About the IESBA - University of Waterloo | University of ... › centre-for-accounting-ethics › ... · (All Professional Accountants ) PART 2 Professional Accountants in Business

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The IESBA Code and Technology Initiative

Brian Friedrich LLM, MEd, FCPAIESBA Member, Technology Working Group MemberUniversity of Waterloo Centre for Accounting Ethics

CPA Canada – Ethics SymposiumToronto, Canada

April 25-26, 2019


To provide an overview: • IESBA • Revised and restructured Code

• IESBA’s Technology Initiative and the Technology Working Group activities

Agenda


About the IESBA

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About the IESBA

Board compositionv Independent global ethics standards

setter with independent Chair v 17 volunteer members from around the

world, including three academics v No more than 9 practitioners,

No fewer than 3 public membersv Members appointed by IFAC Board,

approved by PIOB


Global Adoption of the IESBA Code

• Adopted or used as basis for national ethics standards or the codes of IFAC member bodies in 120+ countries

• Adopted by the largest 31 international networks of firms (the Forum of Firms) for transnational audits

• Translated in 39 languages, including all major UN languages (Chinese, French, Japanese, Russian and Spanish)

About the IESBA


Revised and Restructured Code

http://www.ifac.org/about-ifac/forum-firms-and-transnational-auditors-committee

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• Released April 2018– Extensive stakeholder consultation, including with

IFAC PAOs such as CPA Canada

• New design – easier to navigate, use and enforce– Completely rewritten, new user Guide– Requirements clearly distinguished from Application material

– Effective June 15, 2019

• Renamed International Code of Ethics for Professional Accountants (including International Independence Standards)

About the Revised and Restructured Code


ArchitectureAbout the Revised and Restructured Code

PART 1 Complying with the Code, Fundamental Principles and Conceptual Framework (All Professional Accountants)

PART 2 Professional Accountants in Business (PAIBs)

(Sections 200 to 299)PART 3 Professional Accountants

in Public Practice (PAPPs)(Sections 300 to 399)

GLOSSARY (All Professional Accountants)

PARTS 4A & 4B International Independence Standards

(Sections 400 to 899)Part 4A—Independence for Audits & Reviews

Part 4B—Independence for Assurance Engagements Other than Audit & Review Engagements

(Sections 900 to 999)

(Part 2 is also applicable to individuals PAPPs when performing professional activities pursuant to their relationship with the firm)

(Sections 100 to 199)


Professional Behavior

Independence

Integrity

Confidentiality

Professional Competence and Due Care

Objectivity


Conceptual Framework, Fundamental Principles and Independence

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Packages all substantive

advances in ethics and independence

over the last 4 years

Significant enhancements to

Conceptual Framework

Enhanced safeguards

provisions better aligned to threats

NOCLAR

Strengthened Long Association provisions

Strengthened provisions regarding

Inducements

Strengthened provisions re Preparing or Presenting Information

New provisions addressing

Pressure to Breach FPs

Applicability of relevant PAIB

provisions to PAPPs clarified

New guidance re professional

judgment and professional skepticism

What is Included? About the Revised and Restructured Code


Resources and Tools

• Available now– 2018 Handbook– Basis for Conclusions – One-page flyer êPowerPoint Slides– Videos êArticles– Country Visits êTargeted outreach– Webinars

• More to come, including e-CodeVisit www.ethicsboard.org/restructured-code



Technology Initiative

http://www.ethicsboard.org/restructured-code

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April 2018

IESBA issued 2019-2023 SWP consultation paper (CP) that identified technology as an imperative priority

June 2018

Technology WG established by IESBA

September 2018

IESBA discussed comments received on the CP including strong support to prioritize the topic and preliminary thinking from the Technology WG

December 2018

IESBA approved WG’s Terms of Reference

Background – IESBA Technology Initiatives


Background

Terms of Reference

Objectives of the WG:a) Identify implications of technological developments on the robustness

and relevance of the Code b) Develop proposed responses including revisions to the Code,

publication of non-authoritative material and discussion forumsc) Identify outreach and partnership opportunities to share knowledge and

to promote the Code


Background

Terms of Reference

Highlights of other key elements:• A phased approach (Phase 1 to be completed by December 2019)• Initial information gathering focusing on AI/Robotic Process Automation (AI) and Big

