The document discusses challenges faced by the Lebanese Association of Certified Public Accountants (LACPA) in meeting international ethics standards. It outlines LACPA's code of ethics and efforts to align it with the International Federation of Accountants (IFAC) code. However, some Lebanese laws conflict with ensuring auditor independence. LACPA works to amend these laws and build public trust in the audit profession through outreach, training programs, and cooperation with regulatory bodies. While progress has been made, continued efforts are needed to fully comply with global standards.

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SMO 4: IESBA Code of Ethics for Professional
Accountants
LACPA
Lebanese Association of Certified Public Accountants
The IFAC Action Plan Challenges
Presented by:
Salim ABDEL BAKI
President
LACPAJanuary 21st 2017 - Dead Sea - Jordan

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• LACPA is the sole organization for the CPA profession in
Lebanon
• Formed in 1994 under the Accountancy Profession
Act Law No 364/94 issued in August 1994
• Practicing in Lebanon = LACPA Membership
• No person shall act as certified accountant unless he/ she
is a member of the LACPA
Introducing LACPA

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Introducing LACPA (cont’d)
The LACPA has a legal personality, and is created with the
objectives of:
• Protecting the profession, promoting it and preserving its image
• Providing the necessary resources for members to thrive in a dynamic, rapidly
changing environment
• Providing members with a personal and professional development opportunities
• Promoting the cooperation and solidarity among members
• Protecting the members interests and defending their legitimate rights
• And many others…

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• Since inception, in 1994, The LACPA always worked to
ensure independence of the auditor
• In 1996, the LACPA issued its Code of Ethics for
Professional Accountants
LACPA Code of Ethics

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• In view of the international development of the
professional standards, the IESBA issued the Code of
Ethics
IFAC Code of Ethics for Professional Accountants

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LACPA issued in 2006 its amended Code of Ethics in line
with the Code of Ethics issued by the International
Accounting Ethics Standards Board for Accountants (IESBA)
and approved by the Minister of Finance.
The New LACPA Code of Ethics

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The LACPA COE it is divided into four parts and each part
is divided into sub-parts:
LACPA Code of Ethics

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• First Part: Includes the fundamental principles
represented by integrity, objectivity, professional
competence, confidentiality, and the conduct to be
followed by the association’s members.
LACPA Code of Ethics (cont’d)

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• Second Part: Includes the general rules related to the
practice of the profession, the special arrangements, and
the principles of full and total independence, thus
rendering the reports submitted by the experts
transparent, credible, and trustworthy for all the
involved parties.
LACPA Code of Ethics (cont’d)

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• Third Part: Includes the obligations of the professional
accountants in business.
LACPA Code of Ethics (cont’d)

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• Fourth Part: Addresses the professional associations
that the expert is entitled to establish or participate therein
in order to enhance the professional competence.
This code can be accessed on the LACPA website: www.lacpa.org.lb
LACPA Code of Ethics (cont’d)

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BUT
As per Article 36 of the Accountancy Profession Act Law No 364/94:
The Association Council is responsible for all matters likely to achieve the
Association’s objectives. He shall make sure that the laws and regulations related
to the profession, protecting its dignity and … are respected. It is also responsible
for…. formulating the rules of professional conduct which are to be
approved by the Finance Minister.
LACPA Code of Ethics Limitation

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The LACPA has always used its best
endeavors to meet with the IFAC SMO
Obligations

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• The challenges faced are in 2 aspects:
– The first one is in the internal environment related to the members’
professional competencies and Due care.
– The second one is the external environment which mainly affects
the members’ professional independence and integrity.
Challenges of the COE application

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The challenge related to the professional competencies of members is
developed through:
 Maintenance of professional competencies.
 Attainment of professional competencies.
Aspect 1: The Internal Environment:

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(i) Maintenance of professional competencies:
 Monitoring the professional development of LACPA members and
updating their skills in order to keep pace with the international
professional requirements.
Aspect 1: The Internal Environment: Maintenance (i)

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(ii) To Ensure Compliance with the LACPA Code of Ethics,
the LACPA:
 Set a minimum Audit fee where all professionals should comply
with.
 Imposed a formal communication, professional clearance, from
the successor auditor to the predecessor in case of change of
auditor.
Aspect 1: The Internal Environment: Maintenance (ii)

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The Disciplinary Board: Moreover, the LACPA has a
Disciplinary board and an investigation committee (chapter 3
of The Accountancy Profession Act of the Lebanese
Association of Certified Public Accountants Law No 364-
articles 43 – 54).
Aspect 1: The Internal Environment: Maintenance (iii)

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(iv) Opening communication channels with leading international PAOs
 As per the MOUs signed with the ACCA and IMA, the LACPA launched professional
courses in DipIFR (84 hrs.), Auditing and Assurance (42 hrs.), Managerial
Accounting and Reporting (48 hrs.). In addition to the Law and Taxation Course
(44 hrs.).
 As per cooperation protocol signed with the AICPA, the LACPA is now able to share
information, training materials and expertise with the AICPA.
 Hence, this cooperation offers the LACPA members, as well as the business
community, a wide variety of continuing professional education publications,
programs, certificates and articles.
Aspect 1: The Internal Environment: Maintenance (iv)

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 Hence, securing a well diversified continuous training program
(Courses, workshops, seminars, congresses, forums…).
Aspect 1: The Internal Environment: Maintenance

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 Attainment of professional competencies:
 In addition to the courses offered, the LACPA training institute is
offering specialized seminars and workshops on special topics as Audit
and Assurance (ISAs), IFRS, Ethics in Business, Business Soft Skills,
Taxation, etc…
 To attain professional competencies, ethical aspects and the code of
ethics, code of conduct are addressed during the LACPA exams.
Aspect 1: The Internal Environment: Attainment

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The Legal Challenges: the Lebanese laws do not give the Auditor the
support for Integrity, Objectivity, Confidentiality and Professional
Behavior.
Aspect 2: The External Environment

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Legal Challenges Faced
• The Code of Commerce in several articles do not ensure the
independence of the auditor.
• Actually, it places a penal liability in many aspects.

