Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code

DavidJohnson@ifac.org — Friday, March 10, 2023

This Q&A publication is designed to highlight, illustrate, or explain aspects of the PIE revisions in the Code and is intended to complement the Basis for Conclusions for the final pronouncement. It will assist national standards setters, professional accountancy organizations, and firms in adopting and/or implementing the PIE revisions. The Q&As will also assist regulators and audit oversight bodies, the corporate governance community, investors, preparers, educational bodies or institutions, and other stakeholders in understanding the revised PIE definition and related provisions in the Code. Among other things, the PIE revisions:

Include an expanded definition of a PIE by specifying a broader list of PIE categories, including a new category "publicly traded entity" to replace the category "listed entity."
Recognize the essential role local bodies responsible for the adoption of the Code play in delineating the specific entities that should be scoped in as PIEs in their jurisdictions, encouraging them to properly define the PIE categories in the expanded definition and adding any other categories relevant to their environments.
Introduce a transparency requirement for firms to publicly disclose the application of independence requirements for PIEs where they have done so.

The PIE revisions are effective for audits of financial statements for periods beginning on or after December 15, 2024. Read the revisions here.

Briefing Note for Global Sustainability Roundtables

DavidJohnson@ifac.org — Thursday, March 9, 2023

the IESBA will hold four global roundtables to obtain input that will help shape the development of new ethics and independence standards for sustainability reporting and assurance.

The objective of the IESBA’s global sustainability roundtables is to obtain stakeholders’ input to key ethics and independence issues relating to sustainability reporting and assurance as well as the related topic of the use of experts. Among other matters, participants will also be asked to exchange views on a number of strategic matters to help inform the IESBA’s deliberations regarding the scope and direction of its new standards.

The IESBA is looking to engage with a broad range of stakeholders, including investors and other users of sustainability information; those charged with governance; regulators and oversight bodies; preparers; national standard setters; sustainability assurance providers (both within and outside the accountancy profession); and academics.

The Briefing Note was prepared by the IESBA Staff as supporting materials for the roundtables.

The roundtables will be held in person at the following times and locations:

Friday, March 24 - Paris, France
Thursday, March 30 - Sydney, Australia
Monday, April 3 - Singapore
Thursday, April 6 - New York, USA

IFAC Response to the IFRS for SMEs Exposure Draft

MichaelPilger@ifac.org — Tuesday, March 7, 2023

IFAC welcomes this comprehensive review of IFRS for small- and medium-sized enterprises (SMEs). In principle, we support alignment of IFRS for SMEs with full IFRS Standards. As a basic standard-setting principle we believe the concepts that underpin IFRS and IFRS for SMEs should be the same, notwithstanding that their application may need to be modified to address user needs and capacity constraints of SMEs.

We generally agree with most of the proposals in the Exposure Draft and commend the IASB for considering the cost/benefit of each new or amended requirements from the perspective of SMEs and users of their financial statements. We believe it is critical to maintain the concept of ‘undue cost or effort’ and related exemptions as this is part of the foundation on which IFRS for SMEs has been developed and is a contributing reason why it is attractive to SMEs across the world.

Final Pronouncement: Revisions to the Code Relating to the Definition of Engagement Team and Group Audits

DavidJohnson@ifac.org — Tuesday, February 28, 2023

These revisions to the Code Relating to the Definition of Engagement Team and Group Audits address holistically the various independence considerations in an audit of group financial statements. The revisions also deal with the independence and other implications of the changes made to the definition of an engagement team in the Code to align with changes to the definition of the same term in the International Auditing and Assurance Standards Board’s (IAASB) International Standards on Auditing (ISAs) and International Standards on Quality Management (ISQMs).

Among other matters, the revisions:

Strengthen and clarify the independence principles that apply to:

Individuals involved in a group audit, including those within, or engaged by, firms that audit components within a group.
Firms engaged in the group audit, including firms within and outside the group auditor firm’s network.

Specify the need for, and content of, appropriate communication on independence matters between the group auditor firm and component auditor firms participating in the group audit.
More explicitly set out the process to address a breach of an independence provision at a component auditor firm, reinforcing the importance of transparency and appropriate communication with those charged with governance of the group.
Amend the definitions of the terms "engagement team" and "audit team" in the Code to recognize the different and evolving engagement team structures, and address the implications of those definitional changes.
Provide guidance to facilitate the determination of who is included in an engagement team or an audit team.
Revise the definitions of a number of existing terms and establish new defined terms with respect to independence in a group audit context.

The development of the proposals has benefited from close coordination with the IAASB’s group audits and quality management projects.

The pronouncement will be effective for audits of financial statements and group financial statements for periods beginning on or after December 15, 2023, with early adoption permitted.

