirement, the Council has decided to allow firms to continue to provide tax services to audit clients for the existing matters that are being heard before a Tribunal till the conclusion of such matters.
Members are advised to take the note of above.