The International Auditing and Assurance Standards Board (IAASB) today released for public comment a new Consultation Paper addressing audit quality. A Framework for Audit Quality seeks input from stakeholders internationally who have an interest in continually enhancing audit quality, including regulators, audit committees, investors, and audit firms.

Through the proposed framework, the IAASB aims to raise awareness of the key elements of audit quality, encourage stakeholders to explore ways to improve audit quality, and facilitate greater dialogue between key stakeholders on the topic.

“While the IAASB recognizes that high-quality auditing standards and well-qualified, competent, skeptical auditors are essential to a quality audit, there are many factors that contribute to maximizing the likelihood of quality audits being consistently performed,” said Prof. Arnold Schilder, IAASB chairman. “There is value in identifying and describing these factors and, thereby, encouraging audit firms and other stakeholders to challenge themselves to think about whether there is more they can do to increase audit quality in their particular environments.”

The IAASB is seeking responses to several questions listed in the Consultation Paper, in particular, whether the framework is clear, comprehensive, and useful. In developing the framework, the IAASB has also identified, with the input of stakeholders, a number of areas for consideration by both auditors and other participants in the financial reporting supply chain that may benefit audit quality on a global basis.

“The proposed framework describes the input and output factors that contribute to audit quality at the engagement, audit firm, and national levels. It also demonstrates the importance of appropriate interactions among stakeholders and the relevance of various contextual factors,” explained James Gunn, IAASB technical director. “We hope that A Framework for Audit Quality will generate discussion and that its active use by various stakeholders will result in positive actions in the public interest to achieve a continual improvement to audit quality.”

How to Comment
The IAASB invites all stakeholders to comment on the consultation paper. To access the document or submit a comment, visit the IAASB’s website at www.iaasb.org. Comments are requested by May 15, 2013.

About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC).

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The Nominating Committee of IFAC has today issued the Call for Nominations for Boards and Committees in 2014. This announcement represents the beginning of the period for submitting nominations for available positions on the independent standard-setting boards* and the IFAC Board and committees. The period for nominations ends on March 15, 2013.

For 2014, there are 46 vacancies on boards and committees, including two leadership positions—the chairs of the Professional Accountancy Organization Development Committee and the Professional Accountants in Business Committee.

“The independent standard-setting boards and the IFAC Board and committees attract extremely talented and qualified individuals with wide-ranging experience, which contributes to their authority,” said IFAC President Warren Allen. “We thank all our stakeholders, including our members and the Forum of Firms, for their continued support and look forward to receiving their nominations.”

The Nominating Committee is looking for highly-qualified nominees who possess knowledge of the subject matters considered by the relevant board or committee, are proficient in English, and are willing to commit between 300 and 600 hours per year, depending on the board or committee. Nominations from the Africa-Middle East and the Latin America-Caribbean regions, as well as BRICS (Brazil, Russia, India, China, and South Africa) are particularly encouraged, as are nominations of female candidates.

All vacancies on the independent standard-setting boards are open for nominations by the public, including, for the first time, the International Public Sector Accounting Standards Board. For more information regarding open vacancies, requirements for membership, and how to apply, please refer to the Call for Nominations.

The Nominating Committee follows an open and transparent process in selecting the best candidates for the available positions, while also aiming to achieve gender, regional, and professional balance. For more information about the Nominating Committee, its due process, or guidance in selecting the best candidate, please visit www.ifac.org/about-ifac/structure-governance/nominating-committee.

IFAC encourages all members and associates to share the Call for Nominations with their membership in order to solicit the most talented professionals.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

 *The independent standard-setting boards are the International Auditing and Assurance Standards Board (IAASB), International Accounting Education Standards Board (IAESB), International Ethics Standards Board for Accountants (IESBA), and International Public Sector Accounting Standards Board (IPSASB).

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Thank you for signing up to receive eNews from the International Ethics Standards Board for Accountants (IESBA). This edition of IESBA eNews provides a summary of decisions made at the IESBA’s meeting held December 10-12, 2012, in New York, USA. See the Meeting Page for more information.

IN THIS ISSUE:

1. Emerging Issues and Strategic Plan
2. Breach of a Provision of the Code
3. Conflicts of Interest
4. Definition of Engagement Team
5. Long Association of Senior Personnel with an Audit Client
6. Non-Assurance Services
7. Review of Part C of the Code
8. Suspected Illegal Acts
9. Next Meetings
10. New Technical Director
11. 2013 IESBA Handbook

1. Emerging Issues and Strategic Plan

IESBA members shared information and views about significant national and international developments or emerging issues of potential relevance to the IESBA’s current and future strategy and work plan.

In addition, the IESBA agreed to the scope of, and general approach to, the survey of stakeholders to be used to facilitate the development of its Strategy and Work Plan, 2014-2016. 

