1. Long Association Task Force
Marisa Orbea, Task Force Chair
IESBA Meeting
July 7-9, 2014
New York

2. From Sept. and Dec. 2013 meetings, IESBA agreed:
Long Association
Background
From Sept. and Dec meetings, IESBA agreed:
Monitor regulatory developments re: mandatory tendering and rotation legislation
Strengthen overall framework of
Maintain 7 yr. time-on period for KAPs on audits of PIEs
Reconsider 2 yr. cooling-off period for KAPs
Mandatory rotation not required for non-PIEs or non-KAPs on PIEs

3. IESBA requested TF to consider:
Long Association
Background
IESBA requested TF to consider:
Longer cooling-off for Key Audit Partners (KAPs) on PIEs
Nature of permissible roles during cooling-off
Adding additional guidance in general framework
Providing guidance on communication with those charged with governance (TCWG) on rotation issues

4. Length of Cooling-Off Period - Background
Long Association
Length of Cooling-Off Period - Background
TF presented 2 proposals in Dec IESBA meeting:
3yr. cooling-off for all KAPs on audit of all PIEs; or
5 yr. cooling-off for the engagement partner on audit of listed company
Informal Board poll: Majority supported 5 yr. cooling-off for engagement partner with 2 or 3 yr. cooling-off for other KAPs
TF requested to consider bifurcation of cooling-off period to focus on engagement partner

5. Length of Cooling-Off Period - Background
Long Association
Length of Cooling-Off Period - Background
March 2014 CAG meeting
all CAG Representatives that expressed a view indicated a preference for a uniform cooling-off period for all KAPs
confirmed that a cooling-off period of greater than two years was preferable but did not indicate a view on the ideal cooling-off period

6. Length of Cooling-Off Period - Background
Long Association
Length of Cooling-Off Period - Background
TF recommendation at April 2013 IESBA meeting:
Extend cooling-off period to five years for engagement partner on listed company audits
Other KAPS to remain the same (2 year cooling-off)
Majority of Board view that there was little or no justification for distinguishing listed companies from other PIEs
TF has made changes to the draft provisions to apply cooling off period to engagement partner on all PIEs

7. Length of Cooling-Off Period – Stakeholder views
Long Association
Length of Cooling-Off Period – Stakeholder views
Lack of support for change from SMP Committee
May 2104 NSS meeting participants supported extended cooling-off period for engagement partner for all PIEs, however consider it should also apply to the EQCR
June 2014 CAG meeting:
Majority of participants supported extension of cooling off period for KAPs on PIES, not just listed companies
Split views whether extended cooling-off should apply to engagement partner only, or also EQCR due to importance of role

8. Length of Cooling-Off Period - Recommendation
Long Association
Length of Cooling-Off Period - Recommendation
TF recommends five year-cooling-off period for the engagement partner on the audit of a PIE
The TF does not recommend also applying the extended cooling-off period to the EQCR
the EQCR role is just as important however the more significant familiarity threats are created with the engagement partner
More effectively deals with perception issues given engagement partner’s unique role on the audit
Ensures there is an effective break in the engagement partner’s influence over the engagement. 

9. Length of Cooling-Off Period - Questions
Long Association
Length of Cooling-Off Period - Questions
Do Board member have any comments in respect to stakeholder feedback received to date?
Do Board members continue to support the proposal that the 5 year cooling off period should apply to the engagement partner on all PIES?

10. Activities during Cooling-Off - Background
Long Association
Activities during Cooling-Off - Background
The TF proposed that during cooling-off, a KAP could not:
be a member of the engagement team
consult on technical or industry specific issues
be the “client relationship” partner
provide non-audit services
The TF also proposed that if the cooling-off period was extended to five years for engagement partner, that certain technical consultation could be performed by the engagement partner after a period of two years

11. Activities during Cooling-Off - Background
Long Association
Activities during Cooling-Off - Background
Majority of Board agreed with proposals
However consensus was not reached on the issue of provision of non-audit services
TF proposals at April 2014 Board teleconference
Replace ban on non-audit services with principle that activities should be prohibited if influence the audit or have significant or ongoing interaction with management / TCWG
Majority of Board supported the proposal

12. Activities during Cooling-Off – Stakeholder views
Long Association
Activities during Cooling-Off – Stakeholder views
Lack of support from SMP Committee for proscribing further restrictions
Rationale for relaxing restrictions after 2 years for engagement partner unclear
May 2104 NSS meeting participants did not consider there should be any permissible interaction during cooling-off
June 2014 CAG meeting:
Majority of participants supported the proposals as reasonable
Some comments supporting no involvement in audit / relaxation

13. Activities during Cooling-Off - Recommendation
Long Association
Activities during Cooling-Off - Recommendation
TF continues to recommend proposals presented at April 2014 Board teleconference
Further changes made by TF to deal with comments from Board regarding:
Not prohibiting individual going into leadership role
Inconsistency of proposed wording with restrictions in other bullet points

14. Activities during Cooling-Off - Question
Long Association
Activities during Cooling-Off - Question
Does the Board agree with the revised for the activities that a KAP may or may not undertake during the cooling-off period?

15. Strengthening of Overall Framework
Long Association
Strengthening of Overall Framework
At the March 2014 CAG meeting and April 2014 Board meeting, some members commented on minimum cooling-off period of one year in the general provisions:
May be too prescriptive
Principles should be applied to get to right outcome
Confusing to have requirements in general principles
TF has amended the provisions to require the firm to determine a period of sufficient duration to eliminate or reduce the threats.

16. Comments from Board member regarding the use of the word “concurrence”
Long Association
Involvement of TCWG
TF recommended that concurrence from TCWG be obtained with respect to the application of and
Comments from Board member regarding the use of the word “concurrence”
TF recommends maintaining the use of “concurrence” as”
consistent with wording in breaches provisions
means agreement whether orally or in writing

17. Corresponding changes made to 291
Long Association
Section 291
Corresponding changes made to 291
Some feedback from Board member that section 291 should recognize the difference between audit/review engagements and other assurance engagements
TF has proposed changes to reflect the discussion:
Clarify that threats from long association arise from recurring engagements
Nature of assurance engagement is first factor to consider