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Climate change risk disclosure

Feb 26, 2020

In February 2020, the Governance Institute Australia published a practical guide to reporting against ASX Corporate Governance Council’s Corporate Governance Principles and Recommendation.

Recommendation 7.4 of the new ASX Corporate Governance Council’s Principles encourages entities for the first time to consider and report upon any material exposure to climate change risk. This practical new guide helps you to identify and disclose your climate change risks.

Review the guide on the Governance Institute Australia's website.

Consider data use before an incident occurs

Jan 13, 2020

On January 13, 2020, the National Association of Corporate Directors (NACD) released a blog on how before any board director reflexively says “breach,” they should think “incident” instead. After all, “breach” is a legal term that carries implications that could harm a company if used before being advised that an incident is, in fact, a breach.

A balance needs to be struck between easy access to and the protection of data. The nature of cyber-attacks has evolved depending on sector, but the regulatory sphere is only slowly ramping up. Directors should consider resiliency as part of any solution.

Review the full blog on the NACD's website.

Cybersecurity threats call for a global response

Jan 13, 2020

On January 13, 2020, the International Monetary Fund Blog (IMFBlog) released a blog on how we all know that money moves quickly around the world and cybercrime is doing the same, thus, becoming increasingly and rapidly collaborative across borders.

To create a cyber-secure world, we must be as fast and globally integrated as the criminals. By developing technical and risk management standards, convening information-sharing forums, and spending considerable resources, all International bodies are creating awareness and identifying sound practices for a global perspective.

Review the full blog on the IMFBlog's website.

Davos 2020: Stakeholders for a cohesive and sustainable world

Feb 25, 2020

In February 2020, the World Economic Forum (WEF) released an an overview of the global media and digital media coverage throughout January of the World Economic Forum Annual Meeting 2020.

The main story of the Annual Meeting was climate-change action to focus on tackling the urgent issue of climate change by committing to net-zero carbon emissions by 2050 or earlier. This urgency was reflected in new data from the Global Risks Report 2020, which included climate threats as the top five risks since its first edition, and the Nature Risk Rising report, which found that $44 trillion of economic value generation is exposed to nature loss. There was also a focus on the sustainability and to bring together leaders of society to address the world’s most pressing challenges. This has an impact on the environment and is another way of fulfilling the mission to improve the state of the world.

Review the overview on the WEF's website.

Executives and Directors view economic conditions and technological and regulatory disruption as top risks in 2020

Jan 09, 2020

On January 9, 2020, the National Association of Corporate Directors (NACD) released a blog on a global survey of C-level executives and directors on macroeconomic, strategic, and operational risks highlighting the influence of the economy, talent, digital disruption, and culture on the risk landscape.

The survey, conducted by Protiviti and North Carolina State University’s Enterprise Risk Management Initiative, captures insights from 1,063 C-level executives and directors across multiple industries. These results were used to rank risk themes in order of priority to provide a context for understanding the most critical uncertainties that companies face in 2020. The top 10 risks for 2020, according to this survey, are:

  1. Impact of regulatory change and scrutiny on operational resilience, products, and services
  2. Economic conditions impacting growth
  3. Succession challenges; ability to attract and retain talent
  4. Ability to compete with “born digital” and other competitors
  5. Resistance to change operations
  6. Cyber threats
  7. Privacy and identity management and information security
  8. Organization’s culture may not encourage timely identification and escalation of risks
  9. Sustaining customer loyalty and retention
  10. Adoption of digital technologies may require new skills that are in short supply

Review the full blog on the NACD's website.

Global Ethics Board proposes significant revisions to international independence standards

Jan 21, 2020

On January 21, 2020, the International Ethics Standards Board for Accountants (IESBA) released two Exposure Drafts (EDs): "Proposed Revisions to the Non-Assurance Services Provisions of the Code" and "Proposed Revisions to the Fee-Related Provisions of the Code".

The EDs are aimed at strengthening the non-assurance services (NAS) and the fee-related independence provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). The EDs represent a key milestone in two major strategic commitments of the IESBA in its current strategy and workplan.

Among the key changes proposed to the NAS provisions are:

  • A prohibition on providing NAS to an audit client that is a public interest entity (PIE) if a self-review threat to independence will be created;
  • Further tightening of the circumstances in which materiality may be considered in determining the permissibility of a NAS;
  • Strengthened provisions regarding auditor communication with those charged with governance (TCWG), including, for PIEs, a requirement for NAS pre-approval by TCWG; and
  • Stricter requirements regarding the provision of some NAS, including certain tax and corporate finance advice.

