1. IAASB – IESBA Coordination Fees Proposals by IESBA
Willie Botha (IAASB Technical Director) and Imran Vanker (IAASB Member)
IAASB Meeting – New York, USA
Agenda Item 3
September 16, 2019

2. IESBA Coordination – Fees Proposals
IESBA identified two broad matters
Level of audit fees should not affect
Firm’s ability to perform audit in accordance with professional standards
Assigning sufficient and appropriate resources
Transparency of information regarding fees for audits of PIEs
Communication with TCWG
Public disclosure of fee-related information
Addressed at Quality Management Task Force level – ongoing
Elevated to Board level for discussion – Sept 2019 IAASB meeting
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3. IESBA Fees Proposals – Communication with TCWG
Extant Code of Ethics [R410.4]
Communicate with TCWG of an audit client that is a PIE:
Where, for two consecutive years, the total fees from client > 15% of total fees of the firm
Disclose to TCWG the fact that such fees > 15% of total fees …
Extant Code does not require communication of any other fee-related information to TCWG
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4. IESBA Fees Proposals – Communication with TCWG
Proposed Requirement in the Code – Fee-Related Information
Communicate with TCWG of an audit client that is a PIE:
Amount of the audit fee and how the firm is satisfied that level of audit fee did not compromise its independence
Amount of fees for non-audit services charged by the firm or network (and threats and safeguards linked to proportion of non-audit fees to audit fees)
Any fee dependency, whether it is likely to continue and the safeguards applied
WHY?
To provide a meaningful discussion with TCWG about fee-related information, including assessing independence
Fees from audit client > 15% of total fee income
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5. IESBA Fees Proposals – Communication with TCWG
Proposed Requirement in the Code – Non-Assurance Services (NAS)
Obtain agreement with TCWG of an audit client that is a PIE regarding provision of NAS
Before accepting NAS engagement, provide information to TCWG about:
Nature and scope of services to be provided
Any threats to independence that might be created
Firm’s evaluation of whether threats identified are at an acceptable level
If any threats are not at an acceptable level
Actions to address any threats
Why the threats would be eliminated or reduced to an acceptable level
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6. IESBA Fees Proposals – Communication with TCWG
Overlap with ISA 260 (Revised), par. 17
Communicate with TCWG of listed entities:
Statement of compliance with relevant ethical requirements re: independence
Relationships and other matters that may reasonably be thought to bear on independence
Total fees charged for audit services and non-audit services during period covered by FS
Safeguards applied to eliminate identified threats or reduce to an acceptable level
Source:
Traced back to May 2003; Also, IFAC Code (2003) required written communication (at least annually) of all relationships that bear on independence
ISA 200, par. 14:
The auditor shall comply with relevant ethical requirements …
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7. IESBA Fees Proposals – Communication with TCWG
Possible Options Identified by IESBA Representatives
Align the scope of the requirements in ISA 260 (Revised) and the Code
Do nothing (in context of pre-existing difference in scope)
Withdraw the requirement in ISA 260 (Revised) – communication in relation to independence and fee information
Withdraw only the part of the requirement in ISA 260 (Revised) concerning communication of fee information
Matters for IAASB Consideration – The IAASB is asked
For its views on the four possible options to achieve closer alignment between ISA 260 (Revised) and the Code, including any other possibilities that should be considered
Whether there are any other matters that the JWG should consider in undertaking further coordination activities
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8. IESBA Fees Proposals – Public Disclosure of Fee-Related Information
Proposed Requirement in the Code
For an audit client that is a PIE, the firm shall be satisfied about public disclosure of:
Amount of the fee for the audit of the FS;
Amount of fees for services other than the audit of the FS charged during the period covered by the FS; and
If applicable, the fact that total fees from audit client > 15% of total fees of the firm (“… represent, or are likely to represent, … for two consecutive years, …”)
Information must be “appropriately accessible”
Readily available for any stakeholder
In a manner that stakeholders are specifically informed about (or firm believes, know about)
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9. IESBA Fees Proposals – Public Disclosure of Fee-Related Information
Proposed Requirement in the Code – How to …
Local laws and regulations
If the requirement is not satisfied by disclosure made in accordance with law or regulation, further guidance is proposed, as follows:
The audit client might agree to disclose the required fee- related information
If not, the firm considers other suitable locations, for example:
Client’s proxy statement
Auditor’s report
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10. IESBA Fees Proposals – Public Disclosure of Fee-Related Information
Possible Disclosure in Auditor’s Report – ISA Requirements
ISA 700 (Revised)
Fees proposals not covered by the basic reporting elements of ISA 700 (Revised)
Reporting not required under the ISAs is regarded as ‘Other Reporting Responsibilities’
Separate section, with heading ‘Report on Other Legal and Regulatory Requirements’ or otherwise as appropriate to the content of the section
ISA 706 (Revised)
If the auditor considers it necessary / in the auditor’s judgment
Matters, not presented or disclosed in FS, relevant to users understanding of the audit, auditor’s responsibilities, or auditor’s report
Exceptions: Prohibited by law or regulation or ‘Key Audit Matter’ (ISA 701)
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11. IESBA Fees Proposals – Public Disclosure of Fee-Related Information
Proposed IESBA Application Material – Group Audits
Fees paid (or estimate) include all fees paid / payable to firms in relation to audit work performed on which the audit opinion is based
Based on information available at time of the disclosure
Group audits: Include work by any component auditor at the direction of the group engagement partner in accordance with ISA 600
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12. IESBA Fees Proposals – Public Disclosure of Fee-Related Information
Matters for IAASB Consideration – The IAASB is asked
For its views on the appropriate location in the auditor’s report for communication of relevant fee-related information as proposed by the Fees Task Force in those instances where it is determined that the auditor’s report is the appropriate location for such disclosure, including the possibilities discussed in paragraphs 25–31 of this paper or any other possibilities that should be considered.
For its views on the proposed application material in the Code relating to the determination of the relevant fee-related information in the case of a group audit (refer to paragraph 32 of this paper).
Whether there are any other matters that the JWG should consider in undertaking its further coordination activities after the September 2019 meetings of the IAASB and IESBA.
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