Page 1 | Confidential and Proprietary Information Emerging Issues and Outreach Gary Hannaford, Chair, Emerging Issues and Outreach Committee IESBA Meeting New York, USA April 7-9, 2014

Page 2 | Confidential and Proprietary Information Emerging Issues & Outreach (EIO) –December 2013 – EIO working processes finalized and EIO Committee (EIOC) established –January 2014 – 1st EIOC teleconference. Issues considered: MG Rover Aggressive Tax Avoidance EU Reform Background

Page 3 | Confidential and Proprietary Information Considered in Dec Exec. Session Presented at March 2014 CAG Tribunal report unclear on: –Circumstances in which accountants must consider the public interest –What it means to consider the public interest –What constitutes a PIE –How to document public interest considerations Is additional guidance needed in the Code? MG Rover Case

Page 4 | Confidential and Proprietary Information CAG Comments: –Consider the totality of issue –Do non-accountants have to consider the public interest –Regulator could be setting a precedent which may warrant further attention –Consider the need for a better explanation of the public interest –Would the public interest have been considered if the transaction had been a success –Consider the political dimension –Would tribunal findings differed under the IESBA Code MG Rover Case

Page 5 | Confidential and Proprietary Information Matters for Consideration: 1.Specific actions re. definition of public interest 2.Public interest – only applicable to PIEs or all entities? 3.Other matters, e.g. revisiting definition of a PIE MG Rover Case

Page 6 | Confidential and Proprietary Information Multinational companies, often assisted by accountants, have exploited outdated tax laws and tax mitigation schemes to reduce tax costs Strong statements from ICAEW and prominent politicians on role of accountants in assisting in aggressive tax avoidance and ignoring public interest concerns G20 countries exchanging information to tighten loopholes Aggressive Tax Avoidance

Page 7 | Confidential and Proprietary Information CAG Comments: –European Commission has initiated group to consider tax issues –Could accountants be held liable if don’t provide client with the best tax advice –Advice is not illegal. Governments use tax as an incentive. Aggressive Tax Avoidance

Page 8 | Confidential and Proprietary Information Matters for Consideration: –Is specific action needed or is monitoring sufficient? –What would that specific action be? Aggressive Tax Avoidance

Page 9 | Confidential and Proprietary Information Final vote on adoption in Q Translate in various EU languages and incorporate into official EU text by Q Members then have two years to adopt – i.e. Q Partner rotation - 7yr. Time-on and 3yr cooling-off Firm rotation must be overlaid with this UK has bifurcated rotation, but no mandatory firm rotation EU Audit Reform

Page 10 | Confidential and Proprietary Information At least 2 firms must tender Recommendation from TCWG needed Min engagement 1 yr. Members states can increase this Max engagement 10 yrs. Member states can decrease this Patchwork implementation between Members likely EU Audit Reform

Page 11 | Confidential and Proprietary Information Dec 2013, preliminary agreement on audit reform: –Mandatory rotation every 10 yrs. –Can extend tenure for 10 yrs. on tender-hence max 20 yrs. –Joint audits can extend for 14 years (hence max 24 yrs.) –Extraordinary circumstances can increase by a further 2 years (hence max 26 yrs.) –Implementation will be staggered EU Audit Reform

Page 12 | Confidential and Proprietary Information Rotation requirements for senior personnel, but no definition of senior personnel Limit on NAS to 70% of audit fees over three years, but no guidance on how to calculate Restrictions of permissible activities during cooling-off – no indicate in extent of restrictions Prohibited services list. No leeway on prohibitions. EU Audit Reform

Page 13 | Confidential and Proprietary Information Matters for Consideration: –Are specific actions needed as relates to EU Audit Developments? –Other international developments for the EIOC to consider? EU Audit Reform / Other Developments

Page 14 | Confidential and Proprietary Information Increased dialogue with profession and other stakeholders Commitment to dialogue with CAG member organizations No immediate suggestions from CAG Reps on additional outreach opportunities Outreach

Page 15 | Confidential and Proprietary Information Matters for Consideration: –Comments in Outreach performed –Possible additional Outreach opportunities Outreach

The Ethics Board