Long Association Task Force Marisa Orbea Task Force

  • Slides: 19
Download presentation
Long Association Task Force Marisa Orbea, Task Force Chair IESBA Meeting June 29 -30/1

Long Association Task Force Marisa Orbea, Task Force Chair IESBA Meeting June 29 -30/1 July, 2015 New York, USA Page 1 | Proprietary and Copyrighted Information

Long Association Recap – Rotation of KAPs on the Audit of PIEs ED proposal

Long Association Recap – Rotation of KAPs on the Audit of PIEs ED proposal Respondents support? Board’s tentative view at April 2015 meeting 7 -yr time-on for all KAPs Most supported No change 5 -yr cooling-off for EP Majority did not support Continued support but consider recognizing jurisdiction rules 2 -yr cooling-off for other KAPs (inc EQCR) Most supported No change but consider PIOB Observer’s remarks 5 yrs off applies all PIEs Most supported No change 5 yrs off if only 1 yr EP General disagreement Support for new proposal>4 yrs or 2 of last 3 as EP: 5 yrs off Page 2 | Proprietary and Copyrighted Information

Long Association Recap – Rotation of KAPs on the Audit of PIEs ED proposal

Long Association Recap – Rotation of KAPs on the Audit of PIEs ED proposal Respondents support? Board’s tentative view at April 2015 meeting Additional KAP restrictions Evenly balanced Continued Support Limited Consultation former On balance supported Continued Support EP Concurrence with TCWG General support Continued Support Enhancements to GP Most supported Continued Support EP becoming EQCR New issue – not in ED TF liaising with IAASB WG Page 3 | Proprietary and Copyrighted Information

Long Association Recent Feedback from Stakeholders • IFAC SMPC – Support alternative approach to

Long Association Recent Feedback from Stakeholders • IFAC SMPC – Support alternative approach to allow local compliance – Supports application to just listed entities or even reconsideration of 7/3 – Concern about SMPs in jurisdictions where there a many PIEs and regarding the proposed restrictions • Letter from FEE considered later Page 4 | Proprietary and Copyrighted Information

Long Association Recent Feedback from Stakeholders (continued) • National Standard Setters – Some concern

Long Association Recent Feedback from Stakeholders (continued) • National Standard Setters – Some concern about extension of EP cooling-off from 2 yrs to 5 – Impact on SMPs / market competition / lack of empirical evidence – Suggested alternative minimum cooling-off period of three years – Others highlighted the “fresh look”, importance to investors – Possibility of flexibility with concurrence of TCWG Page 5 | Proprietary and Copyrighted Information

Further consideration of the issues arising from the ED discussed by the Board in

Further consideration of the issues arising from the ED discussed by the Board in April 2015 EQCR Page 6 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EQCR • ED proposed that the cooling-off

Long Association Length of Cooling-Off Period for EQCR • ED proposed that the cooling-off period for KAPs (inc EQCR) other than the EP remain at 2 years • Most respondents supported • Some respondents did not support indicating the same coolingoff period should apply to the EQCR as the EP • Majority of CAG Representatives supported the EP and EQCR having the same 5 -year cooling-off period • SMPC and EU CAG Representatives did not support Page 7 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EQCR • Further consideration of: – Regulatory

Long Association Length of Cooling-Off Period for EQCR • Further consideration of: – Regulatory stakeholder comments – PIOB Observer comments on familiarity of EQCR – Finding the right balance in public interest – Analysis of difference between EQCR and EP role (Appendix) – Benefits and detriments to audit quality • Presenting another option for the Board’s consideration Page 8 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EQCR – Option Listed PIE Non-Listed PIE

Long Association Length of Cooling-Off Period for EQCR – Option Listed PIE Non-Listed PIE EP 7/5 EQCR 7/5 7/2 Other KAP 7/2 Page 9 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EQCR – How it Addresses Stakeholder Feedback

Long Association Length of Cooling-Off Period for EQCR – How it Addresses Stakeholder Feedback • Addresses regulatory concerns about EQCR having same cooling-off period as EP, at least in respect of listed entities • Consistent with ISQC 1 which requires an EQCR on audits of listed entities • Consistent with CAG suggestion about splitting requirements between listed and unlisted • Addresses some of SMPC concerns Page 10 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EQCR – Other comments • Retains current

Long Association Length of Cooling-Off Period for EQCR – Other comments • Retains current requirements for KAPs other than EP for audits of non-listed PIEs • Increases complexity of application for jurisdictions that do not currently mandate 5 -yr cooling off for EQCRs Page 11 | Proprietary and Copyrighted Information

Further consideration of the issues arising from the ED discussed by the Board in

Further consideration of the issues arising from the ED discussed by the Board in April 2015 Recognizing Jurisdictional Provisions Page 12 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EP • ED proposed increase in cooling-off

Long Association Length of Cooling-Off Period for EP • ED proposed increase in cooling-off period for EP to 5 years • Many agreed 2 years is too short but majority did not support increase to 5 years • Majority of Board supported proposal but asked TF to consider jurisdictional alternative • Board did not support TF’s initial proposal allowing exemption – Where time-on period for a KAP serving on a PIE is shorter than 7 yrs – Where mandatory firm rotation is required in addition to rotation of KAPs • Page 13 | Proprietary and Copyrighted Information

Long Association Task Force Consideration of Alternative Provisions • Took into account views of

Long Association Task Force Consideration of Alternative Provisions • Took into account views of – Board members – IESBA CAG – NSS – IFAC SMPC • Letter from FEE asking for – Holistic approach – IESBA should not undermine robust jurisdictional alternatives Page 14 | Proprietary and Copyrighted Information

Long Association Task Force Consideration of Alternative Provisions (Continued) • Many different approaches to

Long Association Task Force Consideration of Alternative Provisions (Continued) • Many different approaches to partner rotation – Needs of different jurisdictions and their development over time • ED respondents concerned over interaction with local requirements • Unintended consequences making requirements – Stricter than Code in local jurisdictions – Too complicated to interpret and apply Page 15 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EP – Revised Proposal • • No

Long Association Length of Cooling-Off Period for EP – Revised Proposal • • No longer open-ended Not trying to deal with “equivalence” Recognizes different combinations of requirements Limited specific alternative to 5 -yr cooling-off period for EP, while still setting a minimum baseline of 3 years • All other long association requirements continue to apply to all PIE audits Page 16 | Proprietary and Copyrighted Information

Long Association Length of Cooling-Off Period for EP – Revised Proposal • One specific

Long Association Length of Cooling-Off Period for EP – Revised Proposal • One specific alternative if jurisdictional or legislative body following due process/based on local circumstances determines – EP serves a time on period shorter than 7 -years or – Has implemented mandatory firm rotation in addition to KAP rotation – Requirements must be in law or regulation • If the above apply, EP can cool-off for a minimum of 3 years – Specific and limited alternative – not an exception Page 17 | Proprietary and Copyrighted Information

Long Association Other Matters • Liaison with IAASB continues regarding: – Adjustment to ISQC

Long Association Other Matters • Liaison with IAASB continues regarding: – Adjustment to ISQC 1 to address issue of KAP moving directly from EP role – The Role of Professional Skepticism • Corresponding adjustments to Section 291 prepared but not presented Page 18 | Proprietary and Copyrighted Information

The Ethics Board www. ethicsboard. org

The Ethics Board www. ethicsboard. org