Page 1 | Confidential and Proprietary Information Review of Part C Jim Gaa, Chair, Part C Task Force IESBA CAG Meeting New York, USA September 14, 2015

Page 2 | Confidential and Proprietary Information March 2013: Project Proposal approved by IESBA –Phase I addresses Sections 300, 310, 320, 330 and 340 and topics of Pressure and Faithful Representation –Phase II addresses Section 350 (Inducements) and the applicability of Part C to PAPPs Sept 2013: CAG reviewed s370 March 2014: CAG reviewed s320 July 2014: IESBA reviewed s320 & s370 Background

Page 3 | Confidential and Proprietary Information Phase I ED issued - Nov 2014 –Deadline for comment - Apr 2015 June/July 2015 meeting - IESBA considered significant comments on proposed Section 320 and number of other matters raised Sept 2015 – IESBA to consider significant comments on proposed Section 370 Background

Page 4 | Confidential and Proprietary Information Goal: present final text at the Nov/Dec 2015 meeting –Final approval under current structure and drafting conventions Jan 2016: TF to begin Phase II (issues) First half of 2016: IESBA to approve close-off Phase I document (restructured and redrafted under proposed new structure and drafting conventions) Future Actions

Page 5 | Confidential and Proprietary Information June/July 2015 IESBA Meeting –Significant comments relating to: Proposed Revised Section 320 Matters Common to proposed Sections 320 and 370 Key Issues

Page 6 | Confidential and Proprietary Information Code requires PAIBs to prepare information “fairly and honestly” Little guidance on the meaning of this principle ED proposed guidance to better understand and adhere to the spirit of the principle Key Issues “F AIR And H ONEST ” P RINCIPLE (320.2, 320.3)

Page 7 | Confidential and Proprietary Information Majority of respondents were supportive of the proposals Main concern: clarity on how “fair and honest” linked to five fundamental principles To avoid confusion, TF proposes to delete “fair and honest”. Focus guidance on compliance with fundamental principles Key Issues “F AIR And H ONEST ” P RINCIPLE (320.2, 320.3)

Page 8 | Confidential and Proprietary Information ED: Enhanced guidance on misuse of discretion in preparing or presenting financial information General support from IESBA participants. Clarification of certain examples and changes to the proposed wording Key Issues M ISUSE O F D ISCRETION (320.2, 320.3)

Page 9 | Confidential and Proprietary Information ED: Guidance on preparing or presenting information that does not have to comply with a relevant reporting framework Emphasis: purpose of and context for information, and audience Many respondents supportive. Unclear guidance addresses instances where compliance is not necessary Editorial suggestions made and need for additional guidance on how user is made aware of purpose, context and audience Key Issues I NFORMATION P REPARED IN A BSENCE OF R EPORTING F RAMEWORK (320.4)

Page 10 | Confidential and Proprietary Information Code requires PAIBs to take “reasonable steps” to maintain information in appropriate manner ED proposed that PAIBs take “reasonable steps”, when relying on work of others, to ensure they can fulfill Fundamental Principles Many respondents were supportive of the proposal. Some suggested clarity on what is “reasonable steps” along with examples of these steps Key Issues R EASONABLE S TEPS (320.5)

Page 11 | Confidential and Proprietary Information TF proposed “reasonable steps” be replaced with “professional judgment” IESBA members were generally against this change. Consideration could be given to taking a middle ground in terms of exercising professional judgment to determine what steps to take TF: Proposes to revise wording to incorporate the middle ground suggestion and also include a number of factors to consider Key Issues R EASONABLE S TEPS (320.5)

Page 12 | Confidential and Proprietary Information Current Code: No guidance according to seniority, especially where the PAIB has reason to believe information is misleading –Except: includes a higher expectation for more senior PAIBs – but no strict distinction between senior and other PAIBs June/July 2015 IESBA meeting: –IESBA member: NOCLAR (proposed section 360) differentiates “senior” and “other” PAIBs - same approach could be used –IESBA member: distinction is appropriate for NOCLAR not suitable for other sections of Part C Key Issues D IFFERENTIATING B ETWEEN “S ENIOR ” PAIB S AND “O THER ” PAIB S

Page 13 | Confidential and Proprietary Information NOCLAR treats senior PAIBs differently from other PAIBs TF view: retain revised guidance in (Agenda Item C-7): –NOCLAR concerns situations with a significant public interest element –PAIB has identified a potential NOCLAR by another party but is not directly involved –Variety of organizational structures and the place of PAIBs within them, differentiating between “senior” and “other” PAIBs in other sections of Part C would involve great complexity and may generate the “wrong” answers for particular situations. Key Issues D IFFERENTIATING B ETWEEN “S ENIOR ” PAIB S AND “O THER ” PAIB S

Page 14 | Confidential and Proprietary Information September 2015 IESBA meeting - preliminary proposals in response to comments on the ED relating to: –Proposed Revised Section 370 –Matters Common to Sections 320 and 370 Key Issues S IGNIFICANT C OMMENTS O N S ECTION 370

Page 15 | Confidential and Proprietary Information The ED proposed to establish two new principles in Section 370: –PAIBs shall not allow pressure to result in breach of fundamental principles –PAIBs shall not place such pressure on others TF: In response to comments: –Added introductory paragraph to provide context to section –Clarified guidance relating to not placing pressure on others that would result in a breach of the fundamental principles Key Issues O VERARCHING R EQUIREMENTS (370.1, 370.2, 370.3)

Page 16 | Confidential and Proprietary Information ED: Proposed specific description of pressure that could result in a breach of the fundamental principles and number of examples and guidance The majority of respondents agreed with the examples provided TF: In response to comments: –Clarified and changed some examples –Clarified wording –Moved cross-references (370.9) to the examples (370.4) Key Issues T YPES OF P RESSURE (370.4)

Page 17 | Confidential and Proprietary Information ED: focuses on pressure to breach fundamental principles including relevance of routine pressure within a work place environment Respondents’ views were mixed on the guidance TF: Distinction is not beneficial and should be deleted Revised guidance - factors to determine if pressure could result in breach of fundamental principles & how to deal with such pressure Key Issues P RESSURE TO B REACH VS. R OUTINE P RESSURE (370.3)

Page 18 | Confidential and Proprietary Information ED: proposed actions that a PAIB may consider if pressure would lead to breach of fundamental principles Respondents generally agreed with guidance. Many suggestions on how clarity and structure of the suggested wording could be improved The TF made enhancements to the proposed provisions Key Issues R ESPONDING TO P RESSURE TO B REACH THE F UNDAMENTAL P RINCIPLES (370.6, 370.7)

Page 19 | Confidential and Proprietary Information Regulatory respondent expressed a view that proposed Section 370 needs to define “pressure” TF: little benefit to this. –Consistent with other sections in Part C: Provide examples of ways in which inappropriate pressure may arise, rather than a definition Key Issues D EFINITION OF P RESSURE

The Ethics Board