Long Association Task Force Marisa Orbea, Task Force Chair IESBA Meeting April 13-15, 2015 New York, USA

Recap – Rotation of KAPs on the Audit of PIEs Long Association Recap – Rotation of KAPs on the Audit of PIEs ED proposal Respondents support? Board’s tentative view at January 2015 meeting 7-yr time-on for all KAPs Most supported No change 5-yr cooling-off for EP Majority did not support No change, but consider package of safeguards 2-yr cooling-off for other KAPs (inc EQCR) 5 yrs off applicable all PIEs 5 yrs off if only 1 yr EP General disagreement TF to reconsider EP becoming EQCR New issue – not in ED TF to consider further

Further consideration of the issues arising from the ED discussed by the Board in January 2015

Length of Cooling-Off Period for EP Long Association Length of Cooling-Off Period for EP ED proposed increase in cooling-off period for EP to 5 years Many agreed 2 years is too short but majority did not support increase to 5 years Majority of Board supported proposals TF asked to consider whether existence of different regulatory safeguards in local jurisdictions could provide an alternative to the Code’s rotation requirements Teleconference with European stakeholder

Length of Cooling-Off Period for EP – Options (Ref Agenda Item 3-B) Long Association Length of Cooling-Off Period for EP – Options (Ref Agenda Item 3-B) Do not provide any exemption to compliance with Code requirements Provide an exemption to allow compliance with local jurisdiction rules instead of 290.150A Reconsider Board’s position on application of the requirements (e.g. apply to listed entities only instead of all PIEs)

Length of Cooling-Off Period for EQCR Long Association Length of Cooling-Off Period for EQCR ED proposed that the cooling-off period for KAPs (inc EQCR) other than the EP remain at 2 years Most respondents supported Some respondents did not support indicating the same cooling- off period should apply to the EQCR as the EP Majority of CAG Representatives supported the EP and EQCR having the same 5-year cooling-off period SMPC and EU CAG Representatives did not support

Length of Cooling-Off Period for EQCR – Options (Ref Agenda Item 3-B) Long Association Length of Cooling-Off Period for EQCR – Options (Ref Agenda Item 3-B) Continue to support the proposal in the ED that only the EP serve a 5-year cooling-off period Apply a 5-year cooling-off period for both the EP and the EQCR Apply the same cooling-off period for the EP and the EQCR, but reconsider the five years

EP for only Part of the 7-year Time-On Period Long Association EP for only Part of the 7-year Time-On Period ED proposed a KAP who served as EP at any time during 7- year period of service should be required to cool-off for 5 years Two-thirds of respondents did not support Board asked TF to reformulate proposal TF recommends that an individual who has acted as EP for either 4 or more years, or for at least 2 of the last 3 years be required to cool-off for 5 years CAG comments not specifically received

KAP Moving Directly to EQCR Role Long Association KAP Moving Directly to EQCR Role A respondent questioned whether an EP should be able move into an EQCR role without any cooling-off Not an issue addressed in ED Board asked TF to further consider TF tentatively concluded if there was a requirement then it should be included in ISQC1 IESBA and IAASB leadership referred the issue to IAASB’s ISQC1 Working Group

The remaining provisions not discussed by the Board in January 2015

Restriction on Activities of KAPs Long Association Restriction on Activities of KAPs ED Proposal Respondents Support? Allowance for limited consultation role for outgoing EP after 2 years On balance, more respondents supported proposal Additional restrictions on activities performed by KAP during cooling-off Evenly balanced views. Some against the proposal as too strict, some support, some consider not strict enough

Other Enhancements and General Provisions Long Association Other Enhancements and General Provisions ED proposal Respondents support? New 290.150C and 290.150D Most supported Concurrence of TCWG Enhancements to 290.148 Application to all on audit team Firm determining time-out 291 corresponding changes

Limited Consultation by the EP Long Association Limited Consultation by the EP ED proposed permitting an EP to undertake a limited consultation role in relation to the audit after 2 years of the 5-year cooling-off Most respondents supported Those opposed noted contradiction with cooling-off requirement and considered “off means off” CAG did not specifically consider TF continues to support but is proposing amendments: Consultation only with engagement team and not client Add proviso that no other equivalent expertise is available

Additional Restrictions on KAP Activities During Cooling-Off Period Long Association Additional Restrictions on KAP Activities During Cooling-Off Period Support from respondents was mixed CAG did not specifically consider TF not recommending change to proposal: Limiting contact during cooling-off is appropriate It is not necessary or practical however for there to be no contact at all with the client

290.150C – Application of the 7-yr Time-on period Long Association 290.150C – Application of the 7-yr Time-on period ED proposed new provision to consider whether KAP should continue in that role even if they have not completed 7 years on Most respondents supported the proposal Those who did not support thought the Code was already clear enough CAG did not consider TF continues to support the proposal

290.150D – Long Association of Audit Team Members other than KAPs ED proposed a “reminder” that consideration be given to threats by long association of members of audit team other than KAPs Most respondents supported the proposal Those who didn’t suggested provision repetitive and unnecessary CAG did not consider TF considering whether the provisions easier to understand and apply if this paragraph is deleted

290.151 and 290.152 – Concurrence with TCWG Long Association 290.151 and 290.152 – Concurrence with TCWG ED proposed that firm should apply 290.151 and 290.152 only with the concurrence of TCWG Most respondents supported Those who did not support suggested not referring to “concurrence” but “informing” or “communicating” CAG did not consider TF continues to support and proposes no change

Enhancement to the General Provisions in 290.148A & B Long Association Enhancement to the General Provisions in 290.148A & B Most respondents supported the proposed enhancements and also made editorial suggestions Those who did not support believed provisions too detailed CAG did not consider TF has considered suggestions made by respondents and proposed various adjustments

Application of the General Provisions to All Individuals on Audit Team Long Association Application of the General Provisions to All Individuals on Audit Team ED proposed general provisions should apply to all individuals on audit team, not just senior personnel More than half of the respondents recognized junior staff posed less risk but supported application to all Those who did not support believed extension unnecessary CAG did not consider TF continues support with additional evaluation factors: Seniority of individual/extent of review of their work/ability to direct others

Section 291/Other Matters/Project Timetable Long Association Section 291/Other Matters/Project Timetable Corresponding adjustments to Section 291 Other Matters Effective Date Suggestion from regulatory respondent that professional skepticism may warrant dedicated section in the Code and be included in future project on audit quality Matter to be addressed in conjunction with IAASB Project timetable depends on Board’s discussion