1. Review of Part C Lisa Snyder, Task Force Member IESBA CAG Meeting
New York, USA
September 14, 2016

2. Part C - Project Status and Timeline
Project approved - March 2013
Project divided into 2 phases:
Phase 1: addresses Secs. 320 (Preparation & Presentation of Information) and 370 (Pressure)
Conforming changes to other Secs.
Phase 2: addresses Sec 350 (Inducements) and applicability of Part C to PAPPs

3. Part C - Project Status and Timeline
Phase 1:
Completed Dec 2015 under current drafting conventions
Close-off document being restructured
Restructured text to be included in the second Structure ED

4. Phase 2 – Applicability of Part C to PAPPs
March 2016 IESBA:
Agreed Part C applicable to PAPPs
Support for “explanatory paragraph”
June 2016 IEBSA:
Agreed “explanatory paragraph” location key
Support inclusion in: Parts 1, Sec. 120 and Part 3, Sec. 300
June 2016 NSS:
Concern over additional requirements on PAPPs
Clarify when presenting that Part C is not applicable to PAPP / Client scenarios.

5. Phase 2 – Applicability of Part C to PAPPs
When facing an ethical issue, a professional accountant in public practice shall consider the context within which the issue has occurred. Where the accountant is performing professional activities pursuant to the accountant’s employment or ownership relationship with the firm, there might be guidance in Part C that is applicable to those circumstances. If so, the accountant shall comply with relevant provisions. For example, where a PAPP is faced with pressure from an engagement partner to perform a task without sufficient skills or training or with unrealistic deadlines, the guidance is Section XXX would be relevant.

6. Phase 2 – Sec. 350 - Inducements
Jan 2015 IESBA:
Transparency International UK (TI) presentation
Proposed revisions to Sec. 350
April 2015 IESBA:
GAP analysis presented
Phase 2 deferred to complete Phase 1
June 2016 IESBA:
Proposed enhancements to Sec. 350
Initial strawman

7. Phase 2 – Sec. 350 - Inducements
IESBA views: Bribery and Corruption
Sec. 350 should address Bribery and Corruption
Legislation might not exist or inadequate
Task Force response:
Strawman not intended to exclude Bribery and Corruption
Revised principles-based direction to consider all types of inducements
Will explain how it is addressed our proposal in a couple of slides

8. Phase 2 – Sec. 350 - Inducements
Revised Title / Scope
“Inducements” not ideal
“Gifts and Hospitality” could narrow scope
“Inducements” should be considered neutral
Amended title: “Gifts, Hospitality and Other Inducements”

9. Structure of Revised Sec. 350
Introduction
Acknowledge Bribery and Corruption are significant problems in many jurisdictions and are unacceptable behaviors for all PAs
Application and Requirements
Requirement to understand laws and regulations and comply with them (consistent with NOCLAR standard)
Prominent position in revised standard
Task force considered whether definitions of bribery and corruption were needed in order for a PA to conclude whether it was illegal and hence covered by legislation. It concluded that, given the range of different types of bribery and corruption, it would be difficult to devise precise definitions that apply globally.
In intro, acknowledge these are significant issues in some jurisdictions
Will incorporate a requirement to understand laws and regs involving bribery and corruption which is consistent with NOCLAR
TF believes that when a PA faces an inducement that is not illegal but clearly a bribe, this would be captured in the revised Section 350 by an overarching requirement that a PA shall not give or receive an inducement that is made with the intention of improperly influencing another individual or entity.

10. Phase 2 – Sec. 350 - Inducements
Representatives are asked for views on:
The suggestions received on how a revised Section 350 should address Bribery and Corruption
The Task Force’s responses

11. Structure of Revised Sec. 350
Examples of Inducements
Gifts, hospitality, entertainment, etc.
Some forms could be illegal (bribery); Others might not be illegal but could still be unethical
Representatives are asked for their views on the need to have examples within the revised Section 350 and the Task Force’s proposed examples
Inducements can appear in many different forms, for example: gifts, hospitality, entertainment, facilitation payments and political donations. They can also occur in many different situations, ranging from minor gifts between individuals to major deals between private entities and governments.
An inducement can also refer to preferential treatment and inappropriate appeals to friendship and loyalty.
Some forms of inducements could be illegal, such as bribery. Others might not be defined as illegal but could still be unethical and result in a breach of the fundamental principles.

