1. Jim Gaa, Chair, Part C Task Force IESBA Meeting New York July 8, 2014
Part C Review
Jim Gaa, Chair, Part C Task Force
IESBA Meeting
New York
July 8, 2014

2. Background
March 2013: Project Proposal approved by IESBA.
July 2014: First read of Phase I
October 2014: Second read of Phase I
Jan 2015: Exposure Draft scheduled
As soon as practicable: Begin Phase II (issues)

3. Presenting Information: Key Points
One high level requirement for fair and honest information
Many of the previous requirements have become guidance in support of the above requirement
Added 4 high level categories of ways in which it is possible to mislead with one example of each
TF reviewed the changes from the extant Code and consider them to be significant

4. Misuse of discretion
Board supported enhanced guidance on misuse of discretion but not too detailed, including a few examples.
Proposed categories :
Determining estimates to manipulate income
Selecting accounting method to manipulate income
Timing of transactions to manipulate income
Structuring transactions to manipulate balance sheet

5. Matter for Consideration
Does the Board agree that the categories and examples of the use of discretion to mislead are useful and appropriate?
Are there other categories or examples where PAIBs use discretion to mislead that should be added to paragraph ?

6. Requirement and Guidance
Overarching requirement for presenting information in a fair and honest manner
Focus on guidance of meaning of fair and honest manner:
No intention to mislead
Not omitting information
In accordance with an applicable reporting framework, and
Includes taking reasonable steps:
Accurately and completely, true nature, timely and proper manner

7. Significant changes from extant Code
Guidance on meaning of fairly and honestly added.
Pressure now addressed in s.370.
Four ways discretion may be used to mislead added.
How to disassociate added.
Guidance on presenting non-reporting-framework information.
Includes matters no longer in Code after July 1 (310, 320)

8. Pressure: Key Points
Diverse views from Board on appropriateness of language of threats and safeguards
TF recommend not to use language of threats and safeguards
Proposed text prepared on that basis
Pros and cons presented in issues paper

9. Description and Examples
Change description to “pressure to breach fundamental principles”.
PAIB shall not allow pressure to result in breach of fundamental principles.
PAIB shall not place pressure on others.
Examples categorized by 310/320/330/340/350/360.

10. Requirements
Board questioned requirement: “shall not yield to pressure”.
New proposal: “When faced with pressure, the professional accountant shall not allow such pressure to result in a breach of the fundamental principles.”
Remains a strong requirement but is limited to the PA’s responsibility for their own actions.

11. Language of threats and safeguards
Diversity of views on Board on use of threats and safeguards in s.370.
Safeguards is potential future project.
TF considered merits of both views.

12. In favor of threats and safeguards language
Conceptual Framework applies to whole Code
S.310 and s.320 use threats and safeguards
Safeguards presented in September 2013 are consistent with other safeguards in Code and comply with definition in

13. Against threats and safeguards language
Threats and safeguards is only one part of Conceptual Framework
Terminology does not work well with pressure, because pressure is beyond a PAIB’s control.
Proposed section 360 does not use language of threats and safeguards.

14. Threats and safeguards
Task Force strongly believe the public interest is better served by not using language of threats and safeguards.
However proposed Section does require PAIB to decline or discontinue activity where pressure cannot be alleviated or eliminated.

15. Matters for Consideration
Do Board members agree that:
Proposed Section 370 should, or should not, be drafted using the “threats and safeguards” language?
The provisions in Section 370 are helpful guidance in implementing paragraphs ?

16. Other matters
Factors to consider in determining whether pressure would lead to a breach have been revised to address Board comments in April.
Paragraphs on “creating an ethics based culture” are to be moved to s.300 because of its more general applicability.