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Structure of the Code Phase 1

This document discusses the restructured code of conduct, highlighting its enhanced usability, responsiveness to stakeholders, and increased clarity. It also covers the restructuring process, objectives of the meeting, and proposed changes.

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Structure of the Code Phase 1

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  1. Structure of the CodePhase 1 Don Thomson, Task Force Chair IESBA Meeting New York, USA December 12-16, 2015

  2. Structure of the Code Key Features of the Restructuring • Enhanced understandability, improved usability • Serving the public interest, responsive to stakeholders • Requirements distinguished from guidance • Increased prominence of principles and the conceptual framework • Increased clarity of responsibility • IAASB ISQC 1 Task Force considering further clarification • Increased clarity of language, improving readability

  3. Structure of the Code Other Features of Restructuring • New title to emphasize key features • Guide to the Code • More self-contained sections • Careful to avoid inadvertent changes in meaning • Careful to avoid any weakening of the Code • Various matters outside scope noted for Board attention

  4. Structure of the Code Phases 1 and 2 – Agenda Items 3 and 3-A Project Status • September 2016, general support and input from Board and CAG • Outreach - SMPC, Forum of Firms and IFIAR • Reflected on Board and CAG and other input; refined proposals • Drafting guidelines revised, oversight and support to other TFs • Presenting Phase 1 revisions today; Phase 2 tomorrow • Staff-prepared compilation Agenda Item 3-F facilitated consistency review – changes reflected as necessary in text • Final documents include Staff-prepared mapping to assist review

  5. Structure of the Code Phases 1 and 2 – Agenda Item 3 Meeting Objectives and Approach • Review and obtain input on the draft restructured Code • Discuss highlights of proposed changes since September set out in 3-B • Discuss highlights of proposed changes arising from advance input • Opportunity for IESBA members to raise any other significant matters • “Wordsmithing” suggestions welcome off-line • Further proposals to be discussedon Thursday • Advance input considered by Task Force on Sunday • Updated draft text and additional particulars of input received will be available on Wednesday

  6. Structure of the Code Phase 1 – Agenda Item 3-A Conforming Amendments and Consistency • NOCLAR and Safeguards conforming amendments in text • Consistency review - editorial changes • Compliance with Drafting Guidelines • For example, completeness and consistency of headings • Consistency between Task Forces • For example, between Sections 310 and 210

  7. Structure of the Code Phase 1 – Agenda Item 3-B Preface, Guide and Tables of Contents • Preface, Change to active voice from consistency review • Paragraph 6, deleted reference to firms to clarify text • Paragraph 10, adjusted language to simplify wording • Paragraph 11, “may” and “might” added in Guide and Glossary to clarify their particular use in the Code denoting possibility and permission respectively • Table of contents paragraph number change; illustrated for Parts in Staff-prepared compilation

  8. Structure of the Code Phase 1 – Agenda Item 3-B Preface, Guide and Tables of Contents Advance Feedback • Para. 4, Part 2 – add “performing professional activities” • Para. 4, Glossary – change to “used throughout the Code” • Para. 6– restore deleted sentence without parentheses • Para. 8 – change to “of which the subsection forms a part” • Para.12 – delete “as noted in paragraph 100.2”

  9. Agenda Item 3-B Part 1 – Sections 100 to 120Part 3 – Sections 300 to 350 • Part 1 • 100.3 A2, clarified whose belief re disproportionate outcome • 112.2 A1, reference to familiarity removed as threats are first addressed in Section 120 • Part 3 • Changes in this Part are those which have occurred throughout the Code from the consistency review, NOCLAR and Safeguards

  10. Agenda Item 3-B Part 1 – Sections 100 to 120Part 3 – Sections 300 to 350 Advance Feedback • Part 1 • 112.2 A1 – delete premature reference to threats • Part 3 • 320.3 – delete “changes in” • R320.5 and 320.5 A1 – relocate continuance consideration

  11. Structure of the Code Phase 1 - Agenda Item 3-B Part 4A – Paragraphs 400 to 430 • 400.4, used a footnote to set out the complete name for ISQC 1, improving readability • 400.10, removed reference to “line items,” now addressed in Section 900.1 • R400.52, refined changes to network firm restructuring • 400.70 A1, change highlighting that if a firm’s objectivity is compromised it will be unable to continue as auditor

  12. Structure of the Code Phase 1 - Agenda Item 3-B Part 4A – Paragraphs 400 to 430 Advance Feedback • 400.32 A1, etc., – change “members of” to “… members” • 400.70 A1 – delete duplicate of compromised objectivity • R400.75 – change “set out in” to “identified” • 400.80(e)(ii) – change “might be possible” to “is possible” • 400.80 A2 – delete duplicate lead in, “when a …”

