1. IAASB-IESBA Coordination
Sylvie Soulier, IAASB-IESBA Coordination Liaison
IESBA Meeting, New York
September 17-20, 2018

2. Objective
To receive an update on the status of IAASB-IESBA coordination activities in relation to QC and AUP projects
To provide ethics and independence related input on proposed texts
To discuss an approach and timing for the IESBA’s consideration of conforming or consequential amendments arising from changes to the IAASB’s standards

3. General Guidelines for Session
Discussions limited to matters of relevance to ethics and independence
Matters flagged in Agenda Item 8 have been discussed with IAASB TF Chairs and Staff
For most, resolution reached at TF level, however the outcome of some discussions not yet reflected in text
IESBA Board input on QC texts to be considered by IAASB TFs at their October meetings
Approval anticipated at December 2018 IAASB meetings

4. Suggestions to help achieve consistency
Nature of Comments
Clarifications about how to interpret Code, in particular in light of the enhancements to the conceptual framework
Suggestions to help achieve consistency
Descriptions and definitions
New material that might create confusion or inconsistent application of Code
Drafting suggestions to improve overall tone and presentation of ethics and independence matters

5. Structure of Proposed Revisions to QC Req’ts
Change in terminology to align with spirit of ISQC 1
The word “control” is dropped in “EQC review” and “EQC reviewer”
New terms are “EQ review” and “EQ reviewer”
Extant
Proposal
ISQC 1 – Firm responsibilities
ISQC 2 – EQ Reviewer responsibilities
ISA 220 – Engagement-level responsibilities (for EP & EQ Reviewer)
ISA 220 – EP & Engagement Team responsibilities

6. Components of Proposed ISQC 1 (Revised)
“The system of quality management is dynamic, iterative and highly integrated and does not operate in a linear manner.”
Paragraph 6 of proposed ISQC1 (Revised)

7. Components Broken Down (paras. 6-9A)
Governance and leadership
The environment in which the other components of the system of quality management operate
The firm’s risk assessment process
The monitoring and remediation process
Process to apply a risk-based approach to managing quality
Process to evaluate the design, implementation and operation of the system
Resources
Information and communication
Necessary to support the operation of the other components
Relevant ethical requirements
Acceptance and continuance
Engagement performance
Subject-matter specific topics relevant to a firm’s system of quality management

8. Discussions Topics in for ISQC 1 (1)
Responsibilities for ethics and independence (paras. 21, A10; 26, A14 to A22, 36-37, A55-A61)
Views about provisions related to service providers (paras and A )
Considerations about firm’s ability to fulfill relevant ethical requirements in relation to the use of resources in A175
Views about common descriptions/ definitions
Firm Relevant ethical req’ts  System of quality management

9. Discussions Topics for ISQC 1 (2)
Merits and drawbacks of having material in IAASB’s QC standards that is also discussed in the Code
New application material in para. A55A re how firms might adopt more restrictive policies in relation to inducements and NAS
Acceptance and continuance of client relationships (para and A62-A72 versus Section 320
Network firms (para and A versus Section 400)

10. Discussion about Agenda Item 8-A

11. Proposed ISQC 2
Questions about objectivity of EQRs, in particular when previously functioned as EP
Are principles-based provisions in Code sufficient?
Should Code specify a “cooling off period” for EPs stepping into an EQR role?
Are specific examples needed to assist EQRs identify threats to their objectivity?

12. Overview of Proposed ISQC 2

13. Objectivity (including “Cooling-off” Period)
Objectivity is one of the eligibility criteria for the EQ reviewer
Individuals who recently served as EP on an engagement may face threats to their objectivity as an EQ reviewer
IAASB and IESBA established a joint working group (JWG) to coordinate how this issue, and other issues that affect both Boards, are addressed
Agenda Item 8-B summarizes issues and JWG recommendations
Appendix includes proposed changes to the Code, ISQC 1 and ISQC 2
Views sought on suggested examples for inclusion in Section 300
Page 13

14. Discussion about Agenda Item 8-B

15. Other Matters Relating to ISQC 2
Views sought on:
ISQC 2 Task Force’s proposal to include a req’t in para. 43(e)(i) of ISQC 1 for firms to establish policies and procedures addressing EQ reviews regarding the scope of engagements …performed for all audits of f/s of listed entities and of other entities that are of significant public interest
Any other ethics and independence matters in Agenda Item 8-C
Section on relevant ethical requirements in para. 20(d)(i))
Page 15

16. Discussion about Agenda Item 8-C

17. Proposed Revisions to ISA 220
Addressing and encouraging appropriate exercise of PJ and PS in audit context
Clarifying EP’s role and responsibilities
Interaction with or dependence on firm or network quality management processes and procedures
Addressing audit delivery models and component auditors
Other matters:
Required understanding for accepting or continuing an engagement (e.g., access issues);
Interaction of firm quality management with managing quality at the engagement level; and
Ongoing two-way communication.

18. Discussion Topics Relating to ISA 220
Provisions relating to relevant ethical requirements in paras. 9-10A and A4-A4F
Clarifications about independence responsibilities for component auditors in paras. A2JA and A19D
At Sept 12, 2018 meeting, IAASB TF Chair and Staff agreed to defer for consideration in ISA 600 project

19. Discussion about Agenda Item 8-D

20. Proposed ISRS 4400 (Revised)
IAASB to consider for approval for exposure in Sept 2018
All matters discussed and resolutions reflected in drafts
No change to independence position in extant
Discussion Topics include:
Compliance with relevant ethical requirements for AUP engagements
New reporting req’ts relating to provide transparency about independence

21. Discussion about Agenda Item 8-E

22. What’s Next?
Approach for considering conforming or consequential amendments to Code
Due process, necessary to obtain public input
Resources and prioritization
Timing (before or after IAASB’s finalization of standards)

23. The Ethics Board