1. Page 1 | Proprietary and Copyrighted Information Part C Jim Gaa, Chair Part C Task Force IESBA Meeting June 30, 2015 New York

2. Page 2 | Proprietary and Copyrighted Information August 2015: TF meeting (3 days) –320, 370 November 2015: TF meeting November/December 2015: Board meeting –1 st read Post-ED (320), Review of ED responses (370) Timeline -- 2015

3. Page 3 | Proprietary and Copyrighted Information March 2016: Board meeting –Approve close-off June 2016: Board meeting –Approve Restructured Phase 1 (320, 370) September 2016: Board meeting –Issues (Phase 2 – 350 and applicability to PAPPs) December 2016: Board meeting –1 st Read (Phase 2) Timeline -- 2016

4. Page 4 | Proprietary and Copyrighted Information Caution when referring to faithful representation of the economics of transactions. Consideration needed on type of financial information being prepared which depends on whether framework is general purpose or special purpose –TF had earlier considered and rejected general special consideration for Special Purpose and General Purpose financial statements Reconsider the proposed deletion of the extant requirement on 320.2 –TF: addressed below in response to comment letter NSS Comments – Phase I Comments

5. Page 5 | Proprietary and Copyrighted Information Differentiating between senior PAIBs and junior PAIBs –TF: this is addressed in 300.5; may consider providing more guidance in sec 320 Applicability of Part C to professional accountants in public practice should have been addressed before Part C is revised –TF: Board decided earlier to defer this issue to Phase II NSS Comments – Phase II Comments

6. Page 6 | Proprietary and Copyrighted Information Overview of Responses to ED Regulators and Public Authorities4 IFAC Member Bodies26 Firms3 National Standard Setters1 Other Professional Organizations6 Individuals & Others2 42

7. Page 7 | Proprietary and Copyrighted Information Title Section 320 Proposed Title: “Presentation of Information” Respondent comments: –Suggest: “Preparation and Presentation of Information” –Align with ISA 200: “preparation of financial statements” TF response: –Change title to “Preparation and Presentation of Information”

8. Page 8 | Proprietary and Copyrighted Information Respondent comments: –Inclusion of “non-financial information” is beyond the PAIB’s expertise –Approval of the information should also be added to the guidance TF: Approval added TF Response: –Scope is appropriate to range of information PAIBs prepare and present Scope

9. Page 9 | Proprietary and Copyrighted Information “Fair and Honest” principle – Para. 320.2 Section 320 TF observations –Current Code: little guidance –ED: provides more guidance Respondent comments: –Clarity over how “fair and honest” connected to five fundamental principles TF: Not a new fundamental principle (in current Code, 320.1) TF: Relates to all five fundamental principles –Alternative - “true and fair” TF: “True and fair” is too narrow in scope

10. Page 10 | Proprietary and Copyrighted Information Respondent comments: –Should focus on obligation of PAIB, not intent – difficulty in determining intent TF: Code is principle-based, provides guidance TF: First sentence of 320.2 states the obligation TF: Intent is enforceable –Deletion of requirement in extant paragraph 320.2 TF: Requirement not deleted –Consider unintentionally misleading information Outside scope of sec. 320; sec. 130 and 330 may be relevant “Fair and Honest” principle – Para. 320.2

11. Page 11 | Proprietary and Copyrighted Information Respondent comments: –Deletion of requirement in extant paragraph 320.2 TF: Requirement not deleted TF: Part C refers only to PAIBs – employees of employing organizations TF: Disagree that financial reporting for external parties is the most common task of PAIBs –Focus on “misleading” and “contractual and regulator outcomes” too specific TF believes this covers the areas of concern –Clarify focus on compliance with the fundamental principles TF: Compliance with fundamental principles is implicit; explicit in Part A (100.5) “Fair and Honest” principle – Para. 320.2

12. Page 12 | Proprietary and Copyrighted Information Respondent comments: –Applicability of a relevant reporting framework TF: 320.2, third bullet addresses this –Outsourcing situations TF: Outsourcing arrangements are included by the definition of PAIB “Fair and Honest” principle – Para. 320.2