  13. Structure of the Code Phase 1 – Agenda Item 3-B Part 4A – Paragraphs 510 to 525 • 511.6 A1, deleted repetitive text • 520.4 A1, and 520.6 (c)(ii), further clarified the application of materiality or significance test to network firms • R524.8, adjusted the wording to better express the meaning of the paragraph

  14. Structure of the Code Phase 1 – Agenda Item 3-B Part 4A – Paragraphs 510 to 525 Advance Feedback • 510.7 A1, etc. – change “members of” to “… members” • 511.6 A1 – change “home mortgages” to “mortgages” • R511.8, etc. – change “respectively” to “as applicable” • 520.4 A1 – delete “such a relationship is significant” • R520.6, etc. – revise insignificant network firms wording • R521.9 – delete “network firm” from title

  15. Structure of the Code Phase 1 – Agenda Item 3-B Glossary • New definitions • May and might in Guide and Glossary • Predecessor accountant (NOCLAR) • Proposed accountant (NOCLAR) • PAIB definition adjusted (Part C); RITP adjusted (Safeguards) • Described terms • Cooling-off – added • Materiality deleted, matter for Board attention

  16. Structure of the Code Phase 1 – Agenda Item 3-B Glossary Advance Feedback • “Cooling-off” – add “period” • “Eligible audit engagement” add description

  17. Highlights of changes from ED 1 and Basis for Agreement-in-Principle • Unintended changes of meaning • Network firm, necessary adjustments made • Guide to the Code • No longer part of the Code; Some material moved back to the Code • Prominence of the fundamental principles and need to be independent highlighted • Linkage between independence and objectivity clarified • Generally necessary retained in Sections 310 and 210

  18. Structure of the Code Phase 1 – Agenda Item 3-B Other Significant Matters • Do IESBA Members wish to raise any other significant matters that have not already been discussed? • Preface and Guide • Part 1 • Part 3 • Part 4A • The Task Force welcomes “wordsmithing” input off-line

  19. Agenda Item 3-A Next Steps • Proposed ED-2 with complete restructured Code, including agreement-in-principle on Phase 1 • Early consideration of implementation issues encouraged • Important for users of the Code to consider these issues • CAG emphasized the importance of IESBA also considering issues • Matters for Board attention – input on out of scope matters • Electronic enhancements further work in 2017 and tools – once Code is final

  20. Structure of the Code Phases 1 and 2 Forward Timeline (Tentative)

  21. Structure of the Code Phase 2 Don Thomson, Task Force Chair IESBA Meeting New York, USA December 13, 2016

  22. Structure of the Code Phase 2 – Agenda Items 3-A and 3-H Phase 2 Status • Staff-prepared compilation facilitated consistency review • Phase 2 consistent with Phase 1 • 3-D includes TF’s revised proposals – reflects ED-2 “Chapters” • Section 800 and Part 4-B reflect the Drafting Guidelines and include Safeguards conforming amendments (gray text) • The Task Force welcomes “wordsmithing” input off-line • Final consideration of Phases 1 and 2 on Thursday

  23. Structure of the Code Phase 2 – Agenda Item 3-D Part of Part 4-A Section 800 • Introductory text reordered to conform to drafting conventions • R800.13 – text modified from“prepares” to “performs” an eligible audit engagement

  24. Structure of the Code Phase 2 – Agenda Item 3-D Part of Part 4-A Section 800 Advance Feedback • R800.8 – delete the first “interests and relationships”

  25. Structure of the Code Phase 2 – Agenda Item 3-D Part 4-B • Introductory text reordered to conform to drafting conventions • 900.1 – added a second example • 910.4 A1 – reinstated reference to “directly” and “indirectly” (also paragraph 510.4 A1)

  26. Structure of the Code Phase 2 – Agenda Item 3-D Part 4-B Advance Feedback • 900.1 – change second example to performance assurance • 900.13, etc. – remove references to unused section numbers • R900.17, line 1 – change “any threat” to “a threat” • R900.53 – delete “as appropriate” • 907.2 – add reference to types of threats • R911.5, etc. – change “respectively” to “as applicable”

  27. Structure of the Code Phase 2 – Agenda Item 3-D Other Significant Matters and Explanatory Memorandum • Do IESBA Members wish to raise any other significant matters that have not already been discussed? • Section 800 • Part 4B • Explanatory Memorandum

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