ICAEW has issued three guidance notes (the guidance) for members to assist them in understanding and applying those parts of the Code of Ethics (the Code) that consider members duties to the public interest, identifying and addressing conflicts of interest, and setting the basis of determining fees. The guidance has been discussed with and made available to other member bodies of the Consultative Committee of Accountancy Bodies.
While guidance on the Code seeks to assist members and others in interpreting provisions of the Code, it does not add to or change the Code itself. Accordingly breach of guidance is not in itself a disciplinary offence.
Draft guidance notes were consulted on in late 2015. The feedback to the consultation, ICAEW’s responses to that feedback, and a background to the issue of the guidance, is addressed here.
Note that references in the guidance notes to supplementary guidance on the public interest, conflicts and fees are to the other guidance notes indicated below.
This guidance considers the discussions in section 100 of the Code, on the duties of the accountancy profession to the public interest. It explains that the principal public interest duty rests at the level of the profession itself, as a whole. Individual members discharge that duty by following the Code’s requirements in spirit as well as letter, having regard to the perception of the reasonable and informed third party. The perception test is not a hindsight test but is based on what the member knew or should have known at the time.
There is no separate public interest duty. However, the guidance does highlight and discuss the Code’s fairly general requirements not to be associated with misleading information, or otherwise act in a way that discredits the profession. It suggests number of questions that the member might consider when the ethical course of action is unclear.
The Code does not prohibit members from undertaking engagements where different client interests conflict, provided that certain effective safeguards are applied and, generally, informed consent obtained. However, on occasion, the threats to objectivity due to a conflict of interests and the duty referred to above may be of such significance that adequate safeguards cannot be established.
This guidance sets out and discusses these key requirements, including how the law’s requirements on informed consent interact with the Code, and a reminder that they can arise even within what might appear to be one client.
The guidance confirms, for the avoidance of doubt, that the Code does not require the amount of a fee to be ‘justified’: this is a commercial matter. The guidance discusses the key requirements that the basis of charging fees, in particular contingency fees, needs to be made clear (including in writing) and set to ensure there is not a threat to objectivity.