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

2. 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

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

4. 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

5. 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 A
Reconsider Board’s position on application of the requirements (e.g. apply to listed entities only instead of all PIEs)

6. 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

7. 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

8. 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

9. 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

10. The remaining provisions not discussed by the Board in January 2015

11. 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

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

13. 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

14. 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

15. 290.150C – Application of the 7-yr Time-on period
Long Association
C – 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

16. 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

17. 290.151 and 290.152 – Concurrence with TCWG
Long Association
and – Concurrence with TCWG
ED proposed that firm should apply and 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

18. Enhancement to the General Provisions in 290.148A & B
Long Association
Enhancement to the General Provisions in A & 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

19. 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

20. 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