1. Structure of the Code Phase 1
Don Thomson, Task Force Chair
IESBA Meeting
New York, USA
September 26, 2016

2. Project Objectives - The Public Interest
Agenda Item 3-A
Project Objectives - The Public Interest
Enhance understandability
Facilitate compliance & enforcement
Improve usability
Facilitate adoption
Effective implementation
Consistent application

3. Agenda Items 3 and 3-A
Project Status
In June, obtained general support for structural proposals
Then reflected on Board and CAG input; refined proposals
Drafting guidelines, oversight, support to other Task Forces
Presenting Phase 1 revisions today; Phase 2 tomorrow
Staff-prepared compilation facilitates consistency review
Expect final to include mapping to facilitate stakeholder review
In September, obtained CAG support for proposals
Slides highlight CAG suggestions

4. Meeting Objectives and Approach
Agenda Item 3
Meeting Objectives and Approach
Review and obtain input on the draft restructured Code
In the issues paper, further discussion of some structural matters
(Issues specific to certain paragraphs will be covered in the walk-through)
Walk through 3-B mark-up from ED-1; focus on proposed changes
Will consider input; updated draft text to be discussed Thursday
Thank you for advance input; discuss with updated draft text
After walk through, opportunity to raise other significant matters
"Wordsmithing” suggestions are welcome off-line

5. Overarching Requirements
Agenda Item 3-A paragraphs 4-6
Overarching Requirements
For greater clarity and emphasis as agreed in June, revised introductory language (and Guide paragraph 7)
Comply with the fundamental principles (FPs)
Maintain independence when required to be independent
Apply the conceptual framework (CF)
Specific requirements and application material support compliance with FPs and, in independence sections, the requirement to be independent

6. Overarching Requirements
Agenda Item 3-B, page 51
Overarching Requirements
Para provides an example of this language
Firms are required to comply with the fundamental principles, be independent and apply the conceptual framework set out in Section 120 to identify, evaluate and address threats to independence. Section 510 sets out specific requirements and application material relevant to applying the conceptual framework to financial interests.

7. Repeated Requirements
Agenda Item 3-A, paragraph 6
Repeated Requirements
With enhanced introductory language increasing the prominence of requirements to comply with the FPs, be independent (where appropriate), and apply the CF
Deleted many recurring requirements to apply the conceptual framework to avoid it being ignored through overuse
Retained repetition of the requirement to apply the CF in the general sections – Sections 200, 300, 400 and 900
Retained the requirement to be independent in Sections 400 and 900

8. Repeated Requirements
Agenda Item 3-B, pages 33-34
Repeated Requirements
Section 400 provides an example of this language
400.7 When performing audit engagements, the Code requires firms to comply with the fundamental principles and be independent. This Part sets out specific requirements and application material on how to apply the conceptual framework to maintain independence when performing such engagements. The conceptual framework set out in Section 120 applies to independence as it does to the fundamental principles set out in Section 110.
R A firm performing  an audit engagement shall be independent.  
R A firm shall apply the conceptual framework set out in Section 120 to identify, evaluate and address threats to independence in relation to an audit engagement.

9. Agenda Item 3-A, paragraphs 7-8
Ordering of Material
Flow is designed for readability and clarity consistent with principles-based foundation and the conceptual framework
General requirements and application material followed by more specific requirements and application material
Recognizing scalability, more restrictive PIE requirements follow other requirements
PIE and other requirements are clearly distinguished

10. Walk Through Draft Restructured Text
Agenda Item 3-B
Walk Through Draft Restructured Text
Walk through 3-B mark-up; 3-H clean with minor differences
Discuss changes proposed by Task Force first
After these changes have been discussed, will consider other possible changes that Board members regard as significant
Certain proposed changes highlighted in Agenda Item 3-A
Supplement 1: ED-1 input re possible changes in meaning
Supplement 2: ED-1 input with other drafting suggestions

11. The Title Parentheses added but otherwise unchanged since June
Agenda Item 3-B
The Title
Parentheses added but otherwise unchanged since June
International Code of Ethics for Professional Accountants
(including International Independence Standards)
Some CAG Representatives
Questioned need for “Professional"
Does it limit the potential reach of the Code?
Enquired about abbreviated references
Code? Ethics Code? IIS?

