Review of Part C Phase 2 Applicability
Helene Agélii – IESBA Member and
Task Force Chair
IESBA Meeting
New York, USA
June 19-21, 2017
Page 1 | Confidential and Proprietary Information
Applicability – Background
• Project objective
• Approach adopted by TF:
– Holistic
– Does not identify specific ethical issues/matters
• ED released in January 2017 with comment period closed
on April 25, 2017
Page 2 | Confidential and Proprietary Information
Session Outline
1.
2.
3.
4.
5.
6.
Overview
Clarity of Requirement paragraphs (R120.4 & R300.5)
Scope of Requirement paragraphs
Relevance of example in paragraphs 120.4A1 & 300.5 A1
Location of Applicability paragraphs
Other matters
Page 3 | Confidential and Proprietary Information
1. Overview
• Received 39 comment letters
• Respondents are generally supportive of:
− Objectives of the proposals
− The holistic approach
• Only a few respondents expressed general concerns
about increasing complexity of Code
Page 4 | Confidential and Proprietary Information
1. Overview
Key comments:
• Clarity of the Requirement paragraphs – when is Part C applicable to
PAPPs
• Scope of the Requirement paragraphs – individual non-PAs working in
a firm
• Specific example vs non-exhaustive list of relevant situations
• Definitions of PAPP and PAIB
Page 5 | Confidential and Proprietary Information
1. Overview
In response, the TF:
• Made preliminary revisions to both the proposed requirement and
application material
• Sought early feedback from Structure TF
Page 6 | Confidential and Proprietary Information
1. Overview
Matter for IESBA Consideration
Views about general comments on Applicability ED and TF’s
response
Page 7 | Confidential and Proprietary Information
2. Clarity of Requirement Paragraphs (R120.4 & R300.5)
• Majority of respondents did not raise any issues
• Key comments:
−
−
−
−
First sentence may be inaccurate – phrase “ethical issues”
Should state the whole Code may be applicable
Unclear what circumstances will trigger applicability
Does not cover the situation whereby a PA has multiple roles as
both a PAPP and PAIB
Page 8 | Confidential and Proprietary Information
2. Clarity of Requirement Paragraphs – TF Proposals
First sentence
ED
When facing an ethical
issue, a PA shall consider
the context within which
the issue has occurred.
Revised
A PA shall consider the facts and
circumstances, including any
professional activities, interests and
relationships that might create threats
to compliance with the FPs, and the
context in which they apply and comply
with the relevant requirements of the
Code
Page 9 | Confidential and Proprietary Information
2. Clarity of Requirement Paragraphs – TF Proposals
ED
Second sentence
Where a PAPP is performing
professional activities pursuant to the
PAPP’s employment or ownership
relationship with the firm, there might
be req’ts and AM in Part 2 that are
also applicable to those
circumstances. If so, the PAPP shall
comply with the relevant provisions
Revised
Where an individual who is a
PAPP is performing
professional activities other
than for clients of the PAPP’s
firm, and there are req’ts
and AM in Part 2 that are
applicable, the PAPP shall
comply with those relevant
provisions
Page 10 | Confidential and Proprietary Information
Clarity of Requirement paragraphs
Matter for IESBA Consideration:
TF response to comments about clarity of Requirement
paragraphs
Does IESBA agree with the TF’s preliminary revisions to
para R120.4 and R300.5?
Page 11 | Confidential and Proprietary Information
3. Scope of Requirement Paragraphs (R120.4 & R300.5)
Key concerns from respondents:
• Compliance of Part C by non-PA individuals working in firm (e.g., a
lawyer)
• Whether the proposals cover contractors of firms
Page 12 | Confidential and Proprietary Information
3. Scope of Requirement Paragraphs – TF Proposal
• Individual non-PAs:
– Individual non-PAs not within scope (TF’s view)
– TF’s rationale is based on extant definitions
– To avoid confusion, revised proposals to include only individuals
PAs
• PAs working as contractors
– Issue not relevant in light of revised proposals to requirement
Page 13 | Confidential and Proprietary Information
Scope of Requirement paragraphs
Matters for IESBA Consideration:
• TF response to comments about scope of Requirement
paragraphs
• Extant definitions
• TF’s rationale to clarify Part C applicability to individual PAs
only
Page 14 | Confidential and Proprietary Information
4. Relevance of Examples (120.4 A1 and 300.5 A1)
• Whilst most respondents did not raise concerns or provide
alternatives, other questions raised suggest need for
clarification
• Key suggestions:
– Minor changes to example
– Replace with new example (e.g., preparing engagement budgets)
– Replace with more guidance - non-exhaustive list of situations
Page 15 | Confidential and Proprietary Information
4. Relevance of Example – TF Proposals
• Replace specific example with a non-exhaustive list
– Rationale – breadth vs depth
– Four examples that cover different relationships in different
situations:
o Senior staff, supplier, internal department
o Conflicts of interest, pressure, inducement and preparation of
information for internal use
Page 16 | Confidential and Proprietary Information
4. Relevance of Example
Matters for IESBA Consideration:
• TF’s proposal to replace the specific example with a list of
situations
• Relevance of situations listed in Agenda item 7-B
• If the example is to be retained, should it be amended or
replaced
Page 17 | Confidential and Proprietary Information
5. Location of Applicability Paragraphs
• Respondents are generally supportive
• A number of options were suggested
• TF proposal:
– No change to the locations
– TF will review additional guidance already in the Code
• Matter for IESBA Consideration
Do IESBA members agree with TF proposal?
Page 18 | Confidential and Proprietary Information
6. Other Matters – Structure of the Code
1. Division by Roles
2. Definitions of PAPP and PAIB lacks clarity:
• Definition of PAPP may include PAIB working in a firm (e.g. CFO
of the firm)
• Definition of PAIB may include PAPP
• Respondents did not believe these gaps will impact the intended
objective of the proposals
Page 19 | Confidential and Proprietary Information
6. Other Matters – Structure of the Code
• TF proposal:
– Issues regarding definitions outside the scope of this project
– TF’s view is that these concerns will not impact on the objective of
the Applicability paragraphs
– Recommend the Board to consider the concerns at a later date
• Matters for IESBA Consideration:
Do IESBA members agree with the TF’s proposal?
Page 20 | Confidential and Proprietary Information
Way Forward
• TF will:
– Consider Board’s comments during its July 2017 meeting
– Liaise with Structure TF on matters relating to Structure of the Code
• IESBA to consider a “second read” in September 2017
• Finalization of revisions to proposals clarify applicability by
December 2017 is on track
Page 21 | Confidential and Proprietary Information
The Ethics Board
www.ifac.org