Professional Skepticism and Professional Judgment Richard Fleck, Task Force Chair IESBA CAG Meeting Madrid, Spain September 12-13, 2017

Objectives To note report back on March 2017 CAG discussion To discuss feedback on IESBA’s May 2017 ED and obtain Representatives’ views on Task Force response

Overview of Proposals New AM to describe linkage b/w FPs and PS in the context of audits, reviews and other assurance engagements Focus on how compliance with FPs support exercise of PS Illustrative examples using three FPs with focus on f/s audits only New AM to emphasize importance of PAs understanding facts and circumstances to exercise professional judgment when applying the CF to comply with FPs

Overview of ED Responses Category of Respondent Number of Respondents Regulators and Oversight Authorities 2 National Standard Setters Public Sector Organizations 1 Firms 9 IFAC Member Bodies 22 Other Professional Organizations 6 Total 42 Deadline for comments was July 25, 2017

Feedback on ED and Task Force Proposals Professional Skepticism Feedback on ED and Task Force Proposals Support from majority of respondents, some believe that IESBA should focus on LT PS project PS guidance not necessary because it states what is implicit in Code Drafting suggestions provided to clarify the description of linkage and to improve examples Several revisions made to clarify how each FP example supports PS in a f/s audit

Matter for CAG Consideration Professional Skepticism Matter for CAG Consideration Representatives are asked for views about Task Force’s revised proposals relating to PS

Feedback on ED and Task Force Response Professional Judgment (PJ) Feedback on ED and Task Force Response General support, but some mixed views e.g., Some suggest elevating to a req’t while others believe AM is unnecessary because it states what is already implicit in Code Improvements suggested to Align even more closely to description of PJ in IAASB standards Avoid using the word “sufficient” Revisions address many respondents’ suggestions

Matter for CAG Consideration Professional Judgment Matter for CAG Consideration Representatives are asked for views about Task Force’s revised proposals relating to PJ

Views about Longer Term PS Initiative Feedback on ED Views about Longer Term PS Initiative No question asked, but some took opportunity to comment Substantive majority of those who commented believed that PS should apply to all PAs Exercise of PS is important for tax and consulting engagements; Code should explain role of PS for those NAS Code should acknowledge that PS enables compliance with FPs Coordination among IAASB, IESBA and IESBA Approach taken by IAESB seems appropriate for the Code Some cautioned against potential unintended consequences

Longer Term PS Initiative June 2017 – IESBA considered Task Force proposals for progressing a longer term initiative which involve Analysis of underlying concerns that lead to stakeholder calls for greater exercise of PS Exploration of how to address issues at their root causes, mindful of need to avoid unintended consequence and meet public expectations IESBA to consider draft PS consultation in March 2018 Task Force to further consider feedback about LT initiative