The survey is now open through March 15, 2013. The IESBA encourages all stakeholders to participate. For the strategy and work plan currently in effect, see Strategy and Work Plan, 2011–2012, and the additional work streams added in mid-2012.

2. Breach of a Provision of the Code

The IESBA approved for issuance, subject to due process confirmation by the Public Interest Oversight Board (PIOB), changes to the Code of Ethics for Professional Accountants (the Code) related to provisions addressing a breach of a requirement of the Code.

The changes will be effective approximately one year after issuance of the final pronouncement, which is expected by the end of March 2013. The final pronouncement will be included in the 2013 Handbook of the Code of Ethics for Professional Accountants (see below).

3. Conflicts of Interest
The IESBA approved for issuance, subject to due process confirmation by the PIOB, changes to the Code addressing conflicts of interest. The final pronouncement is expected to be released by the end of March 2013, with the changes becoming effective on July 1, 2014. The final pronouncement will be included in the 2013 Handbook of the Code of Ethics for Professional Accountants (see below).

4. Definition of Engagement Team

The IESBA considered the significant comments received on the Exposure Draft (ED) of its proposed change to the definition of the term “engagement team.” The IESBA also considered further amendments to the proposed definition, taking into account limited amendments proposed by the International Auditing and Assurance Standards Board (IAASB) to the material in ISA 610 (Revised), Using the Work of Internal Auditors, dealing with the use of internal auditors to provide direct assistance on the external audit (Direct Assistance).

The IESBA will consider approving the revised definition of “engagement team” after consulting with its Consultative Advisory Group (CAG) on January 21, 2013.

5. Long Association of Senior Personnel (Including Partner Rotation) with an Audit Client

The IESBA approved a project proposal to review the long association provisions in Section 290 of the Code to ensure that they continue to provide robust and appropriate safeguards against the familiarity and self-interest threats arising from long association with an audit client.

The IESBA will consider preliminary issues relating to the project at its March 2013 meeting, including the approach to the project.

6. Non-Assurance Services

The IESBA approved in principle, subject to confirmation of scope, a project proposal to review the non-assurance services provisions in Sections 290 and 291 of the Code to ensure that they continue to support a rigorous approach to independence for assurance services, particularly audits of financial statements.

The IESBA will consider the outcome of a benchmarking exercise for purposes of narrowing the scope of the project at its March 2013 meeting.

7. Review of Part C of the Code

Part C of the Code addresses how the conceptual framework of threats and safeguards in Part A of the Code applies in certain situations to professional accountants in business (PAIBs). The IESBA agreed to the recommendations of the Part C Working Group, including that priority attention be given to the following areas in a review of Part C of the Code:

• Pressure by superiors and others to engage in unethical or illegal acts;
• The responsibility of PAIBs to produce financial reports that are faithful representations of the economics of transactions, and associated matters; and
• Facilitation of payments and bribes.

The IESBA agreed that the Part C work stream should proceed on an accelerated basis under the current strategy and work plan rather than be subject to further consideration of relative prioritization as part of the upcoming consultation on its Strategy and Work Plan, 2014-2016. Accordingly, the IESBA directed the Working Group to develop a project proposal for its consideration at the March 2013 IESBA meeting.

8. Suspected Illegal Acts

The IESBA received a brief update on initial stakeholder reactions to its August 2012 Exposure Draft (ED), Responding to a Suspected Illegal Act, which closed on December 15, 2012.

The IESBA will consider the significant comments from the nearly 70 responses received on the ED at its March 2013 meeting.

9. Next Meetings

Meetings of the IESBA and the IESBA CAG are open to the public. The IESBA CAG will next meet via teleconference on January 21, 2013. The IESBA is expected to next meet via teleconference in the latter part of January 2013. The next face-to-face IESBA meeting will be held in New York, USA, on March 11–13, 2013. For more information and to register to attend an IESBA meeting as an observer, visit IESBA Meetings. For more information and to register to attend an IESBA CAG meeting as an observer, visit IESBA CAG Meetings.

10. New Technical Director

Ken Siong has assumed the role of technical director of the IESBA effective January 1, 2013. Ken brings over 10 years of experience working with the International Auditing and Assurance Standards Board (IAASB), most recently as deputy director. In that capacity, his responsibilities included managing a number of key IAASB standard-setting projects and other initiatives—including audit quality, quality control, and related parties—overseeing the IAASB’s liaison with major national standard setters, and coordinating the IAASB’s strategic and operational activities. Prior to joining the IAASB, Ken worked as a senior manager in the assurance practice of PwC in Hong Kong. He is a member of the Institute of Chartered Accountants in England and Wales.

11. 2013 IESBA Handbook

The IESBA is developing the 2013 Handbook of the Code of Ethics for Professional Accountants. It will contain the final pronouncements addressing breaches of provisions in the Code and conflicts of interest. It is also expected to contain the revised definition of “engagement team.” The 2013 Handbook is expected to be released in the second quarter of 2013. For the current edition, see 2012 IESBA Handbook.   

