1. Page 1 Long Association Task Force Marisa Orbea, Task Force Chair IESBA Meeting September 16-18, 2013 Sydney, Australia

2. Page 2 Summary of research Key issues –Structural changes affecting the profession –General principles in paragraph 290.150 –Rotation requirements that currently apply to PIEs –Exceptions to the rotation requirements –Requirements for non-PIEs Background Long Association

3. Page 3 Mandatory firm rotation and mandatory tendering debates European Commission Green Paper UK FRC Corporate Governance Code U.S House of Representatives vote in favor of prohibiting PCAOB requiring mandatory firm rotation Structural changes Long Association

4. Page 4 Research Findings –Familiarity vs. audit quality –Self Interest –Other safeguards TF Considerations –Revision of framework –Enhancement of 290.150 Paragraph 290.150 Long Association

5. Page 5 TF Proposals –Strengthen framework in 290.150 –Clearer introductory paragraph –Factors to consider when evaluating significance of potential threats –Examples of safeguards –If rotation is applied as a safeguard, other factors to be considered Paragraph 290.150 Long Association

6. Page 6 Research Findings ‒ Majority believe that TCWG should not have a decision making role TF Considerations ‒ TF agree that TCWG should not have a decision making role ‒ Consultation when exceptions sought ‒ Concerns over independence of auditor TF Proposals ‒ TCWG involvement in rotation decision is not a safeguard Involvement of Those Charged with Governance Long Association

7. Page 7 Who should be subject to rotation Duration of “time on” period Duration of “cooling off” period Permissible activities during “cooling off” period Rotation Requirements for PIE Audits Long Association

8. Page 8 Lead Audit Engagement Partner Quality Control Review Partner Other partners assigned to the audit engagement Managerial staff assigned to the audit engagement Junior staff assigned to the audit engagement Who Should be Subject to Rotation Long Association

9. Page 9 Research Findings –No clear preference - five and seven-year most common TF Considerations –Familiarity vs. Audit Quality –Reduce vs. Maintain –Longer / shorter “time on” for certain PIEs TF Proposals –Familiarity vs. Audit Quality – correct balance Duration of “Time On” Period Long Association

10. Page 10 Research Findings –Two-year most common TF Considerations –Perception concern –Increase vs. Maintain TF Proposals –Considering no decrease in “time on” – split views on whether to increase two-year “cooling off” –Consider also whether all KAPs vs. LAEP Duration of “Cooling off” Period Long Association

11. Page 11 Research Findings –Responses split TF Considerations –Exclusion from Engagement Team –Ability to impact audit outcome TF Proposals –Additional guidance Permissible Activities During “Cooling Off” Period Long Association

12. Page 12 Research Findings –Current exception requirements appropriate TF Considerations –Audit quality vs. familiarity –IOSCO letter TF Proposals –No further exception paragraphs –Amend 290.154 Exceptions to Rotation Long Association

13. Page 13 Research Findings –Majority against mandatory rotation TF Considerations –No evidence for mandatory rotation –Audit of financial institutions TF Proposals –Improve guidance - 290.150 Mandatory Rotation for Non-PIE Audits Long Association