As you are no doubt aware, a new “Insolvency Code of Ethics” was introduced on 1 January 2009 in order to bring the ethical considerations of IPs into line with the obligations already in place on accountants in general practice. In short, IPs are now required to consider threats to the fundamental principles (integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour), and as part of wider considerations to pay particular regard to self interest, self-review, advocacy, familiarity and intimidation threats. The IP has to identify and record any threats to the fundamental principles; evaluate those threats; and record the conclusion reached as to whether it is an “acceptable” level of threat. IPs can still take appointments where they indentify a threat that is not at an acceptable level, but only after making disclosure to creditors prior to accepting the appointment, if they receive no objections from creditors, and if they are able to put in place safeguards to reduce the threat to an acceptable level.
Whilst the Code is very much principles based, it does set out instances where the IP has to consider specific matters before accepting an appointment, e.g. being appointed after acting as investigating accountant, or where the threat will always be at an unacceptable level and an appointment can never be accepted, e.g. appointment as liquidator following appointment as receiver.
Since the Code applies to all professional work that may lead to a formal insolvency appointment the IP must consider whether there are any threats to the fundamental principles without delay after their first contact with the directors about a prospective appointment or even to give them advice. The Code also requires IPs to continue to review during the course of the insolvency appointment any threats to the fundamental principles already identified, and to consider any new threats that may come to light or arise.
To assist our clients to meet the requirements of the new Code we have developed pro forma corporate and personal ethics checklists. If you would like a copy of these checklists please contact me, Bill or Rob via our usual e-mail addresses.
Finally, one new area covered by the Code is disclosure in reports to creditors. IPs should now ensure that they report as fully as possible to creditors and members, in the circumstances of the case, and that they do so in a way that is transparent (clear) and understandable, bearing in mind the expectations of others and what a reasonable and informed third party would consider to be appropriate. Given the reference to this principle in the IPA’s Guidance on Transparency and Confidentiality this is clearly something that the IPA in particular consider to be of importance.
