The Canadian Institute of Chartered Accountants is seeking to redraw the independence element of its Rules of Professional Conduct, while embracing the principles-based approach developed by the International Federation of Accountants. But the Association of Certified Chartered Accountants, the world’s largest accountancy body with nearly 300,000 members in 160 countries worldwide and more than 1,300 members and students in Canada, says it has major concerns about the CICA approach.

The CICA is proposing that the Rules of Professional Conduct should be accompanied by a CICA “council interpretation” which draws on the IFAC Code of Ethics. But, says ACCA, there are significant differences between the council interpretation and the IFAC Code, such that they cannot be considered to be equivalent.

“In fact,” says ACCA “by developing a hybrid approach to the issue, it has muddied the waters considerably and diluted the overall effect. Chief among these arises from the watering down of the way judgments about independence are to be made. The IFAC Code says that such judgments should be made in the light of what ‘a reasonable and informed third party, having knowledge of all relevant information, including safeguards applied, would reasonably conclude.’ The council interpretation introduces the concept of a similar third party ‘reasonable observer,’ but this observer deals just with hard facts and is not concerned with knowledge of the firm, only of the member. As such, judgments are potentially less rigorous than would be appropriate under the IFAC Code.”

ACCA says that there are examples throughout the council interpretation which “interrupt” specific prohibitions reproduced from the detailed rules. “The effect of this is to divert attention from the guidance which follows making it less likely that it will be properly considered.”