IFAC SMP Committee Response to the IESBA: Proposed Revisions to the Non-Assurance Services

The no tolerance stance (i.e., outright removal of the materiality threshold) proposed by IESBA for PIEs (and, for some services, also applies to the non-PIEs) is based on the argument that perception of independence in appearance is key, whereas the IESBA’s mechanism has been the application of the reasonable and informed third party test, which was designed for this purpose and is instead being overridden. A third-party test might not lead to the same outcome as a no stance approach in all cases as the former allows for flexibility. For the very largest/publicly relevant PIEs a no tolerance stance could be the best result, but it may not necessarily be the case for all PIEs. Hence, the IFAC Small and Medium Practices Committee is asking for a re-think of this approach.