IESBA to Address Audit Culture in Ethics Code

The International Ethics Standards Board for Accountants (IESBA) announced last month that it will address firm culture and governance through a targeted update to its International Code of Ethics for Professional Accountants.

The decision follows two and a half years of research and stakeholder engagement. As the IESBA notes in its project snapshot, “ethical failures within firms are rarely due to a lack of rules or standards alone. Often, they reflect deeper issues relating to the firm’s ethical culture.” Extensive research, the snapshot adds, demonstrates that “ethical behavior in organizations is strongly influenced by firm culture, including elements such as leadership, governance, incentives, and accountability.”

Rather than introducing prescriptive provisions, the update will establish a single, overarching requirement in the Code. This will be supported by limited application material referencing eight interconnected culture and governance elements: ethical leadership, oversight and governance, independent input, accountability, incentives and disincentives, open discussion and challenge, education and training, and transparency. Practical guidance and educational materials will be developed in parallel with firms, jurisdictional standard setters, and professional accountancy organizations.

This approach, the IESBA explained, balances the need for a clear, enduring global baseline on ethical culture with practical guidance on how firms can build and sustain such a culture. It aims to minimize compliance burden while delivering global consistency. It will also consolidate fragmented existing references into a coherent framework and complement International Standard on Quality Management 1 (ISQM 1) by reinforcing firms’ commitment to a culture that recognizes the importance of professional ethics, values, and attitudes. The requirement will apply proportionately across firms of all sizes and service lines.

An exposure draft is planned for December 2026, with final approval targeted by the end of 2027.