Cultural and Socio-Economic Restrictions for the Adoption of the IESBA Code of Ethics for Professional Accountants in the European Countries

Abstract

1. Introduction The globalization of the economy requires reliable financial reporting, which reinforces the importance of the accounting profession to guarantee the correct functioning and stability of the financial system. The complexity of international transactions makes it impossible that the accounting and auditing standards remain within the confines of the country in which the company or the professionals operate. Accounting professionals already work in international firms that carry out their activity and render their services in different countries. Therefore, the internationalisation of the profession and a study of it are essential (Nobes and Parker, 2008). The International Federation of Accountants (IFAC) was created in 1977 and is comprised by 175 members and associates in 130 countries. IFAC is the global organization for the accountancy profession dedicated to serving the public interest by supporting high-quality international standards and helping to build strong professional accountancy organizations (IFAC, 2014). According to the IFAC's view, a fundamental way to serve the public interest is to develop, promote, and enforce high-quality, internationally recognized standards, including ethical standards for professional accountants (IFAC, 2014). At this respect, IFAC has established the International Ethics Standards Board for Accountants (IESBA) to set internationally appropriate ethics standards for professional accountants worldwide. These ethical standards are compiled in the Code of Ethics for Professional Accountants issued by IESBA. The objective of the IFAC is to promote the implementation of this Code of Ethics for all accountant members, whatever the area in which professionals operate (education, public practice, businesses, amongst others) and whatever the country in which professionals carry out their responsibilities. As Loft et al. (2006) state the power of IFAC as a global accounting and auditing regulator is undeniable, proof of this is that the European Commission (EC) adopted the International Standards on Auditing promoted by this organization. Moreover, the fact that the European Commission states in its audit regulation (Directive 2006/43/EC) that auditors must comply with the IESBA Code of Ethics highlights the positioning of the IFAC as a global leader. However, to date not all the countries of the European Union have adopted the code proposed by the IFAC, nor have the countries that have adopted it done so in the same way (Clements et al., 2009a). The need to reinforce the ethical conduct of the profession and confidence in what it does takes special importance. Auditors need to demonstrate ethical conduct in order to live up to the expectations of those who place trust in their reports for decision-making purposes. Corporate scandals of the beginning of the 21st century as well as the recent global financial crisis have led to a widespread distrust in the accounting profession. There is an imperative need of regaining investors' confidence to restore economic stability (Achim et al. 2010). In this regard, the Public Interest Oversight Board (PIOB) considers the worldwide adoption of the Code of Ethics for Professional Accountants as a top priority project (PIOB, 2012). Taking into account the role IFAC plays as an audit regulator globally, in agreement with Loft et al. (2006) we consider that additional research on the process by which IFAC's pronouncements are issued as well as the degree to which these are adopted and implemented is necessary. National accounting professional bodies, members of the IFAC, belong to different countries with its historical, legal, cultural or socioeconomic background. Accordingly, all these variables could influence the acceptance of a single and universal code of ethics for professional accountants. The globalisation in which we are currently immersed requires that the differences between countries to which professionals belong are consigned to the background. …