Reflections of 2023 and challenges of 2024: The fundamental role of accounting ethics in creating (or destroying) trust and value of businesses

During 2023, multiple events in Australia have made it abundantly clear why ethics is the cornerstone of the accounting profession and that accountants must be constantly vigilant in upholding the fundamental principles of APES 110 (the Code), which are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

The reported ethical failings that have led to multiple government inquiries, especially those that occurred at firms and by accountants who are required to comply with APESB’s professional and ethical standards, were disappointing. The professional standards are clear on the fundamental ethical obligations of professional accountants, such as maintaining confidentiality and addressing conflicts of interest.

APESB made three submissions to Australian government inquiries into the accounting profession in 2023. Of relevance is APESB’s Submission to PJC Inquiry into Ethics and Accountability, which made several recommendations to enhance the existing regulatory framework for accountants and non-accountants working in accounting firms and to consider expanding the professional standards to address management consulting services.

APESB believes it is important to reflect on firm leadership and cultural issues that emerged from recent ethical failures in large firms in Australia and a few other G20 jurisdictions and consider the role and effectiveness of the Code on these matters. We are pleased that the IESBA agrees with this view and will include a project on firm culture and governance in their 2024-2027 Strategy and Work Plan . I am pleased to have been selected as the IESBA Board Member to Chair the IESBA working group on this topic.

During 2023, a key focus of the Board has been to promote the position that professionalism and ethical conduct are the foundation of the public’s trust in accountants. APESB has undertaken extensive stakeholder outreach, including presenting at national and international conferences, webinars, roundtables, meetings, and briefings .

In March 2023, APESB welcomed local and international stakeholders to Sydney, where we hosted a global IESBA roundtable on the development of IESBA’s new ethics and independence standards for sustainability reporting and assurance. We were pleased to assist Ms Gabriela Figueiredo Dias, the IESBA Chair and Mr Mark Babington, IESBA Board Member and Chair of the IESBA’s Sustainability Independence Workstream, in connecting with key stakeholders in Australia and New Zealand and providing feedback on the path forward for professional agnostic and framework neutral ethical and independence standards on sustainability.

Also, in March 2023, APESB co-hosted a panel discussion with CPA Australia on how global developments in ethics, independence and assurance standards will impact the rapidly evolving sustainability reporting landscape. Over 60 people attended in person to listen to the distinguished panel representing the international auditing, assurance and ethics standards setters, the Australian Securities Regulator and the New Zealand Auditing and Assurance Standards Board for providing their insights on developments at both the global and jurisdictional levels, the pace of change and key considerations for professionals engaged in the sustainability space.

During 2023, APESB brought together Australian stakeholders to discuss the future of ethical standards across topics covering tax planning services and the IESBA proposed Strategy and Work Plan for 2024-2027. The feedback from these roundtables and discussions was invaluable in informing APESB’s submissions to the IESBA on these proposals.

APESB’s work program in 2023 was extremely busy as we worked to strengthen the auditor independence standards in Australia and ensure that the APESB suite of pronouncements remains current with changes to firmwide quality management standards as well as significantly contributing to and influencing the global work program of the International Ethics Standards Board for Accountants (IESBA).

APESB completed work on two projects that enhance the independence standards in the Code. New amending standards on the definition of Engagement Team and Group Audit , as well as the definitions of Listed Entity and Public Interest Entity , were released. APESB has continued to lead the way globally on the definition of a Public Interest Entity by including additional requirements and application material to uphold high standards in Australia. We thank the professional accounting bodies, the regulators and other stakeholders who engaged with us on these topics. In order to support stakeholders to stay abreast of changes to the Code, APESB released two Compiled Codes in 2023.

The Board also released eight revised pronouncements , including Forensic Accounting Services, Valuation Services Compilation of Financial Information, Risk Management for Firms, Outsourced Services and all pronouncements related to Corporate Finance. An Exposure draft was also issued with respect to APES 310 Client Monies, which will be finalised in 2024.

APESB released a short three-part video series on the reissued APES 320 Quality Management for Firms that provide Non-Assurance Services . Video clips have also been used to communicate to stakeholders the Highlights of the technical sessions of the APESB Meetings.

APESB continued to work with professional accounting bodies and other stakeholders to promote professional and ethical standards through national conferences, webinars, roundtables, panel discussions, and LinkedIn. We also collaborated with the ATO, ASIC and APRA on issues regarding taxation services, SMSF auditor independence, forensic accounting services and the definition of a public interest entity.

APESB made two submissions to the IESBA in response to an exposure draft on Tax Planning Services and their draft strategic plan for 2024-2027 . APESB also made local submissions to the Treasury on its consultation into climate-related financial disclosure in Australia.

Reflecting on the year ahead, ethics will remain at the forefront of change, with proposed global ethics and independence standards on Sustainability Reporting and Assurance and a new global tax planning services standard to guide the ethical behaviour of tax practitioners. As part of my IESBA Board Member role, I was fortunate to be a member of the IESBA Sustainability and Tax Planning Taskforces that developed these pronouncements. ?With these global developments and ongoing Australian government inquiries, 2024 is going to be a very busy and challenging year, and I look forward to reporting on the progress of these projects at the end of 2024.