ICMAI Issues Revised Code of Ethics Including Independence Standards: Effective from 1st June 2025

Published on cmaknowledge.in
Author: CMA Knowledge Team

Introduction

In a landmark move to reinforce ethical conduct within the cost and management accounting profession, The Institute of Cost Accountants of India (ICMAI) has announced a newly revised Code of Ethics, which comes into effect from 1st June 2025. The revised code introduces comprehensive Independence Standards, aligning Indian CMAs with international ethical practices.

Why the Revised Code Matters

Ethical standards are the foundation of professional credibility. The ICMAI Code of Ethics 2025 addresses the changing regulatory landscape, global practices, and the evolving challenges faced by finance professionals. It aims to equip CMAs with the right framework to make sound and ethical decisions, both in practice and employment.

Key Highlights of the ICMAI Code of Ethics 2025

1. Five Fundamental Ethical Principles Reaffirmed

The Code re-emphasizes five core principles every CMA must adhere to:

• Integrity: Be truthful and honest in all professional matters.
• Objectivity: Avoid bias, conflict of interest, and undue influence.
• Professional Competence and Due Care: Continuously improve skills and perform duties diligently.
• Confidentiality: Respect client and employer data privacy.
• Professional Behavior: Abide by laws and avoid any act that brings disrepute to the profession.

2. Conceptual Framework for Ethical Judgment

The updated code introduces a conceptual framework approach for resolving ethical conflicts. CMAs must:

• Identify threats such as self-interest, self-review, advocacy, familiarity, and intimidation.
• Evaluate their significance and impact.
• Apply appropriate safeguards to mitigate risks.

This flexible model helps members handle real-world situations that may not be explicitly covered under existing rules.

3. Introduction of Independence Standards

The 2025 Code now includes a dedicated section on Independence Standards for:

• Audit assignments
• Assurance and attestation engagements
• Other regulatory services

These standards define both “independence of mind” and “independence in appearance”. Key areas include:

• Prohibited relationships or interests with clients
• Restrictions on non-assurance services to audit clients
• Mandatory cooling-off periods and rotation policies

This brings ICMAI practices closer to the IESBA Code of Ethics issued by the International Federation of Accountants.

4. Alignment with Global Standards

The Code is aligned with internationally recognized ethical frameworks. This alignment allows Indian CMAs to:

• Operate globally with greater acceptance
• Strengthen the reputation of Indian cost audit firms
• Enhance stakeholder trust in financial systems

5. Technology and Ethics

The Code now considers technology-related ethical dilemmas, including:

• Responsible use of AI and analytics in financial reporting
• Ensuring confidentiality in cloud computing environments
• Managing ethical risks in automation and digital transformation

This future-facing approach ensures CMAs are prepared for the evolving professional landscape.

Who Must Follow the New Code?

The ICMAI Code of Ethics 2025 applies to:

• All ICMAI members in practice or employment
• Cost audit and consulting firms
• CMA students during internships or practical training

Compliance is mandatory. Violations may lead to penalties, disciplinary action, or removal from membership rolls.

Action Plan for Practicing CMAs

Here’s what practicing CMAs should do before 1st June 2025:

• Review and update firm policies and internal controls
• Conduct staff and trainee workshops on the new Code
• Identify and mitigate independence risks across engagements
• Document threat assessments and applied safeguards
• Monitor ICMAI announcements and clarifications

Implementation Timeline

• Release Date: May 2025
• Effective Date: 1st June 2025
• Transitional Period: 30 days
• Peer Review for Compliance: From August 2025 onward

Penalties for Non-Compliance

The ICMAI Disciplinary Directorate has the authority to initiate inquiries, issue notices, and impose penalties ranging from warnings to suspension and debarment in case of violations. Ethical compliance is now a legal obligation, not just a best practice.

How to Access the Revised Code

Members can download the full document from the official ICMAI portal:

➡️ Click here to download the ICMAI Code of Ethics 2025 (PDF)

Visit https://icmai.in for further guidance and updates.

Frequently Asked Questions (FAQs)

Q1. Is the Code applicable to CMA students?

Yes. Students are expected to follow ethical behavior during internships, training, and any academic assignments.

Q2. Will there be training on the new Code?

Yes. ICMAI is expected to conduct webinars and physical workshops to guide members through the changes.

Q3. Can a member be penalized for minor breaches?

