Codes of Ethics can be described as either principles based and high level or rules based and detailed.
ICAEW's Code of Ethics is based on the International Federation of Accountants' Code of Ethics, which itself has adopted the principles-based approach pioneered by the Institute.
Proponents of the principles based argue that this approach is robust and flexible because it:
On the other hand, supporters of a rules-based approach argue that compliance with such guidance is easier since the requirements are prescriptive and leave little room for misunderstanding. Furthermore, rules-based approaches are easier to enforce.
In practice, Codes of Ethics are a mixture of principles and rules. The rules should support the underlying principles of the Code. Whether a Code is described as principles or rules-based will be dependent on whether the principles are built into the foundations of the Code and the extent of the rules.
The key issue is striking an appropriate balance which encourages the spirit of the guidance to be complied with and does not undermine the exercise of judgement and the role of the profession. A more detailed discussion of the principles based approach can be downloaded as follows:
Several discussion papers prepared by the Federation of European Accountants (FEE) with significant input from ICAEW:
Principles V Rules (article published in Accountancy Magazine December 2006)
ICAEW discussion paper