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

Summary of September Board meeting 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

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

October 2013 CAG Teleconference 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

Improvements to Overall Framework 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)

Communication with 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

Time served prior to becoming a KAP (PIEs) 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

Cooling-Off Period (PIEs) 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

Permissible Activities During Cooling Off Period 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