IESBA Proposes Revisions to Independence Standards

The International Ethics Standards Board for Accountants® (IESBA®) is proposing significant revisions to its independence standards through the publication of two exposure drafts. The exposure drafts are Proposed Revisions to the Non-Assurance Services Provisions of the Code (Non-Assurance ED), and Proposed Revisions to the Fee-Related Provisions of the Code (Fee-related ED). The IESBA intends the proposed standards, if adopted as proposed, to strengthen the non-assurance services and the fee-related independence provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Ethics Code). The comment deadline is May 4, 2020.

Non-Assurance Services

Key amendments in the Non-Assurance ED include:

  • Prohibition on providing non-assurance services to an audit client that is a public interest entity if a self-review threat to independence will be created;
  • Further tightening of the circumstances in which materiality may be considered in determining the permissibility of a non-assurance service;
  • Strengthened provisions regarding auditor communication with those charged with governance, including, for public interest entities, a requirement for non-assurance services pre-approval by those charged with governance; and
  • Stricter requirements regarding the provision of some non-assurance services, including certain tax and corporate finance advice.

The Non-Assurance ED also includes enhanced guidance to assist firms in evaluating the level of threats to independence when providing non-assurance services to audit clients.

Fee-Related Provisions

Key amendments in the Fee-related ED include:

  • A prohibition on firms allowing the audit fee to be influenced by the provision of services other than audit to the audit client;
  • In the case of public interest entities, a requirement to cease to act as auditor if fee dependency on the audit client continues beyond a specified period; and
  • Communication of fee-related information to those charged with governance and to the public to assist their judgments about auditor independence.

The Fee-related ED also includes enhanced guidance on identifying, evaluating and addressing threats to independence in relation to other fee-related matters, including the proportion of fees for services other than audit to the audit fee.

In developing these proposals, the IESBA has worked in cooperation with the International Auditing and Assurance Standards Board (IAASB) within the established coordination framework of the two Boards. The IESBA will continue its engagement with the IAASB in finalizing the proposals.

In addition, the IESBA will host webinars during the comment period to provide an overview of the Non-Assurance and Fee-related EDs.

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