Thank you for signing up to receive eNews from the International Ethics Standards Board for Accountants (IESBA, the Ethics Board). This edition provides a summary of decisions made at the Ethics Board’s meeting held September 16-18, 2013, in Sydney, Australia. See the Meeting Page for the meeting highlights, including a podcast summary and agenda papers
1. Responding to a Suspected Illegal Act
The Ethics Board considered an alternative to the approach set out in the Exposure Draft, Responding to a Suspected Illegal Act, regarding a professional accountant’s responsibilities when encountering a suspected illegal act. Among other matters, the Ethics Board:
- Discussed and agreed to align the term “illegal act” with the term “non-compliance with laws or regulations” used in the International Standards on Auditing (ISAs);
- Explored the possibility of establishing a presumption, which can be rebutted, that disclosure will be made under certain conditions by professional accountants for clients that are public interest entity audit clients; and
- Discussed documentation, changes to other sections of the Code of Ethics for Professional Accountants (the Code), and communication between successor and predecessor accounting firms.
The Ethics Board is considering releasing a revised draft of the proposed standard for public comment and will review this draft at its December 2013 meeting
2. Structure of the Code
The Ethics Board received an update on the Structure of the Code Working Group’s preliminary analysis of research findings regarding ways to improve the usability of the Code. Among other matters, the board discussed enhancing the visibility of the Code’s requirements; clarifying responsibility for compliance with the Code’s requirements; simplifying the language in the Code; repackaging parts of the Code; and an electronic Code. The Ethics Board will receive the Working Group’s preliminary report at its December 2013 meeting.
3. Long Association of Senior Personnel (Including Partner Rotation) with an Audit Client
The Ethics Board is reviewing the long association provisions in Section 290 of the Code to ensure that they continue to provide robust and appropriate safeguards against the familiarity and self-interest threats arising from long association with an audit client. Following research conducted by the working group, the Ethics Board discussed preliminary issues, including:
- Potential structural changes affecting the profession in the context of external regulatory developments relating to audit reform;
- The involvement of those charged with governance in rotation decisions;
- Who on the engagement team should be subject to rotation with respect to audits of public interest entities (PIEs);
- The duration of the “time on” and “cooling off” periods;
- Permissible activities during the “cooling off” period;
- Exceptions to rotation requirements; and
- The need for rotation requirements for audits of entities that are not PIEs.
The board will continue its deliberation of the issues at its December 2013 meeting.
4. Emerging Issues and Outreach
The Ethics Board discussed and broadly supported proposals for processes to deal with emerging issues and outreach. At its December 2013 meeting, the board will consider refinements to the proposed processes and draft Terms of Reference for a standing working group to oversee emerging issues and outreach activities going forward.
5. Review of Part C of the Code
As part of the first phase of this project, the Ethics Board discussed adding a potential new section to Part C of the Code, aimed at professional accountants in business, that would address pressure from superiors and others to engage in unethical or illegal acts and related issues. Among other matters, the board discussed the scope of the guidance, and how it would be applied using a threats and safeguards approach. As part of the same phase of the project, the board will consider issues relating to the preparation and reporting of information at its December 2013 meeting.
6. Non-Assurance Services
The Ethics Board approved a project proposal to review the non-assurance services (NAS) provisions in the independence sections of the Code (Sections 290 and 291) as these relate to the following three areas: management responsibilities; services of a routine or mechanical nature; and emergency exceptions for bookkeeping and taxation services. The board also discussed producing a paper that would set out its views and positions on NAS and related matters. The Ethics Board will review a first draft of proposed changes to the Code related to the above three areas at its December 2013 meeting.
7. Future Strategy and Work Plan
The Ethics Board discussed a number of matters arising from the International Auditing and Assurance Standards Board (IAASB)'s Audit Quality project that may have implications for the Ethics Board’s future strategy and work plan. These matters included: the need for additional guidance to expand upon some of the fundamental principles in the Code as these apply to auditors; information sharing by auditors with respect to shareholders and regulators, and between auditors when there is a change of auditors; the need for, and who should be involved in developing, guidance on audit firm governance; and the need for a process to analyze root causes of audit failures.
The Ethics Board also discussed an initial draft of the Consultation Paper, IESBA Strategy and Work Plan 2015-2018, setting out the context for the board’s future strategy, proposed strategic themes, and potential actions and priorities. The board will consider a revised draft of the Consultation Paper for approval at its December 2013 meeting.
8. Definition of Those Charged with Governance
Last month, the Ethics Board released a revised definition of “those charged with governance” in, and related changes to, the Code. The amendment is intended to more closely align the definition in the Code with that in the International Auditing and Assurance Standards Board (IAASB)’s International Standard on Auditing (ISA) 260, Communication with Those Charged with Governance, thereby eliminating any potential confusion. The Ethics Board does not expect any changes will be necessary to accounting firms’ systems and methodologies or common practice.
9. Next Meetings
Meetings of the Ethics Board and the Ethics Board’s Consultative Advisory Group (CAG) are open to the public. The next meeting of the board will be held in New York, USA, on December 4-6, 2013. The next meeting of the CAG will be held via teleconference on October 10, 2013. The next physical meeting of the CAG will be held on March 10, 2014, in New York, USA.
For more information and to register to attend an Ethics Board or Ethics Board CAG meeting as an observer, visit Ethics Board Meetings and Ethics Board CAG Meetings respectively.
10. 2013 Handbook of the Code of Ethics Available
The 2013 Handbook of the Code of Ethics for Professional Accountants is now available to download or purchase. The 2013 edition contains the final revised pronouncements addressing a breach of a requirement of the Code and conflicts of interest, and the revised definition of “engagement team.” These changes will be effective in 2014; see the individual pronouncements for details. To download a free electronic copy of the handbook for personal use or purchase print copies, see Handbook of the Code of Ethics for Professional Accountants.
11. Registration Now Open for World Congress of Accountants 2014; Sponsorship Opportunities Available
The next World Congress of Accountants (WCOA) will be hosted by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) in Rome, Italy in 2014. Themed 2020 Vision: Learning from the Past, Building the Future, the 2014 WCOA will be held November 10-13 at the Auditorium Parco della Musica. More than 4,000 professionals from around the world will convene at this quadrennial IFAC event. WCOA 2014 will look back to explore the evolution of the accountancy profession and forward to showcase the innovations that will shape the future of the profession. Register Now.
The WCOA also provides a global platform for organizations and firms to share their projects and visions via various sponsorship opportunities. For more information, please contact firstname.lastname@example.org or Dimarco@wcoa2014rome.com.