The International Ethics Standards Board for Accountants (IESBA) today released for public comment the Exposure Draft Proposed Revisions to the Code Relating to the Definition of Engagement Team and Group Audits.

The proposed revisions establish provisions that comprehensively address independence considerations for firms and individuals involved in an engagement to perform an audit of group financial statements. The proposals also address the independence implications of the change in the definition of an engagement team―a concept central to an audit of financial statements―in the International Auditing and Assurance Standards Board’s (IAASB) International Standard on Auditing (ISA) 220, Quality Management for an Audit of Financial Statements.

“Auditor independence, in fact and in appearance, is fundamental to public trust and confidence in the financial statement audit, which in turn plays a major role in safeguarding the integrity of the financial system,” said IESBA Chair Ms. Gabriela Figueiredo Dias. “These proposals bring much needed clarifications and reinforcement in an area of auditor independence that can be especially challenging, given that many audits are performed for the largest and most complex groups around the world. I wish to acknowledge the close coordination with, and support of, the IAASB in developing those proposals.”

Among other matters, the proposals:

• Establish new defined terms and revise a number of existing terms, including for application with respect to independence in a group audit context.
• Clarify and enhance the independence principles that apply to:
  • Individuals involved in a group audit.
  • Firms engaged in the group audit, including firms within and outside the group auditor firm’s network.
• More explicitly set out the process to address a breach of an independence provision at a component auditor firm, including reinforcing the need for appropriate communication between the relevant parties and with those charged with governance of the group.
• Align a number of provisions in the Code to conform to changes in the IAASB’s Quality Management standards.

The development of the proposals has benefited from close coordination with the IAASB’s group audits and quality management projects.

How to Comment 

The IESBA invites all stakeholders to comment on the ET-GA ED by visiting the IESBA’s website. Comments are requested by May 31, 2022.

About the IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA serves the public interest by setting ethics standards, including auditor independence requirements, which seek to raise the bar for ethical conduct and practice for all professional accountants through a robust, globally operable International Code of Ethics for Professional Accountants (including International Independence Standards).

The IESBA believes a single set of high-quality ethics standards enhances the quality and consistency of services provided by professional accountants, thus contributing to public trust and confidence in the accountancy profession. The IESBA sets its standards in the public interest with advice from the IESBA Consultative Advisory Group (CAG) and under the oversight of the Public Interest Oversight Board (PIOB).

Proposed ISSA 5000 is a stand-alone overarching standard for assurance on sustainability reporting and is:

The International Federation of Accountants (IFAC), which comprises 180 member and associate organizations and represents over 3 million professional accountants globally, welcomes the opportunity to provide input into the European Commission’s work to enhance corporate reporting—including a focus on corporate governance, statutory audit, and supervisory aspects of the ecosystem that delivers relevant, reliable, and comparable information to stakeholders.

As the voice of the global accountancy profession, IFAC understands the crucial role that auditors, as well as professional accountants more broadly, play in high-quality corporate reporting.  But no matter how skilled or well-resourced, auditors alone cannot overcome significant shortcomings in other key areas of the reporting ecosystem—especially the role of directors, audit committees, and those charged with governance.

IFAC believes that global standards promote global methodologies, which lead to enhanced and more consistent quality in both reporting and assurance.  We support high-quality, globally-applicable standards for financial reporting developed by the IASB, sustainability disclosure developed by the ISSB, audit and assurance developed by the IAASB, as well as the IESBA International Code of Ethics.  We also believe audit firms are best placed to provide not only audits of financial statements but also assurance on sustainability disclosures.

IFAC CEO Kevin Dancey said, “Corporate governance, audit, and supervision have historically focused on financial statement reporting for investors and other providers of capital.  But now that sustainability-related disclosure is becoming mainstream, this information must also be high-quality and trustworthy.  The accountancy profession, with its responsibility to act in the public interest, has an essential role to play in this evolution of corporate reporting.”

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.