Page 1 | Confidential and Proprietary Information Structure of the Code Don Thomson, Working Group Chair IESBA Meeting Toronto, Canada April 7-9, 2014

Page 2 | Confidential and Proprietary Information Prior years – Concerns expressed May-October 2013– Research supports change December 2013– Prelim. recommendations February 2014– Additional IOSCO input March 2014– Additional CAG input April 2014– Final report, project proposal Background

Page 3 | Confidential and Proprietary Information Changes from preliminary report (details to follow) –Responsibility – "firm" in most cases –Clarity – inform the Board of inconsistencies etc –Reorganization – less prescriptive re s.290 Electronic Code – some immediate action Examples – more on Parts A and B; in process Since December

Page 4 | Confidential and Proprietary Information Recommendations: Distinguish requirements from guidance –enhance understandability & enforceability Confirm: conceptual framework is a requirement Guidance adjacent to relevant requirements Distinguishing requirements (4-A # I)

Page 5 | Confidential and Proprietary Information Recommendations: Clarify audit firm's responsibility for independence except where clearly beyond firm’s control Firms' policies & procedures shall enable identification of the individual responsible for independence in a particular circumstance Include in project as no change to Code's meaning Clarifying responsibility (4-A # II)

Page 6 | Confidential and Proprietary Information Recommendations: Increase clarity, using drafting conventions / editor –Aspirational reading grade – university level Consider identified inconsistencies –e.g. Any issues re safeguards / documentation –Inform Board if warranted; may be out of scope Clarity of language (4-A # III)

Page 7 | Confidential and Proprietary Information Recommendations: Immediate improvements –HTML, hyperlinks, navigation More extensive electronic features –Coordinate with other restructuring Electronic Code (4-A # IV)

Page 8 | Confidential and Proprietary Information Recommendations: Coordinate changes with electronic Code Raise the profile of the independence standards –e.g. International Standards on Independence –Distinguish the independence standards but clearly retain their integration in the Code Reorganization (4-A # V)

Page 9 | Confidential and Proprietary Information Examples: –Short summaries, FAQs, case studies –Bases for conclusions Recommendations: Address these after restructuring the Code Work with others to develop materials Complementary Materials (4-A # VI)

Page 10 | Confidential and Proprietary Information Proposal consistent with recommendations Timing reflects importance and urgency Consultation paper to test support for approach Exposure Draft will be in process at same time Aim for finalization of revised Code in 2016 Does the Board approve the project proposal? Project Proposal (4-B and 4-F)

Page 11 | Confidential and Proprietary Information Jul'14 – IESBA – draft CP (input re sample restructuring) Sep'14 – CAG – draft CP Oct'14 – IESBA – approve CP Jan'15 – IESBA – continue review of restructured Code Mar'15 – CAG – CP responses Apr'15 – IESBA – CP responses Jul'15 – IESBA – draft ED Sep'15 – CAG – draft ED Oct'15 – IESBA – approve ED 2016 – Finalize and issue a restructured Code Jan'18 – Code effective Forward timeline (tentative) (4)

Page 12 | Confidential and Proprietary Information Guidance for Task Forces / Board; it will evolve Section structure –Purpose, with linkage to fundamental principles and conceptual framework –Requirements – shall; cross references –Application and other explanatory material Structure & drafting conventions (4-D)

Page 13 | Confidential and Proprietary Information Mandatory Drafting Conventions –Shall, consider, evaluate, determine etc. Discretionary Drafting Conventions –Do use short sentences, active voice –Don’t use nuances that aren't clear, repeat definitions, use superfluous adjectives etc Structure & drafting conventions (4-D)

Page 14 | Confidential and Proprietary Information Examples of portions of Parts A and B are presented as a restructuring work in progress – not a final proposal as further work is still required –Purpose / Requirements / Application material –Cross references –Principles / Framework closely linked to Part B Structure & drafting examples (4-C)

Page 15 | Confidential and Proprietary Information Developing electronic features for the extant Code –HTML –Contents list with ability to jump to section –Drill down to individual paragraphs –Hyperlinks to defined terms To be located on IESBA website – landing page Electronic Code (4-E)

Page 16 | Confidential and Proprietary Information Any Other Comments or Questions ? Matters for IESBA Consideration

The Ethics Board