The International Ethics Standards Board for Accountants (IESBA) today released Revisions to Part 4B of the Code to Reflect Terms and Concepts Used in ISAE 3000 (Revised). Part 4B of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) comprises the independence standards for assurance engagements other than audit and review engagements.

The revision fulfills a commitment the IESBA announced in its Strategy and Work Plan, 2019-2023 to review and change Part 4B of the Code to make the part’s provisions  consistent with the revised assurance terms and concepts in the International Auditing and Assurance Standards Board’s (IAASB’s) International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information.

The main revisions, developed in coordination with the IAASB, include:

• Changes in key terminology, including a revised definition of the term “assurance client”;
• Amendments to certain independence requirements in light of the revised assurance client definition;
• Greater clarity as to the parties to an assurance engagement and their roles and responsibilities, and the related independence requirements that apply; and
• A clearer distinction between the types of assurance engagement covered in Parts 4A (addressing independence for audit and review engagements) and 4B of the Code.

“It is in the public interest that Part 4B of the Code is consistent with ISAE 3000 (Revised), clear on the applicable independence requirements and, most importantly, sufficiently robust and practicable for assurance practitioners in the field,” said IESBA Chairman Dr. Stavros Thomadakis. “The successful completion of this project reflects the IESBA’s strong commitment towards enhanced communication and coordination with the IAASB, to better serve the needs of stakeholders in today’s global economy.”

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).

Part 4B of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) comprises the independence standards for assurance engagements other than audit and review engagements.

The IPSASB held its fourth meeting of 2019 from December 10-13, 2019 in Abu Dhabi, United Arab Emirates. The Department of Finance of Abu Dhabi generously hosted the meeting.

The Public Interest Committee, the body that oversees the standard setting activities of the IPSASB, has launched a public survey on IPSASB governance arrangements. All interested stakeholders are encouraged to participate in this global consultation by February 24, 2020.

Revenue with Performance Obligations
The IPSASB approved ED 70, Revenue with Performance Obligations, and agreed on an exposure period of six months from the date of publication. ED 70 is based on IFRS 15, Revenue from Contracts with Customers, and has been expanded to apply to binding arrangements which are not necessarily contractual. ED 70 also has a broadened scope with a greater emphasis on the transfer of goods or services to third-party beneficiaries.

This ED, together with EDs 71and 72, is expected to be published at the end of February 2020. EDs 71 and 72 will have the same exposure period.

Please register on the IPSASB website to ensure that you receive updates when this document and EDs 71 and 72 (see below) are published: https://www.ifac.org/user/register

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Revenue Without Performance Obligations
The IPSASB approved ED 71, Revenue without Performance Obligations. ED 71 updates IPSAS 23, Revenue from Non-Exchange Transactions (Taxes and Transfers). It addresses revenue that arises from binding arrangements with present obligations which are not performance obligations, and revenue not related to binding arrangements. 

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Transfer Expenses
The IPSASB approved ED 72, Transfer Expenses. Transfer expenses are transactions where an entity transfers resources to another party without directly receiving anything in return.

The accounting for transfer expenses with performance obligations mirrors the accounting for revenue with performance obligations in ED 70. ED 72 does not mirror ED 71, however, as where there are no performance obligations it requires an expense to be recognized immediately. ED 72 does not address taxation.
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Leases
The IPSASB revisited the objective and scope of the Leases project and evaluated options for moving the project forward against specified criteria. The IPSASB will continue its work on refining the criteria to analyze options and intends to decide on the approach in March 2020.

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Improvements
The IPSASB discussed the responses to ED 68, Improvements to IPSAS, 2019. The IPSASB approved the amendments proposed in ED 68 with no significant changes. The IPSASB also agreed to an effective date of January 1, 2021 for these improvements, except for improvements related to IPSAS 41, Financial Instruments, which will have an effective date of January 1, 2022 to align with the effective date of that standard.

