IESBA Strategy Survey Questionnaire April 2017

Transcription

1 IESBA Strategy Survey Questinnaire April 2017 Abut the IESBA The Internatinal Ethics Standards Bard fr Accuntants (IESBA) is a glbal independent standard-setting bard. Its bjective is t serve the public interest by setting high-quality ethics standards fr prfessinal accuntants (PAs) wrldwide and by facilitating the cnvergence f internatinal and natinal ethics standards, including auditr independence requirements, thrugh the develpment f a rbust, internatinally apprpriate Cde f Ethics fr Prfessinal Accuntants (the Cde). The IESBA believes that a single set f high-quality ethics standards can enhance the quality and cnsistency f services prvided by PAs thrughut the wrld, thereby cntributing t public cnfidence in the accuntancy prfessin. The IESBA sets its standards under the versight f the Public Interest Oversight Bard (PIOB), and with advice frm the IESBA Cnsultative Advisry Grup (CAG). Request fr Input As the first step in develping a new strategy and wrk plan fr its next planning hrizn beynd 2018, the IESBA is seeking the views f stakehlders, thrugh this survey, as t the key issues that it shuld address. The input frm this survey will infrm the IESBA as it develps its prpsed new strategy and wrk plan, which it expects t issue fr frmal public cnsultatin in This survey sets ut a number f ptential tpics that culd be future strategic pririties fr the IESBA. Each tpic descriptin prvides an indicatin f the nature f the ethical issues that the IESBA may need t explre r research in establishing the merits f a ptential standard-setting prject r ther initiative n the tpic. This survey is nt intended t lay ut the full scpe f any prject r initiative that the IESBA might undertake with respect t any f the tpics nr present a cmprehensive analysis f all the ethical issues that might need t be addressed. Respndents will have an pprtunity t cmment n the verall priritizatin f the IESBA s future wrk in the light f its strategic bjectives and priritizatin criteria when it issues its strategy cnsultatin paper in Respndents are asked t indicate their tp six pririties ut f this list f ptential future pririties, and whether there are ther tpic(s) that shuld be priritized. As they cnsider the varius tpics, respndents are als invited t prvide any cmments they may have n each tpic and, in particular, why a given tpic shuld be priritized ver anther. In a sectin twards the end f the survey, the IESBA has set ut fr infrmatin a number f pre-existing cmmitments related t standard setting (r the Cde mre bradly) that will likely cntinue beynd the end f its current strategy perid (i.e., 2018) r start in the new strategy perid. The IESBA wuld welcme any cmments respndents may have n these pre-existing cmmitments. Finally, the survey prvides an pprtunity fr respndents t cmment n any ther strategic matters they believe the IESBA shuld cnsider as it develps its next strategy and wrk plan. Please cmplete this survey by July 18, Althugh the IESBA prefers that the survey be cmpleted nline, cmments can als be ed t Ken Sing, IESBA Technical Directr at KenSing@ethicsbard.rg. All respnses, whether cmplete r partial, will be accepted and cnsidered a matter f public recrd. Page 1 f 22

2 Sectin A: Classificatin 1. Frm which perspective are yu prviding this feedback? Academia Audit versight bdy Crprate gvernance Investr r investr representative Other users f financial statements (e.g., custmer, creditr/supplier, lender), please specify: Prfessinal accuntant in business preparer f financial statements Prfessinal accuntant in business ther Prfessinal accuntant in public practice Representative f an IFAC member bdy Regulatr Standard setter Other, please specify: IFAC SMPC Please prvide the fllwing cntact infrmatin: Yur name and jb title/rle: Yur address: Yur rganizatin's name, if applicable: 2. In which cuntry r jurisdictin d yu r yur rganizatin wrk r serve? (If internatinal, please indicate s; if a regin f the wrld, please indicate which regin.) Internatinal Page 2 f 22

3 Sectin B: Pssible Future Standards-Related Prjects r Initiatives This part f the survey describes the fllwing pssible future prjects r initiatives: I. KEEPING THE CODE RELEVANT IN AN EVOLVING GLOBAL ENVIRONMENT 1. Trends and develpments in technlgy and innvatin 2. Emerging r newer mdels f service delivery II. MAINTAINING A HIGH-QUALITY CODE FOR APPLICATION BY PAS GLOBALLY 3. Cncepts f public interest entity and listed entity 4. Cllective investment vehicles 5. Tax planning and related services 6. Materiality 7. Cmmunicatin with thse charged with gvernance 8. Dcumentatin 9. Familiarity threat in relatin t extant Part C 10. Breach f the Cde 11. Definitins and descriptins f terms 12. Pst-implementatin review f the restructured Cde III. GENERAL 13. Meaning f public interest in the glbal cntext Nt all initiatives the IESBA decides t undertake will necessarily result in changes t the Cde as a prper needs analysis supprted by apprpriate study will be required. In sme cases, fr example, the IESBA might decide t cmmissin the develpment f IESBA Staff publicatins as ppsed t making changes t the Cde. Pause in Any New Changes t the Cde Becming Effective The IESBA is currently in the final stage f a prject t restructure the Cde t enhance its understandability and usability. This prject is expected t be cmpleted by the end f 2017, with the restructured Cde issued by the end f Q While the restructuring f the Cde is nt intended t change the substance f the extant Cde, substantive changes have been included in a number f areas as a result f the cmpletin f ther prjects that have been prceeding cncurrently with restructuring wrk. Given the vlume f these changes, the IESBA has been sensitive t cncern amng stakehlders regarding standards verlad. Accrdingly, the IESBA has decided that any new changes t the Cde after the cmpletin f the restructuring prject will nt becme effective befre June 15, 2020 unless there is an urgent need t respnd t new r unfreseen circumstances. This pause will allw time fr accuntancy firms ( firms ), natinal standard setters, IFAC member bdies and PAs t cnsider and implement the changes that will be reflected in the restructured Cde. Further infrmatin abut the restructuring f the Cde can be accessed here. Page 3 f 22

