Objective(s) of project
To review the non-assurance services provisions in Sections 290 and 291 of the Code to ensure that they continue to support a rigorous approach to independence for assurance services, particularly audits of financial statements.
Although the independence requirements contained in the Code were modified in 2009, that year also marked the advent of the global financial crisis. As a result of the crisis, a number of major jurisdictions around the world have initiated, or have been actively engaged in, policy debates regarding ways to enhance audit quality. Among several policy initiatives that are currently actively being pursued in these jurisdictions are proposed changes to national requirements relating to the provision of non-audit services by audit firms to their audit clients.
Given these developments, the IESBA initiated a discussion at its February 2012 meeting regarding whether the Code should include additional restrictions on auditors providing non-assurance services. As a result of this discussion, the IESBA decided to add a new work stream to its 2012 strategy and work program to consider whether the Code should include additional restrictions on auditors providing non-assurance services to their audit clients, and whether the use of materiality as the basis for prohibiting certain non-assurance services remains appropriate.
Task Force progress / Board discussions to date
At its December 2012 meeting, the IESBA approved in principle, subject to confirmation of scope, a project proposal to review the non-assurance services
provisions in Sections 290 and 291 of the Code.
At its March 2013 meeting, the IESBA received a brief update on the Task Force’s approach to information gathering for purposes of scoping out the project.
At its June 2013 meeting the IESBA considered the findings from a survey of a number of jurisdictions that the project Task Force had carried out for purposes of narrowing the scope of the project. The IESBA also considered the Task Force’s recommendations for the way forward. The IESBA agreed that the project proposal should be refined to focus on the following:
· Clarification of the provisions in Section 290, Independence—Audit and Review Engagements, addressing management responsibilities;
· Clarification of the concept of “routine and mechanical” services relating to the preparation of accounting records and financial statements; and
· A review of the emergency exception provisions in the Code pertaining both to accounting and bookkeeping services, and to taxation services.
The IESBA also supported the development of a paper to, among other matters, raise awareness of the Code’s approach to NAS and of the robustness of the Code’s NAS provisions, highlight supplementary ways by which the threats and safeguards approach to independence in the Code may be enhanced, and generally increase the visibility and transparency of the relevant provisions in the Code.
At its September 2013 meeting, the IESBA approved a project proposal to review the NAS provisions in Section 290,
Independence – Audit and Review Engagements, and Section 291, Independence – Other Assurance Engagements, of the Code 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 IESBA also discussed possible elements of a paper that would set out its views and positions on NAS and related matters.
The IESBA will consider a first-read draft of proposed changes to the Code related to the above three areas at its December 2013 meeting.