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Measurement
The IPSASB carried out a preliminary review of responses to the Consultation Paper, Measurement.  A number of the issues were raised by respondents related to fair value, including:

• The meaning of fair value in existing IPSAS;
• The interaction of fair value with market value;
• The appropriateness of highest and best use in the public sector; and
• Inconsistency between replacement cost as a measurement basis and a measurement technique to estimate fair value.

The IPSASB also discussed its preliminary view to expense borrowing costs, rather than capitalizing them, noting respondents were split in their views. The IPSASB instructed staff to bring a recommendation forward for its consideration in March 2020.
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Infrastructure Assets
The IPSASB approved the flowchart  for determining whether additional guidance is needed and, if so, whether it should be authoritative or non-authoritative. The flowchart was tested by analyzing issues related to the separation of land under or over infrastructure assets, the control of such land and valuation. The IPSASB instructed staff to revise the draft additional guidance, so that it addresses all the financial reporting issues impacting the accounting for land under or over infrastructure assets. The revised draft guidance will be considered at the March 2020 meeting. 

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Meeting Podcast
A podcast highlighting key points of the December 2019 meeting is now available here.

Next Meeting
The next meeting of the IPSASB will be in New York from March 10-13, 2020. For more information, or to register as an observer, visit the IPSASB website.

Understanding the cost of audit is crucial to the ongoing global discussions about audit quality. The purpose of this analysis is to quantify audit fees as a percentage of corporate revenue in various North American and European jurisdiction from 2013 to 2018. This report breaks down audit fee data by population, jurisdiction, company size, market and industry, drawing from data provided by research firm Audit Analytics.

Highlights from the IPSASB CAG December 2019 meeting in Abu Dhabi, United Arab Emirates: 

00:11     Welcome and introduction: John Stanford, IPSASB Technical Director
01:05     Chair’s summary of the IPSASB CAG meeting: Thomas Müller-Marqués Berger, IPSASB CAG Chair
14:12     Closing remarks: John Stanford, IPSASB Technical Director

Highlights from the IPSASB December 2019 meeting in Abu Dhabi, United Arab Emirates:

00:10     Welcome and introduction: John Stanford, Technical Director
01:02     Chair’s meeting overview: Ian Carruthers, IPSASB Chair
03:02     Revenue with Performance Obligations: Edwin Ng, Principal
04:04     Revenue without Performance Obligations: Joanna Spencer, Manager
04:56     Transfer Expenses: Paul Mason, Senior Advisor
06:06     Leases: João Carlos Fonseca, Principal
06:52     Measurement: Dave Warren, Principal
09:46     Chair’s concluding comments: Ian Carruthers, IPSASB Chair
12:54     Closing remarks: John Stanford, Technical Director

The International Auditing and Assurance Standards Board (IAASB) today released International Standard on Auditing (ISA) 315 (Revised 2019), its revised standard for identifying and assessing risks of material misstatement. 

ISA 315 (Revised 2019) is an important part of the IAASB’s efforts to improve audit quality globally. In finalizing the changes, the IAASB focused on the understandability, complexity and length of the standard, and made enhancements and clarifications to encourage a more consistent and robust risk assessment, which forms the foundation of the auditor’s efforts to gather sufficient appropriate audit evidence. The revisions also modernize the standard to keep up with the evolving environment in which businesses operate, in particular in relation to technology, as well as a focus on why procedures are required.

“This revised standard is the second significant standard to be completed in our efforts to enhance audit quality. ISA 315 (Revised 2019) is foundational to the audit – the core of the audit is undertaking work to obtain sufficient appropriate audit evidence to address the risks of material misstatement, and the changes made to ISA 315 (Revised 2019) recognize the importance of a robust and consistent risk assessment in driving an appropriate and effective response to those risks,” says Tom Seidenstein, IAASB Chair. 

ISA 315 (Revised 2019) becomes effective for financial statement audits for periods beginning on or after December 15, 2021.

Due to the foundational nature of this revised standard, the IAASB will undertake activities to support effective and consistent application of the changes. An implementation plan has been developed which lays out the planned activities and estimated timing.

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). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.