Page 1 | Proprietary and Copyrighted Information Structure of the Code Don Thomson, Task Force Chair IESBA Meeting New York, USA April , 2015

Page 2 | Proprietary and Copyrighted Information Enhance understandability –Facilitate compliance and enforcement Improve usability –Facilitate adoption, effective implementation and consistent application Consultation Paper comment period closed February 2015 Initial proposals presented to CAG March 2015 Structure of the Code – 5-A Background

Page 3 | Proprietary and Copyrighted Information Understand input received from CP respondents Agree on approach to address input received Primarily, agree on structure –Comments on wording are welcome and will be considered in the next draft –Headings to be considered in light of structure and wording Structure of the Code – 5-A Objectives

Page 4 | Proprietary and Copyrighted Information Respondents’ Significant Comments on CP

Page 5 | Proprietary and Copyrighted Information Structure of the Code – 5-A Part I A Stakeholders providing input CategoryNumber Regulators and Public Authorities8 National Standards Setters2 IFAC Member Bodies29 Firms7 Other Professional Organizations8 Individuals and Others2 Total (including some collective input)56

Page 6 | Proprietary and Copyrighted Information Widespread support for the project; useful advice Many support the proposed timetable but some favor a longer time-frame due to concerns –risk of inadvertent changes in meaning –also consider EU reforms and translation Structure of the Code – 5-A Part I A Overview of input received

Page 7 | Proprietary and Copyrighted Information Important to address safeguards Responses shared with safeguards TF Co-ordination –Two concurrent EDs in format and language of draft restructured Code (RSC) –120-day comment period –Safeguards TF considering presentation options Structure of the Code – 5-A Part I B Safeguards

Page 8 | Proprietary and Copyrighted Information Emphasize without excessive repetition Purpose provided a reminder of fundamental principles, conceptual framework, threats –Requirement at the beginning of independence Some want more than the purpose paragraphs –More prominent core requirement / objectives Structure of the Code – 5-A Part I C p4 - 6 Fundamental Principles

Page 9 | Proprietary and Copyrighted Information Changes proposed by task force –Scope sets out the subject matter addressed –Core requirement: compliance with fundamental principles, conceptual framework –Related guidance on threats that may exist –Specific requirements: specific to the topic Structure of the Code – 5-A Part I C p4 - 6 Fundamental Principles - Proposals

Page 10 | Proprietary and Copyrighted Information Simplified since CP Balance between –Reducing repetition –Having relevant material together Sub-sections with common themes grouped into sections –Common core requirements and application material grouped –Visible electronically when accessing sub-section material Structure of the Code – 5-A Part I C p6 and App 2 Proposed Structure

Page 11 | Proprietary and Copyrighted Information Parts –A Fundamental Principles and Conceptual Framework, –B PAIB –C PAPP C1 – Application to PAPP C2 – Independence – Audit & Review Engagements C3 – Independence – Other Assurance Engagements Structure of the Code – 5-A Part I C p6 and App 2 Proposed Structure

Page 12 | Proprietary and Copyrighted Information Sections – typically end in 0 –Terms used –Core requirements and related application material –If no sub-section, section includes specific requirements and related application material Sub-sections – typically end 1, 2, 3 … –Specific requirements and related application material Structure of the Code – 5-A Part I C p6 and App 2 Proposed Structure

Page 13 | Proprietary and Copyrighted Information Step-back to determine compliance with fundamental principles Evaluate new information Implicit in exercising professional judgment in applying conceptual framework Core requirement Coordinate response with Safeguards TF Structure of the Code – 5-A Part I C p6 -7 Stepping-back

Page 14 | Proprietary and Copyrighted Information Reinforce integrated, principles-based approach Rebranding more than improving visibility of the Code Some support for independence standards –Maintain connection with fundamental principles and conceptual framework Structure of the Code – 5-A Part I C p7 Rebranding the Code

Page 15 | Proprietary and Copyrighted Information Differing views on “Standards” for principles-based approach –Reinforces requirement to comply with fundamental principles –Detracts from principles-based nature particularly for extant Part A Structure of the Code – 5-A Part I C p8 Rebranding the Code

Page 16 | Proprietary and Copyrighted Information Maintain complete Code more aligned with “standards” –Independence sub-part within PAPP part International Code of Ethics Standards for Professional Accountants Structure of the Code – 5-A Part I C p9 Rebranding the Code – Proposals

Page 17 | Proprietary and Copyrighted Information Support for distinguishing requirements Some advocate further improvement –Locate guidance closer to requirements –Avoid separation that impedes readability –Manage the risk that requirements may be read without reference to guidance No reduction in requirements Structure of the Code – 5-A Part I C p9 Distinguishing Requirements

