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Responding to Non-Compliance with Laws and Regulations

Responding to Non-Compliance with Laws and Regulations. IESBA Meeting December 2013. Robert Franchini. Responding to Non-Compliance with Laws and Regulations. Disclosure to an appropriate authority. Proposed changes to section 225 from “straw-man” discussed in Sydney:

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Responding to Non-Compliance with Laws and Regulations

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  1. Responding to Non-Compliance with Laws and Regulations IESBA Meeting December 2013 Robert Franchini

  2. Responding to Non-Compliance with Laws and Regulations Disclosure to an appropriate authority Proposed changes to section 225 from “straw-man” discussed in Sydney: • Removed “rebuttable presumption” • Comply with any regulatory provisions (225.19) • Refer to “reporting” rather than “disclosing” to an appropriate authority • Replaced “permitted to override” with “would not be a breach of the duty of confidentiality” • Re-positioned the consideration of existence of whistle-blowing protection

  3. Responding to Non-Compliance with Laws and Regulations Disclosure to an appropriate authority Matters to consider: • Should we retain a specific reference to the public interest threshold as a factor in determining whether to report rather than simply the degree of gravity of the matter • Is existence of whistle-blowing protection appropriate as a factor to consider in determining whether to report

  4. Responding to Non-Compliance with Laws and Regulations Materiality filter • PA should seek to gain an understanding of a matter where the matter is other than clearly inconsequential (225.5) • The PA shall evaluate the response of the client, management and TCWG when the matter could have “significant consequences for the client or others”

  5. Responding to Non-Compliance with Laws and Regulations Successor and predecessor auditors • Under existing Code there is no requirement for successor auditors to communicate with a predecessor auditor • Mandating communication may act as a deterrent to the commission of acts of non-compliance • The TF proposes: • Successor auditor shall request the existing auditor if there any facts or circumstances that the PA needs to be aware of before deciding whether to accept appointment • If client fails to give consent for the predecessor to communicate the predecessor shall communicate this fact to the successor • The successor should carefully consider the reason for such failure to provide consent

  6. Responding to Non-Compliance with Laws and Regulations Documentation Proposed changes from “straw-man” discussed in Sydney: • Removed requirement to document why rebuttable presumption does not apply • Documentation should be prepared in careful and thoughtful manner and with appropriate diligence as may be subject to legal discovery

  7. Responding to Non-Compliance with Laws and Regulations Professional accountants in business • Conforming changes to section 225 • More guidance and less emphasis on requirements • Replaced the public interest as threshold for being overriding duty of confidentiality with consideration of the gravity of the matter

  8. The Ethics Board

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