12. Guide Non-authoritative; separate from Code; in Preface?
Agenda Item 3-B, pages 1-5
Guide
Non-authoritative; separate from Code; in Preface?
Title of Code to be moved after Guide; old para.10 to Code
Para.4 – Numbered Parts: 1, 2, 3, 4A and 4B
Para.4 – Part 2 scope subject to Part C TF proposals
Para.4,6 – Added reference to firms
Para.7 – Emphasize overarching requirements
Para.8 – Relocated required understanding from para.12
Para.10 – Emphasize (needed?) sometimes no safeguards

13. Overview of the Code Agenda Item 3-B, page 6
Part 1 (All Professional Accountants)
Complying with the Code, Fundamental Principles and Conceptual Framework
(Sections 100 to 199)
Part 2
Professional Accountants in Business
(Sections 200 to 299)
Part 3
Professional Accountants in Public Practice
(Sections 300 to 399)
International Independence
Standards (Parts 4A & 4B)
Part 4A—Independence for Audits & Reviews
(Sections 400 to 899)
Part 4B—Independence for Other Assurance Engagements
(Sections 900 to 999)
Glossary (All Professional Accountants)

14. Table of Contents 4XX sub-section relocated within 400
Agenda Item 3-B, pages 7-8
Table of Contents
4XX sub-section relocated within 400
For December, considering
Section numbers in increments of 5 (see Appendix)
Table of contents for each Part
In the body of the Code, each section will begin on a new page

15. Section 100 100.1 – Modified text to more closely align with extant
Agenda Item 3-B, pages 9-10
Section 100
100.1 – Modified text to more closely align with extant
100.2 – Application material description moved from Guide
100.3A2 – Disproportionate outcomes moved from Guide
Added "in order to comply …" for clarity
R100.4 – Reallocated material between requirements and application material
100.4A1 – Added “oversight authority” to be consistent with extant Code (and in (b)(ii) and (e)

16. Section 110 110.1(b)/R112.1 – Reverted to extant objectivity
Agenda Item 3-B, pages 10-15
Section 110
110.1(b)/R112.1 – Reverted to extant objectivity
R110.2 – Included a requirement to comply with each FP
R110.3/A1-6 – Ethical conflict resolution moved from Guide
112.3A1-2 – Deleted references to independence
R113.1 – Modified text to more closely align with extant
R115.1 – Restored material from extant para.200.2

17. Sections 120 and 300 (shaded text)
Agenda Item 2-B, pages 1, 5 and 6
Sections 120 and 300 (shaded text)
Preliminary proposed revisions discussed in June; wording refinements reflected in this updated draft text
120.3A1 – Roadmap to additional material in other parts
120.10A1 – Clarified linkage between independence and fundamental principles using the independence definition
120.10A2 – Added reference to “firm” and clarified the application of the conceptual framework to independence
300.3 – Roadmap to additional material in other PAPP parts

18. Agenda Item 3-B, pages 17-31
Sections 310 to 350
320.3A1 – Reinstated “if known” to align with extant
320.3A4 – Reinstated "cannot" to align with extant
330.2A2 – Reinstated “level of fees quoted” to align
350.3A1 – Redrafted to address duplication

19. Section 400 400.1 – Deleted “Independence is a measure of objectivity"
Agenda Item 3-B, pages 32-45
Section 400
400.1 – Deleted “Independence is a measure of objectivity"
400.2 – Applies equally to review engagement from footnote
400.5 (from 400.7) – Retained “firm for ease of reference”
More closely aligned Code’s language to ISQC 1
Firms & PAs within firms each have responsibilities
400.6 – Independence definition linkage to FP highlighted
400.30A1 – Engagement period definition from Glossary

20. Agenda Item 3-B, pages 45-51
Sections 410 to 430
R410.8 – Deleted the words “for example through an intermediary” from the requirement and included them in the application material in A1 as they are properly explanatory material

21. Agenda Item 3-B, pages 51-68
Sections 510 to 525
In response to respondents’ comments, the term “network firm” has been added to
R510.7 and R521.7 preambles
(After considering advance input, not proposing addition to R521.7)
Section 524

22. Agenda Item 3-B, pages 70-78
Glossary
Engagement period – Distinguished the period for audit and review engagements from the period for other assurance engagements
Materiality – Added a reference to the descriptions in the body of the Code
May and might – After considering CAG and other input, the Task Force is proposing addition of a description of may and might in the Glossary

23. Other Significant Matters
Agenda Item 3-B
Other Significant Matters
Do IESBA Members wish to raise any other significant matters that have not already been discussed?
Guide
Part 1
Part 3
Part 4A
The Task Force welcomes wordsmithing input off-line

24. Agenda Item 3-A, page 9
Next Steps
December 2016– Phase 2 with complete restructured Code, including agreement-in-principle on Phase 1
Early consideration of implementation issues encouraged
Important for users of the Code to consider these issues
CAG emphasized the importance of IESBA also considering issues
Matters for Board attention – input on out of scope matters
Electronic enhancements and tools – once Code is final

25. Forward Timeline (Tentative)
Agenda Item 3-A page 9, Agenda Item 3-G, page 2
Forward Timeline (Tentative)
DECEMBER 16
JUNE 2017
SEPT 2017
DEC 2017
Structure Phase 1
Agree-in-principle
Approve Final
Structure Phase 2
Approve ED 2
Update
Full review
Safeguards Phase 1
Safeguards Phase 2
First-read
LA/NOCLAR/ Part C
Phase 1
Approve ED
restructured text