1. KICPA Seminar Seoul, South Korea November 12, 2013
IESBA Update
Jörgen Holmquist, IESBA Chair
KICPA Seminar
Seoul, South Korea
November 12, 2013

2. Role of Ethics Ethics fundamental to civil society
A strength of society when not everything comes from legislation
Legislation is necessary
But society stronger if the professions are involved in setting rules and principles for how society should work
Adherence to a robust code of ethics a hallmark of the accountancy profession
Reflects the profession’s commitment to acting in the public interest

3. Importance of Ethics Standards
Robust ethics standards:
Are key to fostering and maintaining trust in the profession
Help professional accountants (PAs) understand and meet their clients’ and employers’ expectations and therefore better serve them
Provide a basis for accountability
Help to uphold good reputation of the profession

4. About the Ethics Board and Its Role
Independent Board
Overriding objectives:
Set standards to support high level of ethical conduct by the profession
Facilitate adoption of high-quality ethics standards globally
18 members, including three public members
First independent Chair since Sept 2012
Overseen by Public Interest Oversight Board (PIOB)
Consults twice yearly with Consultative Advisory Group (CAG)

5. Engaging with Stakeholders
Focus on increasing regulatory trust in Ethics Board
Closer dialogue with IOSCO, IFIAR, and national regulators
But focus equally on strengthening dialogue with the profession
Opportunity to speak to Korean profession greatly appreciated
Country visits over past 12 months
Australia, China, France, Germany, Ireland, Italy, Japan, Myanmar, Portugal, South Africa, South Korea, Spain, UK, US, Vietnam
Media outreach, e.g., El País, Australian Financial Review, Le Monde, and IFAC member body journals and magazines

6. Highlights of Current Work Program

7. Responding to Non-Compliance with Laws and Regulations
Highlights of Current Work Program
Responding to Non-Compliance with Laws and Regulations
Impetus for project
Regulatory perception that confidentiality provisions in IESBA Code are an impediment to whistle-blowing re non-compliance with laws and regulations
Key issue
When should a PA override confidentiality and report non-compliance to an appropriate authority?
Balances confidentiality principle vs. acting in public interest
Debate about disclosure of non-compliance is about what’s reasonable to ask of PAs within their role in the public interest

8. Changes Being Considered to Exposure Draft
Responding to Non-Compliance with Laws and Regulations
Changes Being Considered to Exposure Draft
A right to override confidentiality to serve the public interest
Alignment to ISA terminology (non-compliance with laws or regulations)
A less prescriptive approach to the guidance
No limitation on the type of reportable non-compliance
Only encouraging documentation
Communication between successor and predecessor auditors
A number of more technical issues

9. Highlights of Current Work Program
Structure of the Code
Enhancing the Code’s usability
To spur increased adoption and more effective implementation
Considering options to facilitate compliance/enforcement, e.g.:
Raise visibility of requirements and prohibitions
Clarify who is responsible for meeting them
Also considering a number of other options, e.g.:
Use of plain English, re-packaging, development of complementary materials such as summaries and flow charts, electronic Code, etc
No changes in the short term

10. Long Association of Senior Personnel with an Audit Client
Highlights of Current Work Program
Long Association of Senior Personnel with an Audit Client
A number of issues being considered, e.g.
Whether 7-year on / 2-year off rotation requirement remains appropriate
Permissible activities during cooling-off period
Who should be subject to rotation
Involvement of those charged with governance
Surveys of jurisdictions and audit committees, and other research
Towards ED Q3 2014?
Not addressing mandatory firm rotation or mandatory tendering

11. Non-Assurance Services (NAS)
Highlights of Current Work Program
Non-Assurance Services (NAS)
Project focusing on:
Clarification of provisions addressing management responsibilities
Clarification of concept of “routine and mechanical” re bookkeeping services
Review of emergency exception provisions re bookkeeping and tax services
Also to develop position paper to, among other matters:
Raise awareness of Code’s approach to NAS and highlight its robustness
Highlight potential supplementary ways that may enhance threats and safeguards approach to independence, e.g., audit committee approval, firewalls

12. Review of Part C of the Code
Highlights of Current Work Program
Review of Part C of the Code
Addressing three priority issues with respect to professional accountants in business (PAIBs)
Pressure by superiors and others to engage in unethical or illegal acts
Responsibility of PAIBs to produce financial reports that are faithful representations of the economics of transactions
Facilitation payments and bribes
Towards ED/consultation paper Q3 2014?

13. Strategy and Work Plan 2015-2018
To prioritize review of structure of the Code
Short list of possible projects/initiatives proposed
Review safeguards in the Code for appropriateness and adequacy
Fee dependency
Collective investment vehicles
Approval of consultation paper December 2013
Input of Korean stakeholders strongly encouraged

14. Further enhancing regulatory trust in the Ethics Board
Key Challenges
Further enhancing regulatory trust in the Ethics Board
Threats and safeguards approach / Principles-based Code
Robust Code – not Least Common Denominator
Further strengthen the Code vs. burden of implementation
Understanding extent to which the Code is enforced and how compliance can be further improved
Acting in the public interest

15. The Ethics Board