IFAC Engagement with IAASB and IESBA—Representing the Interests of PAIBs & SMPs

The SMP Committee has two task forces dedicated to following the activities of the IAASB and IESBA and coordinating the committee’s input—the IAASB Rapid Response Task Force, chaired by Katharine Bagshaw, and the Ethics Task Force, chaired by Raymond Cheng.

The committee invests significant resources through staff, member body, and volunteer time preparing comment letters ahead of the quarterly IAASB and IESBA meetings on behalf of the SMP and SME constituencies. In 2015, this included:

• Six comment letters submitted ahead of the IAASB March, June, and September meetings covering projects on:
  • Group Audits;
  • Quality Control;
  • Disclosures; and
  • Non-Compliance with Laws and Regulations (NOCLAR); and
• Eleven comment letters submitted ahead of the IESBA January, April, June, and September meetings covering projects on:
  • Safeguards and their Applicability Pertaining to Non-Assurance Services (NAS)
  • Long Association of Senior Personnel (including Partner Rotation) with an Audit Client;
  • Structure of the Code; and
  • Responding to Non-Compliance with Laws and Regulations (NOCLAR).

IFAC staff observe the boards’ meetings and discussions and, in particular, monitor how the SMP Committee comments are considered. The SMP Committee comment letters may also be discussed during individual board task force meetings. In addition, there is regular interaction and communication between the respective board and IFAC staff.

In 2015, formal comment letters were submitted on behalf of SMP and PAIB constituencies in response to the following IAASB and IESBA Consultation Papers and Exposure Drafts:

IAASB

• SMP Committee Response: Exposure Draft: Proposed International Standard on Auditing (ISA) 810 (Revised)—Engagements to Report on Summary Financial Statements
• SMP Committee Response: Exposure Draft: Proposed Amendments to the IAASB’s International Standards—Responding to Non-Compliance or Suspected Non-Compliance with Laws and Regulations
• SMP Committee Response: Exposure Draft: Proposed International Standards on Auditing—ISA 800 (Revised) and ISA 805 (Revised)

IESBA

• SMP Committee Response: Exposure Draft: Responding to Non-Compliance with Laws and Regulations
• PAIB Committee Response: Exposure Draft: Responding to Non-Compliance with Laws and Regulations
• SMP Committee Response: Consultation Paper: Improving Structure of the Code of Ethics for Professional Accountants
• PAIB Committee Response: IESBA Exposure Draft on Proposed Changes to Part C of the Code of Ethics

It is well acknowledged that due to their often limited resources, SMPs and PAIBs, especially those working in SMEs, are not always aware of the activities of the standard-setting boards, and even if they are aware, they are often not able to easily respond and engage with the standard-setting process. The time required to serve as a member of the boards also limits the direct involvement of SMPs and PAIBs. In addition to collecting, developing, and publishing input via staff engagement and comment letters, the SMP and PAIB Committees have raised awareness of the boards’ activities through discussions on the Global Knowledge Gateway, for example, How Valuable Is Client Confidentiality to You? and Responding to the IESBA: New Ethical Guidance for Professional Accountants in Business Timely and Relevant. The committees also promote their input via member bodies, recognized regional organizations, and through IFAC social media channels, such as the IFAC SMP Community on LinkedIn and the IFAC SMP Committee twitter handle.

The committees often include representatives from the IAASB and the IESBA on their meeting agendas. For example, the Chair of the IAASB Auditor Reporting Implementation Group attended the September 2015 PAIB Committee meeting and representatives from the IAASB and IESBA attended the June 2015 SMP Committee meeting; see SMP Committee Meeting Highlights.

Both the IAASB and IESBA have individuals who are responsible for liaison with the SMP Committee—Brendan Murtagh and Brian Caswell, respectively. The SMP Committee interacts with both individuals— raising key concerns and providing copies of each comment letter submitted. 

The SMP and PAIB Committees provide input to the Board Task Forces at specific stages of different projects, including arranging conference calls to discuss significant concerns. Recent conference calls have covered the IAASB Disclosures project and the IESBA project on Safeguards. In addition, recent input, for example, was provided to the IAASB on common types of Agreed-Upon Procedures (AUP) engagements, issues regarding the use of extant ISRS 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information, and on hybrid engagements (i.e., engagements using a combination of procedures derived from review, compilation, and AUP engagements).

Representatives from both committees are or have been members of IAASB and IESBA Task Forces. This is a highly effective method for providing input from a particular perspective as the projects develop and changes to the standards are considered. Ian Rushby represented the PAIB Committee on the IESBA Part C Task Force while the SMP Committee is represented by Dawn McGeachy on the IAASB Quality Control Task Force and Katharine Bagshaw on the IAASB Agreed-Upon Procedures Task Force. 

SMP Committee member Dawn McGeachy is an official observer on the IAASB CAG and the IESBA CAG. The CAGs meet physically twice a year to provide input on the boards’ projects.

There are a number of inherent difficulties in assessing the effectiveness of SMP and PAIB input provided to standard-setting boards. This includes the recognition that the boards have to balance the views of a number of different stakeholder groups. However, feedback indicates that both boards value the input and find it useful.

It is considered important to ensure that key concerns are raised in a timely and efficient manner through the mechanisms outlined above. Indeed, there could be a greater risk of the SMP and PAIB views being unrepresented, if no such input and contributions were made.