The International Ethics Standards Board for Accountants (IESBA) released a 20-minute podcast that highlights the IESBA meeting that took place in Athens, Greece from June 18 - 20. The board's meetings page on the IFAC web site also provides a 3-page summary of highlights and decisions that covers a broader array of the topics discussed at the meeting.
The podcast provides quick updates on:
- development of an improved electronic or "e"-code
- nonassurance services working group
- fees working group
- professional skepticism working group
Nonassurance Services: The board heard an update on preliminary fact-finding efforts, including feedback from two of the four roundtable discussions. So far, commenters appear to favor continuance of some form of "de minimus" standard for nonassurance services; small and medium practices (SMPs) raised concerns about subjecting all audit engagements, whether they are for public interest interest entities (PIEs) or not, to the same (generally more stringent) PIE independence requirements; that investors think the distinction should not solely be PIE vs non-PIE, but rather whether an audit client has outside parties with interests in the company. As for firms' emerging services; commenters asked whether business relationships should also be explored. Some thought the fundamental principles and conceptual framework remain relevant for examining emerging services. Consensus emerging (at least preliminarily) that communication between the auditor and those charged with governance (TCWG) is important and that pre-approval of services might be appropriate.
Fees Working Group: As discussed in our blog post dated July 9, the fees working group presented its final report to the Board. Four issues are being explored; level of audit fees; size of fee from a client relative to the firm's revenues or partner's book of business; proportion of nonaudit to audit fees; and audit firms with significant nonaudit services revenues. Concerns have been raised about fee pressures, especially among SMPs, which can result in lower competence and audit quality; high ratios of nonaudit to audit fees can impact independence, especially in appearance. Several options being considered. Many favor high transparency where TCWG would pre-approve services. The board agreed that based on its findings, the working group should propose a new project that the board will consider at its September meeting. They also suggested this working group coordinate efforts with the Nonassurance Services Working Group as they move forward.
Professional Skepticism: This working group briefed the board on preliminary feedback received at two (of the four) roundtable discussions. Preliminary consensus is that all professional accountants should exercise professional skepticism when performing professional services. However, the board should not use the term "professional skepticism" to apply to all professional accountants, which will cause confusion as the term is closely associated with the audit profession. So far, there is broad support for a new term and additional guidance. The working group plans to update the board at the September meeting and present a more formal proposal by the end of 2018.
The next IESBA meeting will be held in NYC on September 17-20 with a joint IESBA/International Auditing and Assurance Standards Board (IAASB) meeting to take place on September 19, 2018.