4 I. KEEPING THE CODE RELEVANT IN AN EVOLVING GLOBAL ENVIRONMENT B.1 Trends and Develpments in Technlgy and Innvatin This initiative wuld seek t understand the transfrmative effects f trends and develpments in technlgy and innvatin n the assurance, accunting and finance functins, and explre their ethical implicatins. Recent trends and develpments in technlgy and innvatin such as data analytics, emergent artificial intelligence, scial netwrks, clud cmputing and cyber-security are causing disruptins in hw PAs and firms undertake their wrk, including hw they carry ut their duties, deliver prfessinal services, and transfrm their business and fee-charging mdels. Data analytics, fr example, is impacting hw firms perfrm audit engagements, with stakehlders such as the audit versight cmmunity and the Internatinal Auditing and Assurance Standards Bard (IAASB) actively cnsidering hw they shuld respnd. A number f majr jurisdictins have als in recent years intrduced legislatin r regulatin gverning cyber-security. As a result, questins may need t be addressed regarding the ethical implicatins f these trends and develpments, fr example: Wuld new ethics standards be needed t address emergent patterns f scial behavir caused by technlgical disruptins? Wuld there be a need t recnsider the cncept f independence f mind and the fundamental principles f integrity, bjectivity and prfessinal behavir when reliance is placed n machine anticipatin, synthesis and deductin (fr example, in the cntext f assessing audit evidence, prviding strategic, financial r peratinal advice t clients, r preparing r presenting infrmatin)? Are there any ethical issues frm develpments in infrmatin and cmmunicatin technlgies, fr example, with respect t cmpliance with data privacy r intellectual prperty laws and regulatins, r in terms f cmpliance with the fundamental principle f cnfidentiality? Are there any ethical implicatins frm newer types f services such as cyber-security advisry services r data analytics that firms may prvide t clients? Are there any ethical implicatins with respect t wnership f data when the infrmatin is stred in the clud r prcessed and transmitted by third party service prviders lcated in different parts f the wrld? Because the applicatin f technlgy is changing in respnse t experience and new develpments, it is likely that any IESBA initiative n this tpic wuld invlve the IESBA explring the issues thrugh the develpment f discussin papers r thught pieces. The SMPC agrees that trends and develpments in technlgy and innvatin is a key area which the IESBA needs t actively mnitr. The 2016 IFAC Glbal SMP Survey fund that the anticipated impact f technlgy develpments ver the next five years had increased substantially frm The likely impact f digital disruptin n the wrk perfrmed by prfessinal accuntants is a significant issue, and the rapid and differential pace f change make assessing the full impact at any ne pint f time very difficult. Page 4 f 22

5 Given the IESBA s acceptance f the need t limit changes t the Cde in the near future, it makes sense fr the IESBA t start a fact-finding prject t mnitr develpments in rder that the Bard can give sme initial thught t the ptential impact(s) in terms f ethical issues arising frm all these new trends. B.2 Emerging r Newer Mdels f Service Delivery This initiative wuld seek t explre the ethical implicatins f emerging r newer mdels f service delivery such as managed services that firms may prvide r utsurced services that firms may use, and the related ethical implicatins fr any PAs in business wh are invlved in decisins abut such services. Sme f the changes are being influenced by rapid develpments in technlgy and changing views n the future f wrk, fr example, the use f s-called cntingent wrkers 1 in prviding services t clients. The questins that arise might cncern all five f the fundamental principles in the Cde as well as independence, fr example: While the Cde prhibits firms frm assuming management respnsibility when prviding nnassurance services t audit clients, are there any particular threats t independence when firms enter int cntracts t manage entire perating functins f client entities, such as cmpany secretarial r crprate taxatin? Are there any ethical implicatins such as threats t bjectivity and cnflict f interest issues at the staff level when firms absrb entire staff teams n their payrll frm their clients as a result f entering int a cntract fr a managed service, fr example, managing the crprate taxatin functin f a multi-natinal client? Are there any implicatins with respect t cmpliance with the fundamental principles when businesses utsurce parts r aspects f their accunting r finance functins t third party service prviders lcated in r utside their jurisdictins? Are there any implicatins with respect t cmpliance with the fundamental principles and/r independence when firms rely n shared service centers based in r utside their jurisdictins fr the perfrmance f selected parts r aspects f prfessinal services? What d the cncepts f ffice and engagement team in the Cde mean frm an independence perspective when the rganizatinal mdel and ways f wrking (e.g. flexible wrkfrce, cntingent wrkers) are changing and the cncept f a physical ffice gradually becmes less relevant? As new mdels f service delivery appear t be becming mre prevalent in respnse t the increasingly internatinal (and cmplex) business landscape, the IESBA shuld actively mnitr develpments and cnsider any related ethical issues the Cde will need t address in the near future. 1 Cntingent wrkers are generally freelancers, independent cntractrs, cnsultants, r ther utsurced and nnpermanent wrkers wh are hired n a per-prject basis. They can wrk n site r remtely. Page 5 f 22

