The December meeting highlights feature updates on the IESBA’s current projects and initiatives, including: Long Association, Structure of the Code of Ethics for Professional Accountants (the Code), Safeguards, Part C, Professional Skepticism, and the IESBA’s future strategy and work plan. The IESBA also received a final report on a review of academic research and other literature on the topic of fees, and provided input on proposed IESBA Staff Questions & Answers (Q&As) addressing responding to non-compliance with laws and regulations (NOCLAR) (see below).
The IESBA approved three Exposure Drafts, and agreed in principle the new structure and drafting conventions of the Code, the restructured text of Phase 1 of its Structure project, and the revised text of Phase 1 of its Safeguards project. The latter comprises revisions to the provisions in the extant Code relating to the conceptual framework (Section 120) and the application of the conceptual framework to professional accountants in public practice (Section 300). See Restructuring the Code for the status of all the component pieces of the Structure project, set for completion at the end of the year, along with numerous support materials including an Update from the board, Mapping Table, and Compilation of the Proposed Restructured Code.
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The Structure Phase 2 proposals restructure select sections of the Code, including recently finalized provisions addressing accountants’ response to NOCLAR, long association of firm personnel with an audit or assurance client, and ethical issues that professional accountants in business often face.
The proposals address safeguards-related provisions in the Code’s independence sections pertaining to non-assurance services provided to audit and assurance clients. The document also explains the rationale for the revisions to the non-assurance services section of the extant Code; and the proposed conforming amendments arising from the Safeguards project as these relate to the text of Phase 1 of the Structure project.
The proposals clarify the applicability of the requirements and application material in the Code’s extant Part C—Professional Accountants in Business—to professional accountants in public practice.
The IESBA’s final pronouncement, Responding to Non-Compliance with Laws and Regulations, comes into effect July 15, 2017. To support implementation, IESBA staff have released two Q&A documents: one for professional accountants in practice; and one for professional accountants in business. For additional resources, see the IESBA NOCLAR page. The text of the NOCLAR pronouncement is being redrafted as part of the Structure project (See Structure Phase 2 above). The restructuring work is not intended to change the substance of the NOCLAR provisions. Additional implementation support resources will be made available on the IESBA NOCLAR page in due course.
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The IESBA considered a proposal for a short-term project and proposed enhancements to more strongly emphasize professional skepticism in the Code. The IESBA will consider a revised project plan and proposals at its March 2017 meeting. The IESBA also received an update on the recent activities of the tripartite Professional Skepticism Working Group (PSWG) comprising representatives of the International Auditing and Assurance Standards Board (IAASB), IESBA, and International Accounting Education Standards Board (IAESB).
The IESBA began developing its next Strategy and Work Plan (SWP) with initial consideration of matters to include in a survey, to be issued as part of an extensive due process at the end of March, followed by a consultation paper by Q1 2018. As part of this process, the IESBA will hear a presentation at its next meeting about transformation of the accounting and finance functions, including disruptions from technological advances and innovation.
The Consultative Advisory Group (CAG) met twice by phone: once in January to receive a report-back on the outcome of the IESBA’s deliberations regarding the Long Association project in the light of comments raised by the Public Interest Oversight Board (PIOB), and in December to consider a proposal for a short-term IESBA project to respond to stakeholder calls for greater emphasis on professional skepticism in the Code.
At its December 1-2, 2016, meeting, the Public Interest Oversight Board (PIOB) discussed the IESBA task force's response to the PIOB’s feedback on the Long Association project. In January 2017, the PIOB concluded that the Long Association close-off document was approved by the IESBA in accordance with due process and with proper regard for the public interest.
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