Professional Skepticism Richard Fleck, Working Group Chair IESBA CAG, New York March 5, 2018

Our report to IESBA CAG – September 2017 Agenda Our report to IESBA CAG – 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 From the September 2017 Report to IESBA CAG 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 From the September 2017 Report to IESBA CAG 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

The Way Forward - Options 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/Brussels July 12 Tokyo or Singapore