6 II. MAINTAINING A HIGH-QUALITY CODE FOR APPLICATION BY PAS GLOBALLY B.3 Cncepts f Public Interest Entity and Listed Entity The extant Cde defines the term public interest entity (PIE) as either a listed entity r an entity (a) defined by regulatin r legislatin as a PIE r (b) fr which the audit is required by regulatin (which may be prmulgated by any relevant regulatr, including an audit regulatr) r legislatin t be cnducted in cmpliance with the same independence requirements that apply t the audit f listed entities. Sme regulatry stakehlders such as the Internatinal Assciatin f Insurance Supervisrs (IAIS) and the Basel Cmmittee n Banking Supervisin have suggested that the definitin f a PIE shuld be reexamined frm the perspective f financial institutins, including banks. In additin, ther regulatry stakehlders such as the Internatinal Organizatin f Securities Cmmissin (IOSCO) have nted that many jurisdictins d nt appear t have the capacity t tailr the definitin t their specific natinal circumstances. Other stakehlders, particularly the small and medium practices (SMP) cmmunity, have expressed cncern that the independence requirements are increasingly disprprtinate in thse circumstances where audit and review services are prvided t small entities that fall within the PIE definitin. In this cnnectin, the extant Cde als defines a listed entity as an entity whse shares, stck r debt are quted r listed n a recgnized stck exchange, r are marketed under the regulatins f a recgnized stck exchange r ther equivalent bdy. Sme stakehlders have questined the meaning f the term recgnized stck exchange in this definitin, fr example, whether it is intended t be the same as, r brader than, the cncept f a regulated market in the definitin f PIEs in the EU audit legislatin. It was nted that sme might perceive a difference as in practice exchanges exist that are infrmal and utside f the scpe f regulatin. In additin, there might be a need t recnsider the definitin given brader develpments in capital markets in varius jurisdictins and newer frms f capital raising, such as crwd funding. This initiative wuld therefre seek t explre whether the definitins f these tw terms shuld be revised and the implicatins f any changes n hw the Cde addresses PIEs and listed entities, fr example, in relatin t prhibitins. Setting a minimum glbal definitin r describing characteristics f particular public interest ther than listed entities may nt be easy. The definitin f a PIE varies frm cuntry t cuntry - an entity may be a PIE because f the nature f its peratins, its size, r the number f its emplyees and the range f sectrs captured in different definitins can als be very wide. Hence, the circumstances and treatment f many entities labelled as PIEs may differ cnsiderably frm ne regin t anther. While there culd be sme value in having IESBA wrking tgether with IAASB t explre if the definitins f the tw terms shuld be revised and understanding the ptential implicatins, including any intended cnsequences, cnsiderable wrk will be needed prir t arriving at whether a single glbal slutin is likely t be apprpriate. Page 6 f 22

7 There may als be a need fr IESBA t cnsider crdinating with the IASB and its use f the public accuntability cncept in IFRS fr SMEs. B.4 Cllective Investment Vehicles (CIVs) This is a cmmitment in the current strategy and wrk plan n which the IESBA has nt yet cmmenced wrk. The IESBA planned t start explring issues related t CIVs during the current strategy perid, recgnizing the imprtance f CIVs such as unit trusts and mutual funds given their glbal reach and size. The issues center n the applicatin f the related entity definitin in the Cde t CIVs when firms audit the underlying funds, the spnsr/advisr f the funds, r bth. 2 The initiative wuld cnsider whether changes t the independence prvisins f the Cde are needed r whether further guidance shuld be develped. At the time the current strategy and wrk plan was being develped, the tpic was regarded as imprtant by a number f stakehlders, including frm the regulatry cmmunity and CAG member rganizatins. Hwever, since then, the external envirnment has evlved and the IESBA has determined that it shuld seek stakehlders views as t whether the tpic shuld remain a pririty during its next strategy cycle, r whether there are ther ethical aspects relating t CIVs that shuld be studied. We d nt cnsider that a prject n Cllective Investment Vehicles is a pririty frm an SMP-SME perspective. B.5 Tax Planning and Related Services This initiative wuld seek t understand develpments in tax planning by cmpanies and related prfessinal services, and explre the assciated ethical questins that may arise. Fr example, in recent years there has been much public attentin n the tpic f aggressive tax avidance ntwithstanding the legality f the tax mitigatin schemes r related transactins t achieve desired tax utcmes. Questins have in particular been raised regarding the ethical implicatins fr prfessinal behavir when PAs in business (PAIBs) are invlved in develping tax minimizatin strategies that are perceived as aggressive, r when firms prvide advice t their clients n such strategies. The issue has risen t such a level f imprtance that it has been discussed n the G-20 agenda. 2 The definitin f a related entity in the Cde is based n cntrl and significant influence. This cnstruct des nt wrk well with CIVs such as mutual funds. Fr example, a Fund (such as a unit trust), its Asset Manager and its Trustee may nt have financial interest links, and may therefre nt be related entities within the definitin f a related entity in the Cde. In such a case, the questin is whether there shuld be additinal guidance n hw the definitin shuld be applied in certain cmmn Fund-Asset Manager-Trustee relatinships. Page 7 f 22