13. Page 13 | Proprietary and Copyrighted Information Misuse of Discretion – 320.3 Section 320 TF approach: ED provides enhanced guidance addressing misuse of discretion Respondent comments: –Guidance should cover non-financial information as well as financial information TF: Addressed in 320.1; “financial” deleted from 320.3 –Discretion vs. judgment in choosing between accounting standards TF agrees: Clarification has been made –No control over the discretion being exercised in timing and structuring transactions TF: 320 addresses situations where PAIB has discretion and/or knowledge of intentions of others. 320 does not apply otherwise

14. Page 14 | Proprietary and Copyrighted Information Respondent comments: –Better and more appropriate examples TF: examples have been reconsidered, some changes made –Legitimate difference of opinion – no intention to misuse discretion TF agrees; 320.2 implicitly recognizes “honest” differences of opinion; 320.3 addresses situations in which intention is or may be to violate fundamental principles –Safeguard - document thought process behind decision TF: guidance in 320.9 is sufficient –Specific reference to fundamental principles of integrity and objectivity TF: All fundamental principles are relevant Misuse of Discretion – 320.3

15. Page 15 | Proprietary and Copyrighted Information Respondent comments: –Improved consistency - align with ISA 540 and stronger guidance TF: 320 addresses situations in which information may be intentionally misleading or intended to influence contractual or regulatory outcomes inappropriately, but does not violate a law or regulation. Reference is made to Section 360 Misuse of Discretion – 320.3

16. Page 16 | Proprietary and Copyrighted Information Purpose, Context and Audience – 320.4 Section 320 TF approach: In making judgments about preparing and presenting information, PAIBs need to consider: purpose, context and audience Respondent comments: –Proposed guidance is limited, does not provide sufficiently clear direction where no relevant reporting framework exists TF: Variety of situations makes a few examples not useful –Factors should be incorporated into overarching principles in 320.2 TF agrees and will consider including this in 320.2. 320.4 is intended to focus on situations in which a reporting framework does not exist.

17. Page 17 | Proprietary and Copyrighted Information Respondent comments: –Example provided does not support purpose, context and audience TF agrees; greater focus on judgment has been added Purpose, Context and Audience – 320.4

18. Page 18 | Proprietary and Copyrighted Information Respondent comments: –Need guidance on extent of effort required to ascertain the use of the information TF agrees that PAIBs may have limited information about use of information, and can only act on basis of available information or reasonably obtainable information. 320.2 (together with 330.2) imply that PAIBs are responsible to some degree for the work of others TF does not agree that 320.3 and 320.4 should be guidance rather than requirements TF has clarified that information may have more than one use, context and audience TF has considered whether this responsibility may vary by seniority and if so whether to include it in section 320 in addition to 300.5 Purpose, Context and Audience – 320.4

19. Page 19 | Proprietary and Copyrighted Information Respondent comments: –Requiring estimates, etc. reduces relevance of PAIBs’ judgments; especially important for SMEs TF does not agree. In SME setting, the relevance of judgment may be more important –Extent of “due diligence” regarding uses of information TF agrees: Wording has been added –Judgments of fairness and honesty should take into account context and use of information – more guidance needed TF agrees: Wording has been added TF: Additional guidance about judgments re. context and use not necessary Purpose, Context and Audience – 320.4

20. Page 20 | Proprietary and Copyrighted Information Respondent comments: –Guidance on presentation is needed TF: Presentation would be determined in part on basis of consideration of use, context and audience TF: Where a reporting framework applies, it may provide guidance or requirements about presentation Purpose, Context and Audience – 320.4

21. Page 21 | Proprietary and Copyrighted Information Reliance on the Work of Others – 320.5 Section 320 Current Code: PAIB shall take “reasonable steps” to maintain information for which the PAIB is responsible (320.3) TF approach: extend this requirement to address explicitly reliance on the work of others. Respondents comments: –Consider the competence of individual providing and preparing information TF: This is covered by Sec. 130 and 330

