1. Auditor Reporting – Independence and Other Relevant Ethical Requirements
Bruce Winter, IAASB Member and ISA 700 Drafting Team Chair
IESBA Meeting
New York, N.Y.
July 9, 2014

2. IAASB – Auditor Reporting Project
Dominant project on IAASB’s current agenda
Follow-up to session in Toronto – April 2014
IAASB continues to target finalization and approval of its suite of auditor reporting standards in 2014
Initial thinking -- new and revised ISAs will be effective for audits of financial statements for periods beginning on or after December 15, (“2016 audits”)

3. Auditor Reporting Project – Headlines
Key audit matters
Going concern
Enhanced descriptions of management and auditor responsibilities
Engagement partner name
Statement about independence and other relevant ethical responsibilities

4. Key Proposals – Exposure Draft vs. Current Thinking
July 2013 Exposure Draft
Recommendations in June 2014 IAASB Agenda Material
Opinion preferably first
Opinion and Basis for Opinion sections required to be presented first
New section to address Key Audit Matters (KAM) for listed entities
Continue to require reporting on KAM for listed entities initially
New section to address Going Concern (GC)
Revert to reporting when a material uncertainty related to going concern exists (i.e., an exception based reporting model)
New section to address Other Information (OI) when such information is presented with the audited financial statements
Continue to require reporting on OI for all entities – addressed as part of separate ISA 720 revision project
Statement about independence and other relevant ethical responsibilities
Continue to require for all entities, but not a detailed listing of sources of requirements
Naming of the engagement partner for listed entities
Continue to require for listed entities only
Improved description of auditor responsibilities and key features of the audit
Continue to require for all entities, with additional description of the auditor’s responsibilities for GC and KAM

5. Statement about Independence and Other Relevant Ethical Requirements
Prominent placement of a positive assertion with respect to auditor compliance with independence and other relevant ethical requirements within “Basis of Opinion” paragraph
Listing of sources – IAASB sought IESBA views in April on a continuum of alternatives ranging from: a requirement to list all sources of independence/ethics codes; to, no reference in the auditor’s report

6. IAASB Recommendation
Directionally, majority of IESBA members were in favor of a generic statement referencing the geographic origin of the standards
IAASB DT-700 also supported this approach, with input from correspondent member, Gary Hannaford
IAASB unanimously supported this direction at their recent June meeting

7. Draft Illustrative Wording
Basis for Opinion
…We are independent of the Group in accordance with the ethical requirements that are relevant to the audit of the consolidated financial statements in [jurisdiction] and have fulfilled our other ethical responsibilities in accordance with these requirements. …
[Or]
… We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and have fulfilled our other ethical responsibilities in accordance with these requirements. ...

8. Matters for IESBA Consideration
IESBA members are asked for views about the IAASB’s illustrative wording and proposed requirement?
IESBA members are also asked whether the proposed application material is sufficient?