The International Ethics Standards Board for Accountants (IESBA) today released for public comment the Exposure Draft, Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code.

The proposed revisions broaden the definition of a public interest entity (PIE) to include more categories of entities, given the level of public interest in their financial condition, for the purposes of additional independence requirements to enhance confidence in their audits.

“The PIE concept is central to the International Independence Standards as it determines whether the auditor of an entity should comply with additional independence requirements,” said IESBA Chairman Dr. Stavros Thomadakis. “As economies around the world evolve, capturing the appropriate types of entities as PIEs and doing so in a globally operable way is a matter of public interest. I am grateful for the good input provided by the IAASB, under our established arrangements for close coordination.”

Among other matters, the proposed revisions:

• Introduce an overarching objective for additional requirements to enhance confidence in the audit of financial statements of PIEs.
• Provide guidance on factors to consider when determining the level of public interest in an entity.
• Broaden the definition of PIE to additional categories of entities.
• Replace the term “listed entity” with the term “publicly traded entity” and redefine that PIE category.
• Introduce new requirements for firms to determine if additional entities should be treated as PIEs for independence purposes and to publicly disclose if an audit client was treated as a PIE.
• Recognize and encourage local regulators to refine PIE categories in regard to national conditions.

In the holistic approach adopted, the specifications for the PIE categories are set at a high level given the wide diversity in national PIE definitions which necessarily reflect local circumstances. Integral to this approach is the role the IESBA expects regulators, national standard setters or other relevant local bodies to play in refining these high-level categories so that the right entities in the local context are captured. To assist in understanding this prospective role, the IESBA will undertake outreach and education activities over the coming months, including guidance material in February and webinars in March.

How to Comment

The IESBA invites all stakeholders to comment on the Exposure Draft by visiting the IESBA website. Comments are requested by May 3, 2021.

As part of this public consultation, the IAASB invites stakeholders to comment on aspects of the Exposure Draft for its consideration of the possible development of its International Standards.

About the IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA serves the public interest by setting ethics standards, including auditor independence requirements, which seek to raise the bar for ethical conduct and practice for all professional accountants through a robust, globally operable International Code of Ethics for Professional Accountants (including International Independence Standards).

The IESBA believes a single set of high-quality ethics standards enhances the quality and consistency of services provided by professional accountants, thus contributing to public trust and confidence in the accountancy profession. The IESBA sets its standards in the public interest with advice from the IESBA Consultative Advisory Group (CAG) and under the oversight of the Public Interest Oversight Board (PIOB).

Earlier today, the Staff of UK Financial Reporting Council (FRC) and the International Ethics Standards Board for Accountants (IESBA) jointly released the publication, Ethical and Auditing Implications Arising from Government-Backed COVID-19 Business Support Schemes.

This staff publication highlights ethical and auditing implications arising from government-backed business support programs which have been utilized at unprecedented levels during the COVID-19 pandemic. The guidance sets out important ethical considerations for professional accountants who are called upon to assist their employing organizations or clients in applying for and using COVID-19-related funding or financial support. The document includes guidance for those who prepare related financial information and disclosures, as well as for those who independently audit or provide assurance services regarding such information.

The publication was developed by the Staff of UK FRC under the auspices of a Working Group formed by the IESBA and national ethics standard setters (NSS) from Australia, Canada, China, South Africa, the UK and the US. Chaired by Mr. Richard Fleck, former IESBA Deputy Chair, the Working Group’s mandate is to develop implementation support resources to assist accountants effectively apply the International Code of Ethics for Professional Accountants (including International Independence Standards) when facing circumstances created by the COVID-19 pandemic. The publication benefited from input from IESBA Staff.

The publication can be found on the IESBA COVID-19 resource page.

About the IESBA-NSS Working Group

The Working Group organizations comprise: Accounting Professional & Ethical Standards Board (Australia); Chartered Professional Accountants of Canada; the Chinese Institute of Certified Public Accountants; the Independent Regulatory Board for Auditors (South Africa); the UK Financial Reporting Council; and the American Institute of Certified Public Accountants (US).

About UK Financial Reporting Council

The UK Financial Reporting Council regulates auditors, accountants and actuaries, and it sets the UK’s Corporate Governance and Stewardship Codes. The FRC promotes transparency and integrity in business. Its work is aimed at investors and others who rely on company reports, audit and high-quality risk management.

About IESBA

The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA’s mission is to serve the public interest by setting ethics standards, including auditor independence requirements, which seek to raise the bar for ethical conduct and practice for all professional accountants through a robust, globally operable International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code).

This staff publication, jointly released by the Staff of UK Financial Reporting Council (FRC) and the IESBA, highlights ethical and auditing implications arising from government-backed business support programs which have been utilized at unprecedented levels during the COVID-19 pandemic.