1. Professional Skepticism and Professional Judgment
Richard Fleck, Task Force Chair
IESBA Meeting
New York
September 19-22, 2017

2. Objectives
To consider the significant issues raised by respondents to ED related Task Force responses
Task Force’s proposed revisions in Agenda Item 7-B
Clean version included in compilation in Agenda Item 2-C

3. Recap of Proposals in ED
New AM to describe linkage b/w FPs and PS in the context of audits, reviews and other assurance engagements
Focus on how compliance with FPs support exercise of PS
Illustrative examples using three FPs with focus on f/s audits only
New AM to emphasize importance of PAs understanding facts and circumstances to exercise professional judgment when applying the CF to comply with FPs

4. Overview of ED Responses
Category of Respondent
Number of Respondents
Regulators and Oversight Authorities 2
National Standard Setters
Public Sector Organizations 1
Firms 9
IFAC Member Bodies 22
Other Professional Organizations 6
Total 42

5. Feedback on ED and Task Force Proposals
Professional Skepticism
Feedback on ED and Task Force Proposals
Support from majority of respondents, some believe that
IESBA should focus on LT PS project
PS guidance not necessary because it states what is implicit in Code
Drafting suggestions provided to clarify the description of linkage and to improve examples
Several revisions made to clarify how each FP example supports PS in a f/s audit

6. Professional Skepticism
Feedback from CAG
General support from CAG
Necessary to explain that AM did not discuss the role of PS in supporting FPs because that would involve extending PS to all PAs
Need to better align Integrity example with “questioning mind” element of PS
Continued interest in understanding scope and planned timing for LT PS project

7. Matter for IESBA Consideration
Professional Skepticism
Matter for IESBA Consideration
IESBA members are asked for views about Task Force’s revised proposals relating to PS

8. Feedback on ED and Task Force Response
Professional Judgment (PJ)
Feedback on ED and Task Force Response
General support, but some mixed views e.g.,
Some suggest elevating to a req’t while others believe AM is unnecessary because it states what is already implicit in Code
Improvements suggested to
Align even more closely to description of PJ in IAASB standards
Avoid using the word “sufficient”
Revisions address many respondents’ suggestions

9. Professional Judgment
Feedback from CAG
General support for proposed revisions and for moving forward
Requests for liaising with IAASB to
Ensure that proposed text relating to PJ in para A1 is not inconsistent with how PJ is characterized in IAASB’s standards
Determine whether proposed text relating to PJ is consistent with, and aligned to new material to emphasize PJ in IAASB’s QC project

10. Matter for IESBA Consideration
Professional Judgment
Matter for IESBA Consideration
IESBA members are asked for views about Task Force’s revised proposals relating to PJ

11. Views about Longer Term PS Initiative
Feedback on ED
Views about Longer Term PS Initiative
No question asked, but some took opportunity to comment
Of those who commented, substantive majority 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

12. Strong interest from CAG in understanding scope and timing of LT
LT PS Initiative
Feedback from CAG
Strong interest from CAG in understanding scope and timing of LT
Continued support for coordination with IAASB and IAESB
Some CAG Representatives and PIOB representative reemphasized view that PS should apply to all PAs
Others continued to caution against unintended consequences for audit and assurance engagements

13. 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
Task Force to further consider feedback about LT initiative

14. Longer Term PS Initiative
Next Steps
PS and PJ guidance
Further refinement of proposed texts in light of Board input
December 2017 approval anticipated
Effective date to be aligned with restructured Code
Longer Term PS Initiative
Outline of draft CP December 2017?
Draft CP March 2018 IEBSA and CAG; IESBA approval June 2018