1. Fees Initiative Chishala Kateka, Working Group Chair IESBA Meeting
Madrid, Spain
March 14–17, 2016

2. Objectives for IESBA Session Agenda Item 5
Approve a Terms of Reference (ToR) for a Working Group (WG) charged with fact finding regarding the initiative on fee-related matters
Agree the scope of, and approach to, a call for academic research on the topic of fees
The IESBA is asked to consider items in Agenda 5-A and 5-B and approve a) The ToRs and b) The scope, approach to the call for academic research.

3. WG Objectives Agenda Item 5-A Section B
To identify whether there is a relationship between fees and threats to auditor independence and to the fundamental principles
Are there reasonable perceptions that such threats exist?
Is need for further enhancements or clarifications to the Code?
Report findings and recommendations to the IESBA
IESBA to determine whether to pursue a project on the topic of fees and if so, the scope and focus of such a project
Two amendments that have been made to this objective
Reference to Auditor Independence. This is because Auditor Independence is not one of the fundamental principles and hence the need to be mentioned specifically.
The need to recognize that ‘reasonable perceptions’ that threats to Independence and fundamental principles, do exist.
The W/G believe that the inclusion of these two amendments address concerns such as Marisa’s and others raised by the Board at the last Board meeting.

4. WG Objectives – Areas of Focus Agenda Item 5-A Section B
Level of audit fees for particular audit engagements
Relative size of fees (fee dependency)
Are there self-interest or intimidation threats created as a result of the significance of the client to the partner, office or the firm?
To what extent is partner(s) remuneration dependent upon fees from a particular client?
Ratio of non-audit services fees to audit fees paid by an audit client
Threats to the fundamental principle of Professional Competence and Due Care

5. Matter for IESBA Consideration
IESBA members are asked for their views about the WG objectives, including the planned areas of focus in Agenda Item 5-A, Section B

6. Planned Approach Agenda Item 5-B Section C
Understand the nature and extent of relevant fee-specific rules and regulations at jurisdiction levels, with a focus on G20 countries
Analyze ethical rules and regulations and determining whether there are gaps in the IESBA Code with respect to the fee provisions
Obtain relevant empirical evidence for each area of focus through
State of the art summary of academic research publicly available to date
Consider various stakeholder perspectives (firms and TCWG)
Determine whether there is a need for more in-depth academic research
State of the art summary of academic research is typically at a higher level
Could be 6-8 pages
Can be done in 6-8 months
Could involve a presentation to the IESBA and a detailed proposal that scopes and provides the pricing for a more detailed academic synthesis
Based on ii) above depending on findings, the WG and IESBA will consider whether there is need to commission
A more detailed synthesis of academic research
Typically pages and involves in-depth analysis of existing research
Work is typically performed in month period
Original academic research.
Custom targeted research
Time frame is dependent on the researcher and the topic (requires at least 24 months)
Stakeholder perspectives will be obtained through:
An analysis of regulatory inspection findings and other publicly available and relevant info (expected to be covered as part of academic summary)
An outreach to key stakeholders, particularly audit firms and TCWG to obtain their perspectives on the topic.
Outreach to firms will include asking them whether they have established and implemented specific processes to address ‘fee specific’ process to address actual or perceived threats.
I will ask the Board regarding their comments on this.

7. Matter for IESBA Consideration
IESBA members are asked for their views about the WG’s planned approach for fact-finding as described in Agenda Item 5-A, Section C

8. Proposed Timeline and Deliverables Agenda Item 5-A Section F
Today
Planned IESBA approval of ToR
Agree to the scope of, and approach for academic research
September 2016
Present results of fact-finding
WG’s G20 study
Summary of academic research
Outreach findings
Determine whether to undertake further academic research
December 2017
Consider outputs aimed at further understanding specific issues
Present discussion paper with the WG’s final proposals
Ongoing outreach to key stakeholders, in particular firms and TCWG
Comments on the timeline please.

9. Matter for IESBA Consideration
IESBA members are asked for their views about the planned timeline and deliverables (See Agenda Item 5-A, Section F)