1. IESBA Meeting Tennessee, USA June 17-19, 2019
Role and Mindset
Richard Fleck, IESBA Deputy Chair & Task Force Chair
IESBA Meeting
Tennessee, USA
June 17-19, 2019

2. Overview of the Session
Update of Activities since March 2019
Discuss TF proposals:
Sections 100, 110 and 120
Consequential changes in Part 2 & Glossary
Aim to seek Board approval of proposed text for exposure during the Wednesday session

3. April May Activities Update
Revised draft circulated to Board, IAASB PSSG and IAESB PSTF
May
PS joint chairs call to discuss substantive comments
TF meeting to consider all comments received and develop proposals

4. Feedback from SSBs and IFAC SMPC
The TF’s proposed text has taken into consideration comments from IAASB and IAESB on the earlier draft circulated in late April
Key IAASB comments to the proposed text:
Whether the use of “critically evaluate… information” is to too close to IAASB’s definition of PS and whether this would extend an assurance work effort with respect to the consideration of information to all activities that PAs undertake
Suggestion to align the definition of PJ with that in the IAASB Standards
SMPC
The relevant comments from SMPC to the proposed text will be addressed at the meeting

5. Revisions to March 13 Version
Section 100
Merged proposed Introduction to the Code with s100
Reframed the concept of “spirit of the Code”
Section 110
Revised/added references to tech in light of TWG’s recommendations
Added new element to description of professional behavior
Key Changes
Section 120
Introduced concept of “inquiring mind”
Reinserted commonly used terms for types of bias
Added reference to ISQM 1
Consequential Changes
Revisions to Part 2
Inserted description of PJ in the Glossary

6. Revisions to March 13 Version
Please Note
The Revisions and changes mentioned in this slide deck are from Agenda Item 2-A (Mark-up of the March 13 Version)

7. Revisions to Section 100 Proposed Introduction to the Code
Merged parts of text with the material in s100
Public Interest
Introduced the phrase “upholding the ethical values upon which the Code is based” to capture the concept of complying with the spirit of the Code
To act in the public interest means to both uphold the ethical values upon which the Code is based and comply with the Code
Considered how public interest is framed in ED ISQM 1 - “The public interest is served by the consistent performance of quality engagements” - but determined such a formulation is not suitable for the Code
Scope of the Code
Para A2 and A3 of March 13 version deleted to avoid unintended consequences

8. Revisions to Section 100 Question:
Does the Board agree with the proposed changes to paragraphs A1 to A3 of the Code?

9. Revisions to Section 110 Objectivity
Revised reference to technology in para A1 (b), R112.1, A2
Removed example of reliance on technology in para A1
Professional Competence and Due Care
Inserted reference to technology in para A2

10. Revisions to Section 110 Professional Behavior Professional Judgment
Added new element to req’t relating to professional behavior in para A1 (e), R115.1:
Give an affirmative element
Link public interest with an FP
Professional Judgment
Added AM that links the exercise of PJ with compliance with the FPs in para A1

11. Revisions to Section 110 Question:
Does the Board agree with the proposed changes to Section 110?

12. Revisions to Section 120 – Inquiring Mindset
Introduced the concept of “inquiring mind” in paragraphs R120.5 – A5:
Replace “questioning mindset” with “inquiring mind”
Replace requirement to “Remain alert for new information and to changes in facts and circumstances” with “Have inquiring mind”
Insert new AM to explain the concept of having an inquiring mind

13. Inquiring Mindset The new material explains the need for PAs to:
Revisions to Section 120
Inquiring Mindset
The new material explains the need for PAs to:
Be inquisitive and curious about information at hand
To conduct the necessary investigation in order to reach an informed decision
The concept of “inquiring mind”:
A way of thinking for all PAs
“Mind” denotes a way of thinking whereas “mindset” relates more to a set of attitudes
A scalable construct that progresses from being “open and alert” to critical evaluation
“Questioning mind” to “inquiring mind”
Concluded the new term will further minimize potential confusion with exercise of PS
“Remain alert to new info and changes in facts and circumstances”
Retained as a point for consideration when determining if future investigation is needed

14. Inquiring Mindset Question:
Revisions to Section 120
Inquiring Mindset
Question:
Does the Board agree with the proposed introduction of the term “inquiring mind” and the revisions to para. R120.5 to A5 of the Code?

15. Revisions to Section 120
Bias
Retained term “unconscious bias” after considering the suggestion of “subconscious bias”
Connected bias with exercise of PJ instead of application of CF
Lead-in to examples of bias in para A2, removed reference to “unconscious bias” as examples relate to both conscious and unconscious bias

16. Revisions to Section 120
Bias – List of Examples
Commonly used terms – on balance, useful to have and consistent with IAASB ISA 220 (Revised) ED (e.g., Confirmation bias, groupthink)
Term “anchor” – no change after consideration of IAASB PSSG comment re translation
Automation bias – added at recommendation of Tech WG

17. Revisions to Section 120
Bias – List of Examples
Groupthink – Revised in light of potential translation issue with “coalesce”
Overconfidence bias – Replaced with text from IAASB ISA 220 (Revised) ED
“Devil’s advocate” – Removed in para A3 to avoid potential translation issue

18. Revisions to Section 120
Bias
Question:
Does the Board agree with the proposed changes to paragraphs A1 – A3?

19. Organizational Culture
Revisions to Section 120
Organizational Culture A2
Revised proposed text to align with language in IAASB ISQM 1 ED
Inserted last sentence to highlight the importance of adherence to ethical values in dealings with 3rd parties with respect to promoting ethical culture within an organization

20. Reference to ISQM 1 and Professional Skepticism
Revisions to Section 120
Reference to ISQM 1 and Professional Skepticism A2
Added reference to ISQM 1 to:
Highlight importance of firm culture towards compliance of the Code by PAPPs
Demonstrate connectivity between the two Board’s standards \ A2
Added AM on “determination to act appropriately” to demonstrate how such behavior supports the exercise of PS

21. Organizational Culture
Revisions to Section 120
Organizational Culture
Question:
Does the Board agree with the proposed changes relating to:
Organizational culture?
cross-reference to ISQM 1 and PS?

22. Consequential Changes
Reviewed Parts 2 - 4B of the Code
Taken into consideration:
Focus is on Part 1 of the Code as the Role and Mindset concepts apply to all PAs when undertaking professional activities
Reference to application of the CF already included in every Section
Stakeholders’ caution (including those from CAG) about the need to add more material to the Code in light of the revised and restructured Code only becoming effective in June 2019

23. Consequential Changes
Added a bullet on examples of actions that promote ethics-based culture; this proposed change aligns with the language in the “organizational culture” concept in A2
R220.4
Added a requirement for PA to be aware of the risk of bias when preparing or presenting information
R220.7
Revised requirement that aligns with revisions to description of objectivity
270.3 A2
Added a new paragraph on determination to act appropriately when a PA is facing pressure
Glossary
Inserted the description of “professional judgment”

24. Consequential Changes
Question:
Does the Board agree with:
The consequential changes in Part 2?
The insertion of PJ description in the Glossary?

25. Discuss turnaround version
Next Steps
Wednesday session
Discuss turnaround version
Approve ED
July 2019
Publish ED
Comment period (90 days)

26. The Ethics Board