IFAC Small and Medium Practices (SMP) Committee Response to the International Ethics Standards Board for Accountants (IESBA) Exposure Draft: Proposed Revisions Pertaining to Safeguards —Phase 1

The IFAC SMP Committee generally supports IESBA’s proposed revisions to the extant Code pertaining to the conceptual framework. However, it believes that the new overarching requirements for all PAs to apply the Conceptual Framework (R120.3 and R300.2) should be replaced with overarching objectives for the PA, which are supported by more specific requirements. The SMP Committee agrees that the so-called third-party test as proposed in R120.4 A1 does seem to make sense in relation to a determination of whether the professional accountant complies with the fundamental principles of the Code. However, it does not believe that additional third-party tests for specific matters are appropriate elsewhere in the Code beyond this.

The SMP Committee generally agrees with the revised description of “Reasonable and Informed Third Party” and the the proposed revisions to an “acceptable level” and the inclusion of this as application material in the section on Evaluating Threats. It agrees that the revised description of safeguards establishes a stronger correlation between “threats and safeguards” and the fundamental principles in the Code. However, the SMP Committee is concerned about the inclusion of the word “effectively” in place of “may”.

For specific comments, read the full comment letter below.