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Page 1 | Proprietary and Copyrighted Information NOCLAR Caroline Gardner, Task Force Chair IESBA Meeting London January 12-14, 2015.

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Presentation on theme: "Page 1 | Proprietary and Copyrighted Information NOCLAR Caroline Gardner, Task Force Chair IESBA Meeting London January 12-14, 2015."— Presentation transcript:

1 Page 1 | Proprietary and Copyrighted Information NOCLAR Caroline Gardner, Task Force Chair IESBA Meeting London January 12-14, 2015

2 Page 2 | Proprietary and Copyrighted Information To create framework to guide professional accountants (PAs) in deciding how best to serve public interest when they come across NOCLAR/suspected NOCLAR Recap – Key Project Objective

3 Page 3 | Proprietary and Copyrighted Information Support for direction re proposed response framework –Objectives for all categories of PAs  Comply with fundamental principles re integrity and professional behavior  Seek to have management/TCWG rectify, remediate or mitigate consequences; or deter commission of NOCLAR  Take any further action needed to serve public interest –Scope aligned with ISA 250 scope Tentative Board Decisions – October 2014

4 Page 4 | Proprietary and Copyrighted Information Support for direction re proposed response framework –Differential approach re auditors, PAs in public practice other than auditors, senior PAIBs, other PAIBs –Thresholds of substantial harm and credible evidence for:  Auditors to prompt management/TCWG to take appropriate actions  Senior PAIBs to take such actions  Also for auditors and senior PAIBs to determine need for any further action to serve public interest Tentative Board Decisions – October 2014

5 Page 5 | Proprietary and Copyrighted Information October 2014 IFIAR Standards Coordination Working Group (SCWG) Meeting

6 Page 6 | Proprietary and Copyrighted Information Proposed Sections 225 and 360

7 Page 7 | Proprietary and Copyrighted Information Scope of Proposed Section 225 Refinements to articulation of scope in response to CAG –Deletion of examples of L&R attached to description of the two categories of L&R from ISA 250 –Clearer examples at beginning of section re nature of NOCLAR intended to be addressed –Expanded guidance re second category of L&R covered –Articulation of interrelationship between scope of the section and ISA 250 scope

8 Page 8 | Proprietary and Copyrighted Information “Clearly Inconsequential” Threshold A concern at October board meeting re interaction with thresholds implicit in second category of L&R Rationale for why threshold necessary Proposed changes to address concern –Delink threshold from requirement to seek an understanding –Make clear prerequisite is to seek understanding of nature of the act –Scope out clearly inconsequential matters upfront

9 Page 9 | Proprietary and Copyrighted Information Third Party Test Some concerns at October board meeting re is test in the right place? Task Force rationale –Test not about whether or not to disclose to appropriate authority –It is about need for and extent of any further action to serve public interest –Ensures objective and rigorous assessment

10 Page 10 | Proprietary and Copyrighted Information PAPPs Other Than Auditors Proposed requirement for PA to consider informing audit engagement partner where client is an audit client Is further guidance needed? Task Force rationale –Potential complexity in attempting to address all possible circumstances –General guidance on factors to consider provided

11 Page 11 | Proprietary and Copyrighted Information Other Notable Proposals Guidance added re “substantial harm” and “credible evidence” Requirement to understand L&R governing responding to NOCLAR Making clear “public interest” not capable of general definition Recognizing possible constraints on further action in some jurisdictions, and that withdrawal may be only possible action Guidance to make clear forensic engagements and engagements involving legally sensitive matters are outside scope

12 Page 12 | Proprietary and Copyrighted Information Proposed Section 360 Changes generally correspond to changes in proposed Section 225

13 Page 13 | Proprietary and Copyrighted Information Draft Rationale for Proposed Framework

14 Page 14 | Proprietary and Copyrighted Information Strengths of Proposed Framework A more holistic and balanced model Clearer scoping and threshold for action A more proportionate approach A new emphasis on tone at the top within entity

15 Page 15 | Proprietary and Copyrighted Information Strengths of Proposed Framework Stimulating increased reporting under law or regulation An expanded auditor’s toolkit Rigorous consideration of further action to serve public interest Greater emphasis on guidance to assist PAs in responding appropriately in public interest

16 Page 16 | Proprietary and Copyrighted Information Rationale for Not Mandating Disclosure to Appropriate Authority Protection generally linked to a legal or regulatory reporting requirement Potentially severe practical consequences Potential for unintended consequences for public interest

17 Page 17 | Proprietary and Copyrighted Information Illustrative Example Views on worked example?

18 Page 18 | Proprietary and Copyrighted Information Next Steps – First Half 2015 TimingAction FebruaryDiscussion with IOSCO Committee 1 MarchDiscussion with CAG MarchDiscussion with IAASB (?) AprilApproval of re-ED MayDiscussion with NSS

19 The Ethics Board


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