The International Public Sector Accounting Standards Board (IPSASB) has issued the first four chapters of its Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (the Conceptual Framework). The chapters are:

Chapter 1:    Role and Authority of the Conceptual Framework
Chapter 2:    Objectives and Users of General Purpose Financial Reporting 
Chapter 3:    Qualitative Characteristics  
Chapter 4:    Reporting Entity  

The Conceptual Framework underpins the development of International Public Sector Accounting Standards (IPSASs) and Recommended Practice Guidelines (RPGs).    

“The publication of the Conceptual Framework’s first four chapters is a major landmark for the IPSASB and the setting of global accounting standards for the public sector,” said IPSASB Chair Andreas Bergmann. “These concepts will provide the basis for the ongoing development of consistent and useful IPSASs and RPGs, and for the other three phases of the Conceptual Framework. They will also provide guidance to preparers faced with financial reporting issues not dealt with by IPSASs or RPGs.”

The chapters outline the role of the Conceptual Framework in the IPSAS and RPG development process, identify that the primary users of general purpose financial reports (GPFRs) of public sector entities are service recipients and resource providers, and clarify that the objectives of financial reporting by public sector entities are to provide information useful to users for accountability and decision making purposes. They also identify the qualitative characteristics of, and constraints on, information included in GPFRs and the key characteristics of a public sector reporting entity.

Information presented in financial statements is central to financial reporting and will remain the primary focus of IPSASs and RPGs developed by the IPSASB. However, because the primary objective of governments and other public sector entities is to deliver services to constituents the performance of public sector entities can only be partially evaluated by reference to their financial position, financial performance, and cash flows. These chapters explain that, to respond to users’ need for information for accountability and decision-making purposes, the scope of financial reporting by public sector entities is more comprehensive than information included in the financial statements. GPFRs may include, for example, information about an entity’s achievement of its service delivery objectives, compliance with its approved budget, and prospective information about its future service delivery activities, objectives, and resource needs.

Other chapters of the Conceptual Framework, which will address the definition, recognition, and measurement of the “elements” (or building blocks) of financial statements, and presentation in GPFRs, are being developed. They will be added to the Conceptual Framework when completed.

At its recent meeting, the IPSASB confirmed that it will review present IPSASs and non-authoritative guidance and, through application of the due process, address circumstances where there is substantial conflict between an IPSAS and the Conceptual Framework when issued. The mechanism and timing for withdrawal of the qualitative characteristics presently in IPSAS 1, Presentation of Financial Statements, and any other changes to IPSASs resulting from issue of these four chapters will be determined and communicated to constituents in 2013.

About the IPSASB
The IPSASB develops IPSASs, RPGs and other publications for use by public sector entities. The structures and processes that support the operations of the IPSASB are facilitated by IFAC. The IPSASB receives support (both direct financial and in-kind) from the World Bank, the Asian Development Bank, the United Nations, and the governments of Canada, China, New Zealand, and Switzerland.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (the Conceptual Framework) underpins the development of International Public Sector Accounting Standards (IPSASs) and Recommended Practice Guidelines (RPGs).

The first four chapters of the Conceptual Framework are:

Takeo Fukiya became Technical Advisor to Mari Kobayashi in 2021, having previously served as a Technical Advisor for former board members; Kenji Izawa (2012-2017) and Do-jin Jung (2018-2020).

Mr. Fukiya is a researcher in The Japanese Institute of Certified Public Accountants (JICPA) since July 2021. Before that, He was an Audit Partner at KPMG Japan, where he had worked for more than 20 years, including more than 10 years in the public sector. He has led a number of audit engagements for Japanese public sector entities, including incorporated administrative agencies, such as state-owned R&D institutions and infrastructure entities. Since 2017, he has worked in the HQ Division, focusing on IPSASB-related activities and providing professional views regarding IFRS/J-GAAP issues, including public sector issues for audit/advisor teams.

He was the Chair of the IFAC-IPSASB Working Group of the Japanese Institute of CPAs  (2012-2016)  and prepared comments for IPSASB’s Consultation Papers/Exposure Drafts. He writes many articles relating to IPSAS. He has developed relationships with key Japanese constituents, such as the national governmental standard-setting division, allowing an ongoing exchange of views and information.

A Japanese certified public accountant, he has also been an adjunct researcher at Waseda University since 2014, and a board member of Japan’s Association of Governmental Accounting. He is a graduate of Keio University, Economics.

The SMP Committee submitted this comment letter to the International Ethics Standards Board for Accountants (IESBA)'s proposed changes to the Code of Ethics for Professional Accountants addressing Responding to a Suspected Illegal Act.