1. Review of Part C of the Code – Inducements & Applicability
Helene Agélii – IESBA Member and Task Force Chair
IESBA CAG Meeting
Madrid, Spain
September 13, 2017

2. Overview of the Session
Inducements Provisions
Update and report back on March 2017 CAG
Applicability ED
Highlight significant issues raised by respondents to ED
Discuss TF proposed response
Obtain CAG’s views in advance of Board meeting

3. Inducements – Overview
Deliberations
IESBA deliberated issues and TF proposals (Mar & Jun 2017)
Approval
ED approved by IESBA (Jun 2017)
Exposure
ED issued for exposure (Sept 8, 2017) Comments Due Dec 8!
Review
TF anticipates discussing feedback on ED and proposed response with CAG and IESBA (March 2018)

4. Inducements – Report Back
TF/IESBA responses to key matters raised by CAG
Definition of bribery and corruption not necessary
ED establishes description of inducement; clarifies term as being neutral
Use of RITP test in enhanced conceptual framework
ED clarifies general approach to dealing with inducements
Terms “trivial and inconsequential”, “immediate family” and “close family” not new terms

5. Inducements – ED Key Features
Description of Inducements
Compliance with Laws and Regulations
Intent Test
Application of Conceptual Framework
Immediate or Close Family Member
Conforming Changes for PAPP Sections

6. Inducements – Matter for CAG Consideration
CAG Representatives are asked to note report back and share any reactions

7. Applicability – Overview
Project objective
Approach adopted by IESBA

8. Applicability – Overview
IESBA anticipates approval of proposed text
DEC 2017
Further consideration of issues and “first read” of revised proposals
SEPT 2017
IESBA discussion of comments on ED and TF response JUN 2017
ED released with 90 day comment period
JAN 2017
Applicability – Overview

9. Applicability – ED Comment Overview
Received 40 comment letters
Respondents are generally supportive of:
Objective of the proposals
The holistic approach
Only a few respondents expressed general concerns about increasing complexity of Code

10. Applicability – Issues and TF Proposals
Key issues raised by respondents:
Clarity and Scope of Requirement
Illustrative Examples
Location of Guidance Material
Structure Related Matters

11. Issue 1 – Clarity and Scope of Requirement (Circumstances)
Comment
PAs should be required to consider whole Code and comply with relevant provisions
Proposal
TF does not support this suggestion as it may draw focus away from project objective

12. Issue 1 – Clarity and Scope of Requirement (Circumstances)
Comment:
Phrase “facing an ethical issue” implied that PA has already encountered a specific ethical issue that needs to be addressed
Proposals
TF has revised first sentence to clarify that ethical issue may or may not have taken place yet

13. Issue 1 – Clarity and Scope of Requirement (Circumstances)
Comment
Proposed text should cover PA who serve as both PAPPs and PAIBs in multiple roles
Proposal
TF does not agree with this suggestion
A PA should already be aware of the guidance if working as a PAIB
Suggestion would draws focus away from project objective

14. Issue 1 – Clarity and Scope of Requirement (Circumstances)
Comment
Unclear about circumstances that may trigger Part C applicability
Because all professional activities (including client services) can be understood to be pursuant to a PA’s employment

15. Issue 1 – Clarity and Scope of Requirements (Circumstances)
TF agrees
A PA’s employment with a firm and client engagement are closely connected
Provision of professional activities in a firm employment context will often be connected to or impact client engagement in some ways
TF’s View
The phrase “pursuant to PA’s employment” is sufficiently broad to cover this aspect and does not require any revision

16. Issue 1 - Clarity and Scope of Requirement (Circumstances)
One matter that requires Board’s deliberations:
Whether Applicability provisions require a PAPP to directly apply Part C when performing professional services for clients or to client relationship
Section 220:
Preparation and presentation of information for outside organization
Section 270:
Pressure on a professional accountant from an external individual or organization
Sections apply under proposed text
TF Proposal

17. Issue 1 - Clarity and Scope of Requirement (Individual PAPPs)
Comment
Whether individuals who are not PAs are covered by applicability paragraphs
Proposal
IESBA agreed in June that scope of applicability paragraphs should be restricted to those PAPPs who are individuals

18. Issue 1 – Clarity and Scope of Requirement (Contractor)
Comment:
Contractor relationship was not explicitly dealt with in ED and therefore not clear if such relationship is within scope
Sept Board Meeting
3 options for consideration
Proposal
TF agrees that PAs working as contractors of a firm should comply with Part C

19. Issue 1 – Clarity and Scope of Requirement (Applicability of Extant Part B to PAIBs)
In June, Board asked Task Force to consider whether ED should also clarify applicability of Part B provisions to PAIBs
Proposal
TF does not recommend revisions and believes that doing so
Is outside the scope of project
Requires more analysis

20. Issue 1 - Clarity and Scope of Requirement (Revised Requirement R120
When facing dealing with an ethical issue, a the PA shall consider the context within in which the issue has occurred arisen or might arise. Where an individual who is a PAPP is performing professional activities pursuant to the accountant’s employment, contractor or ownership relationship with the firm, the individual shall comply with the there might be requirements and application material provisions in Part 2 that are also applicable to those these circumstances. If so, the professional accountant in public practice shall comply with the relevant provisions

21. Issue 2 – Illustrative Examples
ED contains a specific example of a situation where a PAPP might face where Part C would be applicable
Comments suggest a need for further enhancement
4 Situations
Conflict of interest
Preparing or presenting information
Inducements
Pressure
Proposal
Specific example is replaced with four examples relating to four situations

22. Issue 3 – Location of Guidance Material
General support for proposed location of Applicability paragraphs in Sections 120 and 300.
Proposal
IESBA agreed in June to remove application material in Section 120
Other guidance material also updated

23. Issue 4 – Structure Related Matters
Structure of Parts 2 and 3
Some respondents questioned whether Parts 2 and 3 should be retitled to take focus off from PAs role
New titles may reduce prominence of PAIB provisions
Definitions of PAPP and PAIB
Some respondents believe that potential gaps in definitions create confusion about how Part C should apply to PAPPs
TF believes changes to definitions are out of scope

24. Applicability – Matters for CAG Consideration
CAG Representatives are asked for views about TF’s responses to respondents comments, and whether they agree with the proposed revisions to ED