IESBA Meeting Livingstone, Zambia December 4-8, 2017 SWP 2019-2023 Stavros Thomadakis, IESBA Chairman Ken Siong, Technical Director IESBA Meeting Livingstone, Zambia December 4-8, 2017

Context Now Fully restructured and substantively revised Code at end of current planning horizon (2018) Major changes to architecture (Structure) and logic of the Code (enhanced CF, safeguards) Enhanced ethical requirements and guidance for PAIBs (Part C) Robust upgrades (NOCLAR, Long Association, Inducements) Enhanced guidance (Prof Skepticism/Prof Judgment (short term))

Environmental Factors Context Now Environmental Factors Rapid spread of digital technologies, “data economy” transformations More liquid workforce, use of “contingent workers” Continuing regulatory pressure: Steer Code to meet needs of audit inspection authorities Timely standard setting Heightened stakeholder expectations re SSB coordination Joint Sept 2017 IAASB-IESBA discussion re seek SWP alignment along dimensions of time, substance and due process

Sept 2017 CAG and Board Discussions SWP Survey Responses Sept 2017 CAG and Board Discussions CAG broadly aligned with PC analysis re top 6 standard-setting priorities Board also broadly supportive of PC analysis but… Keep post-implementation review of restructured Code high on forward agenda E-Code and implementation should be central to future strategy Outreach and global adoption important axes re restructured Code Reflect on what should be success factors in 2023, esp. relevance, quality and global adoption Maintain some reserve capacity to address emerging issues

Proposed Vision for the Code Strategic Orientation for 2019-2023 Proposed Vision for the Code A Code that will: Guide the ethical conduct of PAs worldwide in a way that is robust, relevant and fit for purpose; Reflect, and will be enabled by, developments in technology; and Be recognized worldwide as a high ethical benchmark for the global accountancy profession.

Matter for Consideration Strategic Orientation for 2019-2023 Matter for Consideration Do Board members support Planning Committee’s proposed vision for the Code?

Strategic Orientation for 2019-2023 Strategic Themes Striving to ensure a modern, relevant and readily accessible Code Raising the ethical bar for PAs globally, including strengthening auditor independence Increasing global adoption of the Code and facilitating its effective implementation Proactively engaging and seeking cooperative avenues with key stakeholders

Strategic Orientation for 2019-2023 Strategic Themes Striving to ensure a modern, relevant and readily accessible Code Respond to ethical implications of technological transformations Leverage digital technology to broaden reach and increase access to Code Respond to regulatory and other developments internationally Raising the ethical bar for PAs globally, including strengthening auditor independence Continue to enhance auditor independence provisions, with particular focus on definitions of PIE/listed entity, and concept of materiality Respond to public concerns re ethical dimensions of tax planning services

Strategic Orientation for 2019-2023 Strategic Themes Increasing global adoption of the Code and facilitating its effective implementation Imperative to promote global adoption and implementation of restructured Code In due time, assess whether IESBA objectives met re post-implementation review Proactively engaging and seeking cooperative avenues with key stakeholders Major axis of cooperation and coordination with IAASB Proactively engage with other important stakeholder groups, including regulatory community, investors/TCWG, NSS, PAIBs and SMPs, firms, academia, etc

Matter for Consideration Strategic Orientation for 2019-2023 Matter for Consideration Do Board members support Planning Committee’s recommendations regarding strategic themes?

Criteria Influencing Development of Work Plan Developing the Work Plan Criteria Influencing Development of Work Plan Benefits to public interest of undertaking particular action Enhance public trust in Code and profession Promote ethical mindset for professional judgment Support public interest outcomes Increase global adoption of the Code Pervasiveness of the matter Degree of urgency Global relevance Feasibility within realistic timeframes

Managing Delivery of SWP Developing the Work Plan Managing Delivery of SWP Key focus areas Strength of Board reputation and global acceptance of the Code Capacity at leadership, volunteer and staff levels Operational effectiveness and stability Robust outreach and communication with stakeholders

Matter for Consideration Developing the Work Plan Matter for Consideration Do Board members support criteria for developing work plan and approach to managing its delivery?

Pre-commitments # Topic Status 1. NAS Not started 2. Fee-related matters Fact finding in progress; WG report expected Q2 2018 3. Professional skepticism (longer term) Under way; consultation paper approval Q2 2018 4. E-Code 5. Alignment of Part 4B with ISAE 3000 6. NOCLAR post-implementation review 7. Long association post-implementation review 8. IAASB-IESBA coordination topics (excl. PS) Objectivity of EQCR started; others to be prioritized

Top 6 Priorities (Factoring CAG and Board Support) Future Standard-setting Initiatives Top 6 Priorities (Factoring CAG and Board Support) Survey Ref # Topic Potential Scope Strong Convergence of Views B1 Technology and innovation Broad B2 Models of service delivery B5 Tax planning and related services Significant Convergence of Views B3 Definitions of PIE and listed entity Narrow B6 Materiality B12 Post-impl. review – restrd. Code

Topics with Less Significant or Weak Support Future Standard-setting Initiatives Topics with Less Significant or Weak Support Survey Ref # Topic Potential Scope Less Significant Support B10 Breach of the Code Narrow B13 Meaning of global “public interest” Broad B8 Documentation B7 Communication with TCWG Weak Support B11 Definitions and descriptions of terms B4 Collective investment vehicles B9 Familiarity threat in relation to extant Part C

Technology and Innovation Future Standard-setting Initiatives – Relevant Considerations Technology and Innovation Particular PIOB interest Establish WG to explore and scope out issues? Involve external experts? Given fast pace of change, begin exploratory work without awaiting SWP finalization? Potentially pervasive New patterns of social behavior in data economy, “always on” culture? Impact on definitions of terms and concepts in the Code, e.g. independence of mind when relying on AI?