12. Structure of Revised Sec. 350
Assess intent of Inducement
Intention to improperly influence behavior
Consider how inducement perceived by others
Identify and evaluate threats
Trivial and inconsequential inducements not a threat to compliance with FPs
List of factors provided to evaluate threats
Value, frequency and nature
Significance or materiality
In considering intent, must consider how inducement perceived by others (third party test)
Even if decide intention is not to improperly influence behavior, must still evaluate threats and apply safeguards, if necessary
Most common threats are self-interest, familiarity and intimidation threats.
Where inducements are offered or accepted that are clearly trivial and inconsequential, the PA can generally conclude that any threats to compliance with the fundamental principles are at an acceptable level.
The existence and significance of any threat will depend on various factors, including the following:
The value, frequency and nature of the inducement. Guidance should note that inducements accepted or offered on a regular basis, especially to or from the same party, could result in the PA becoming less mindful to the fact that such inducements, in totality, could create a threat.
The occasion that has given rise to the inducements, such as a religious holiday or wedding.
Whether the acceptance of the inducements can be directly associated with the conduct of business.
Whether the inducements is specific to an individual or available to a broader group. The broader group might be internal to the employing organization or external to the employing organization, such as other customers or vendors.
The roles and positions of the individuals offering and being offered the inducements.
The significance or materiality of the inducements to the individual(s) offering and being offered the inducements.
Policies and procedures of the employing organization of the individual offering or receiving the inducements.

13. Structure of Revised Sec. 350
Address threats - safeguards provided to reduce threats to acceptable level
Register in log
Consult with senior management or TCWG
Recuse from business-related decisions to individual/org
Secondary reviews
If cannot reduce threat to acceptable level, PA shall not offer or accept inducement
Below are examples of actions that in certain circumstances might be safeguards in addressing threats:
Registering the inducements in a log.
Consulting with senior management of the employing organization, those charged with governance or employing organizational policy, when an inducements is offered.
Consulting with a senior colleague or professional organization on the inducements.
Recusing from making any business-related decisions relating to the individual or organization, such as a customer or vendor, to whom the PA offered or accepted the inducements.
Secondary reviews of any work performed or decisions made by the PA with respect to the individual or organization from which the PA accepted or offered the inducements.

14. Phase 2 – Sec. 350 - Inducements
Requirements of PA:
Cannot offer inducement with intention of improperly influencing another
Cannot accept inducement if made with intent to improperly influence behavior
Decline inducement if threats not reduced to acceptable level
Note that will also include requirement to understand laws and regulations and comply with them to be consistent with NOCLAR

15. Phase 2 – Sec. 350 - Inducements
Representatives are asked for their views on:
Proposed requirements
Related Task Force proposals

16. Phase 2 – Sec. 350 - Inducements
IESBA view: Cultural Differences
Consider but not account for every cultural difference
Task Force response:
Acceptable inducement can vary by culture. However, ethical concerns the same
Third party test to assess perceived intent would consider culture
Cultural differences not cover for unethical inducements
The Task Force acknowledges that views on what constitutes an acceptable inducement can differ between different cultures.
The Task Force also believes that it would not be appropriate to address cultural issues
If the value or nature of an inducement is beyond what is generally acceptable for the recipient but there is no misguided intention involved from the giver,, threats should be evaluated and safeguards applied where necessary.
If refusal might be considered impolite, the PA should consider safeguards, such as donating the gift to charity.
If safeguards cannot reduce the threat to an acceptable level, the inducement must be declined regardless of the ramifications.

17. Phase 2 – Sec. 350 - Inducements
Representatives are asked for their views on:
Whether cultural differences should be explicitly addressed in the revised Section 350
Any other views or suggestions on matters that should be addressed in revision of Section 350

18. The Way Forward
First read of proposed revisions: Dec 2016 IESBA meeting
Second read with intention of obtaining approval: March IESBA meeting