Long Association Task Force Marisa Orbea Task Force

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Long Association Task Force Marisa Orbea, Task Force Chair IESBA Meeting December 4 -6,

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

Long Association Background • Summary of September Board meeting ‒ Continue to monitor regulatory

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 Page 2

Long Association Background • Summary of September Board meeting (continued) ‒ No modification to

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

Long Association October 2013 CAG Teleconference • Main views expressed: – Support for principles

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 Page 4

Long Association Improvements to Overall Framework • Suggested amendments: – – – Recognize familiarity

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) Page 5

Long Association Communication with TCWG • Already guidance on communications between auditor and TCWG

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 Page 6

Long Association Time served prior to becoming a KAP (PIEs) • Should time served

Long Association Time served 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 Page 7

Long Association Cooling-Off Period (PIEs) • Recommend a 3 year cooling-off period (time on

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 Page 8

Long Association Permissible Activities During Cooling Off Period • Minimal contact with audit client

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 Page 9