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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
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To provide an overview: • IESBA • Revised and restructured Code
• IESBA’s Technology Initiative and the Technology Working Group activities
Agenda
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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
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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
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Revised and Restructured Code
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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
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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)
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Professional Behavior
Independence
Integrity
Confidentiality
Professional Competence and Due Care
Objectivity
About the Revised and Restructured Code
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
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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
About the Revised and Restructured Code
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Technology Initiative
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Questions
Questions?
The Ethics Boardwww.ethicsboard.org