22. Page 22 | Proprietary and Copyrighted Information Respondents comments: –Clarity is needed over “reasonable steps” TF: “Reasonable steps” is used in Code, but usually doesn’t have additional guidance TF: Meaningful guidance is precluded by the variety of concrete situations TF: Will consider this further at next meeting –“Reasonable steps” is vague, “professional judgment” is more appropriate TF agrees: Wording changed to “professional judgment” Reliance on the Work of Others – 320.5

23. Page 23 | Proprietary and Copyrighted Information Respondents comments: –Code may impose a higher standard of behavior on PAIBs than employing organization imposes on PAIBs and non-professional accountants TF agrees, but it is part of being a PAIB –Align guidance with Part B, which has similar guidance TF: Part B does not have a section comparable to section 320 TF: This issue will be addressed in Phase Reliance on the Work of Others – 320.5

24. Page 24 | Proprietary and Copyrighted Information Disassociation from Misleading Information – 320.6 Section 320 TF Approach: Enhanced guidance for sec. 110.2 requirement to “take steps” to be disassociated from misleading information Respondent comments: –More extensive and alternative wording on legal requirements to breach fundamental principle of confidentiality, while noting that legal protection can vary by jurisdiction Reference to confidentiality is contained in 320.7 Whistle blower protection laws generally protect employees only for violations of a law or regulation; such acts are outside the scope of sec. 320 –Reminder of obligations of confidentiality under the fundamental principles Reference to confidentiality is contained in 320.7

25. Page 25 | Proprietary and Copyrighted Information Respondent comments: –Insufficient guidance once a matter has been escalated TF believes guidance in 320.7 is sufficient –SME specific guidance TF: Some of the guidance is helpful to SMEs; some guidance does not apply –Clarify that resigning may not be plausible in certain circumstances Section 110.2 requires that PAIBs disassociate themselves from misleading. Resignation is one of a number of alternative actions to achieve that are described in 320.6-320.8 Disassociation from Misleading Information – 320.6- 320.8

26. Page 26 | Proprietary and Copyrighted Information Respondent comments: –Clarify that resigning does not remove the PAIB from any further obligations The TF agrees, and has incorporated language from the NOCLAR ED Sec. 320 cannot have a higher standard for unethical but legal acts than is in the NOCLAR standard –Emphasize need to keep clear documentation The TF believes that the guidance in 320.9 is sufficient. Disassociation from Misleading Information – 320.6- 320.8

27. Page 27 | Proprietary and Copyrighted Information Matters Relating to Section 320 and 370 Respondent comments: –Negative tone of Proposed Sections 320 and 370 The TF believes that the appropriate tone has been achieved –List of Examples TF: The extent of guidance via examples is an ongoing issue

28. Page 28 | Proprietary and Copyrighted Information Respondent comments: –Tailoring Guidance to the PAIB’s Level of Seniority TF: 300.5 addresses the extra responsibilities that accompany increasing seniority TF: The guidance in section 320 is sufficient TF: This issue is related to the issue of providing additional guidance concerning making judgments and taking reasonable steps The TF will consider these issues further at its next meeting Matters Relating to Section 320 and 370

29. Page 29 | Proprietary and Copyrighted Information Respondent comments: –Clarify that executive management may include PAIBs TF: 300.3 and the definition of PAIB make this clear –Section 320 should clarify that PAIBs should exercise professional skepticism TF: Incorporating this is premature because professional skepticism is being addressed by a joint working group of the IESBA, the IAASB, and the IAESB Matters Relating to Section 320 and 370

30. Page 30 | Proprietary and Copyrighted Information Other Matters Other Matters Raised by Respondents Respondent comments: –Concerns over piecemeal approach to changes to the Code –Part C should be applicable to PAs working within the public sector –Enforceability could be improved if structure was improved to make it less unwieldy

31. The Ethics Board www.ethicsboard.org