Applying the IESBA Code: Proportionality Guidance for Small and Medium Practices
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The International Ethics Standards Board for Accountants (IESBA) has released a new staff publication, Proportionality of the IESBA Code, to help professional accountants understand how the International Code of Ethics is designed to be applied by firms of all sizes. The guide is particularly relevant for small and medium practices (SMPs), many of which have questioned whether the Code was developed with smaller firms in mind.
The publication makes an important point: while ethical standards are the same for everyone, the way they are applied can be proportionate to the size and complexity of the firm and the work being performed.
One Ethical Standard for Everyone
The guide emphasises that the IESBA Code establishes a single, universal ethical standard for all professional accountants. Every accountant is expected to comply with the same five fundamental principles:
Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour.
These principles do not change depending on the size of the firm or the type of client. However, the Code recognises that a sole practitioner, a small accounting practice and a large international firm do not all face the same risks or operate in the same environment.
What Does "Proportionality" Mean?
According to the guide, ethics are not proportionate, but the Code is.
This means that while every professional accountant must achieve the same ethical outcome, the Code allows practitioners to apply its requirements in a way that reflects the nature of their work, the risks involved and the public interest.
Rather than prescribing identical procedures for every firm, the Code relies on professional judgement and a principles-based approach.
Three Ways the Code Applies Proportionately
The publication explains that proportionality is built into the Code in three key ways.
A Scalable Conceptual Framework
The Code requires accountants to identify, evaluate and address threats to compliance with the fundamental ethical principles and, where applicable, independence.
The guide explains that this process is inherently scalable. It does not prescribe a single method for every engagement. Instead, practitioners are expected to consider the specific facts and circumstances before deciding what safeguards are appropriate.
For example, a sole practitioner providing accounting services to a small family business may require far less documentation and fewer safeguards than a large audit firm auditing a listed company. In both cases, however, the accountant is expected to reach the same ethical outcome.
A Building-Blocks Approach - Only Apply Relevant Sections
The Code is structured so that accountants only apply the sections relevant to the work they perform.
This means practitioners are not expected to comply with requirements that do not apply to their role or services.
For example:
A tax practitioner does not need to apply independence requirements that relate only to audit engagements.
An accountant working in business applies different sections of the Code from a practitioner in public practice.
A firm performing compilations or agreed-upon procedures applies only the relevant ethical requirements for those engagements.
This approach reduces unnecessary compliance while maintaining the integrity of the ethical framework.
Independence Requirements Reflect the Public Interest
The guide also explains that the Code's independence requirements vary according to the level of public interest involved.
Engagements where there is greater public interest in the information, such as audits of listed entities and public interest entities, are subject to more stringent independence requirements.
Smaller private entities generally involve fewer mandatory independence provisions because the public interest considerations are different. Nevertheless, the underlying objective of maintaining independence remains unchanged.
Focus on Implementation Rather Than New Standards
The publication also reflects IESBA's decision, announced in June 2025, to concentrate on supporting the implementation of the Code rather than issuing significant new ethics standards before 2027. By explaining how proportionality is already embedded within the Code, the guide aims to help practitioners apply the existing requirements with greater confidence and consistency.
Why This Matters
For many accountants, particularly those in small and medium practices, the new guide provides reassurance that compliance with the IESBA Code does not require the same policies, documentation or governance structures used by large international firms.
Instead, the publication confirms that the Code was deliberately designed to be principles-based, scalable and practical, allowing firms of all sizes to uphold the same high ethical standards while applying them in a way that is appropriate to their own circumstances.
As regulatory expectations continue to evolve, the guide offers timely practical support for accountants seeking to maintain ethical compliance without creating unnecessary administrative burdens.
