How to deal ethically with conflicts of interest
As we highlighted last week there is a newly revised and restructured Code of Ethics coming soon for accountants in Ireland, expected to be effective from the 1st of March 2020.
Sometimes accountants realise they have a conflict of interest due to lack of foresight or pre-planning. An example could be trying to sort out a dispute between two clients of the same accountant. The new Code seeks to address this with more guidance.
Conflicts of Interest
The sections on conflicts of interest in the new code have been completely replaced and split into two sections, 210 and 310, covering ‘business’ and ‘public practice’ respectively.
These sections have been revised and the guidance on ‘how to apply the conflicts of interest requirements’ has been enhanced.
The new section maintains the requirement for all parties to be notified of the conflict and obtain their explicit written consent, but also:
- Gives examples of the types of conflict of interest;
- Makes explicit reference to the ‘RITP’ test – the Reasonable and Informed Third Party test (which was only hinted at in the past). The definition of ‘RIPT’:
- The reasonable and informed third party is someone ‘who weighs all the relevant facts and circumstances that the accountant knows, or could reasonably be expected to know, at the time the conclusions are made. The reasonable and informed third party does not need to be an accountant, but would possess the relevant knowledge and experience to understand and evaluate the appropriateness of the accountant’s conclusions in an impartial manner.’ – (from 120.5 A4 in the proposed new Code of Ethics)
- Sections 210/310 also provide additional discussion of matters such as conflict identification processes, safeguards, types of disclosure and consent, and when work can be taken on without disclosure and consent.
A helpful flowchart to aid the decision-making process regarding conflicts of interest is available at this link (courtesy of the ICAEW helpsheet from December 2019).
Watch our website for the forthcoming webinar on the new rules.
See our latest additions to the website store which are the AML Business-Wide Risk Assessment Word template and a webinar on how to prepare it. Both of these help firms comply with the latest requirements of Section 30A of the Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2018, effective from 26 November 2018.
For other webinar topics including Investment Property Accounting, FRS 105, Common Errors in FRS 102 Accounting and the latest on FRS 105 and company law, visit our online webinar training website.