Ethical Requirements Take Center Stage in Ecuador’s Accounting Landscape

Ecuador has made significant strides in implementing ethical requirements for its accountancy professionals, with two professional accountancy organizations (PAOs) setting the tone for self-regulation. However, a closer look at the country’s regulatory landscape reveals both progress and areas for improvement.

Ethical Requirements: A Work in Progress

The Colegio de Contadores Públicos de Pichincha y del Ecuador (CCPPE) has adopted the 2018 International Code of Ethics issued by the International Ethics Standards Board for Accountants (IESBA), while the Federación Nacional de Contadores del Ecuador (FNCE) has its own Code of Ethics. While both PAOs have made efforts to establish ethical standards, the extent of alignment with IESBA’s requirements remains unclear.

Regulatory Landscape

The Ministry of Economy and Finance (MoF) is responsible for setting accounting standards for the public sector, having adopted accrual- basis International Public Sector Accounting Standards (IPSAS) through Agreement No. 67 of 2016. However, the implementation of IPSAS is still in its early stages, with 2020 being the first year of application.

Investigation and Discipline Mechanisms: A Work in Progress

The financial sector regulators – Superintendence of Companies, Securities, and Insurance (SCVS) and Superintendence of Banks (SB) – have authority over enforcement related to auditors and audit firms providing services to certain regulated companies. However, the extent to which their systems align with best practices remains unclear.

• Professional accountancy organizations like CCPPE and FNCE are responsible for implementing investigation and disciplinary mechanisms for their members.
• CCPPE has conducted an assessment of its system against SMO 6 requirements, identifying gaps in areas such as composition of the investigative committee and public availability of proceedings’ results. It is unclear whether FNCE has established a similar mechanism.

International Financial Reporting Standards (IFRS) Adoption

The SCVS has adopted IFRS and IFRS for Small and Medium-sized Entities (SMEs) by reference and without modification. Companies under SCVS oversight may use IFRS for SMEs if they meet specific conditions, while banks and other financial institutions are required to prepare their financial statements in accordance with the accounting norms issued by the SB.

Conclusion

While Ecuador has made progress in implementing ethical requirements and adopting international standards, there is still room for improvement. The country’s accountancy professionals and regulatory bodies must continue to work together to ensure a robust and effective system that upholds professional ethics and promotes transparency and accountability.

Sources:

• Colegio de Contadores Públicos de Pichincha y del Ecuador (CCPPE)
• Federación Nacional de Contadores del Ecuador (FNCE)
• Superintendence of Companies, Securities and Insurance (SCVS)
• Superintendence of Banks (SB)
• Relevant legislation and publications.