Page 18 | Proprietary and Copyrighted Information Changes proposed by task force –Guidance adjacent and clearly linked to requirements –Label paragraphs with "R" or "A“ Consider use of bold text Structure of the Code – 5-A Part I C p Distinguishing Requirements

Page 19 | Proprietary and Copyrighted Information Support for –Reducing use of passive voice –Requiring firm policies and procedures –Alignment with ISQC 1 Retain individual as well as firm responsibility Structure of the Code – 5-A Part I C p Responsibility

Page 20 | Proprietary and Copyrighted Information Task force liaising with IAASB ISQC 1 Working Group considering revisions to ISQC 1 ISQC 1 –Requires policies and procedures to enable compliance with the Code –Requires policies and procedures to address breaches –Assigns specific responsibilities for quality within a firm and for monitoring quality control processes Structure of the Code – 5-A Part I C p Responsibility – Liaison with IAASB

Page 21 | Proprietary and Copyrighted Information Widespread support for reversing the order –But a few expressed concern –Few suggested creating separate codes Benefits to reordering –May be less of an issue in an electronic Code Structure of the Code – 5-A Part I C p Reordering Parts B and C

Page 22 | Proprietary and Copyrighted Information Concern about the risk of inadvertent changes in meaning, unintended consequences Task force plans to manage the risk –Side by side mapping table to facilitate comparison –Encourage early stakeholder engagement –Follow due process; plan 120-day ED exposure Structure of the Code – 5-A Part I C p15 Unintended Changes

Page 23 | Proprietary and Copyrighted Information Structure as proposed by the TF in the agenda items –Parts (Parts B & C reordered), sections, sub-sections –Scope, core and specific requirements (with better title) –Numbering and alignment of application material with requirements "Stepping back” referred to the Safeguards TF Responsibility to be deferred and coordinated with IAASB Mapping to help manage risk of unintended changes Outreach to encourage early engagement of stakeholders Structure of the Code Decision summary from yesterday

Page 24 | Proprietary and Copyrighted Information Structure of the Code Distinguishing Requirements Example 1Example 2 R400.1 Requirement A1Guidance paragraph A2Guidance paragraph R400.2Requirement A1Guidance paragraph R400.3Requirement A1Guidance paragraph RRequirement A1Guidance paragraph A2Guidance paragraph RRequirement A1Guidance paragraph RRequirement A1Guidance paragraph

Page 25 | Proprietary and Copyrighted Information Other Matters Raised by Respondents

Page 26 | Proprietary and Copyrighted Information No separate section Mixed views on changing current approach Avoid repetition detrimental to readability TF proposes to maintain current approach Consider referring to “audits and reviews” in jurisdictions where reviews common Structure of the Code – 5-A Part I D p Audit Includes Audit and Review

Page 27 | Proprietary and Copyrighted Information Blue, bold and underline distracting Alternative options suggested TF proposals –Normal electronic highlighting –No highlighting for paper copy Structure of the Code – 5-A Part I D p18 Highlighting Definitions

Page 28 | Proprietary and Copyrighted Information Combined glossary suggested –Definitions –Descriptions TF proposals –A combined glossary at the end of the Code –Fewer “Terms Used” components Structure of the Code – 5-A Part I D p19 Definitions and descriptions

Page 29 | Proprietary and Copyrighted Information Delineating PIE requirements – electronic Code will facilitate navigation Use of language – widespread support Numbering conventions – use of "R" and "A" Structure of the Code– 5-A Part I D p Other Matters

Page 30 | Proprietary and Copyrighted Information Other Developments since CP

Page 31 | Proprietary and Copyrighted Information S.290 “Firm” includes “network firm” Proposal: –Remove dual meaning –Network to be used when relevant to considering relationships or circumstances that may create threat Structure of the Code– 5-A Part I D p Firm Includes Network Firm

Page 32 | Proprietary and Copyrighted Information Post-CP Draft Restructured Code

Page 33 | Proprietary and Copyrighted Information –“Scope” and “Core requirements” replace “Purpose” –“Application material” located adjacent to “Requirements” –“R” and “A” to distinguish requirements and guidance –Realigned grouping of sections –Fewer “Terms Used” paragraphs –Numbering starts at “.1” –“Firm” no longer includes “network firm.” Structure of the Code – 5-A Part I D p20 Overview of changes since CP

Page 34 | Proprietary and Copyrighted Information 2015-June/July– IESBA – draft ED part September – CAG / IESBA– draft ED parts December – IESBA – approve ED 2017-early in the year– approve Code 2018-January – Code effective Forward timeline (tentative) Structure of the Code

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