Transcript Non-Assurance Services Caroline Gardner IESBA December 2013 New York, USA Page 1 Non-Assurance Services Conclusions from September 2013 IESBA Meeting • At the September 2013 IESBA.

Non-Assurance Services
Caroline Gardner
IESBA December 2013
New York, USA
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Non-Assurance Services
Conclusions from September 2013 IESBA Meeting
• At the September 2013 IESBA meeting the Board:
– Unanimously approved the project proposal as presented, with a focus on:
• Clarifying the NAS provisions in the Code concerning management responsibilities;
• Clarifying the phrase “routine or mechanical” as it pertains to the provision of accounting
and bookkeeping services; and
• Examining the “emergency exception” provisions related to bookkeeping and taxation
services
– Provided feedback concerning the NAS Position Paper.
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Key Dates
• Key dates:
– Board approval of final enhancing edits to the Code: April 2014
– Final Board approval of NAS position paper: July 2014
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To Be Discussed
• The Task Force requests feedback from the Board
concerning:
– Proposal to remove the “emergency exception” from the Code
– Proposed changes to “Management Responsibilities” (Agenda Items 7-B
and 7-C)
– Proposed changes to “Preparing Accounting Records and Financial
Statements” (Agenda Items 7-D and 7-E)
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Emergency Exception
• Emergency Exception factors considered:
– Terms “emergency” and “unusual situations” are subjective such that it may be
difficult to gauge what a reasonable and informed third party may consider, thus
creating unnecessary threats to independence;
– “Impractical” is not robust enough to fully describe the extreme conditions intended
for the emergency exception to be acceptable
– Use of the exception should not be the decision of the auditor and/or the client
– Securities and Exchange Commission’s (SEC) elimination of the exception
– SEC’s release “Bookkeeping Services Provided by Auditors to Audit Clients in
Emergency or Other Situations” – September 14, 2001
– If a regulator were to permit the exception and the auditor declined, the public
interest may not be served
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Emergency Exception
• Two options considered:
– Revised language permitting an emergency exception that is
subject to an appropriate third party, such as a regulator; and
– Deletion of the provision entirely
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Emergency Exception
• Conclusion:
– Emergency exception related to bookkeeping and taxation services be
deleted due to:
• Situations in which the exception should be allowable should be so rare and
extraordinary that is should be addressed by the Code, should be addressed
by a local regulator;
• Removal of the exception strengthens Code by removing potential for misuse
of the exception;
• Code would be strengthened by fact that if regulator permits the exception, firm
would implement provision addressing breaches which would address threats
to independence
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Management Responsibilities
• Proposed changes included in Agenda Item 7-B
• Proposed change of order of first three paragraphs to
follow that of the guidance concerning internal audit:
– 1st paragraph contains description of a management responsibility
(290.162)
– 2nd paragraph contains threats associated with assuming a management
responsibility (290.163)
– 3rd paragraph contains examples of activities that would generally be
considered a management responsibility (290.164)
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Management Responsibilities
• Proposed changes to paragraph 290.162:
– First sentence of extant paragraph 290.163 proposed to be moved to
290.162 as it is descriptive in nature
– The term “significant” be deleted in the following sentence:
• However, management responsibilities involve controlling, planning, leading
and directing an entity, including making significant judgments and decisions
regarding the acquisition, deployment and control of human, financial, physical,
technological and intangible resources.
– Audit firm should not assume any management responsibility
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Management Responsibilities
• Proposed changes to paragraph 290.163 (newly
renumbered 290.164):
– New examples of management responsibilities added to assist in
identifying and clarifying what would constitute a management
responsibility
– Final sentence of the paragraph note that providing advice or
recommendations to management is not considered a management
responsibility
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Management Responsibilities
• Custody of client assets
– Considered to be included as an example of an activity that would
generally be considered a management responsibility
– Addressed in paragraph 270 – but not as it relates to independence
– Board is asked for feedback concerning addressing the topic in
independence
– Task Force will continue to deliberate
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Management Responsibilities
• Administrative Services
– Extant paragraph 290.164 includes activities that are of an administrative
nature in support of management (i.e. monitoring dates for filing statutory
returns)
– As currently located under “management responsibilities” it appears as if
the accountant may assume “some” management responsibilities
– Proposal – Subsection of the Code entitled “Administrative Services”
addressing the respective services
– Topic already addressed in 290.149 – may not be correct location
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Management Responsibilities
•
•
Extant paragraph 290.166 amended to ensure that the requirement of the firm
to be satisfied that a member of management accepts responsibilities for the
actions of the service is robust and defined
Professional accountant ensures client management:
–
–
–
Provides oversight of the service and evaluates the adequacy and results of the services
performed;
Accepts responsibility for the actions to be taken arising from the results of the service; and
Designates and individual, preferably within senior management who possesses suitable skill,
knowledge and experience to be responsible at all times of the client’s decisions and to oversee
and acknowledge responsibility for the services. A suitable individual would understand the
services, but not required to possess the expertise to perform or re-perform the services
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Routine or Mechanical
• Proposed enhancements to clarify “routine or mechanical” are
included in Agenda Item 7-D
• Terms “routine or mechanical” are appropriate, however, require more
explanatory language
• Proposed changes to paragraph 290.171:
–
–
–
–
“Services that are routine or mechanical in nature require little to no professional judgments
from the professional accountant”
Reminder that performance of such services is subject to the provisions on management
responsibilities in proposed paragraph 290.165
Newly proposed examples of services that would be considered routine or mechanical
Newly proposed examples of services that would not be considered routine or mechanical
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Routine or Mechanical
• Source documents
– “Invoicing or generating statements of account to customers of the client”
was considered to be included in examples of services that are not
considered to be routine or mechanical
– Defining a source document was considered by the Task Force
– An audit firm may provide permitted bookkeeping services and enter sales
information as determined and coded by the client into the accounting
system, this may result in the generation of invoices to be sent or
transmitted to customers of the client
– Task Force requests feedback from the Board
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Questions?
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