Review of Part C Helene Agélii, Task Force Chair IESBA Meeting New York, USA December 13, 2016 Objectives of this session: The restructuring of Part C The applicability paragraph Inducements

Proposed Restructuring History Part C Phase 1 – extant format and drafting conventions Restructured drafts presented at earlier IESBA meetings This draft addresses Comments from Sept 2016; and Conforming amendments to Structure and Safeguards In between the September Board meeting and this meeting – a lot of work communication between the Part C TF and the Structure and Safeguards TF Agenda Item 5 B is the result of that Also, received a number of comments from Board members and TFs prior to this meeting. Go through the new main structure issues and the glossary and then we’ll go through the entire 5-B

Proposed Restructuring Key changes: Deletion of: Last example in para. 210.7 A3 - Consulting another party Reference to familiarity threats in para. 240.2 Guidance on consultation and education in para. 240.4 A4 Focus on earlier meetings has been on the examples in s200 – no further changes after the September Board meeting. Any comments on this I recommend that we leave for now. Questions regarding these issues?

Proposed Restructuring Glossary Reclassify as description Clarify that positions are not finite Restructure – areas before positions Do IESBA members agree to revised glossary definition?

Proposed Restructuring Professional Accountant in Business: A professional accountant operating working in areas such areas as commerce, industry, service, the public sector, education, the not for profit sector or in regulatory or professional bodies, who might be that is an employee, contractor, partner, director (executive or non-executive), owner-manager or volunteer AFTER THIS GO THROUGH THE ENTIRE 5-B WITH THE HELP OF SAFEGUARD AND STRUCTURE TF!

Applicability of Part C to PAPPs March 2016: Board agreed Part C applicable to PAPPs and addition of “applicability paragraphs” First read of “applicability paragraphs” June / September 2016: Review of “applicability paragraphs”

Applicability of Part C to PAPPs R120.4 When facing an ethical issue, a professional accountant in public practice shall consider the context within which the issue has occurred. Where the accountant is performing professional activities pursuant to the accountant’s employment or ownership relationship with the firm, there might be requirements and application material guidance in Part 2 that is are also applicable to those circumstances. If so, the accountant shall comply with the relevant provisions.

Applicability of Part C to PAPPs 120.4 A1 For example, where a professional accountant in public practice is placed under faced with pressure by from an engagement partner to perform a task without sufficient skills or training accept a client’s questionable accounting treatment in a specific financial reporting issue in order to retain the client, or with unrealistic deadlines the requirements and application material set out in Section 270 would might be relevant. Still doubts about the example; the TF has provided additional examples.

Applicability of Part C to PAPPs Alternative 1: 120.4 A1 For example, where a professional accountant in public practice is placed under faced with pressure byfrom an engagement partner to approve expenses for a colleague that the accountant believes are inappropriate, perform a task without sufficient skills or training, or with unrealistic deadlines the requirements and application material set out in Section 270 wouldmight be relevant.

Applicability of Part C to PAPPs Alternative 2 120.4 A1 For example, where a professional accountant in public practice is placed under faced with pressure by from a partner to accept a client’s questionable taxation position in order to retain the client, perform a task without sufficient skills or training, or with unrealistic deadlines the requirements and application material set out in Section 270 wouldmight be relevant.

Applicability of Part C to PAPPs IESBA members are asked for views on the proposed revisions to the “applicability paragraphs”

Applicability of Part C to PAPPs Title of Part C “Applicability paragraphs” render current title inconsistent with broadened scope Change title: Might have to change Part 3 Clarify that scope is PAPPs and clients. Solution: Include subheading under the title of both Parts No proposal yet, just highlighting our concern.

Phase 2 – Sec. 250 - Inducements History: Sept 2016 IESBA considered strawman IESBA members generally approved revised structure

Phase 2 – Sec. 250 - Inducements Key changes to strawman: Positioning of guidance on bribery and corruption: Clarify that focus on inducements that might breach FPs Illegal inducements covered by laws and regulations Reminder: understand legal and regulatory provisions

Phase 2 – Sec. 250 - Inducements Definition of bribery & corruption: Difficult to devise global definition Might conflict with local definitions Generic definition could set adverse precedent Could imply Sec. 250 addresses illegal bribery & corruption External definition: Widely accepted definition - Does one exist External references outside guidelines

Phase 2 – Sec. 250 - Inducements Title of revised section 250 Clarify inducement is neutral Additional clarification on what is an inducement Counterparties For PAIB not apparent Could exclude category QUESTIONS SO FAR?

Phase 2 – Sec. 250 - Inducements Intent behind an inducement How an inducement might be perceived Motivation behind an action already in extant Code Addition of factors for assessing the intent RITP test to evaluate perceptions?

Phase 2 – Sec. 250 - Inducements Trivial and inconsequential inducements Adverse intent – cannot accept No adverse intent – can accept QUESTIONS ALSO REMIND THEM THAT THIS WILL HAVE IMPLICATIONS ON S340

Phase 2 – Sec. 250 - Inducements Evaluating and addressing threats: CP requires use of RITP test hence not necessary Recusing is valid action Cultural differences: Principle-based approach intent test and evaluation of threats to FPs

Phase 2 – Sec. 250 - Inducements Immediate or close family members Guidance added Conforming amendments to section 340 The basis for proposals in Sec. 250 also applicable to PAPPs Tailor examples of inducements and threats for PAPPs

The Way Forward Phase 1: Phase 2: December 2016: Approve ED Phase 1 restructured text Phase 2: March 2017: Second read and approval of ED Phase 2