8 We recgnize the imprtance f this tpic in light f the recent public attentin and that it is becming a significant fcus f gvernments arund the wrld. As tax cmpliance and planning cntinues t be a substantial service line fr many SMPs, we believe that the scpe and apprach f any initiative in this area wuld need careful cnsideratin. Given the different stances frm cuntry t cuntry cncerning the rle f tax legislatin vs. mral psitin, tax legislatin needs t address the issue hlistically, as ultimate respnsibility lies with the relevant jurisdictinal curt. B.6 Materiality Materiality is a cncept that applies acrss the Cde. While the IESBA is prpsing new applicatin material in the Expsure Draft f Phase 2 f its Safeguards prject (paragraph A1) t explain materiality in relatin t nn-assurance services (NAS) prvided t audit clients, the Cde refers t materiality in ther areas, fr example, in relatin t ther independence matters. Fr instance, prpsed restructured Sectin 510 addressing financial interests states that fr the purpses f determining whether such an interest is material t an individual, the cmbined net wrth f the individual and the individual s immediate family members may be taken int accunt. During its previus strategy cnsultatin, the IESBA had als received suggestins relating t the tpic f materiality, fr example, the pssible prvisin f guidance n hw t evaluate materiality in the cntext f cnsidering breaches f the Cde. Accrdingly, a brader cnsideratin f hw the cncept f materiality shuld be applied in the cntext f the full Cde, and nt just in relatin t NAS, might be needed and might require crdinatin with the IAASB and the Internatinal Accunting Standards Bard. We believe that cperatin with the IAASB shuld take place when explring the issue f materiality as a whle nt just in the cntext f specifics listed in the survey paper. There shuld be a thrugh cnsideratin f what materiality as well as significance mean, s that a principles-based rather than cntext-driven slutin can be develped fr the IESBA Cde. Such a cperative prject culd als address the issue f matters falling belw materiality threshlds (this may als have an impact n Item B.10 dealing with the Breach f the Cde), s as t distinguish clearly trivial/ incnsequential matters frm thers in terms f the significance f any impact n an individual prfessinal accuntant s ethical behavir. A further aspect f materiality that shuld be cnsidered is that whilst matters may be immaterial when seen individually, they are ptentially relevant when viewed cumulatively. S far the IESBA has nt explred this aspect in a mre hlistic manner. B.7 Cmmunicatin with Thse Charged with Gvernance (TCWG) The extant Cde requires auditrs t cmmunicate with TCWG in relatively few and specific circumstances, fr example: When a breach f a prvisin in Sectin 290 r 291 ccurs. Page 8 f 22

9 When an audit client is a PIE and fr tw cnsecutive years the ttal fees frm the client and its related entities represent mre than 15% f the ttal fees f the firm. The extant Cde als encurages regular cmmunicatin between the firm and TCWG regarding relatinships and ther matters that might reasnably bear n independence. During its current prject t review the safeguards in the Cde, the IESBA cnsidered whether strengthening the prvisins in the Cde regarding cmmunicatin with TCWG wuld prmte stakehlder cnfidence in the audit prfessin. The IESBA determined that a review f such prvisins wuld fall utside the scpe f the Safeguards prject. Strengthening the cmmunicatin prvisins culd in particular increase transparency arund the identificatin and evaluatin f threats t cmpliance with the fundamental principles, and the actins r measures taken t eliminate r reduce thse threats t an acceptable level. Ding s culd als clarify that auditr independence is a jint respnsibility, and respnd t regulatry stakehlders wh have expressed views that a party ther than the auditr itself (generally TCWG) shuld cnsider the auditr s independence. Such a review wuld include cnsideratin f: Whether t require specific matters t be cvered in the cmmunicatin. 3 The rle, if any, f TCWG in apprving NAS prvided t audit clients. We d nt cnsider the tpic as a pririty frm an SMP/SME perspective. B.8 Dcumentatin The Cde s dcumentatin requirements and applicatin material are lcated in varius areas f the Cde dealing with particular tpics. During its Safeguards prject, the IESBA cnsidered whether the extant Cde includes sufficient and apprpriate dcumentatin requirements related t safeguards. In the light f this discussin, the IESBA identified a need t recnsider the nature, extent and lcatin f material relating t dcumentatin in the Cde hlistically. In additin, the IESBA has received sme specific suggestins frm respndents t its Structure f the Cde prject fr matters t be cnsidered, fr example: 3 Paragraph 17 f Internatinal Standard n Auditing (ISA) 260 (Revised), Cmmunicatin with Thse Charged with Gvernance, already requires that in the case f listed entities, the auditr cmmunicate with thse charged with gvernance a statement that the engagement team and thers in the firm as apprpriate, the firm and, when applicable, netwrk firms have cmplied with relevant ethical requirements regarding independence, and: (i) (ii) All relatinships and ther matters between the firm, netwrk firms, and the entity that, in the auditr s prfessinal judgment, may reasnably be thught t bear n independence. This shall include ttal fees charged during the perid cvered by the financial statements fr audit and nn-audit services prvided by the firm and netwrk firms t the entity and cmpnents cntrlled by the entity. These fees shall be allcated t categries that are apprpriate t assist thse charged with gvernance in assessing the effect f services n the independence f the auditr; and The related safeguards that have been applied t eliminate identified threats t independence r reduce them t an acceptable level. Page 9 f 22

