IESBA CAG Meeting New York USA March 6 2017 Project approved March 2013 Project divided into 2 phases Phase 1 addresses Secs 220 Preparation amp Presentation of Information and 270 Pressure ID: 630441
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Slide1
Review of Part C
Lisa Snyder, Task Force Member
IESBA CAG Meeting
New York, USA
March
6
, 2017Slide2
Project approved - March 2013
Project divided
into 2 phases:Phase 1: addresses Secs. 220 (Preparation & Presentation of Information) and 270 (Pressure)Conforming changes to other SecsPhase 2: addresses Sec. 250 (Inducements) and applicability of Part C to PAPPs
Part C - Project Status and TimelineSlide3
Phase 1:
Restructured
text approved at December 2016 IESBA meeting and included in Structure ED-2Phase 2 - Applicability to PAPPs:Agreed Part C applicable to PAPPs and addition of “applicability paragraphs”
Exposed in separate ED in January 2017. Deadline for responses is April 25, 2017
Part C - Project Status and TimelineSlide4
June 2016 IESBA:
Proposed enhancements to Sec.
250September 2016 IESBA:S
trawmanDecember
2016
IESBA:
First read of proposed textMarch 2017 IESBA:Second read with view to exposure
Phase 2 – Sec.
250
- InducementsSlide5
Bribery and
Corruption
IESBA and CAG suggested should be coveredTask Force Response:Bribery/corruption covered by legislation is addressed but not primary focusProposals require PAs to obtain an understanding of relevant laws and complyProposals principles-based. Primary focus on inducements not covered by laws/regulations
Phase 2 – Sec.
250 – Inducements: ApproachSlide6
Bribery and
Corruption
IESBA considered definition for bribery and corruptionTask Force Response:Global definitions: Difficult to deviseGeneric definition: Adverse precedentMight imply Section 250 aimed at bribery and corruption
No single global definition to reference
Phase 2 – Sec.
250 – Inducements: ApproachSlide7
IESBA concerns over term “inducements”
Alternative - “Gifts
and Hospitality” – narrows scopeTask Force Response:
Need collective term, hence keep “inducements” Prefer “Gifts, Hospitality and other Inducements
”
Add clarification:
“inducements” influence behavior, but not necessarily with inappropriate intent
Phase 2 – Sec.
250 – Inducements:
Use of “Inducements” and Title of Sec. 250Slide8
Representatives
are asked for views on the Task Force’s proposals with respect to:
The use of “inducements” as a neutral term and the title of proposed Section 250.Phase 2 – Sec. 250 – Inducements:
Use of “Inducements” and Title of Sec. 250Slide9
Consider actual or perceived intent
Adverse intent: decline inducement
Factors to evaluate the intentFactors same as evaluating level of threatsPhase 2 – Sec. 250 – Inducements: IntentSlide10
Reasonable and Informed Third Party test
December 2016: Alternative “anyone” test proposed
IESBA feedback: Maintain RITP test. “Anyone” test not established.Task Force Response:“Anyone” test could forbid any inducementsDifficult to enforceRevert back to RITP test
Phase 2 – Sec.
250 – Inducements: RITPSlide11
Representatives are asked for views on the Task Force’s proposals with respect to:
The provisions related to the intent
testThe use of the RITP test to evaluate the intent behind an inducement
Phase 2 – Sec. 250 – Inducements: Intent and RITPSlide12
Trivial and Inconsequential
A
dverse intent: must decline inducement even if trivial and inconsequentialNo adverse intent: Identify and evaluate threats Unless inducement trivial and inconsequential, individually and in aggregate
Phase 2 – Sec.
250 – Inducements:
Trivial and InconsequentialSlide13
Inducements offered / accepted by family members
Might affect actual or perceived ability of PA to comply with fundamental principles
Code not enforceable to non-PAsExtant requirement: PA must evaluate threats to fundamental principlesPhase 2 – Sec. 250 – Inducements
Immediate and Close Family MembersSlide14
Proposals: PA must:
D
iscuss threats with relevant family membersAdvise not to offer/accept inducement if threats existEvaluate threats if offered/accepted, unless trivial and inconsequentialUse same factors if PA offered/received inducement directlyAdditional factor: relationship between 3 parties
Refrain from making any business decisions with CP
Phase 2 – Sec.
250 – Inducements
Immediate and Close Family MembersSlide15
Representatives
are asked for views on the Task Force’s proposals with respect to:
The provisions related to immediate and close family members.Phase 2 – Sec. 250 – InducementsImmediate and Close Family MembersSlide16
Sec. 340 – Prof. Accountants in Public Practice (PAPP)
Counterparty is client
Examples: Client / PAPP appropriateNot applicable to audits, reviews and other assurance engagementsSec. 420 and 906 (Independence guidance)Applicable to audits, reviews and other assurance engagementsIESBA to consider conforming amendments in March 2017 meeting
Phase 2 – Sec.
250 – Inducements:
Conforming AmendmentsSlide17
Representatives
are asked for views on the approach to the proposed conforming amendments arising from the proposed revisions to extant Section 350.
Phase 2 – Sec.
250 – Inducements: Conforming AmendmentsSlide18
Second read with intention of obtaining approval: March 2017 IESBA meeting
Release ED: April 2017 with 90 day comment period
Finalize Phase 2: With restructured CodeThe Way ForwardSlide19