1. Review of Part C Phase 2 - Applicability
Helene Agélii – IESBA Member and Task Force Chair
IESBA Meeting
New York, USA
June 19-21, 2017

2. Applicability – Background
Project objective
Approach adopted by TF:
Holistic
Does not identify specific ethical issues/matters
ED released in January 2017 with comment period closed on April 25, 2017

3. Session Outline
Overview
Clarity of Requirement paragraphs (R120.4 & R300.5)
Scope of Requirement paragraphs
Relevance of example in paragraphs 120.4A1 & A1
Location of Applicability paragraphs
Other matters

4. Received 39 comment letters Respondents are generally supportive of:
1. Overview
Received 39 comment letters
Respondents are generally supportive of:
Objectives of the proposals
The holistic approach
Only a few respondents expressed general concerns about increasing complexity of Code

5. 1. Overview Key comments:
Clarity of the Requirement paragraphs – when is Part C applicable to PAPPs
Scope of the Requirement paragraphs – individual non-PAs working in a firm
Specific example vs non-exhaustive list of relevant situations
Definitions of PAPP and PAIB

6. 1. Overview In response, the TF:
Made preliminary revisions to both the proposed requirement and application material
Sought early feedback from Structure TF

7. Matter for IESBA Consideration
1. Overview
Matter for IESBA Consideration
Views about general comments on Applicability ED and TF’s response

8. 2. Clarity of Requirement Paragraphs (R120.4 & R300.5)
Majority of respondents did not raise any issues
Key comments:
First sentence may be inaccurate – phrase “ethical issues”
Should state the whole Code may be applicable
Unclear what circumstances will trigger applicability
Does not cover the situation whereby a PA has multiple roles as both a PAPP and PAIB

9. 2. Clarity of Requirement Paragraphs – TF Proposals
First sentence
Revised
A PA shall consider the facts and circumstances, including any professional activities, interests and relationships that might create threats to compliance with the FPs, and the context in which they apply and comply with the relevant requirements of the Code ED
When facing an ethical issue, a PA shall consider the context within which the issue has occurred.

10. 2. Clarity of Requirement Paragraphs – TF Proposals
Second sentence ED
Revised
Where a PAPP is performing professional activities pursuant to the PAPP’s employment or ownership relationship with the firm, there might be req’ts and AM in Part 2 that are also applicable to those circumstances. If so, the PAPP shall comply with the relevant provisions
Where an individual who is a PAPP is performing professional activities other than for clients of the PAPP’s firm, and there are req’ts and AM in Part 2 that are applicable, the PAPP shall comply with those relevant provisions

11. Clarity of Requirement paragraphs
Matter for IESBA Consideration:
TF response to comments about clarity of Requirement paragraphs
Does IESBA agree with the TF’s preliminary revisions to para R120.4 and R300.5?

12. 3. Scope of Requirement Paragraphs (R120.4 & R300.5)
Key concerns from respondents:
Compliance of Part C by non-PA individuals working in firm (e.g., a lawyer)
Whether the proposals cover contractors of firms

13. 3. Scope of Requirement Paragraphs – TF Proposal
Individual non-PAs:
Individual non-PAs not within scope (TF’s view)
TF’s rationale is based on extant definitions
To avoid confusion, revised proposals to include only individuals PAs
PAs working as contractors
Issue not relevant in light of revised proposals to requirement

14. Scope of Requirement paragraphs
Matters for IESBA Consideration:
TF response to comments about scope of Requirement paragraphs
Extant definitions
TF’s rationale to clarify Part C applicability to individual PAs only

15. 4. Relevance of Examples (120.4 A1 and 300.5 A1)
Whilst most respondents did not raise concerns or provide alternatives, other questions raised suggest need for clarification
Key suggestions:
Minor changes to example
Replace with new example (e.g., preparing engagement budgets)
Replace with more guidance - non-exhaustive list of situations

16. 4. Relevance of Example – TF Proposals
Replace specific example with a non-exhaustive list
Rationale – breadth vs depth
Four examples that cover different relationships in different situations:
Senior staff, supplier, internal department
Conflicts of interest, pressure, inducement and preparation of information for internal use

17. Matters for IESBA Consideration:
4. Relevance of Example
Matters for IESBA Consideration:
TF’s proposal to replace the specific example with a list of situations
Relevance of situations listed in Agenda item 7-B
If the example is to be retained, should it be amended or replaced

18. 5. Location of Applicability Paragraphs
Respondents are generally supportive
A number of options were suggested
TF proposal:
No change to the locations
TF will review additional guidance already in the Code
Matter for IESBA Consideration
Do IESBA members agree with TF proposal?

19. 6. Other Matters – Structure of the Code
Division by Roles
Definitions of PAPP and PAIB lacks clarity:
Definition of PAPP may include PAIB working in a firm (e.g. CFO of the firm)
Definition of PAIB may include PAPP
Respondents did not believe these gaps will impact the intended objective of the proposals

20. 6. Other Matters – Structure of the Code
TF proposal:
Issues regarding definitions outside the scope of this project
TF’s view is that these concerns will not impact on the objective of the Applicability paragraphs
Recommend the Board to consider the concerns at a later date
Matters for IESBA Consideration:
Do IESBA members agree with the TF’s proposal?

21. IESBA to consider a “second read” in September 2017
Way Forward
TF will:
Consider Board’s comments during its July 2017 meeting
Liaise with Structure TF on matters relating to Structure of the Code
IESBA to consider a “second read” in September 2017
Finalization of revisions to proposals clarify applicability by December 2017 is on track