The NAS ED also includes enhanced guidance to assist firms in evaluating the level of threats to independence when providing NAS to audit clients. 

Among the key proposed changes to the fee-related provisions are:

  •  A prohibition on firms allowing the audit fee to be influenced by the provision of services other than audit to the audit client;
  • In the case of PIEs, a requirement to cease to act as auditor if fee dependency on the audit client continues beyond a specified period; and
  • Communication of fee-related information to TCWG and to the public to assist their judgments about auditor independence.

The Fees ED also includes enhanced guidance on identifying, evaluating and addressing threats to independence in relation to other fee-related matters, including the proportion of fees for services other than audit to the audit fee.

Review the press release and exposure drafts on the IESBA's website.

Global Ethics Board releases report exploring the ethical implications of technology for accountants

Feb 27, 2020

On February 27, 2020, the International Ethics Standards Board for Accountants (IESBA) released its Phase One Report exploring the ethical implications of technology on the accounting, assurance, and finance functions.

The report is the culmination of the first phase of fact-finding work the global ethics standard-setting board initiated in recognition of the pace and magnitude of change caused by disruptive technological innovations. The initial phase of the initiative was led by the IESBA’s Technology Working Group (TWG).

In its findings, the TWG concluded that, generally, the IESBA’s International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) currently provides high level, principles-based guidance for most technology-related ethics issues that professional accountants and firms might encounter. However, the report cites various findings and sets out recommendations grouped into five key topical areas where material in the Code could be enhanced.

The report also includes other recommendations for the next phase of the initiative, including that the IESBA conducts additional information gathering with respect to the ethical implications of other technological developments such as blockchain, cybersecurity and Internet of Things.

Review the press release and report on the IESBA's website.

IESBA proposes guidance to address the objectivity of engagement quality reviewers

Jan 30, 2020

On January 30, 2020, the International Ethics Standards Board for Accountants (IESBA) released for public comment the Exposure Draft, "Proposed Revision to the Code Addressing the Objectivity of Engagement Quality Reviewers". The proposed limited-scope revision to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) dovetails with the International Auditing and Assurance Standards Board’s (IAASB’s) development of proposed International Standard on Quality Management (ISQM) 2, Engagement Quality Reviews. Comments are requested by March 16, 2020.

The Exposure Draft includes proposed guidance on the application of the conceptual framework in the Code to address the topic of the objectivity of an engagement quality reviewer (EQR), thereby supporting proposed ISQM 2 in addressing the matter of the eligibility of an individual to serve in an EQR role. In particular, the proposed guidance:

  • Explains the different types of threat to compliance with the fundamental principle of objectivity that might be created in circumstances where an individual is being considered for appointment as an EQR for a given engagement;
  • Sets out factors to consider in evaluating the level of the identified threats; and
  • Suggests actions that might be safeguards to address the threats.

The development of the proposal benefited from cooperation with the IAASB within the established coordination framework of the two Boards. The IESBA is proceeding on an accelerated time frame to finalize the proposal in order to align closely with the anticipated finalization of ISQM 2 within 2020.

Review the press release and Exposure Draft on the IESBA's website.

IESBA Revises Part 4B of the International Code of Ethics

Jan 03, 2020

On January 3, 2020, the International Ethics Standards Board for Accountants (IESBA) released Revisions to Part 4B of the Code to Reflect Terms and Concepts Used in ISAE 3000 (Revised). Part 4B of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) comprises the independence standards for assurance engagements other than audit and review engagements.

The main revisions, developed in coordination with the IAASB, include:

  • Changes in key terminology, including a revised definition of the term “assurance client”;
  • Amendments to certain independence requirements in light of the revised assurance client definition;
  • Greater clarity as to the parties to an assurance engagement and their roles and responsibilities, and the related independence requirements that apply; and
  • A clearer distinction between the types of assurance engagement covered in Parts 4A (addressing independence for audit and review engagements) and 4B of the Code.

Review the press release on the IESBA's website.

Improved governance and reporting required to promote sustainability and trust in business

Jan 09, 2020

On January 9, 2020, the Financial Reporting Council released a report on how companies need to improve their governance practices and reporting if they are to demonstrate their positive impact on the economy and wider society.

While changes to the 2018 UK Corporate Governance Code raised the bar considerably and have led to some high-quality reporting, greater focus is needed on longer term sustainability including stakeholder engagement, diversity and the importance of corporate culture. These changes are expected to take time to bed in. The UK Corporate Governance Code was updated to help build trust in business by forging strong relationships with key stakeholders. It called for companies to focus on long-term sustainability by aligning purpose, strategy and culture, promoting integrity and valuing diversity.

Review the press release and report on the FRC's website.

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