Board for Accountants (IESBA) is an ethics regime that, through its Code, seeks to hold up the standards of accountants. It is often compared with the Code of the American Institute of Certified Public Accountants organization (AICPA Code). While both codes have similar purposes and attempt to cover the same ethical material, the Codes’ method of holding those they cover to account has typically been seen as diverging from each other.
The IESBA is referred to as a principles based code, that is, it requires accountants to adhere to a series of more abstract and interpretative principals; whereas the AICPA code is rules based that sets out strict guidelines that cover each situation – which must also be adhered to. This traditional viewpoint, however, can be considered to be misleading. It is not argued, however, that the AICPA is not rules based – a brief consideration of the guidelines would establish this to be the case. Taken at random as an example, rule 102-4 of the AICPA code explicitly prevents AICPA members from referring their own personal judgement onto their supervisors and explicitly sets out examples where this might occur and how to prevent it (Duska, Duska, & Ragatz, 2011). Throughout, the AICPA Code is clearly littered with ‘shall not’ and so on; it is unreasonable to suggest it is not a rules based code.
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That being said, the suggestion that the IESBA Code is principals based can be disputed. The IESBA Code has a clearly defined conceptual framework approach that sets out how one is to respond to its principals of conduct (Allen, 2010). Much like in the manner of the AICPA, the IESBA proscribes many situations that demonstrate how one is to respond. The implication of this is that if one does not respond to a potential ethical breach in the same situation they would fall foul of the IESBA Code. This brings the IESBA Code in the realm of rules rather than principles that one is to strive to adhere to. Furthermore, the IESBA Code contains positive obligations when an accountant identifies a potential ethical threat based on the significance of the threat (Allen, 2010). Again this requires one to do something rather than to do it themselves – a rule and requirement rather than a boundless guideline. An extension of this are the “de facto” rules that apply when considering IESBA situations where the threat significance is so extreme it is impossible for one to mitigate the potential ethical risks by themselves (Allen, 2010). In that case, the IESBA explicitly prohibits certain actions that would obviously lead to an ethical breach. Therefore, the standard rules vs. principles statement cannot strictly apply, as it is clear that the IESBA, while more flexible in interpretation, proscribes rules.
With this, the superiority of the IESBA Code is evident. The IESBA Code clearly sets out what is right and wrong and places the onus on the individual to adhere to its standards. Yet, it also has a clear minimum of acceptability so individuals cannot be too interpretative of its rules. As well as this, its framework gives guidance to individuals that may be unclear as to how they are adhere to the IESBA Code. This strikes a good balance between having a decent and enforceable ethics code but not getting too rigid and prescriptive as with the AICPA Code. The rigidity of the AICPA does not allow for context or other developments relating to a possible breach and this encourages rigidity in the practise of accounting. The IESBA and the AICPA Codes do attempt to encourage more faith and a higher standard of practice – but it is clear that both the standard conception of the IESBA and its usefulness have been underrated.
