Rewrite of NZ Code of Ethics - Invitation to comment

NZICA's New Zealand Regulatory Board (NZRB) is proposing to adopt a revised Code of Ethics based on the recently revised International Code of Ethics issued by the International Ethics Standards Board for Accountants (IESBA).

The revised Code of Ethics will apply to all members of Chartered Accountants Australia and New Zealand (CA ANZ) in New Zealand. 

This revised Code will be consistent with the New Zealand Auditing and Assurance Standards Board’s (NZAuASB) Code of Ethics for Assurance Practitioners (PES1), which is also currently being updated to align with the International Code of Ethics - See Exposure Draft NZAuASB 2018-1 Professional and Ethical Standard 1, International Code of Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the External Reporting Board (XRB) in August 2018 (ED-NZAuASB 2018-1)

Members should review Exposure Draft 2018-2:  Proposed Revision of Code of Ethics (ED) (see below) to familarise themselves with the new structure and to understand the substantive changes that have been made. 

Members are invited to make submissions on the ED by 8 February 2019.

Members can keep up to date with the submission/approval process (outlined below) by referring to this webpage. 

The finalised Code of Ethics will be published on this page and in the Members Handbook once it has been approved by the NZRB.

The revised Code of Ethics is proposed to apply from 15 June 2019.

Overview of proposed amendments

The proposed Code of Ethics is by necessity a complete revision of the extant Code of Ethics as the IESBA has undertaken a full re-write of the International Code of Ethics. 

However, many of the core components of the extant Code of Ethics remain - merely in a rearranged form - including:

• The fundamental principles (i.e. integrity, objectivity, confidentiality, professional competence and due care, professional behavior)
• The threats to compliance with the fundamental principles (i.e. self-interest, self-review, advocacy, familiarity, intimidation)
• The requirement to be independent when required
• The requirement to apply the conceptual framework to comply with the fundamental principles (i.e. identify the threat, evaluate the threat and address the threat).

The proposed amendments to the Code of Ethics can be divided into 4 categories:

Restructuring and re-write

Key features:

• Principles based but with new structure and clarified language
• More prominent requirements to comply with the fundamental principles, be independent when appropriate and apply the conceptual framework to identify, evaluate and address threats
• More robust and clearly distinguished requirements
• Application material clearly linked to requirements
• Clarification about responsibilities; avoidance of passive language
• Topic specific material more closely linked to the conceptual framework is set-out in section 120
• Incremental provisions that assist in applying the conceptual framework are included in Parts 2 (Members in Business), 3 (Members in Public Practice), 4A and 4B (International Independence Standards).

Substantive changes

Key revisions:

• Significant enhancements to the conceptual framework with emphasis on threats to compliance with the fundamental principles
• Enhanced safeguard provisions better aligned to threats
• Improved rules for Members in Business including enhanced provisions relating to preparation and presentation of information and a new section on pressure to breach the fundamental principles
• Clarification of how some provisions relevant to Members in Business also apply to Members in Public Practice
• New guidance regarding professional judgement and professional skepticism
• More extensive inducement provisions.

How to Guide

The revised Code of Ethics comes with a guide designed to assist new and infrequent users with understanding how to use it.

For existing members it will be a useful tool to assist members with “getting to grips” with the re-written Code of Ethics.

New Zealand provisions

The NZ specific paragraphs in the current version of the Code of Ethics have been reviewed and amended (or deleted) to update or clarify their intended meaning in light of the changes to the International Code or changes to technical and professional standards or legislation.

New paragraphs have also been added to encourage members to document matters relating to conflicts of interest.

The Code of Ethics has been drafted to ensure it is aligned as far practicable with the Code of Ethics applicable to CA ANZ members resident outside New Zealand:  APES 110 Code of Ethics for Professional Accountants (including Independence Standards) issued by the Australian Professional and Ethical Standards Board (APESB).  As a result, the revised Code of Ethics includes two new NZ specific paragraphs based on Australian specific paragraphs relating to contingent fees and to referral fees and commissions.

Review of ED and Invitation for Submissions

All New Zealand resident members must comply with the Code of Ethics issued by the NZRB. 

Members should review the ED (see below) to familarise themselves with the new Code of Ethics and to understand the substantive changes that have been made.  Members should also consider how the changes will affect their activities (including threat assessments, policies, procedures, and training programmes, as appropriate).

Members are invited to make submissions on the ED. The closing date for comments is 8 February 2019.  Details on how to make a submission are in the Invitation to Comment on the ED (ITC on ED - see below).

Please note that this ED does not include the provisions that relate solely to assurance practitioners (as indicated in the ED).  Members should instead refer to ED-NZAuASB 2018-1 for a summary of the proposed changes to those provisions and the full text of the new sections.

Timeline and Next Steps

Management's Report

This document will be posted in accordance with the above timeline and next steps

Submissions Received

These documents will be posted in accordance with the above timeline and next steps

NZRB Decision

This document will be posted in accordance with the above timeline and next steps

Finalised Code of Ethics

This document will be posted in accordance with the above timeline and next steps