Speaking yesterday to accountants in China, Groom called for the adoption of the UK’s principles-based approach rather than taking on the US system based on accounting rules.
The ICAEW claims the UK’s approach already has the support of the Treasury Select Committee, the Department of Trade & Industry, the European Commission, the European Federation of Accountants and the International Federation of Accountants.
Groom said the problem with the US system was that rules could be circumvented. He said: ‘Good guidance should be proactive, requiring the auditor to identify and address risks and not to passively obey rules.’
Rather he said in the case of the UK approach, an auditor must apply reason to ethical principles: ‘If an auditor were to appear before a disciplinary tribunal charged with a breach of ethical requirements, it would not be a sufficient defence to demonstrate that particular examples of threats and safeguards in the ethical code had been addressed. The auditor must also demonstrate that the fundamental principles had been observed – a far more rigorous test.’
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