10 Whether the applicatin material that encurages dcumentatin with respect t ethical cnflict reslutin (extant paragraph ) shuld be elevated t a requirement. Whether the Cde shuld require independence dcumentatin t be f a standard that wuld enable anther prfessinal t understand the judgments made, and the reasning supprting thse judgments. The merit f cntinuing t retain the statement in the Cde (extant paragraph ), r clarifying the intent, that a lack f dcumentatin des nt determine whether a firm has cnsidered a particular matter r whether it is independent, as it might undermine the dcumentatin requirements and their enfrceability. Other related matters had als been raised during the IESBA s previus strategy cnsultatin, fr example, whether the requirement with respect t dcumentatin f threats t independence that necessitate significant analysis (extant paragraph ) shuld be extended t any threats t independence requiring analysis. In additin, the MG Rver case in the UK has raised the questin as t whether PAIBs shuld be subject t a dcumentatin requirement in certain circumstances. The Cde currently nly encurages dcumentatin fr PAIBs. We d nt cnsider the tpic as a pririty frm an SMP/SME perspective. B.9 Familiarity Threat in Relatin t Extant Part C During its Lng Assciatin prject, the IESBA recnsidered the cncept f a familiarity threat in relatin t client financial infrmatin in the cntext f an audit f financial statements. The IESBA nted that the extant definitin cntains a reference t emplyer. 4 Extant Part C (Part 2 f the restructured Cde) currently des nt address familiarity threat with respect t emplyers in the cntext f PAIBs, ther than a brief mentin in paragraph which is nt further develped: Examples f circumstances that may create familiarity threats fr a PAIB include: Being respnsible fr the emplying rganizatin s financial reprting when an immediate r clse family member emplyed by the entity makes decisins that affect the entity s financial reprting. Lng assciatin with business cntacts influencing business decisins. Accepting a gift r preferential treatment, unless the value is trivial and incnsequential. The IESBA nted that there may be a need t revisit the definitin f familiarity threat in that regard, and in particular cnsider whether additinal guidance shuld be prvided regarding hw PAIBs shuld address familiarity threats in the cntext f their wrk fr emplying rganizatins. 4 The extant Cde defines familiarity threat as the threat that due t a lng r clse relatinship with a client r emplyer, a prfessinal accuntant will be t sympathetic t their interests r t accepting f their wrk. Page 10 f 22

11 We d nt cnsider the tpic as a pririty frm an SMP/SME perspective. B.10 Breach f the Cde This tpic invlves cnsideratin f specific matters that respndents t the Structure f the Cde prject have raised with respect t breaches f the Cde fr the IESBA s cnsideratin, including: The need fr guidance n actins t eliminate circumstances that cause a breach f the Cde as, ther than in the cntext f independence, the extant Cde requires a PA t address the cnsequences f a breach and determine whether t reprt it, but n specific actin t stp the activity that caused the breach. Eliminating any ptinality as t whether a PA has t reprt a breach t, fr example, thse wh might have been affected by it, a prfessinal bdy r a regulatr. As nted in ur respnse t B.6 Materiality, IESBA culd cnsider whether t mre fully address the cnsequences f breaches f the Cde, tgether with lking t develp a threshld t identify inadvertent minr breaches that by their nature and relative insignificance wuld nt actually be deemed t impact an accuntant s cmpliance with the fundamental principles. B.11 Definitins and Descriptins f Terms There are certain differences between the definitins f sme terms in the Cde and the definitins f the same terms in the IAASB s standards. These terms include assurance engagement, engagement quality cntrl review, financial statements, firm, independence, review engagement, and special purpse financial statements. In additin, during the Structure f the Cde prject, the IESBA received a number f suggestins frm respndents t recnsider hw certain terms are currently defined in the Cde, fr example: Recnsidering the use f the term emplyee as it appears t cver nly emplyees f an audit client and nt thers wh may act in the capacity f an emplyee (e.g. a cntractr). Nt limiting the cncept f engagement perid t the date when the audit reprt is issued as the auditr has further respnsibilities in an audit f financial statements, such as addressing the effect n the audit pinin f matters that cme t the auditr s attentin after cnclusin f the audit. Revisiting the definitin f financial interest t, fr example, clearly cver interests in a trust. Defining the cncept f a netwrk firm t fcus mre n the exercise f judgement rather than n a list f examples f situatins that might indicate the existence f a netwrk. Page 11 f 22

