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Long Association Task Force

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This document outlines key recommendations from the Long Association Task Force meeting in New York, focusing on regulatory monitoring, framework strengthening, and permissible activities during the cooling-off period. Suggestions include increasing cooling-off periods and limiting interaction with clients. Communication with TCWG and time served prior to becoming a KAP are also addressed.

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Long Association Task Force

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  1. Long Association Task Force Marisa Orbea, Task Force Chair IESBA Meeting December 4-6, 2013 New York, USA

  2. Long Association Background • Summary of September Board meeting • Continue to monitor regulatory developments • Strengthen overall framework of 290.150 • Further consider: • Communication with TCWG • Role of non-KAPs that can influence the audit • Time served prior to becoming a KAP • Length of cooling-off period • Permissible activities during cooling-off

  3. Long Association Background • Summary of September Board meeting (continued) • No modification to the exception provisions • No extension of mandatory rotation to non-PIEs

  4. Long Association October 2013 CAG Teleconference • Main views expressed: • Support for principles based Code • Consider all individuals who can influence the audit not just partners • TCWG should not have a decision making role however consider improving communication • Mandatory rotation should not extend to non-PIEs • Increase cooling-off period • Limit interaction with client during cooling-off • Mixed feedback on exception provisions

  5. Long Association Improvements to Overall Framework • Suggested amendments: • Recognize familiarity can add to audit quality • Additional guidance on self-interest and familiarity threats • Factors to be considered – individual and client • Factors in combination can both increase and reduce threats • Additional safeguards • Rotation as a safeguard for all audits and its application (at least one year off)

  6. Long Association Communication with TCWG • Already guidance on communications between auditor and TCWG in 290.28 • Improving communication not specific to long association • Considered role of TCWG with respect to exception provisions: • Amend 290.152 to require communication with TCWG

  7. Long Association Timeserved prior to becoming a KAP (PIEs) • Should time served count towards total length of service • Imposing an overall time limit would be arbitrary • Recommend including guidance that application of principles could mean total service as KAP is less than seven years • Also need to consider long association of non-KAPs

  8. Long Association Cooling-Off Period (PIEs) • Recommend a 3 year cooling-off period (time on remains at 7 years) • Away for at least two full audit cycles • Applicable to all KAPs not just lead and review partners • To be considered in conjunction with restrictions on permissible activities during the cooling-off period

  9. Long Association Permissible Activities During Cooling Off Period • Minimal contact with audit client during cooling-off • Cannot continue on the audit or directly influence the audit • “audit team” definition minus “chain of command” • however can answer questions on prior year audit • Cannot provide non-audit services • “ad hoc” or “one off” too imprecise • Can provide generic services involving technical expertise • Cannot be the “relationship partner” for the client • Can have social contact

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