1. International Conference of the Slovak Chamber of Auditors
High Tatra Mountains, 3-4 June 2010
The Ethics and Application of the Ethical Principles
in the Audit Practice
Olivier Boutellis-Taft
FEE Chief Executive
The European Profession and Professional Ethics

2. Overview About FEE A few Ethics projects in FEE
FEE Discussion Paper on Integrity in Professional Ethics
FEE Comparison Project on Auditor Independence

3. About FEE
So let’s start by a few words on FEE.
The profession in its entirety and its diversity: 45% in public practice in both large and small firms and this is more than auditors only: accountants acting as consultants in a variety of sectors and specialities from company law to corporate finance and sustainability, tax advisors…
A majority of our members are not in public practice: business and public sector.
43 professional institutes of more than accountants all contributing to a more efficient, transparent and sustainable European economy
32 European countries, including all 27 EU MS

4. FEE: Representing the Profession and Adding Value to Members
Catalyst in Europe
With PCAOB, SEC, etc With EC, EP, EU Council & Committees
Inform, advise & influence
Facilitate consensus between
With IFAC & its Boards: IAASB, IESBA, IAESBA, CAGs, IPSASB, etc.
EU & intl. regulation, policy standard setting, etc.
institutes, accountancy firms (big & small)
How do we represent them?
We’re very much focused on the policy debate and especially the EU policy debate and we are engaging on all issues that have an impact on the profession or on which the profession can add value by bringing its expertise and field experience, its values and its public interest dimension.
We are in regular dialogue with the different policymakers, regulators and standards setters that you can see on this slide.
We’re also informing our members and hope to be a catalyst for change in the profession.
It’s from that perspective that we have worked on XBRL.

5. Europe and Ethics

6. FEE Discussion Paper on Integrity in Professional Ethics

7. Integrity in Professional Ethics
FEE Discussion Paper
issued in September 2009 for comments by 31 January 2010
Analysis of responses being prepared
FEE Event on Integrity
To promote debate
Integrity is the core principle of professional behaviour, but the hardest to understand and instil in people
More focus on training on integrity rather than independence and objectivity
What does it mean?

8. Integrity is more than Words...
BEHAVIOUR
Personal
Professional

9. Behavioural Characteristics of Integrity instead of Definition

10. Drivers of Organisational Integrity
Be honest and truthful
Leadership
Deal fairly
Strategy
Comply with laws
Policies
Promote public interest
Show consistency
Information
Be open-minded
Culture
Take corrective action

11. Embedding Organisational Integrity
Culture
Information
Policies
Strategy
Leadership
Be honest and truthful
Awareness
Deal fairly
Predictability
Comply with laws
Transparency
Promote public interest
Show consistency
Long-term view
Be open-minded
People
Take corrective action

12. FEE Comparison Project on Auditor Independence
Relevance of the Code for FEE and FEE Member Bodies
The Case for a Common Code

13. FEE Comparison Project on Auditor Independence (1)
To update the 2004 comparison:
EC Recommendation (16 May 2002) and Statutory Audit Directive Art. on independence (17 May 2006)
IESBA Code of Ethics, independence section 290
Main sections:
Factual analysis, comparison and differences in table form (being prepared)
Comparison of essential requirements and guidance (o/s)
Comments, discussion and conclusions on differences (o/s)
Subgroup of FEE Ethics WP performs the work

14. FEE Comparison Project on Auditor Independence (2)
Findings so far:
Principles: EC & IESBA +/- =
IESBA Code includes far more detailed requirements and guidance
IESBA Code is usually more robust and stringent
EC is sometimes more demanding, especially in relation to definitions
Preliminary conclusion: the devil will be in the detail

15. Relevance of the Code: IFAC Statements of Membership Obligations (SMOs)
SMO4: IESBA Code of Ethics for Professional Accountants
IFAC/FEE Member Bodies (MB): not apply less stringent standards
If responsibility with 3rd parties: MB use best endeavours to persuade them
MB objective is convergence of national code with the IESBA one
MB to assist in implementation

16. Relevance of the Code: ISA
ISA 200 (objectives auditor and audit):
Auditor shall comply with relevant ethical and independence requirement
That is ordinarily the IESBA Code of Ethics plus more restrictive national requirements (Application Material (AM))
ISA 220 (quality control for an audit)
Engagement partner’s responsibility related to relevant ethical requirement
Reference to IESBA Code of Ethics in AM

17. Relevance of the Code: ISQC1
ISQC1 (quality control in audit firm)
Audit firm policies & procedures to provide reasonable assurance on compliance with relevant ethical requirements
Reference to IESBA Code of Ethics in Definitions (12q) and AM

18. The Case for a Common Code
Regulators’ needs:
Reliance on third country oversight system only if auditors apply equivalent standards
Profession‘s needs/concerns:
Group audit situation: reliance on other auditor‘s independence
Multiple standards reduce choice in audit market
Reputation risk: Multiple standards create higher risk of specific independence violations even if they don‘t differ in substance
Costs of monitoring compliance with multiple standards, in particular relatively high for smaller networks with cross-border activities
Investors‘ / Clients‘ concerns: Confusion and unnecessary costs (for audit committees)

19. Discussion and Questions

20. Standing for trust and integrity
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