12 Certain recent changes t the Cde have revealed that the IESBA s decisins have an increasing impact n the wrk f ther standard setters, especially the IAASB. Cnsequently, it is increasingly imprtant fr the SSBs t align their respective terminlgy t fster cnsistent applicatin, where apprpriate. Frm ur perspective, this is an exercise that shuld be undertaken befre new initiatives r subjectspecific wrk is t be cnsidered in the future. B.12 Pst-implementatin Review f the Restructured Cde The bjective f the Structure f the Cde prject is t enhance the understandability and usability f the Cde, thereby facilitating its adptin, effective implementatin, cnsistent applicatin, and enfrcement. The prject, which is expected t be cmpleted by December 2017, has invlved extensive restructuring and redrafting f the Cde. Further infrmatin abut the current status f the prject, including its different wrk streams and hw these are being crdinated with ther cncurrent prjects, is prvided in the January 2017 IESBA Update. Given the imprtance f the restructuring prject, the purpse f a pst-implementatin review f the restructured Cde wuld be t assess whether the restructured Cde has effectively met the prject s bjectives. In ur view, it wuld be extremely beneficial fr the IESBA t perfrm a pst-implementatin review f the Cde. Such a review wuld infrm the IESBA abut any practical difficulties experienced in applying the prvisins, whether unintended cnsequences have resulted frm any specific prvisins, and als whether specific aspects f the Cde are as effective as IESBA had intended it t be. The results f such a review wuld indicate where change is needed t the existing prvisins, where further clarificatin f existing prvisins is needed and where perhaps the Cde is less effective than the Bard had intended. Besides lking at specific cntent f the Cde, the initiative culd be used t btain infrmatin as t the glbal applicatin (i.e. extent f take-up) f the Cde. Infrmatin differentiating between jurisdictins where the Cde is applied in its entirety, where there is partial applicatin (and reasns therefr), and full r part transpsitin int natinal equivalents etc. All such infrmatin wuld be valuable t the future maintenance and develpment f the Cde. III. GENERAL B.13 Meaning f Public Interest in the Glbal Cntext The Cde refers t the cncept f public interest in a number f places, ntably in extant Part A (Part 1 f the restructured Cde) and in the new NOCLAR prvisins. The draft restructured Cde, cnsistent with the extant Cde, des nt expand upn individual public interest bligatins and therefre cntains little applicatin material relating t a PA s public interest respnsibilities. Questins have been raised regarding the meaning f the cncept, fr example, in the Page 12 f 22

13 relatively recent MG Rver case in the UK (see Sectin A f the IESBA s April 2014 issues paper and related backgrund material). A view has been expressed by sme within the regulatry cmmunity in the cntext f the IESBA s previus public cnsultatin n its Cnflict f Interest prject that the cncept f public interest shuld be recgnized as a fundamental principle in the Cde. The IESBA has had lengthy but incnclusive discussins n the tpic in the past. In additin, IFAC issued in June 2012 a related Plicy Psitin, A Definitin f Public Interest. Ntwithstanding the difficulty f defining the cncept, this initiative wuld seek t explre a number f questins such as: The meaning f the cncept f public interest in the glbal cntext. The different expectatins f different categries f PA with respect t the respnsibility t act in the public interest. Whether perceptins f the public interest vary with time, acrss cultures, and frm the lens thrugh which it is viewed. Whether the evlutin f the accuntancy prfessin affects the nature f its public interest respnsibility. This initiative might invlve the IESBA explring the tpic thrugh the develpment f a discussin paper r thught piece, taking int accunt wrk that has been dne by thers n the tpic as well as relevant external develpments. Any such wrk wuld likely necessitate crdinatin with the ther standard-setting bards verseen by the PIOB, i.e., the IAASB and IAESB. This is a very majr tpic and the lack f a clear definitin and cmmn understanding f public interest remains an issue as the interpretatin f acting in the public interest can be highly subjective. In additin, the degree f public interest in the wrk perfrmed by the prfessin is nt unifrm. While there is a widespread recgnitin f the cllective cntributin f SMEs t the glbal ecnmy, and hence the sectr s high level f public interest, the public interest inherent in any ne small practitiner s client base is typically much less than that f a large listed cmpany. When respnding t the IESBA Strategy Survey in March 2013 and in ur cmment letter in respnse t the IESBA Prpsed Strategy and Wrk Plan , we encuraged the IESBA t priritize a prject n guidance n the meaning f public interest in the cntext f the Cde. We wuld supprt the apprach f explring the tpic thrugh the develpment f a discussin paper and the intentin t crdinate with the ther standard-setting bards, as the relevance f this issue is nt exclusive t IESBA. Page 13 f 22

14 Please rank yur tp six pririties amng items B.1 t B.13 abve (1 being highest and 6 being lwest). Item Tpic Rank in Order f Pririty B.1 Trends and develpments in technlgy and innvatin 3 B.2 Emerging r newer mdels f service delivery B.3 Cncepts f public interest entity and listed entity 6 B.4 Cllective investment vehicles B.5 Tax planning and related services B.6 Materiality 4 B.7 Cmmunicatin with thse charged with gvernance B.8 Dcumentatin B.9 Familiarity threat in relatin t extant Part C B.10 Breach f the Cde B.11 Definitins and descriptins f terms 2 B.12 Pst-implementatin review f the restructured Cde 1 B.13 Meaning f public interest in the glbal cntext 5 Are there any trends, develpments r issues nt therwise cvered in this sectin that yu wuld rank in yur tp six pririties? If s, please explain why. The SMPC strngly supprts the intended pause in any new changes t the Cde becming effective. We believe that there is need fr IESBA t change its apprach and fcus its wrk n prjects that will nt result in further changes t the Cde in the near future i.e. primarily fact gathering initiatives cupled with active mnitring f develpments. Keeping up with new regulatins and standards has been cnsistently ranked as ne f the tp challenges facing SMPs in the Glbal SMP Surveys cnducted by IFAC. In sme jurisdictins the Cde will need t be translated (pssibly anew), ther factrs such as updating teaching and CPD material, adapting firm methdlgies etc. all demand sufficient time if the Cde is t be applied in the manner the IESBA intended. We therefre welcme the fact that the IESBA itself has specifically acknwledged this in the Survey. Page 14 f 22