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Some examples: Legal Challenges Faced
• Article 174: The Auditors exercise a permanent control over the
company's operations. They may require to be acquainted with all
actions, all documentary evidence in support of accounts, demand all
information from the Directors….
LACPA is working on amending the Article 174 in a way that the Auditors are expected
to give their opinion about the financial statements prepared by the directors… and
the directors are obliged to provide the auditors with all financial statements, notes,
disclosures and relevant information to the auditor on due dates.

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• Article 158: The Board of Directors and the supervisory commissioner submit
-separately- to the general assembly a report on the transactions to be
concluded, and the general assembly shall take its decision in the light of
these two reports.
LACPA is working on the amendment of the Article 158 to report only the
concluded deals signed by the directors.
Legal Challenges Faced

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• Article 107 Every fictitious dividend distribution involves the civil liability of the
Directors towards whosoever may be prejudiced therefrom. Liability of the
Auditors is equally involved if they have failed in their supervisory duties.
Penal liability of these very persons may be involved if dividends are
distributed in the absence of any Balance Sheet or by virtue of a report on
fraudulent stock-taking, Balance Sheet, or Profit and Loss Account. Their
penalty shall be that of fraud.
LACPA is working on amending the Article 107 Liability of the Auditors is
equally involved unless they proved that they have performed their supervisory
duties properly.
Ethicalbehaviortobeprioritized
Legal Challenges Faced

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Legal Challenges Faced: What Could be Done?
• Accordingly, as per the above mentioned examples, the Auditor
integrity and objectivity are affected. He is subject to penal
liability.
• LACPA is still working towards the amendment of the local relevant laws
with the Legal Parliamentary Commission in charge of this amendment.
• LACPA is working in parallel on the amendment of the Accountancy
Profession Act Law No 364/94 including the article 36 mentioned
earlier which allows revision of the Code of Ethics without the approval
of the Minister of Finance.

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The Other Option:
• Since it is time consuming to move on due to
several political aspects.
• The LACPA worked on several tracks and
followed strategies that have somehow worked
and we started to reap the benefits:

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a distinguishing mark of the Audit profession is its
acceptance by the general public.
The Auditor is a trusted advisor who can provide the
specialized services, objective guidance, and expert
advice crucial for the growth of any business as well as
compliance with the applicable laws and regulations.
Since…

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CONFIDENCE and TRUST
LACPA Motto became:

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Gain Confidence and Build Trust
LACPA Strategy

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• Through Ongoing Professional Coordination with Regulatory, Judiciary and
Supervisory Bodies such as:
 The Special Investigation Commission (SIC) Fighting Money Laundering – BDL
 The Banks’ Control Commission (BCC)
 The Insurance Control Commission (ICC)
 The Capital Market Authority (CMA)
• Through MOUs signed with special interest Groups: the Beirut Bar
Association, Chamber of Commerce in Beirut (CCIB) and collaborating in
specialized business community events in order to form well-founded views
and perceptions about our role within the business environment and to
create professional awareness among this community.
Gain Confidence and Build Trust

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• Regular contact with the politicians involved with the work of
auditor (mainly the ministry of Finance, Ministry of Justice)
members of parliament involved in concerned parliamentary
committees (i.e, Budget and Finance Parliamentary Committee,
Legal Parliamentary Committee)
Gain Confidence and Build Trust (cont’d)

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Law No 44 of November 24, 2015 Fighting Money Laundering and Terrorist Financing:
In Article 12: ….the auditors, shall have the same immunity in performing their
duties under the provisions of this Law as the Chairman, members, staff and
delegates of “the Anti Money Laundering Commission” when they report the details of
operations they suspect to be related to money laundering or terrorist financing.
Started to Reap the Benefits

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LACPA worked on changing the decision of the Insurance
Control Commission that required the Auditor to sign the
insurance intermediaries’ annual reports to the ICC.
The thing that was perceived by the LACPA an issue affecting
the auditor independence and objectivity.
Started to Reap the Benefits

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As a result, and after negotiating the matter with the Minister of
Economy and the ICC.
The decision changed to comply with the International Standard on
Related Services (ISRS) 4400 'Engagements to perform agreed-upon
procedures regarding financial information.‘ and
The auditor now issues a separate “Report Factual Findings for
Insurance Intermediaries”.
Both examples reflect the confidence and trust that the Audit profession have
gained through years of hard work.
Started to Reap the Benefits

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 Support from all those involved to enforce the required legal
amendments.
 Support LACPA in its efforts for the IPSAS application: Once
IPSAS is applied, the transparency of the public sector will be
reflected in all aspects and laws would be amended accordingly.
 Support or enforce changing the Public Accountancy Act to
comply with international standards.
 Lobbying to enforce the application.
Hard work need to be done and require:

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THANK YOU
Any Questions???

39. www.lacpa.org.lb