The Role Accounting Technicians Can Play in the Global Accountancy Ecosystem

meganhartman@ifac.org — Thursday, February 23, 2023

Accounting Technicians are part of the global accountancy profession, working across all sectors in financial management roles that are essential to a strong and sustainable accountancy profession, private and public sector organizations, and financial markets and economies. When Accounting Technicians, or ATs, are empowered with appropriate technical knowledge and practical skills—and valued by employers—they support the production of reliable financial and non-financial information that drives timely and informed decision making, and delivers transparency and accountability.

Learn more about Accounting Technicians on our dedicated web page: ifac.org/accountingtechnicians.

Proposed Revisions to the Code Addressing Tax Planning and Related Services

DavidJohnson@ifac.org — Friday, February 17, 2023

Due to upcoming website maintenance, our stakeholders will not be able to submit comment letters from Friday, March 31 at 2:00 PM EDT to Monday, April 3 at 8:00 AM EDT. If you need to submit your comment letter during this time, please email a PDF and Word version to Communications@ethicsboard.org and specify your organization and country or region.

The proposed revisions to the Code addressing tax planning and related services responds to public interest concerns about tax avoidance and the role played by consultants, including professional tax advisers, in light of revelations in recent years such as the Paradise and Pandora Papers. The proposals strengthen the ethical expectations for professional accountants in business and in public practice when performing tax planning activities for employing organizations or providing tax planning services to clients, respectively.

Among other matters, the proposed ethical framework:

Explains the types of threats to compliance with the fundamental ethics principles of the Code that might be created when professional accountants are involved in tax planning.
Sets a clear principle that professional accountants recommend or otherwise advise on a tax planning arrangement only if they have determined that there is a credible basis in laws and regulations for it.
Requires consideration of the reputational, commercial and wider economic consequences that could arise from the way stakeholders might view the tax planning arrangement before determining whether to proceed with the recommendation or advice.
Provides practical guidance to assist professional accountants in navigating situations of uncertainty when carrying out tax planning.
Deals with other practical matters, including disagreement with the client or management or those charged with governance, and documentation.

The development of the proposals has been informed by extensive fact finding and outreach to stakeholders, including three global roundtables held in April 2022.

The State of Play: Sustainability Disclosure & Assurance 2019-2021 Trends & Analysis

KatherineMartin@ifac.org — Wednesday, February 15, 2023

The State of Play in Sustainability Assurance benchmarking study captures and analyzes the extent to which companies are reporting and obtaining assurance over their sustainability disclosures, which assurance standards are being used, and which companies are providing the assurance service. The 2019-2021 Trends & Analysis report marks our third annual benchmarking study of global practice in sustainability disclosure and its assurance.

For the third consecutive year, our analysis indicates that while the frequency of reporting ESG information is very high and the incidence of assurance is on an upward trend, there continues to be a meaningful difference between reporting and assurance rates.

Non-Authoritative Support Material Related to Technology

meganhartman@ifac.org — Wednesday, February 8, 2023

This Frequently Asked Questions (FAQ) helps address investigating exceptions and the concept of performance materiality when performing audit procedures using automated tools & techniques (ATT). While not unique to ATT, questions on these topics have become more prevalent with the increasing use of ATT, which enable analyzing data sets with large volumes of information.

The publication does not amend or override the International Standards on Auditing (ISAs), the texts of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs.

Other technology-related publications are available on the IAASB’s Technology web page.

IFAC Technology Matrix

meganhartman@ifac.org — Thursday, January 26, 2023

This Technology Matrix is a quick guide to help stakeholders understand and access the breadth of technology resources available. Featuring content from January 2021-January 2023, the matrix categorized resources using technology ABCs:

A: Artificial Intelligence
B: Blockchain
C: Cyber-security
D: Data Governance (& Valuing Data)
E: Ethics
Other Tech Content (i.e., content not falling within A, B, C, D or E)

The Matrix is updated periodically throughout the year.

Proposed Part 10, Audits of Group Financial Statements of the Proposed ISA for Audits of Financial Statements of Less Complex Entities

meganhartman@ifac.org — Tuesday, January 24, 2023

Due to upcoming website maintenance, our stakeholders will not be able to submit comment letters from Friday, March 31 at 2:00 PM EDT to Monday, April 3 at 8:00 AM EDT. If you need to submit your comment letter during this time, please email a PDF and Word version to IAASBcommunications@iaasb.org and specify your organization and country or region.

This proposed section, Part 10, Audits of Group Financial Statements, is intended to form part of the proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) when finalized. Group audits were not included in the scope of the original Exposure Draft of the ISA for LCE. Given stakeholder feedback, the IAASB reconsidered its decision to exclude group audits and developed proposals that address audits of less complex groups.

With the inclusion of group audits, the IAASB has proposed changes to the Authority of the proposed ISA for LCE. For example, the IAASB removed the prohibition on using the standard when the audit is a group audit unless component auditors are involved, other than in limited circumstances in which a physical presence is needed for a specific audit procedure for the group audit (e.g., for attending a physical inventory count or inspecting physical assets).