15 With the abve in mind, we have ranked the tp six pririties frm an SMP-SME perspective, but wuld als cnsider priritizing emerging r newer mdels f service delivery (B.2), Breach f the Cde (B.10) and Tax planning and related services (B.5). Page 15 f 22

16 Sectin C: Adptin and Implementatin (A&I) With the anticipated issuance f the restructured Cde by Q1 2018, the IESBA intends t pursue vigrus utreach effrts t raise awareness f the significant imprvements t the Cde and prmte its further adptin and effective implementatin glbally. Amng varius initiatives the IESBA will cnsider priritizing with respect t A&I are the fllwing: Develping and executing a rbust cmmunicatin strategy. Pursuing a practive stakehlder utreach agenda, including cnsideratin f stakehlder feedback n the implementatin f the restructured Cde. Tracking and reprting n the prgress f glbal adptin f the Cde. Cmmissining the develpment f apprpriate staff publicatins in supprt f A&I. Pursuing cperatin pprtunities with key stakehlders, including natinal standard setters (NSS), regulatrs and firms. Speaking ut n ethics-related develpments that have the ptential t lead t greater divergence in standards, and seeking t influence debates twards greater internatinal cnvergence. D yu have any cmments n any f the abve activities r initiatives? In particular, d yu believe any f them shuld nt be a strategic pririty fr the IESBA and, if s, why? Please be as specific as pssible. All these activities are imprtant t prmte adptin and effective implementatin. We believe that a rbust cmmunicatin strategy is imprtant t the successful adptin f a wrldwide Cde. Are there any specific activities r initiatives yu believe the IESBA shuld undertake t prmte further adptin and mre effective implementatin f the Cde? If s, please explain why. The IESBA shuld cnsider having sme frm f mechanism t cntinuusly mnitr whether the Cde remains suitable as well as palatable fr glbal applicatin, as ppsed t being perceived as verly fcused n the circumstances in nly certain jurisdictins r respnding t the needs f any particular stakehlder grup. The Cde needs t be easy t apply in practice and the Bard needs t be aware f any in unintended cnsequences f its decisins, s that these can be dealt with as apprpriate. Page 16 f 22

17 Sectin D: Pre-existing Cmmitments The IESBA has a number f pre-existing cmmitments related t standard setting r the Cde mre bradly that will likely cntinue beynd 2018 r start in the new strategy perid. These include the fllwing: Cmmitment Descriptin Cmmitments Arising frm Decisins n Recently Finalized Standards and PIOB Input 1. Nn-assurance services In January 2015, the IESBA cmpleted a prject t revise certain independence prvisins in the Cde pertaining t the prvisin f NAS t audit and assurance clients. The main changes included: The remval f prvisins that permitted a firm t prvide certain bkkeeping and taxatin services t PIE audit clients in emergency situatins. New and clarified guidance regarding what cnstitutes management respnsibility. Clarified guidance regarding the cncept f rutine r mechanical services relating t the preparatin f accunting recrds and financial statements fr audit clients that are nt PIEs. The Basis fr Cnclusins includes backgrund t the prject. At the time the IESBA undertk the prject, the IESBA had cncluded, based n a benchmarking exercise fcused n G-20 cuntries and a select number f ther jurisdictins in early 2013, that there was n evidence that the Cde s NAS prvisins were at significant variance frm thse f mst r all f these jurisdictins. In apprving the changes t the Cde frm this prject in March 2015, hwever, the PIOB called n the IESBA t revisit issues n auditr independence frm a brader perspective, including prhibited NAS and the rle f thse charged with gvernance in apprving NAS. Preliminary wrk n this initiative will include a review f updated benchmarking data as well as the results f the fact finding wrk n the Fees initiative (see belw) t determine the scpe f any ptential prject n this tpic. Page 17 f 22

18 Cmmitment Descriptin 2. Fee-related matters This is a cmmitment in the IESBA s current strategy and wrk plan. The IESBA has begun t explre fee-related matters raised by the regulatry cmmunity t determine whether there is a need fr further enhancements t the Cde r the cmmissining f staff guidance. Fact finding wrk cmmenced in 2016 in respnse t PIOB input and is aimed at identifying whether there are trends r ther factrs that indicate a relatinship between fees and threats t auditr independence and cmpliance with the fundamental principles, r whether there are reasnable perceptins that such threats exist, and hw they might be addressed. The fact finding is fcusing in particular, n whether such relatinships exist in the fllwing areas: Level f audit fees fr individual audit engagements. Relative size f fees t the partner, ffice r the firm, and the extent t which partner(s) remuneratin is dependent upn fees frm a particular client. The rati f nn-audit services fees t audit fees paid by an audit client. The prvisin f audit services by a firm that als has a significant nn-audit services business. Pending the utcme f the fact-finding wrk, the IESBA has nt yet determined whether it shuld launch a standard-setting prject r undertake any ther initiative n this tpic. The IESBA mst recently discussed the tpic at its March 2017 meeting. 3. NOCLAR pst-implementatin review In April 2016, the IESBA finalized the prvisins in the Cde addressing the tpic f nn-cmpliance with laws and regulatins (NOCLAR). The new prvisins cme int effect July 15, In cmpleting that prject, the IESBA cmmitted t undertake a pst-implementatin review t assess hw effectively the implementatin f the Page 18 f 22