Data/Data Analytics (Data)• A focus on ethical behavior of both PAPPs and PAIBs• Information gathering encompasses desk research, stakeholder meetings and other

channels such as focus groups and panel discussions; also partnership with other professional organizations/stakeholders

• Phase 1 Final Report to be presented to the Board in December 2019

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Information Gathering Activities to Date

• Desk research involving published articles; webcasts/webinars/podcasts

• Discussions with industry representatives, academics, ethics org leaders

• In person outreach meetings with stakeholders


Key Emerging Themes

Five themes have emerged to date:A. Common ethical principles are also applicable to AIB. PAs need to have a growth mindsetC. Bias in AI can be a significant riskD. Fairness and transparency are important elements in AI ethicsE. Responsibility to advise on risks and benefits of technologies


Emerging Themes

Theme A – Common Ethical Principles Also Apply to AI

• Stakeholders did not identify noticeable gaps in the FPs or rest of Code – Guidance or supplementary material on how PAs can identify, evaluate and

address technology related risks and ethical issues would be more useful than changes to the Code

• Frameworks for the development, use and application of AI have been developed - and are also of increasing interest to governmental bodies. Key framework principles include:– Fairness, transparency, inclusiveness, reliability and safety, privacy and

security, accountability

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Emerging Themes

Theme B – PAs Need a “Growth Mindset”

• Stakeholders mentioned the importance of PAs having a mindset appropriate for the digital age:– Mindset that adapts to new technologies– Shift from a compliance mindset (only) to advisory mindset– Adopting a “growth mindset”

• Stakeholders also highlighted the importance of professional judgement in the midst of dynamic changes


Emerging Themes

Theme C – Bias in AI is a Significant Risk

• Bias in AI (machine bias) can be present in the– inputs: data the AI consumes– processing: algorithms used to analyze the data; and– outputs: interpretation of the results

• In order to rely on outputs from AI applications, PAs need a sufficient understanding of the AI technology used and impact on PA’s work– PAs must accept responsibility for machine decisions used in their work


Emerging Themes

Theme D – Addressing Fairness and Transparency

• Ethical frameworks for AI often include fairness, transparency and accountability– The WG is exploring how these concepts intersect with the IESBA Code

• Some stakeholders also asked whether PAs might have a broader role in society as ethical leaders and champions in their organizations

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Emerging Themes

Theme E – Responsibility to Advise on Risks and Benefits

• As companies and firms continue to invest in technologies, some stakeholders suggested employers, customers, and clients should be made aware of the risks and benefits of new technologies

• The WG will reflect on whether PAs have an ethical responsibility to inform relevant third parties of the risks and benefits of technologies being implemented


Preliminary views/questions • The impact of technology is pervasive and spread across all the five FPs as

well as the application of the Conceptual Framework.– How best to address technology impact in the Code?

• Should the concepts of transparency, fairness and accountability (common principles in AI ethics) also be addressed in the Code?– How to address the tension between transparency and confidentiality?

• How might the concept of growth mindset be addressed in the Code?• Should PAs have a role in promoting broader ethical behavior in society?

Preliminary Assessment


Preliminary views/questions • Is a new threat required?

– Are AI-related threats to complying with the FPs and Independence sufficiently covered in the five Code defined threats (self-interest, self-review, advocacy, familiarity, and intimidation)

• AI/machine bias is one of the key ethical challenges relating to AI– How does AI/machine bias impact the FPs?

Preliminary Assessment

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Next Steps

Continue with information gathering and analysis of the

CodeReport-back to the Board Present Phase 1 Final Report

in December 2019


Questions

Questions?

The Ethics Boardwww.ethicsboard.org

http://www.ethicsboard.org/

Documents

About the IESBA - University of Waterloo | University of ... › centre-for-accounting-ethics › ... · (All Professional Accountants ) PART 2 Professional Accountants in Business