Accountants and the ICAEW: A new code of ethics for a new era

Professional ethics is a hot topic following on from the Post Office/Horizon Inquiry. There is an enormous amount of public and media interest around the involvement of professional advisors in the underlying investigations and convictions.

Disciplinary proceedings are expected to follow and interest will no doubt be reignited, with the stories behind the individual cases having captured the public imagination, as well as having developed political backing.

It follows that professional regulators are now receiving more complaints and reports than ever, with many unable to cope with the volume being received. The public and clients (who are themselves often subject to increased regulatory oversight) understand more clearly the role of regulators and how to engage with the regulatory process. Professionals are also being held to higher standards than ever before by regulators.

Accountants are not immune from these changes. The Institute for Chartered Accountants in England and Wales (ICEAW) has a new Code of Ethics which will come into force on 1 July 2025 (the Code). The Code represents a step forward in promoting ethical conduct and professionalism for ICAEW members.  

In this article, we look at the changes as well as considerations for ICAEW members and their insurers.

Background

The Code is based on the Code of Ethics for Professional Accountants of the International Ethics Standards Board for Accountants (IESBA). The IESBA Code doesn't apply directly to ICAEW members but the ICAEW must comply with its principles. IESBA recently updated their Code so the ICAEW has had to review its own to ensure compliance.

What does the new Code of Ethics say?

The Code sets out five fundamental principles which guide members’ behaviour:

1. Integrity – to be straightforward and honest in all professional and business relationships. Members must not knowingly be associated with misleading information.  
2. Objectivity – not to compromise professional or business judgements because of bias, conflict of interest or undue influence of others. Members must remain independent.  
3. Professional competence and due care – a professional must attain and maintain professional knowledge at the level required to ensure that a client or employing organisation receives competent professional service.  
4. Confidentiality – A member must respect confidential information acquired because of professional and business relationships. It must not be disclosed outside the organisation without authority.  Save for when there is a duty or right to disclose, or disclosure is in the public interest and permitted by law.
5. Professional behaviour – a member must comply with laws and regulations. They should avoid any conduct that might discredit the profession.

The key changes

• The role and mindset expected of professional accountants
• The impact of technology 
• Provisions regarding audit, including fees charged and maintaining independence in group audit work
• Professional behaviour

Looking at these in turn:

Role and mindset

Members must:

• Act in the public interest
• Have the strength of character to act appropriately
• Have an enquiring mind which includes exercising professional scepticism.  

Accountants are encouraged to take a proactive stance on ethical decision-making by not only following established guidelines but also foreseeing potential ethical issues and addressing them before they become problematic.

The Code stresses the importance of members acting in the public interest, maintaining an “inquiring mind” and recognising bias.  

A concern amongst the profession is that the Code provides disgruntled creditors and shareholders with a renewed avenue to challenge accountant directors and in-house accountants – which could in turn lead to an increase in associated claims.

The impact of technology

The Code provides members with guidance on embracing tech responsibly. Members must stay up-to-date and use tech to enhance the quality and efficiency of their work. This is a positive development which we expect will ultimately reduce the risk of errors that could lead to claims.

However, there are always risks associated with adopting new technology – the Code deals with issues around confidentiality and protecting client data.  

Audit provisions

It's not surprising that the Code has been toughened up around audit. Auditors have faced criticism following high-profile company collapses including Carillion, Thomas Cook and BHS. Only last week it was reported that EY had been fined £4.9 million and reprimanded by the FRC for serious failings in its audit of the failed Thomas Cook, the UK’s oldest travel company. EY’s failures led to significant breaches of the acceptable standards.  

Research published in 2024 by the Audit Reform Lab at the University of Sheffield reported that from the largest 250 publicly traded companies that collapsed between 2010 and 2022, auditors failed to warn of potential bankruptcies in 75% of cases.

The Code is notably strengthened in respect of independence principles for those involved in group audits and has introduced requirements for fee transparency and client communication. A new 15% fee dependency threshold has also been introduced for audit clients that are Public Interest Entities, meaning there is a limit on the proportion of total fee income that can be earned from a single audit client.  

There are also stricter safeguards for non-audit services, especially where members undertake audit and non-audit work for a client.

Professional behaviour

The old Code rather “gently” requires accountants to act with “courtesy and consideration” when performing their work, under a general provision that members should not act in a way that discredits the profession.  

The new Code has sharpened this up and includes specific standards, reflective of how the public expects an accountant to act. A key addition reads:

115.1 A2

“A reasonable and informed third party would expect that a professional accountant, in their professional life, treats others fairly, with respect and dignity and for example does not bully, harass, victimise or unfairly discriminate against others.”  

Guidance has been issued to help members understand what is expected of them in their professional life, be it posting on social media, representing the profession at a conference, or attending work events.  

The professional/private life distinction above is likely to be a subject of debate. What happens in a member’s private life is also not off limits either. If a member engages in poor conduct in a personal capacity, that could still be looked at. The Code says a member must: “Avoid any conduct that the professional accountant knows or should know might discredit the profession”.  

Impact of the code

It’s the ICAEW’s hope that the clearer wording of the Code will help those who wish to report conduct that falls below the standards expected. Accountants are concerned that it will embolden and encourage complainants. Firms should also think carefully about the impact of workplace culture in light of the new Code. With an anticipated increase in regulatory investigations, there will be an uptick in findings and fines and, in turn, potentially claims.  

Findings are published on the ICAEW Disciplinary Database, with many reported by trade publications and sometimes the wider media. These can shine an unhelpful spotlight on a member/member firm and in turn encourage claims. An adverse finding can also make defending a connected claim difficult. Not to mention the reputational damage it can do.  

Insurance underwriters will want to carry out more thorough investigations into risks - looking at the roles their insureds have, whether they have updated workplace policies and even the extent of the insured’s profile online. 

It is of course also possible that the Code will serve to tighten up practices, which could in turn lead to fewer claims. Only time will tell.  

Should you wish to know more please contact Alexa Jones or Neera Malde. 

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