19 Cmmitment Descriptin prvisins arund the wrld is meeting the bjectives f the prject. The IESBA has nt yet cnsidered the apprach t, and timing f, the pst-implementatin review. 4. Lng assciatin pst-implementatin review In December 2016, the IESBA finalized revisins t the prvisins in the Cde addressing the lng assciatin f firm persnnel with an audit r assurance client. These prvisins are currently being redrafted t align with the new structure and drafting cnventins f the Cde. The revised and restructured prvisins are expected t be issued by Q In cmpleting the revisins prject, the IESBA cmmitted t review the new prvisins t take accunt f, amng ther matters, relevant legislative and regulatry develpments relating t lng assciatin (including mandatry firm rtatin and mandatry retendering) as well as experience f the applicatin f the new prvisins in practice. The IESBA has nt yet cnsidered the apprach t, and timing f, the pst-implementatin review. Active Prjects r Initiatives, and Cmmitments in the Current Strategy and Wrk Plan 5. Prfessinal skepticism (PS) The IESBA is participating in a tripartite Wrking Grup with the Internatinal Auditing and Assurance Standards Bard (IAASB) and the Internatinal Accunting Educatin Standards Bard (IAESB) t explre apprpriate standardsetting respnses t calls frm regulatry and ther stakehlders t enhance auditrs applicatin f PS. Separately, the IESBA has been explring hw best t respnd t calls frm the PIOB and certain stakehlders fr enhancement t the applicatin f PS amng PAs mre bradly in the Cde. Fr example, sme respndents t Phase 1 f the IESBA s Part C prject have suggested that the Cde shuld emphasize the need fr PAIBs t exercise adequate PS thrughut the prcess f preparing, presenting r filing infrmatin. Other Page 19 f 22

20 Cmmitment Descriptin stakehlders have argued that PAIBs shuld always maintain PS and that the cncept shuld nt be limited t auditrs. In additin, at its March 2017 meeting, the IESBA cnsidered prpsals t develp applicatin material t (a) explain hw the fundamental principles in the Cde supprt the effective applicatin f PS as defined in IAASB standards, and (b) emphasize the imprtance f PAs btaining an understanding f the facts and circumstances knwn t them when exercising prfessinal judgment in applying the cnceptual framewrk in the Cde. The IESBA will further cnsider these prpsals with a view t pssible issuance fr expsure by Q Crdinatin with the IAASB n crss-ver tpics r issues (in additin t wrk n prfessinal skepticism) As part f its current strategy and wrk plan, the IESBA has cmmitted t cnsidering the need fr apprpriate actin t cmplement any actins the IAASB may undertake t cntribute t enhancing audit quality. In this regard, the IESBA has been maintaining nging crdinatin with the IAASB n a number f tpics where there are issues that verlap the remits f bth Bards. Crdinatin is taking place at the leadership, Bard and staff levels. In additin, the IESBA has appinted ne f its members t act as Bard liaisn t the IAASB. New Cmmitments Arising frm Discussins n Current Prjects 7. Alignment f extant Sectin (Part 4B f the restructured Cde) t ISAE 3000 (Revised). 6 This invlves a review f extant Sectin 291 fr any changes needed t align the prvisins in that sectin with the revised assurance terms and cncepts in ISAE 3000 (Revised). The need fr this review has been identified during the restructuring f the Cde but is utside the remit f the Structure f the Cde prject. T avid delaying cmpletin f that prject, the IESBA has agreed t defer the 5 Extant Sectin 291, Independence Other Assurance Engagements 6 Internatinal Standard n Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other Than Audits r Reviews f Histrical Financial Infrmatin Page 20 f 22

21 Cmmitment Descriptin review until after the extant Cde has been restructured. 8. Develpment f the e-cde This invlves leveraging the new structure f the Cde and develpments in technlgy t explre additinal features and tls that culd be develped t increase the accessibility, ease f use and value f the Cde. An initial versin f the e-cde with basic search functinality, hyperlinked sectins and pp-up definitins f key terms is available n the IESBA website. Are there any particular matters yu believe the IESBA shuld cnsider in relatin t any ne f these pre-existing cmmitments? Please be as specific as pssible and explain yur reasning. The fact-finding wrk n the fees-related matters abve has been useful t infrm the Bard s deliberatins. We understand that IESBA has nt yet determined whether it shuld launch a standardsetting prject r undertake any initiative n this tpic. We believe that there shuld be a strng evidence base with cnclusive findings befre the Bard advances with any future initiative in this area. Otherwise, cncerns culd be raised that the initiative is being driven by particular stakehlders with difficult t justify ratinale. Page 21 f 22

22 Sectin E: Any Other Strategic Matters Are there any ther matters f strategic imprtance nt cvered elsewhere in this survey r yur earlier respnses that yu believe the IESBA shuld cnsider as it psitins the Cde fr 2025? Please be as specific as pssible. We wuld like t emphasize ur supprt f the Bard s decisin t have a perid f stability (see page 14 after the ranking f pririty). In yur recent June 2017 Bard paper, a time frame f 18 mnths have been mentined althugh a lnger perid f 24 mnths wuld have been much preferred. In additin, wrk effrts will need t be expended t cllate the data n the take up rate f the revised Cde given sufficient time, the reasn fr the partial applicatin in certain jurisdictin and challenges n full r part transpsitin int natinal equivalents etc. These are valuable infrmatin t guide the Bard n yur maintenance and future expansin/ develpment f the Cde ver time. Thank yu fr taking ur survey. Yur respnse is very imprtant t us. Page 22 f 22