IESBA Strengthens and Clarifies Independence Requirements for Group Audits

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Feb 28, 2023

On February 28, 2023, the International Ethics Standards Board for Accountants (IESBA) released final revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) to address holistically the various independence considerations in an audit of group financial statements.

Among other matters, the revisions:

  • Strengthen and clarify the independence principles that apply to:
    • Individuals involved in a group audit, including those within, or engaged by, firms that audit components within a group.
    • Firms engaged in the group audit, including firms within and outside the group auditor firm’s network.
  • Specify the need for, and content of, appropriate communication on independence matters between the group auditor firm and component auditor firms participating in the group audit.
  • More explicitly set out the process to address a breach of an independence provision at a component auditor firm, reinforcing the importance of transparency and appropriate communication with those charged with governance of the group.
  • Amend the definitions of the terms “engagement team” and “audit team” in the Code to recognize the different and evolving engagement team structures, and address the implications of those definitional changes.
  • Provide guidance to facilitate the determination of who is included in an engagement team or an audit team.
  • Revise the definitions of a number of existing terms and establish new defined terms with respect to independence in a group audit context.

The pronouncement will be effective for audits of financial statements and group financial statements for periods beginning on or after December 15, 2023, with early adoption permitted.

Review the press release on the IESBA's website.

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