Professional Skepticism Richard Fleck, Working Group Chair IESBA, New York March 12-14, 2018
Agenda Our report to IESBA – September 2017 Longer Term PS Initiative Where We Are and Where We Are Going Release Consultation Paper Roundtables Next Steps
Views about Longer Term PS Initiative No question asked, but some took opportunity to comment Substantive majority of those who commented believed that PS should apply to all PAs Exercise of PS is important for tax and consulting engagements; Code should explain role of PS for those NAS Code should acknowledge that PS enables compliance with FPs Coordination among IAASB, IESBA and IESBA Approach taken by IAESB seems appropriate for the Code Some cautioned against potential unintended consequences
Longer Term PS Initiative June 2017 – IESBA considered Task Force proposals for progressing a longer term initiative which involve Analysis of underlying concerns that lead to stakeholder calls for greater exercise of PS Exploration of how to address issues at their root causes, mindful of need to avoid unintended consequence and meet public expectations IESBA to consider draft PS consultation in March 2018 Task Force to further consider feedback about LT initiative
Professional Skepticism Consultation paper anticipated Q2 2018 Will explore key questions: Behavioral characteristics comprised in PS? Should all PAs exercise these characteristics? Should the Code be further developed? Aim includes supporting and reinforcing effective exercise of PS in audit and assurance context Close coordination with IAASB and IAESB
Meeting Public Expectations Professional Skepticism Meeting Public Expectations Preliminary behavioral characteristics identified by WG Obtaining and understanding information necessary for reliable judgments Making informed challenges of views developed by others Being sensitive to the integrity of information Withholding judgment pending thoughtful consideration of all known and available information Being alert to potential bias or other impediments to professional judgment Ability and willingness to stand ground when facing pressure to do otherwise Professional Skepticism Understand information Informed challenges Information integrity Withhold judgment Potential bias Stand your ground
Options to consider All PAs to exercise PS as defined by the ISAs Redefine PS that is appropriate for all types of professional activity Develop another term and definition Add application material to the Code Add requirements and/or application material to address bias, preconception, pressure and other impediments
Roundtables Three roundtables planned June 11 Washington, DC June 15 Paris July 12 Tokyo
Views from CAG Meeting – March 5 Support the approach for the long-term initiative Support for proposed outreach and round tables Support for emphasis on behavior of all PAs Outcome should not adversely affect audit and assurance context Suggestions that CP should set out a preferred approach Eventual approach should link to FPs Need to consider unintended consequences Importance of application material – “One size won’t fit all” Collaborate with other SSBs, including re: educating the public
Comments from IAASB and IAESB PS chairs Broad support for the approach we are taking Appreciate the cooperation among the three boards IAASB keen to participate in the roundtables IAASB will consider a proposed additional paragraph(s) and question focused on IAASB definition of PS and whether it needs development Also received some drafting comments from IAASB Conference call among the three PS chairs scheduled in late March
Working Group meets again in early April Way Forward Anticipate additional feedback from IAASB after their meeting in Amsterdam this week Working Group meets again in early April If the Board is broadly supportive of the CP… The WG will address comments at its April meeting Send a revised draft to the Board in mid-late April Ask for negative clearance Release the paper in early May