1. Professional Skepticism
Richard Fleck, IESBA WG Chair
IESBA CAG Meeting
New York
March 6, 2017

2. Objectives
To note report back on December 7, 2016 CAG teleconference
To obtain Representatives’ views on IESBA PS Working Group’s (WG) proposed way forward

3. IESBA does not have a PS project
Project Status
IESBA does not have a PS project
Actively been contributing to activities of PSWG since July 2015
Gained insights from IAASB-led initiatives aimed at enhancing PS in context of audit engagements, including development of IAASB ITC
PSWG concluded that link b/w FPs and PS in the Code should be developed in Code
IESBA CAG provided input on tentative proposals in December 2016
Note to Richard: This section corresponds to paras 3-7. I suggest drawing CAG to report back in para 8 for their noting.

4. Reference to PS in SSBs’ Standards
PS is defined in IAASB’s standards
Applies to PAs who perform audits and other assurance engagements only
Code only refers to PS as part of describing independence
Independence applies to audits and other assurance engagements only
IAESB standards refer to PS definition in the IAASB’s standards
PS applies to all PAs, including PAIBs who prepare financial statements

5. Overview of Feedback to IESBA about PS
Initial WG proposals for PS discussed at Q meetings of PSWG, IESBA CAG, IAASB and IESBA
Ideally, a coordinated approach should be adopted by all SSBs
Concern that extending PS to all PAs would dilute/conflict with IAASB’s standards and its objective to enhance audit quality
Concern that to extend PS to all accountants might have unintended consequences

6. IESBA WG Proposals
Input from December 2016 meetings used to redraft PS project proposal and
Refine proposed description of linkage b/w FPs and PS
Propose clarifications to existing req’t to exercise professional judgment when applying conceptual framework (req’t to apply critical mindset withdrawn)

7. Linkage between FPs and PS
Enhancing description of PS or changing how PS is used in Code (e.g., require for PS for all PAs) require consideration of complex issues in a coordinated manner by SSBs
In short term, public interest is best served if IESBA focuses its attention on emphasizing PS for audits, reviews and other assurance engagements
Proposed text provide examples to illustrate interaction b/w FPs and PS
Note to Richard – I suggest drawing attention to Agenda Item B-2 and highlighting key aspects of the proposal

8. Matters for CAG Consideration
CAG is asked for views about the:
PS Project proposal in Agenda Item B-1
WG’s proposed text to describe linkage b/w FPs and PS in Agenda Item B-2

9. Clarification – Exercise Professional Judgment
Phase 1 of Safeguards project resulted in an enhanced conceptual framework (Section 120)
Reflections on feedback received to-date suggest need for clarification to existing req’ts in conceptual framework to help PAs better comply with FPs
Proposed clarification will make it explicit that PAs should obtain a clear understanding of facts and circumstances when exercising professional judgment
Note to Richard – I suggest drawing attention to Agenda Item B-3 and highlighting key aspects of the proposal

10. Matters for CAG Consideration
CAG is asked whether they support the proposed text to clarify req’t to exercise professional judgment in Agenda Item B-3

11. Way forward and Interaction with Others
WG has advised the PSWG of its plan to put forward proposals to IESBA at its March 2017 meeting
Subject to IESBA support for and finalization of proposals
Immediately after meeting: Input of a “fatal flaw nature” to be requested from PSWG, IAASB and IAESB
Mid-April 2017: IESBA to consider significant issues via teleconference (if needed)
Late-April 2017: Planned release for EDs
Note to Richard – Indicate that WG has received preliminary reactions from PSWG via and teleconference is planned for March 9 to discuss

12. Looking Ahead to Longer Term PS Initiatives
Views are sought about other actions that IESBA or others should take to respond to PS issues, e.g.,
Should references to bias in Code be further developed?
Is there a need for a non-authoritative publication to explain attributes of a PA more broadly?
Is more guidance to explain how PAs should overcome impediments to applying PS needed in the Code?
Should the term PS be used by all SSB’s in the same way?

13. Matters for CAG Consideration
CAG is asked for views about how IESBA should respond to PS concerns raised by stakeholders in the context of:
Applying the requirements in the Code
Enhancing auditors’ application of PS