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Part C – Section 370 Pressure

This document outlines the discussions from the IESBA Task Force regarding Section 370, focusing on the challenges posed by pressure on professional accountants. It emphasizes the neccessity for Professional Accountants in Business (PAIB) to resist pressure that threatens the fundamental principles of ethics. The section was refined to incorporate factors affecting ethical decision-making and the acknowledgment of diverse ethical norms within corporate culture. Practical measures for mitigating pressure and fostering an ethics-based environment are also highlighted.

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Part C – Section 370 Pressure

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  1. Part C – Section 370Pressure Jim Gaa, Chair, Part C Task Force IESBA Meeting Toronto, Canada April 7, 2014

  2. Background • March 2013: Project Proposal approved by IESBA • September 2013: IESBA and CAG consider Pressure(370) • December 2013: IESBA considered Section 320 • March 2014: CAG considered Section 320 • April 2014: IESBA considers Section 370

  3. Description and Examples • Change description from “engage in unethical or illegal activities” to “pressure to breach fundamental principles”. • PAIB shall not yield to pressure. • PAIB shall not place pressure on others. • Examples categorized by 310/320/330/340/350/360.

  4. Determine whether pressure may lead to a breach of the fundamental principles • Threats and safeguards approach difficult to use in Part C. • Safeguards may not be real safeguards • PAIBs may be unfamiliar with Conceptual Framework. • Section redrafted to avoid conceptual framework language. • Factors the PAIB may consider in determination. • Actions for PAIB to take in determination.

  5. Steps to mitigate pressure • If pressure would result in a breach, PAIB shall take steps that are available to mitigate pressure. • Mitigate: reduce to a level that can be resisted • Mitigate - elimination may not be possible. • Some steps may not be available to the PAIB. • Examples: policies & procedures; challenge; restructuring; obtain oversight; escalation; disclosure; consultation. • If necessary: decline, discontinue or resign.

  6. Diversity of ethical norms • Different opinions on CAG on recognizing diversity of ethical norms. • Diversity of ethical norms is a reality. • But its recognition appears to condone a “movable bar”. • TF suggests that including “the corporate culture and leadership of the employing organization” as a factor to consider recognizes this diversity.

  7. Creating an Ethics Based Culture • 300.5 creates expectation of an ethics based-culture. • This was developed as an important step to address pressure. • May be more generally applicable and moved back to 300. • Further work needed on drafting as references to fundamental principles apply to the Code and would not apply in business’s ethics codes.

  8. Matters for Consideration • Does the Board have any comments on the draft wording of proposed Section 370? • Does the Board have any comments on the way that the diversity of ethical norms is addressed in the draft wording?

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