Transcript Emerging Issues and Outreach
Emerging Issues and Outreach
Gary Hannaford, Chair, Emerging Issues and Outreach Committee IESBA Meeting New York, USA April 7-9, 2014 Page 1 | Confidential and Proprietary Information
Background
• Emerging Issues & Outreach (EIO) – December 2013 – EIO working processes finalized and EIO Committee (EIOC) established – January 2014 – 1st EIOC teleconference. Issues considered: • MG Rover • Aggressive Tax Avoidance • EU Reform Page 2 | Confidential and Proprietary Information
MG Rover Case
• Considered in Dec. 2013 Exec. Session • Presented at March 2014 CAG • Tribunal report unclear on: – Circumstances in which accountants must consider the public interest – What it means to consider the public interest – What constitutes a PIE – How to document public interest considerations • Is additional guidance needed in the Code?
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MG Rover Case
• CAG Comments: – Consider the totality of issue – Do non-accountants have to consider the public interest – Regulator could be setting a precedent which may warrant further attention – Consider the need for a better explanation of the public interest – Would the public interest have been considered if the transaction had been a success – Consider the political dimension – Would tribunal findings differed under the IESBA Code Page 4 | Confidential and Proprietary Information
MG Rover Case
• Matters for Consideration:
1. Specific actions re. definition of public interest 2. Public interest – only applicable to PIEs or all entities?
3. Other matters, e.g. revisiting definition of a PIE Page 5 | Confidential and Proprietary Information
Aggressive Tax Avoidance
• Multinational companies, often assisted by accountants, have exploited outdated tax laws and tax mitigation schemes to reduce tax costs • Strong statements from ICAEW and prominent politicians on role of accountants in assisting in aggressive tax avoidance and ignoring public interest concerns • G20 countries exchanging information to tighten loopholes Page 6 | Confidential and Proprietary Information
Aggressive Tax Avoidance
• CAG Comments:
– European Commission has initiated group to consider tax issues – Could accountants be held liable if don’t provide client with the best tax advice – Advice is not illegal. Governments use tax as an incentive.
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Aggressive Tax Avoidance
• Matters for Consideration: – Is specific action needed or is monitoring sufficient?
– What would that specific action be?
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EU Audit Reform
• Final vote on adoption in Q2 2014 • Translate in various EU languages and incorporate into official EU text by Q3 2014 • Members then have two years to adopt – i.e. Q3 2016 • Partner rotation - 7yr. Time-on and 3yr cooling-off • Firm rotation must be overlaid with this • UK has bifurcated rotation, but no mandatory firm rotation Page 9 | Confidential and Proprietary Information
EU Audit Reform
• At least 2 firms must tender • Recommendation from TCWG needed • Min engagement 1 yr. Members states can increase this • Max engagement 10 yrs. Member states can decrease this • Patchwork implementation between Members likely Page 10 | Confidential and Proprietary Information
EU Audit Reform
• Dec 2013, preliminary agreement on audit reform: – Mandatory rotation every 10 yrs.
– Can extend tenure for 10 yrs. on tender-hence max 20 yrs.
– Joint audits can extend for 14 years (hence max 24 yrs.) – Extraordinary circumstances can increase by a further 2 years (hence max 26 yrs.) – Implementation will be staggered Page 11 | Confidential and Proprietary Information
EU Audit Reform
• Rotation requirements for senior personnel, but no definition of senior personnel • Limit on NAS to 70% of audit fees over three years, but no guidance on how to calculate • Restrictions of permissible activities during cooling-off – no indicate in extent of restrictions • Prohibited services list. No leeway on prohibitions.
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EU Audit Reform / Other Developments
• Matters for Consideration:
– Are specific actions needed as relates to EU Audit Developments?
– Other international developments for the EIOC to consider?
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Outreach
• Increased dialogue with profession and other stakeholders • Commitment to dialogue with CAG member organizations • No immediate suggestions from CAG Reps on additional outreach opportunities Page 14 | Confidential and Proprietary Information
Outreach
• Matters for Consideration:
– Comments in Outreach performed – Possible additional Outreach opportunities
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The Ethics Board
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