Technology and Innovation Future Standard-setting Initiatives – Relevant Considerations Technology and Innovation Broad scope – PAPPs and PAIBs Potential for multiple work streams? Linked to topic of service delivery models Initial deliverables Thought piece/discussion paper? Staff alerts/FAQs? Likely need to coordinate response with IAASB/IAESB Track work of IAASB Data Analytics WG?

Developments in Models of Service Delivery Future Standard-setting Initiatives – Relevant Considerations Developments in Models of Service Delivery Broad scope – PAPPs and PAIBs Implications for definitions or descriptions of key concepts such as “office,” “engagement team,” “employee?” Other questions related to “outsourcing,” both from clients to firms, and from firms to shared service centers Linked to topic of technology and innovation Initial deliverable – Discussion paper? Staff alerts/FAQs? Likely need to coordinate response with IAASB/IAESB

Tax Planning and Related Services Future Standard-setting Initiatives – Relevant Considerations Tax Planning and Related Services Broad scope – consider roles of both PAPPs and PAIBs Central Q: how to clearly define ethical boundaries for such services Much research and thinking already done by policy-makers, think tanks, international/regional organizations, IFAC member bodies E.g., OECD, Accountancy Europe, ICAEW Views/attitudes across jurisdictions diverse Challenge to keep politics out of debate but opportunity for IESBA to take leadership role? Deliverables?

Definitions of PIE and Listed Entity Future Standard-setting Initiatives – Relevant Considerations Definitions of PIE and Listed Entity Robustness of current PIE definition a central concern for IOSCO, Basel Committee and IAIS Wide variation of definitions around the world SMP concerns re scoping in small entities in PIE definition Distinction re PIE/non-PIE for independence still justifiable? Listed entity definition has raised questions of interpretation in EU Scope will be PAPPs and independence standards Likely need to coordinate with IAASB

Future Standard-setting Initiatives – Relevant Considerations Materiality Scope: mainly independence standards but also touches other parts of the Code (e.g. in relation to breaches) A specific IOSCO concern re adequacy of guidance Linked to NAS initiative Deliverable: enhanced guidance in the Code Potential need to coordinate with IAASB?

Post-implementation Review (Excl. NOCLAR and LA) Future Standard-setting Initiatives – Relevant Considerations Post-implementation Review (Excl. NOCLAR and LA) Assess whether restructured Code met objectives of Structure project? What about substantive revisions from Safeguards? Whole restructured Code or targeted areas? When and how? Timeline? Interaction with NOCLAR and LA post-implementation reviews? Opportunities for synergies in work effort? Deliverable – report of findings to IESBA? Lessons from IAASB’s post-implementation review for clarified ISAs?

Other Proposed Initiatives Future Standard-setting Initiatives Other Proposed Initiatives Subject to availability of resources: Communication with TCWG Documentation Reserve some capacity for general maintenance of the Code

Adoption and Implementation Developing the Work Plan Adoption and Implementation Strong support from survey respondents for indicated activities Major effort on outreach and communication re release of restructured Code Develop and execute robust communication strategy Pursue proactive outreach agenda Track and report on progress of global adoption of the Code Commission development of appropriate staff publications Pursue cooperation opportunities with key stakeholders, including NSS, regulators, firms, and IFAC SMP and PAIB Committees Speak out on ethics-related developments

IFAC SMP Committee Comments on Agenda Material Start monitoring implementation of restructured Code from Q3 2022 Support for rollout initiatives re restructured Code; consider doing more Re NAS – be cautious about “regulatory creep”; Code must remain principles-based and globally operable Focus on evidence-based standard setting and appropriate research of issues

Matters for Consideration Developing the Work Plan Matters for Consideration Views on : Proposed 2019-2023 Work Plan re content and timing? Individual identified priority actions? Views on proposed 2018 Work Plan?

Matter for Consideration Other Identified Topics Matter for Consideration Input from IOSCO – Agenda Item 6-B Do Board members agree with PC responses?

Matter for Consideration Other Identified Topics Matter for Consideration Matters identified for future Board attention during current or recently completed projects – Agenda Item 6-C PC recommendation to consider under general maintenance initiative Do Board members agree?

Future Strategy and Work Plan Forward Timeline Mar 2018 Discussion with CAG IESBA approval of CP MaY 2018 Discussion with NSS Sept 2018 Full review of responses to CP – CAG and IESBA Dec 2018 IESBA approval of final SWP Mar 2019 PIOB approval of final SWP