Yes. Even minor violations may attract disciplinary action depending on their nature and frequency.

Q4. Will this Code be updated regularly?

Yes. The ICMAI periodically reviews the Code to reflect global standards and emerging challenges.

Key Highlights of Code of Ethics for CMAs

The Institute of Cost Accountants of India (ICAI) has issued a revised and comprehensive Code of Ethics that comes into effect from 1st June 2025. It sets ethical expectations and standards for all practicing and non-practicing members (CMAs), including detailed Independence Standards for audit and assurance engagements. Below are the key highlights:

1. Issued By:

• Developed and published by the Cost Auditing and Assurance Standards Board (CAASB) of the ICAI.
• Approved by the Institute's Council in its 358th meeting.

2. Applicability:

• Applies to all CMAs — both in public practice and in business (employed in corporate, government, education, or non-profit sectors).
• Also sets ethical expectations for assurance engagements.

3. Fundamental Principles of Ethics:

Every CMA must comply with the following five core ethical principles:

1. Integrity: Be honest and straightforward in all professional and business relationships.
2. Objectivity: Avoid bias, conflict of interest, and undue influence.
3. Professional Competence and Due Care: Maintain professional knowledge and skill to ensure competent service.
4. Confidentiality: Respect and protect all confidential information.
5. Professional Behaviour: Comply with laws, regulations, and avoid any conduct that discredits the profession.

4. Structure of the Code:

The Code is divided into several parts:

• Part 1: General principles and conceptual framework (applies to all CMAs)
• Part 2: Additional requirements for CMAs in Business
• Part 3: Additional requirements for CMAs in Practice
• Part 4A: Independence for Audit and Review Engagements
• Part 4B: Independence for Assurance Engagements (excluding audit and review)
• Glossary: Definitions and explanations of key terms used in the Code

5. Conceptual Framework:

The Code introduces a robust Conceptual Framework requiring CMAs to:

• Identify threats to compliance with ethical principles
• Evaluate the significance of such threats
• Take action to eliminate or reduce threats to an acceptable level

6. Types of Ethical Threats Identified:

Threats that may compromise compliance with the fundamental principles include:

• Self-interest: Personal gain or benefit influencing decisions
• Self-review: Reviewing own previous work without objectivity
• Advocacy: Promoting client or employer’s interest at the cost of objectivity
• Familiarity: Being too close to a client or employer, compromising independence
• Intimidation: Pressure from others affecting professional judgment

7. Independence Standards:

CMAs performing audits and assurance services must comply with strict independence requirements, including:

• Independence of Mind: Ability to express conclusions without undue influence
• Independence in Appearance: Avoidance of situations that may appear biased to third parties

8. Requirements and Application Material:

Each section of the Code contains:

• Requirements (R): Mandatory rules (denoted with 'R' and “shall”)
• Application Material (A): Provides guidance, context, and examples (denoted with 'A')

9. Ethical Culture and Professional Judgment:

• Organizations are expected to promote an ethics-based culture from top leadership down.
• CMAs must demonstrate professional skepticism, sound judgment, and be vigilant against cognitive biases such as confirmation bias, automation bias, groupthink, etc.

10. Confidentiality Guidelines:

• CMAs must protect confidential information even after leaving employment or client relationships.
• Disclosure is only permitted under legal or professional obligations, or with proper authorization.

11. Conflicts of Interest:

• CMAs must not let personal or organizational conflicts interfere with objectivity or ethical obligations.
• Full disclosure and safeguards are required if conflicts exist.

12. Preparation and Presentation of Information:

• CMAs must ensure all data, reports, and analysis are accurate, fair, and in line with professional standards.
• Intentional misstatements or misleading reporting are prohibited.

13. Whistleblower Protection and Ethical Reporting:

• The Code encourages CMAs to report unethical behavior.
• Organizations must have policies in place to protect whistleblowers.

14. Global Alignment:

This Code is based on the International Code of Ethics developed by IFAC (International Federation of Accountants) to ensure global convergence and best practices.

15. Effective Date:

The new Code becomes mandatory for all members from 1st June 2025.

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Conclusion: This revised Code of Ethics aims to uphold the highest standards of professionalism, independence, and ethical conduct among CMAs. Every member is expected to apply this Code diligently in all professional circumstances, ensuring that the trust placed in the profession is consistently maintained.

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