Page 1 | Proprietary and Copyrighted Information NOCLAR – Preliminary Update on ED Responses Caroline Gardner NOCLAR Task Force Chair IESBA CAG Meeting New York September 14, 2015

Page 2 | Proprietary and Copyrighted Information Overview of Responses as of September 8 Category of Respondents# Regulators and public authorities7 National standard setters2 IFAC member bodies23 Firms8 Other professional organizations9 Individuals and others7 Total56 Many late submissions still to come….

Page 3 | Proprietary and Copyrighted Information Overview of Responses Generally broad support for response framework across stakeholder groups Significant improvement vs. first ED Substantially the “right balance” Approach proportionate Concerns about operability and potential for unintended consequences addressed Balances expectations of PA vs responsibilities of management/TCWG

Page 4 | Proprietary and Copyrighted Information Some split views on aspects of the proposals within the following stakeholder categories: –Regulators and public authorities –IFAC member bodies –Other professional organizations A few respondents not supportive of IESBA addressing the topic –Addressing PAs’ responsibilities regarding NOCLAR should be left to law or regulation –The Code’s conceptual framework sufficient; proposals overly complex and prescriptive Overview of Responses

Page 5 | Proprietary and Copyrighted Information Broad support for key aspects of the proposals: –Overall objectives –Alignment of scope with ISA 250 –Differential approach among the four categories of PA –Proposed courses of action and factors to consider in determining need for and nature and extent of further action –Third party test re further action to meet objectives –Documentation Overview of Responses

Page 6 | Proprietary and Copyrighted Information Recurring concerns among some, e.g.: –No clear definition or guidance on meaning of “public interest” in objectives –Entry threshold too low (“other than clearly inconsequential”) –Potential for increased public expectations gap –Adverse impact on trust relationship between PAs in public practice and clients –PAs being placed at competitive disadvantage vs non-PAs –Forensic-type/insolvency engagements scoped in –High risk of retaliation for PAIBs Selected Key Concerns

Page 7 | Proprietary and Copyrighted Information A “de facto” requirement to disclose to an appropriate authority? Too much subjectivity in factors to consider (e.g. “substantial harm”) Lack of clear test will discourage disclosure; PAs erring on side of caution Extension of auditor’s work effort and documentation beyond ISAs Implications for cross-border engagements adequately addressed? “Passing the buck” to auditors re non-auditors communicating to auditors? Ethical for PA to accept bounty by disclosing in compliance with proposals? Selected Key Concerns

Page 8 | Proprietary and Copyrighted Information Next Steps TimingAction Oct 2015Task Force meeting OctUpdate to IFIAR, Forum of Firms and EAIG DecFull IESBA review of ED comments; update to IAASB March 2016 Discussion with CAG and IAASB IESBA approval under current structure and drafting conventions JuneIESBA approval of restructured text for exposure

The Ethics Board