The revised standard sets out a comprehensive framework that more clearly distinguishes the boundaries of acceptable inducements, and guides the behaviour and actions of professional accountants in business and in public practice in situations involving inducements.

Central to this framework is a new intent test that ban the offering or accepting of inducements where there is actual or perceived intent to improperly influence the behaviour of the recipient or of another individual.

The IESBA has also clarified the meaning of an inducement, which can range from minor acts of hospitality between business colleagues to acts that result in non-compliance with laws and regulations. It stresses that an inducement is ‘considered as improperly influencing an individual’s behaviour if it causes the individual to act in an unethical manner’.

Section 250.9 A3 states that ‘the determination of whether there is actual or perceived intent to improperly influence behaviour requires the exercise of professional judgment. Relevant factors might include the nature frequency, value and cumulative effect of the inducements, and the timing of when the inducement is offered relative to any action or decision that it might influence’.

It also gives room for reasonable business behaviour, citing for example ‘whether the inducement is an ancillary part of a professional activity, for example, offering or accepting lunch in connection with a business meeting’.

The definition includes gifts, hospitality, entertainment, political or charitable donations, appeals to friendship and loyalty, employment or other commercial opportunities, and preferential treatment, rights or privileges.

It also warns about potential for familiarity threats, if for example, an accountant accepts regular invitations to sporting events from a supplier or customer, and open themselves up to perceived risk. There are also perception risks if the hospitality accepted is too large, and would raise questions if it had to be disclosed on a public register of hospitality.  

The framework also:

•             establishes a requirement to understand and comply with laws and regulations that prohibit the offering or accepting of inducements in certain circumstances, such as in relation to bribery and corruption;

•             guides professional accountants in applying the enhanced conceptual framework underpinning the International Code of Ethics for Professional Accountants (including International Independence Standards) where there is no improper intent; and

•             provides enhanced guidance on the offering and accepting of inducements by professional accountants’ immediate or close family members.

The revised provisions come into effect from June 2019, including consequential amendments to the independence provisions of the Code addressing gifts and hospitality. The changes constitute the last piece of the recently revised and restructured Code.

‘Incentives motivate behaviour, and some inducements can be a powerful incentive to unethical behaviour,’ said IESBA chairman Dr Stavros Thomadakis. ‘This revised standard complements our standard on NOCLAR [non-compliance with laws and regulations] to offer a full system of ethical defences that relate both to malfeasance committed by others and to accountants’ own involvement in potentially unethical behaviours.’

IESBA Revisions to the Code Pertaining to the Offering and Accepting of Inducements issued 19 July 2018

Report by Sara White

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