On July 31, 2006, the International Ethics Standards Board for Accountants (IESBA), an independent setting board within the International Federation of Accountants (IFAC), has revised the Code of Ethics for Professional Accountants by updating the definition of “network firm”. Thus, network firms are required to be independent of an audit client of another firm within the network.
Richard George, IESBA Chair, pointed out that, the revised definition focuses on how networks operate and how they present themselves to third parties…this revision provides clear guidance for firms and contains additional information on the application of the definition.
The revised definition is considered consistent with the definition in the European Union’s Eighth Company Law Directive. It would classify firms as network firms if the firms belong to larger structure that is aimed at cooperation and is clearly aimed at profit or cost sharing, or shares common ownership, control or management, common quality control polices and procedures, common business strategy, and the use of a common brand-name or significant part of professional resources.
The revised definition will be effective for assurance reports dated on or after December 31, 2008.
The IESBA develops ethical standards and guidance for use by professional accountants. It encourages member bodies to adopt high standards of ethics for their members and promotes good ethical practices globally. IFAC is the worldwide organization for the accountancy profession dedicated to serve the public interest by strengthening the profession and contributing to the development of strong international economies.
For more information please visit the following website: www.ifac.org