Changes to the ICAS Code of Ethics – what do the changes mean for ICAS firms?

In our first blog, we discussed the changes made to the ICAS Code of Ethics and what those changes mean for members.
 

The 2026 updates to the ICAS Code of Ethics have significant implications that extend well beyond individual members. For firms, the strengthened framework around professional behaviour raises important questions about how they respond when a member employed by or practising within the firm may have fallen short of the expected standard. Those questions touch on reporting obligations, internal investigations, and the practical steps firms need to take to ensure they are meeting their own regulatory duties.

ICAS member firms are not bystanders

ICAS member firms carry their own obligations, and the 2026 changes make it more important than ever that accountancy firms understand what those obligations require of them in the context of behavioural misconduct.

The starting point is the duty to report. Member firms have a duty to report conduct which might fall foul of the ICAS regulations to the conduct department. It is not a discretionary matter; where a firm becomes aware of facts or matters which, in its reasonable opinion, indicate that a member may be liable to disciplinary action, the obligation to report arises. The strengthened framework around professional behaviour under paragraph 115.1 A2 means that this duty is now directly engaged by a wider range of conduct than may previously have been appreciated, including conduct at work social events, on business trips, and in other settings that fall within a member's professional life.

The practical consequence is that firms can no longer treat behavioural misconduct as purely an internal HR matter. Where the conduct in question involves an ICAS member, the firm must consider whether a referral to ICAS is required, and that consideration needs to be made carefully and with appropriate advice.

The reporting obligation in practice

The duty to report does not necessarily require a firm to make an immediate referral to ICAS the moment a concern arises. Where a firm has an internal reporting or investigation process, it is reasonable to direct concerns through that process in the first instance. A firm may await the outcome of an internal investigation before deciding whether to report to ICAS, provided that decision is made in good faith and without unreasonable delay.

However, firms should be aware that delay can itself become a problem. The decision about whether and when to report should therefore be kept under active review throughout any internal process.

When an internal investigation is required

In many cases, a firm will need to conduct an internal investigation before it is in a position to assess whether a report to ICAS is warranted. An investigation is often an important and necessary step in that process. It allows the firm to establish the facts, assess the seriousness of the conduct, and make an informed decision about next steps.

However, conducting an internal investigation into behavioural misconduct is not straightforward, and firms should approach it with care. A poorly conducted investigation can undermine the firm's position, compromise the integrity of any subsequent regulatory proceedings, and expose the firm to additional risk. There are a number of important considerations that should be addressed before an investigation begins, including the following.

• Establishing the core investigation group. The firm should identify at the outset who will be responsible for conducting the investigation. Those individuals should have no personal involvement in the matters under review and should be sufficiently senior to carry the necessary authority. In some cases, it may be appropriate to appoint external investigators, particularly where the conduct involves senior members of the firm or where there is a risk that internal investigators may be perceived as lacking independence.
   
• Drafting terms of reference. Clear terms of reference should be agreed before the investigation commences. These should set out the scope of the investigation, the issues to be examined, the process to be followed, and the timescales involved. Well-drafted terms of reference help to ensure that the investigation remains focused and that its conclusions are capable of withstanding scrutiny.
   
• Preserving evidence. Steps should be taken at an early stage to preserve relevant evidence, including emails, messages, documents, and any other records that may be material to the investigation. Failure to preserve evidence can seriously damage the credibility of the investigation.
   
• Legal professional privilege. Firms should consider carefully whether legal professional privilege applies to the investigation or to parts of it. Firms should take advice on this question early, as decisions made at the outset of an investigation can affect whether privilege is available later.
   
• Confidentiality and data protection. Investigations of this kind may involve the processing of personal data, and firms must ensure that they are complying with their obligations under data protection legislation throughout. Consideration should also be given to how confidentiality is managed during the investigation, both to protect the integrity of the process and to protect the individuals involved.
   
• Criminal conduct. Where there is any possibility that the conduct under investigation may be criminal in nature, the firm must proceed with particular caution. It is essential to avoid taking steps that could interfere with any potential criminal investigation or prosecution. If there is any doubt about whether the conduct may be criminal, the firm should seek legal advice before proceeding further.

Applying the RITP test

When assessing whether the conduct of a member may fall within the scope of paragraph 115.1 A2, the relevant standard is the reasonable and informed third party (RITP) test. The question is not whether the firm considers the conduct to have been acceptable, but whether a reasonable and informed third party, with the relevant knowledge and experience to evaluate the conduct objectively, would be likely to conclude that it brings discredit to the profession.

Firms should apply this test when assessing the outcome of an internal investigation and when deciding whether a report to ICAS is required. Where the conduct, viewed objectively, would be likely to be regarded as falling below the standard expected of a chartered accountant in their professional life, the reporting obligation is likely to be engaged.

It is also worth bearing in mind that the RITP test applies regardless of the seniority of the member involved. The obligations under paragraph 115.1 A2 apply equally to partners, directors, managers, and more junior members of staff. Firms should resist any temptation to apply a different standard depending on the seniority or commercial importance of the individual concerned.

The importance of taking advice

Given the complexity of the issues involved, firms facing a potential conduct matter of this kind should seek legal advice at an early stage. The decisions made in the initial stages of a matter, including whether to investigate, how to structure that investigation, and when to report to ICAS, can have a significant bearing on how the matter develops and on the firm's own regulatory position.

Early advice can help to ensure that any investigation is conducted robustly, that the firm's reporting obligations are properly understood and met, and that the firm is well placed to respond to any subsequent regulatory proceedings. It can also help to identify and manage the various legal risks that arise in this context, including those relating to employment law, data protection, and privilege.

further information

At Kingsley Napley, we advise firms on regulatory and disciplinary matters across the professional services sector, including conduct investigations and the management of referrals to professional bodies. If you would like to discuss any concerns in confidence, please do not hesitate to get in touch.