1. IESBA CAG Meeting New York March 4, 2019
Role and Mindset
Richard Fleck, IESBA Deputy Chair & Task Force Chair
IESBA CAG Meeting
New York
March 4, 2019

2. Overview of the Session
Report-back and update on recent activities
Discuss issues, TF proposals and rationale and seek CAG input:
New Introduction to the Code
Revisions to Sections 100, 110 and 120 of the Code
Next steps

3. Activities Since September 2018 CAG Meeting
Board approved project: Promoting the Role and Mindset Expected of Professional Accountants (formerly professional skepticism)
December 2018
Board considered TF preliminary proposals, including:
New Introduction to the Code addressing role of profession in society, responsibility to act in public interest and its overarching objective
Proposed revisions to Sections 100 and 120 relating to organizational culture and professional judgement
Board also provided feedback to TF’s thinking on:
Courage, objectivity, questioning mindset and bias
February 2019
SSB professional skepticism joint chairs teleconference

4. Report-back – September 2018 CAG Meeting
Any questions on the report-back?
Representatives are asked to note the report-back

5. Key Proposed Changes to the Code
Introduction to the Code (New)
The role of the accountancy profession and the relationship between compliance with the Code and professional accountants acting in the public interest
Section 100
Applicability of the Code
The linkage between the provisions of the Code on the one hand and behavior and approach expected of professional accountants and responsibility to act in the public interest on the other.
Section 110
Revisions to the description of “objectivity”
New application material on exercising “resolve” - Subsection 111
A new example of potential reliance on technology affecting the objectivity of a professional accountant under Subsection 112
Section 120
The inclusion of “a questioning mindset” as a requirement in combination with the exercise of professional judgment
New application material on having a questioning mindset and the exercise of critical analysis.
New application material on bias and organizational culture

6. Coordination with SSBs
Teleconference with Chairs of IAASB PS Sub-Working Group and IAESB PS Task Force on 28 February. Substantive comments from Chairs include:
New Introduction to the Code
Support from IAASB PS SWG Chair
Objectivity
IAASB SWG will consider whether proposed revised description of objectivity impacts the way the term is used in IAASB literature
IAASB approached reliance on technology (para A1 (b)(iv)) from the perspective of bias (e.g. over-confidence bias). Agreed that there should be further discussion between Chairs of both Board’s Technology TFs
Resolve
It should be clarified that the concept involves a commitment to do the right thing

7. Coordination with SSBs
Questioning mindset and critical analysis
IAASB PS SWG Chair queried if “questioning mindset” and “critical analysis” are too close to the terms used in the definition of “professional skepticism”; also prefers “questioning mind”
IAESB PS TF Chair suggested “critical assessment” (as used in the definition of “professional skepticism”) should be used. Rationale is that the outputs expected from critical assessment and critical analysis are different
IAASB PS SWG to consider whether relationship between professional judgment and questioning mindset in the proposed text aligns with the relationship between professional judgement and professional skepticism in ISA 220 (Revised) ED
Bias
Support from both Chairs for the approach taken and for the number and description of those listed.
Comments on ISA 220 (Revised) ED due in June IAASB will share feedback to the material on “bias”.
Organizational culture
Support from IAASB PS SWG Chair for the organizational culture and ‘tone at the top’ to be included in the proposed text

8. New Introduction to the Code
The Introduction:
Aims to remind and exhort PAs about importance of their role and function in society, their responsibility to act in the public interest and how the Code can help
Is positioned as an Introduction because:
Material more effective if non-technical language is used - hence Part 1 is not suitable
The Guide to the Code serves a different purpose and also not suitable location
The TF considered the Board’s question – “Does compliance with the Code means a PA has acted in the public interest?” and concluded that although the Board does not have the requisite authority to determine this issue:
It would be helpful if the Code could provide some assurance to PAs similar to the IASB on the effect of compliance with IFRS, and so
Para 3 aims to support the proposition that compliance with the Code provides prima facie evidence that a PA has acted in the public interest.

9. Introduction to the Code
Questions:
Does the CAG agree that the proposed text should be placed in the Introduction? The alternative would be for the text to be redrafted in more formal/technical language and placed in Part 1 of the Code.
Does the CAG agree that compliance with the Code is prima facie evidence that a PA has acted in the public interest

10. Revisions to Section 100 Questions: The revisions to Section 100:
Clarify:
the provisions of the Code that set out the behaviors and approach expected of PAs and support their responsibility to act in the public interest
Applicability of the Code:
Individuals who are members of IFAC member body
Firm responsibility over individuals who provide professional services to comply with the Code
Highlight the central role of FPs and CF in the Code
The TF considered, but rejected, the inclusion of a Requirement that a professional accountant should act in the public interest (e.g., “R A professional accountant shall act in the public interest when undertaking a professional activity.”)
Questions:
Does the CAG support the proposed text in paragraphs 100.1A1 – A2?

