Published: Apr 25, 2017
SMP Committee Response to the IESBA Exposure Draft on Safeguards
The IFAC Small and Medium Practices (SMP) Committee submitted this comment letter to the International Ethics Standards Board for Accountants in response to its Exposure Draft, Proposed Revisions Pertaining to Safeguards—Phase 2 and Related Conforming Amendments.
The SMP Committee believes that there are still areas that the IESBA needs to further refine or think through. For example, in taxation and recruitment services, the IESBA’s proposal on safeguards (or the lack of it) appears to have disregarded some of the more practical implications, especially for the SMPs. In addition, the delineation of the requirements and guidance should be clearer in some of the sections therein. This could also be an issue with the structure of the Code in general.
On the risk of assuming management responsibility, the Code requires firms to “ensure client’s management delegates an individual who possesses suitable skill, knowledge, and experience to be responsible at all times for the client’s decisions and to oversee the non-assurance service as a safeguard to address such risk - when providing any non-assurance service to an audit client.” This may not be possible in a lot of small- and medium-sized entities (SMEs). Beyond considerations of how “ensuring” is to be evidenced, the implication is that where the auditor cannot ensure this skillset is present in the individual, the auditor would fail the “test” that would permit provision of the service. Consequently, unless a different interpretation of “ensure” is intended, the provision of services to many SME audit clients would thus be prohibited.
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