1. Non-assurance Services
Richard Fleck, Working Group Chair
IESBA Meeting
New York
March 12-14, 2018

2. To obtain input on planned approach and timing for the NAS initiative
Objectives
To obtain input on planned approach and timing for the NAS initiative
To inform Board about plans for stakeholder outreach/ roundtables on the topic
To brief IESBA on outcome of CAG discussions

3. Overview of Initiative
WG established in December 2017
Response to PIOB and regulatory concerns
Focused on independence provisions relating to the provision of NAS to audit or assurance clients
WG attaches great importance to stakeholder input about the WG’s initial analysis and proposed approach

4. Recap of NAS Developments
2013 IESBA NAS Benchmarking
2015 Limited changes to NAS Provisions
2017 Revisions to NAS provisions as a result of enhanced conceptual framework and safeguards and structural changes to Code
Other developments
New and revised NAS provisions at national level (e.g., EU Audit Reforms)
IESBA November 2017 Fees Questionnaire

5. Preliminary Issues Identified by WG
Materiality
Should materiality continue to be a factor in evaluating whether a threat to independence created by providing a NAS is at an acceptable level?
Should NAS prohibitions continue to factor in a “materiality test”?
Should Code have different NAS provisions for PIEs vs. non PIEs?
Are explicit req’ts for auditor communication with TCWG about NAS needed in Code (e.g., disclosure/ preapproval of the nature of NASfees charged for NAS)?
Merits/achievability of aligning IESBA NAS provisions Code with those of G-20 jurisdictions

6. Objective of Fact-finding Activities
To define the parameters and scope of a future NAS project the WG plans to
Review and analyze issues raised by stakeholders in relation to existing NAS prohibitions
Identify and understand rationale for differences b/w IESBA’s NAS provisions those of G-20 jurisdictions
Undertake stakeholder outreach to further understand issues → Global roundtables
Take into account the final recommendation of Fees WG

7. Stakeholders’ Views About NAS (1)
Revised and Restructured Code
Resulted in significant enhancements of the NAS provisions
But, respondents to Safeguards ED called for NAS prohibitions to be more closely aligned with local ethics req’ts
Regulators and PIOB want to see a “black list”
Identified as a public interest matter by PIOB
Code would be stronger and more credible with a clear list of prohibitions
NAS should be approved by TCWG

8. Stakeholders’ Views About NAS (2)
Questions about whether IESBA Code should
Include more NAS prohibitions in relation to firms and their networks
Be strengthened in relation to auditor communication with TCWG
Address NAS fee related matters which affect perceptions about independence
Include specific disclosure req’ts related to fees charged for NAS
Establish fee caps

9. Rationale for Principles-based Conceptual Framework
Not possible to include a complete and all-inclusive list of facts and circumstances that might trigger threats to FPs and independence
Important to have a set of principles to assist all PAs deal with ethics and independence issues not explicitly dealt with in Code
More robust and explicit provisions as a result of Safeguards project

10. Matters for Future Consideration
Applying conceptual framework to threats created by providing NAS to audit and assurance clients
Advocacy Threats
Materiality
Are revised safeguards appropriate to address the threats to independence, at the firm level, that are created by the fees charged for NAS?
PIEs versus non PIEs
Reconciliation of NAS Provisions in G-20 Jurisdictions
Rationale for having global principle-based provisions

11. Roundtables
Global RTs planned in conjunction with PS
June 11, 2018 Washington DC, US
June 15, 2018 Paris, France
July 12, 2018 Tokyo, Japan

12. Planned Approach and Timeline to Roundtables
Date
Planned Activities
April 2018
WG meeting
June-July 2018
Roundtables
August 2018
September 2018
IESBA and CAG Discussions – Consideration of RT feedback
December 2018
Report of fact-finding and WG recommendations

13. Feedback From March 2018 CAG and SMPC
Strong support for undertaking the initiative now
Support for dealing with materiality issue
Questions about the objective of “benchmarking”
Is the objective to raise the bar to an aspirational level or to achieve commonality?
Cautions about timing and possibility for a disproportionate impact on SMPs and SMEs, given calls for change arise most often in relation to NAS provisions that apply to PIE

14. Matters for IESBA Consideration
IESBA members are asked for views about:
The issues identified and the WG’s views and observations
The WG’s planned approach to fact-finding, including its plan for roundtables
The WG’s planned timeline