11. Revisions to Section 110 - Objectivity
The revisions to section 110:
Reframe the description to be more affirmative in nature; this is consistent with how other FPs are described
Add “Perception, emotion or imagination” as a factor that can compromise the exercise of professional judgment
Expand “undue influence of others” to “Undue influence of, or reliance on, individuals, organizations or other factors (including technology)”
Add an example of how reliance on technology may affect objectivity (para A1)
Questions:
Does the CAG support the revised description of “Objectivity”?
Does the CAG think it would be helpful if new application material is added to explain more than just the potential influence of technology? E.g., “Perception, emotion or imagination”

12. Resolve Questions: Revisions to Section 110
There was general support from the Board to develop new application material about the need for confidence/ strength of character as an enabler of compliance with FPs
In light of some Board members’ concern about the use of the words “courage” and “moral courage”, the TF agreed to use the term “resolve” to highlight the importance of having the determination to act appropriately
The proposed text is placed under Subsection 111 (Integrity) because the concept is closely aligned with acting with integrity
Questions:
Does the CAG agree with the concept of “resolve”? Should an alternative term (e.g. courage, strength of character) be used?
Does the CAG agree that the proposed text should form part of the material on integrity under Subsection 111?

13. Revisions to Section 120 – Questioning Mindset
It is important for a PA to have the right mindset when applying the CF
TF took note of the clear view from stakeholders that professional skepticism is a term of art in audit and assurance standards
In the 2018 consultation paper “Professional Skepticism – Meeting Public Expectation”, the term “impartial and diligent mindset” was used to articulate the mindset expected of PAs
Upon consideration, the TF is of the view that having a “questioning mindset” is important for a PA when exercising professional judgment
A questioning mindset would require a PA to assess the circumstances and information at hand to determine if any critical analysis is necessary
TF is of the view that “questioning mindset” and “critical analysis” does not interfere with the use of “professional skepticism” in the ISAs. This is clarified in paragraph A5

14. Revisions to Section 120 – Questioning Mindset
Questions:
Does the CAG:
Support the approach taken by the TF?
Agree that “questioning mindset” should be included as a requirement in combination with the exercise of professional judgment in paragraph R120.5?
Agree with the material relating to “questioning mindset” and “critical analysis” in paragraph A3?

15. Bias Questions: Revisions to Section 120
Unconscious bias can cloud a person’s judgement and impair a PA’s exercise of professional judgment
The revisions introduced new application material (paragraphs A1 to A3) to highlight the importance of being aware of one’s bias
When developing the proposed text, the TF has taken into consideration the new material on bias in IAASB’s ISA 220 (Revised) Exposure Draft to ensure there is no undue inconsistency
Questions:
Does the CAG support the approach taken to the inclusion of bias in Section 120?

16. Revisions to Section 120
Bias – List of Examples
The proposed text includes seven (7) examples of bias:
Anchoring bias
Availability bias
Confirmation bias
Groupthink
Overconfidence bias (2 options)
Representation bias; and
Selective perception
Questions:
Does the CAG agree that it would be helpful to include in the Code examples of the different types of bias that may arise? An alternative is to discuss the types of unconscious bias in a staff publication or other types of non-authoritative material.
Does the CAG agree with the descriptions of different types of bias in paragraph A2?

17. Organizational Culture
Revisions to Section 120
Organizational Culture
Although the Board questioned why organizational culture (and not other enablers) was regarded as requiring additional application material, the TF maintained its view that having the right organizational culture and tone at the top is of such importance in promoting ethical behavior by PAs that it should be included.
The proposed text highlights the importance of having
The right culture at the organizational level; and
Support from leaders and managers through implementation of appropriate education and training programs, performance criteria, management processes, and consequences when ethical principles are not upheld
The proposed text has taken into consideration the relevant material in ISQM 1 ED
Questions:
Does the CAG agree that the text on organizational culture should be added to the Code to remind PAs of its potential impact on the application of the conceptual framework?

18. Next Steps Seek Board input at its March 2018 Board meeting
Seek input from Forum of Firms and NSS in April and May 2019 respectively
Present revised proposals to Board in June 2019 (including a review of other parts of the Code)

19. The Ethics Board