1. IESBA Code vs. local codes in G20 & Major Financials Centers
Reyaz Mihular, IESBA member and Emerging Issues and Outreach Committee Chair
IESBA Meeting
New York
September 29, 2016

2. Adoption in G20 and Major Financials
Progress report on analysis of key differences between the IESBA Code and local codes within the G20 and Major Financial centers
Final report to be made at future date

3. Adoption in G20 and Major Financials
History and Work Performed
Oct 2014: EIOC requested to review adoption in G20 and major financials
January 2015: Presentations begin
Sources of Information:
Presentations
National Standard Setters (NSS) Representatives
IFAC Quality & Membership (Q&M) team

4. Adoption in G20 and Major Financials
Extent of adoption (as per IFAC Q&M team definition of adoption)
Argentina and India not adopted
Indonesia, Mexico, S. Arabia & USA partially adopted
All others adopted the 2015 Code (with variations)
Not adopted 2015 Code: India (’05), S. Korea (‘06), Indonesia (‘08), Canada and Mexico (’09)

5. Adoption in G20 and Major Financials
EIOC Observations:
Prioritize adoption of a/c standards over ethics standards
Trouble keeping pace with regular changes
No indication translation causing delays

6. Adoption in G20 and Major Financials
Board members are asked for:
Personal views on why jurisdictions not adopting latest Code
Actions IESBA can take to assist jurisdiction with adoption

7. 14 adopt CF in its entirety Different approach:
Adoption in G20 and Major Financials – Part A - Conceptual Framework (CF)
14 adopt CF in its entirety
Different approach:
Australia: Consider multiple insignificant threats in aggregate
Canada: no T&S, exception of independence standards
USA AICPA: encourages use of CF if no guidance or Code requires. Uses rules-based not principles-based approach
UK FRC: More requirements on engagement partner

8. Board members are asked for their views on:
Adoption in G20 and Major Financials – Part A - Conceptual Framework (CF)
Board members are asked for their views on:
Implications for making the conceptual framework the basis for the IESBA Code if jurisdictions do not follow the conceptual framework concept
Additional work the IESBA can perform to understand jurisdictions decision not to follow the conceptual framework concept

9. Adoption in G20 and Major Financials Part B - Substantive Provisions
Ten countries with minor differences
Eight take more stringent approach due to local issues
Two take less stringent approach
No themes between the differences

10. Adoption in G20 and Major Financials Part B - Section 290 - Independence
PIE definition:
Significant variations in definition
EU regulators: listed & Financial. Allow extension of definition
Criteria to assess PIE
No. of employees rarely used. Correlation previously, but outdated
Alternative criteria used by jurisdictions:
Issuers of debt & equity, entities in process of listing, large charities

11. Adoption in G20 and Major Financials Part B - Section 290 - Independence
EIOC Observations
Possible alternative PIE Indicators:
Industry that entity operating in and significance of that industry in jurisdiction
Consequences if entity fails
Is one size fits all PIE definition possible?

12. Board members are asked for their views on:
Adoption in G20 and Major Financials Part B - Section Independence
Board members are asked for their views on:
Need to enhance factors to consider when assessing if an entity could be deemed a PIE

13. Adoption in G20 and Major Financials Part B - Partner rotation
Significant variations by jurisdiction
Only Canada concurs with revised LA proposals (based on available information in rotation requirements)
MFR - substantial effects on partner rotation
EIOC Observations
Not an emerging issue
Board should monitor LA project
“one size fits all approach” may not be practicable

14. Adoption in G20 and Major Financials Part B - Provision of Non-Assurance Services (NAS)
Guidance in Code
NAS permitted provided threats to independence considered and reduced to acceptable level
Examples of prohibited NAS in Code – not exhaustive

15. Adoption in G20 and Major Financials Part B - Provision of Non-Assurance Services (NAS)
Two themes emerged:
Six jurisdictions: TCWG approve NAS
Qualification by entity type, notably PIEs
Qualification by threats created, notably advocacy or self-review
Self-review: mgmt. responsibilities, account & fin. Statements prep, valuations, internal audit and corporate finance services
Main concern over permissible NAS. EU prohibitions address self- review threats and ensuring auditor independence.
Advocacy: many provisions, notably around litigation support

16. Adoption in G20 and Major Financials Part B - Provision of Non-Assurance Services (NAS)
EIOC Conclusions
NAS prohibitions main difference
No indication Code weak - additional restrictions due to local issues
EIOC to compile a compilation of NAS differences by jurisdiction to allow detailed comparison

17. Adoption in G20 and Major Financials Confirmation of Adoption Data
Currently rely on member bodies to self-certify status of adoption
Need to check enforcement
EIOC to seek informal ratification from Firms
Firms might only consider from an audit aspect
Consider obtaining ratification from local regulator

18. Adoption in G20 and Major Financials Confirmation of Adoption Data
Board members are asked for their views on:
How the status of adoption can be ratified