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Page 1 Review of Part C of the Code Jim Gaa, Task Force Chair IESBA Meeting June 10-12, 2013 New York, USA.

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Presentation on theme: "Page 1 Review of Part C of the Code Jim Gaa, Task Force Chair IESBA Meeting June 10-12, 2013 New York, USA."— Presentation transcript:

1 Page 1 Review of Part C of the Code Jim Gaa, Task Force Chair IESBA Meeting June 10-12, 2013 New York, USA

2 Page 2 “A professional accountant employed or engaged in an executive or non-executive capacity in such areas as commerce, industry, service, the public sector, education, the not for profit sector, regulatory bodies or professional bodies, or a professional accountant contracted by such entities.” In addition, “professional accountants in public practice may also find Part C relevant to their particular circumstances.” Definition of PAIB

3 Page 3 PAPPs are already included in Part C –Employed or engaged in commerce and service Including partners, directors and owner managers (300.3) –Contracted by “such” entities –Part C may be relevant to PAPPs Part B focuses solely on client relationships PAPPs are employees and/or partners of firms –i.e., firms are “employing organizations” (e.g., 300.3) Application of Part C to all Professional Accountants

4 Page 4 Problems with current Code: –Presumption that Part C is specifically for and about PAs not in public practice –No explanation or guidance about how Part C applies to PAPPs –The term “professional accountant in business” is confusing Application to public practice not recognized Even as usually understood, it’s not confined to professional accountants working in business entities Two types: PAs in public practice and PAs not in public practice Application of Part C to all Professional Accountants

5 Page 5 Four options to address how Part C is relevant to PAPPs: Option 2: Reproduce most or all of the current and future Part C in Part B: –Responding to pressure within organization –Information, including consulting reports, to be prepared “fairly and honestly” –Not to use information for personal gain –Conflict of interest – relating to non-clients –Making, receiving offers – relating to non-clients –Reporting suspected illegal acts – relating to non-clients Application of Part C to all Professional Accountants

6 Page 6 Option 3: Defer decision until after Structure WG Option 4 (TF minority view) Part C is for PAs not in public practice Provide additional paragraphs in Part B reminding PAPPs when Part C may be relevant –More detail than the current Code Application of Part C to all Professional Accountants

7 Page 7 Option 1 (TF majority view): Part C applies to all Professional Accountants Remove all references to “PAIB” from Code Rename Parts B and C Add examples in Part C to cover public practice, public sector etc Application of Part C to all Professional Accountants

8 Page 8 Arguments for option 4 – Practicality –It would have less impact on codes of professional bodies –It makes Part C appear specifically relevant to professional accountants NOT in public practice Application of Part C to all Professional Accountants

9 Page 9 Arguments for option 1 –It better reflects: The definition of professional accountant in business That all professional accountants encounter Part C issues That, except for client issues, all professional accountants face the same kind of issues, threats and safeguards –It cleans up the terminology – the term PAIB, as defined in the Code, is not an accurate description of those not in public practice –It is simpler: Part B is about client issues, Part C is about non-client issues Application of Part C to all Professional Accountants

10 Page 10 Does the IESBA agree with the Task Force’s tentative conclusions that: –The definition of a PAIB already includes PAPPs; –Part B provides additional guidance to PAPPs in relation to their clients; and –Part C provides additional guidance for issues faced by all professional accountants? Application of Part C to all Professional Accountants

11 Page 11 Does the IESBA agree with the Task Force’s tentative conclusions that: –Option 1 is the preferred option? –That Parts B and C be renamed accordingly? Does the IESBA have any other views on the Task Force’s comments on the Scope of Part C? Application of Part C to all Professional Accountants

12 Page 12 Many members of member bodies (Professional Accountants) do not work in accounting related areas e.g. CEOs, Chairs, line managers. Does the IESBA agree with the TF that Part A applies to all professional accountants even when working outside the accountancy profession but Part C only applies when working within the accountancy profession as specified in Part C? Application of Part C to all Professional Accountants

13 Page 13 Structure of revised Section 340 should follow the five stage process of Section 310 (Conflicts): –Description –Examples –Identification of threats –Evaluation of threats –Application of safeguards Section 340: Pressure

14 Page 14 Description – factors to consider: –Pressure can be linked to any fundamental principle –Pressure is a circumstance that may create any of the five categories of threat –Pressure per se is not necessarily inappropriate. Determination if it is inappropriate to be considered at the evaluation stage. –Inappropriate pressure is pressure to engage in unethical or illegal acts –Include pressure downwards by superiors who are PAs Section 340: Pressure

15 Page 15 Examples: –Include public practice, public sector, not for profit –Include pressure to and from non-accountants –Pressure can also be intangible, e.g., analyst expectations, peer pressure and organization culture Section 340: Pressure

16 Page 16 Task Force will develop: –Guidance on identification of threats –Guidance on evaluating seriousness of pressure, i.e., when pressure from financial incentives, culture, bullying, targets etc. is inappropriate and creates a threat to engage in unethical or illegal actions –Examples of safeguards, ideally related to the examples of pressure provided within this Section Section 340: Pressure

17 Page 17 Does the IESBA agree with the Task Force that: –Because pressure is subjective, a threats and safeguards approach is more appropriate than a bright line/requirement/prohibition approach? –The structure of the section addressing pressure should follow the five stage process of a description, examples, identification, evaluation and safeguards? Does the IESBA have any views on the Task Force’s tentative conclusions related to description, examples, identification, evaluation and safeguards? Section 340: Pressure

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