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Non-Assurance Services
Caroline Gardner
IESBA June 2013
New York, USA
Page 1
Non-Assurance Services
Recent Developments
• EC’s proposed regulation on statutory audits
– Audit fees – limitation of provision of NAS to 10% of total audit fees
removed
– Prohibition of Non-Audit Services
• Concept of pure audit firms removed
• Adopted list of prohibited NAS comparable to IESBA Code
• Audit committee approval of NAS
– Audit Report
• Reporting of a list of NAS provided by the statutory auditor
• Decision not final
– Next step is discussion in Parliament and member states
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Non-Assurance Services
Regulatory and Other Feedback
• IOSCO Committee 1 Letter
– Bookkeeping and Emergency Situations
• Remove exemption for providing accounting and bookkeeping services and
preparation of tax calculations in emergency or other unusual situations
– Internal Audit Services
• Consider how external auditors use internal auditors as part of audit
• Prohibit auditor from providing internal audit services where there is any selfreview threat, not only when management functions are assumed
• Further distinction needed on what constitutes “internal audit” and other similar
services
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Non-Assurance Services
Regulatory and Other Feedback
• FEE Paper - “A Comparison of EC Recommendation on
Statutory Auditor’s Independence in the EU and Statutory
Audit Directive with the Independence Sections of the
IESBA Code of Ethics for Professional Accountants”
– Comparison focuses on independence provisions required by the
Statutory Audit Directive of May 17, 2006 and provisions recommended by
EC in its recommendation of May 16, 2002
– Concludes IESBA Code is more robust with respect to audits of PIEs
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Non-Assurance Services
NAS Surveys
• Non-assurance services (NAS) surveys requesting
information sent to 26 jurisdictions
– Survey requested information for PIEs and non-PIEs
– 24 Responses received
– Survey inquired whether national ethical requirements are more
restrictive than the provisions in the Code
• Most jurisdictions had similar provisions
• More restrictive provisions usually due to local laws & regulations
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Non-Assurance Services
Survey Responses - Definition of PIEs
• Majority of jurisdictions (17) do not define PIEs or have
definition that differs from IESBA
– Reporting issuer or other entity of significance identified by law or
regulator
– Common trend among differences include additional language to identify
PIEs or specifically note certain PIEs
– Many jurisdictions consider listed entities to be PIEs
• Task Force notes that decision to re-open definition of PIE
is outside scope of project
– Planning Committee is considering for future strategy and work plan
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Non-Assurance Services
Survey Responses - Management Responsibility
• Most responses report more restrictions concerning
“assuming management responsibility”
– Due to laws and regulations that do not allow NAS or any assumption of
management responsibility
• Task Force recommends that management responsibilities
be included within scope of project
– Examination of the terms “management responsibilities” versus
“management activities”
– Review of paragraph 290.166
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Non-Assurance Services
Survey Responses - Preparing Accounting Records
and Financial Statements
• Majority of jurisdictions (17) report more restrictive
provisions for accounting and bookkeeping services
• Significant number of jurisdictions report rules do not
provide for emergency bookkeeping provision for PIEs
• Task Force agreed
– Term “routine and mechanical” should be further examined for alternative
language to provide greater clarity
– Examination of “emergency provision” should be included in scope of
project.
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Non-Assurance Services
Survey Responses - Valuation Services
• Eleven jurisdictions report more restrictive provisions for
valuation services
– Six report prohibition on all valuation services due to local laws or
regulations
• Most prohibitions/more restrictive provisions relate to PIEs
• Twelve jurisdictions report provisions not more restrictive
• Task Force agreed may be a benefit in performing
valuation services if threats are at an acceptable level
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Non-Assurance Services
Survey Responses - Taxation Services
• Twelve jurisdictions report more restrictive provision for
taxation services
– Relate to PIEs and are due to local laws and regulations
– Additional restrictions vary greatly in nature
• Eleven jurisdictions report not more restrictive
• Task Force agreed
– Knowledge and experience of auditor beneficial in performance of certain
taxation services
– Code may benefit from restructuring of section to simplify guidance
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Non-Assurance Services
Survey Responses - Internal Audit Services
• Thirteen jurisdictions report more restrictive prohibitions
for internal audit services
– Most did not indicate how rules are more restrictive
– In some cases, appears rules prohibit services regardless of materiality or
significance due to laws and regulations for PIEs
• Ten jurisdictions report provisions are not more restrictive
• Task Force noted extant provision issued in July 2009
Code and only became effective January 1, 2011
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Non-Assurance Services
Survey Responses - Areas Not Addressed in the Code
• Most responses concerning other services or restrictions
relate to restrictions or topics outside scope of NAS
• Task Force agreed topics of materiality, exceptions and
TCWG pertaining to NAS should be addressed in
discussion paper
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Non-Assurance Services
Overall Approach to NAS
• Task Force concluded
– Conceptual framework approach is appropriate for NAS
– Less restrictive provisions for non-PIEs are appropriate
– Develop a discussion paper to provide basis for
discussion
Page 13
Non-Assurance Services
Overall Approach to NAS
• Paper would include
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Overall approach of the Code concerning NAS
Supplementary approaches to enhance threats and safeguards approach
Services addressed within the provisions
Identification of key stakeholders and expectations
Comparison of expectations of key stakeholders and provisions in Code
Ways in which Task Force will address concerns in relation to potential
“expectation gaps”
– Potential additional safeguards concerning NAS
– Further implementation guidance for SMEs and SMPs and
– Discussion of materiality, exceptions and those charged with governance
Page 14
Non-Assurance Services
Next Steps
• Refine project proposal to address following:
– Clarify provisions of management responsibility;
– Examine phrase “routine and mechanical” within bookkeeping
services; and
– Examine “emergency exception” within bookkeeping service
Page 15
Non-Assurance Services
Survey Responses - Recommendation on Valuation,
Taxation and Internal Audit Services
• Surveys did not provide clear cut direction or majority
views on how jurisdictions address these services
• Provisions addressing these services do not require
immediate changes to wording or greater restrictions
– Provisions require greater deliberation as to overall approach
• Task Force will further consider these services in future
meetings
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Non-Assurance Services
Questions?
Page 17
www.ethicsboard.org