Review of Part C Lisa Snyder, Task Force Member IESBA CAG Meeting New York, USA March 6, 2017

Part C - Project Status and Timeline Project approved - March 2013 Project divided into 2 phases: Phase 1: addresses Secs. 220 (Preparation & Presentation of Information) and 270 (Pressure) Conforming changes to other Secs Phase 2: addresses Sec. 250 (Inducements) and applicability of Part C to PAPPs

Part C - Project Status and Timeline Phase 1: Restructured text approved at December 2016 IESBA meeting and included in Structure ED-2 Phase 2 - Applicability to PAPPs: Agreed Part C applicable to PAPPs and addition of “applicability paragraphs” Exposed in separate ED in January 2017. Deadline for responses is April 25, 2017

Phase 2 – Sec. 250 - Inducements June 2016 IESBA: Proposed enhancements to Sec. 250 September 2016 IESBA: Strawman December 2016 IESBA: First read of proposed text March 2017 IESBA: Second read with view to exposure

Phase 2 – Sec. 250 – Inducements: Approach Bribery and Corruption IESBA and CAG suggested should be covered Task Force Response: Bribery/corruption covered by legislation is addressed but not primary focus Proposals require PAs to obtain an understanding of relevant laws and comply Proposals principles-based. Primary focus on inducements not covered by laws/regulations Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: Approach Bribery and Corruption IESBA considered definition for bribery and corruption Task Force Response: Global definitions: Difficult to devise Generic definition: Adverse precedent Might imply Section 250 aimed at bribery and corruption No single global definition to reference Will explain how it is addressed our proposal in a couple of slides

IESBA concerns over term “inducements” Phase 2 – Sec. 250 – Inducements: Use of “Inducements” and Title of Sec. 250 IESBA concerns over term “inducements” Alternative - “Gifts and Hospitality” – narrows scope Task Force Response: Need collective term, hence keep “inducements” Prefer “Gifts, Hospitality and other Inducements” Add clarification: “inducements” influence behavior, but not necessarily with inappropriate intent Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: Use of “Inducements” and Title of Sec. 250 Representatives are asked for views on the Task Force’s proposals with respect to: The use of “inducements” as a neutral term and the title of proposed Section 250. Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: Intent Consider actual or perceived intent Adverse intent: decline inducement Factors to evaluate the intent Factors same as evaluating level of threats Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: RITP Reasonable and Informed Third Party test December 2016: Alternative “anyone” test proposed IESBA feedback: Maintain RITP test. “Anyone” test not established. Task Force Response: “Anyone” test could forbid any inducements Difficult to enforce Revert back to RITP test Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: Intent and RITP Representatives are asked for views on the Task Force’s proposals with respect to: The provisions related to the intent test The use of the RITP test to evaluate the intent behind an inducement Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: Trivial and Inconsequential Adverse intent: must decline inducement even if trivial and inconsequential No adverse intent: Identify and evaluate threats Unless inducement trivial and inconsequential, individually and in aggregate Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements Immediate and Close Family Members Inducements offered / accepted by family members Might affect actual or perceived ability of PA to comply with fundamental principles Code not enforceable to non-PAs Extant requirement: PA must evaluate threats to fundamental principles Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements Immediate and Close Family Members Proposals: PA must: Discuss threats with relevant family members Advise not to offer/accept inducement if threats exist Evaluate threats if offered/accepted, unless trivial and inconsequential Use same factors if PA offered/received inducement directly Additional factor: relationship between 3 parties Refrain from making any business decisions with CP Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements Immediate and Close Family Members Representatives are asked for views on the Task Force’s proposals with respect to: The provisions related to immediate and close family members. Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: Conforming Amendments Sec. 340 – Prof. Accountants in Public Practice (PAPP) Counterparty is client Examples: Client / PAPP appropriate Not applicable to audits, reviews and other assurance engagements Sec. 420 and 906 (Independence guidance) Applicable to audits, reviews and other assurance engagements IESBA to consider conforming amendments in March 2017 meeting Will explain how it is addressed our proposal in a couple of slides

Phase 2 – Sec. 250 – Inducements: Conforming Amendments Representatives are asked for views on the approach to the proposed conforming amendments arising from the proposed revisions to extant Section 350. Will explain how it is addressed our proposal in a couple of slides

The Way Forward Second read with intention of obtaining approval: March 2017 IESBA meeting Release ED: April 2017 with 90 day comment period Finalize Phase 2: With restructured Code