Overview

On Jan­u­ary 8, 2024, the International Auditing and Assurance Standards Board (IAASB) launched a con­sul­ta­tion process on pro­posed nar­row scope amend­ments to achieve greater con­ver­gence with the International Ethical Standards Board for Accountants's (IESBA) In­ter­na­tional Code of Ethics for Pro­fes­sional Ac­coun­tants (In­clud­ing In­de­pen­dence Stan­dards). These pro­posed re­visions have two key ­ob­jectives­. First, they would align de­f­i­n­i­tions and re­quire­ments in the IAASB stan­dards with the new de­f­i­n­i­tions for pub­licly traded and pub­lic in­ter­est en­tities ­(PIE) added to the IESBA Code. Sec­ond, the amend­ments would ex­tend the ap­plic­a­bil­ity of ex­ist­ing dif­fer­en­tial re­quire­ments for listed en­ti­ties to meet height­ened stake­holder ex­pec­tations ­re­garding­ au­dits of PIE.

Key pro­posed re­vi­sions in­clude ex­tend­ing the scope of the In­ter­na­tional Stan­dards on Qual­ity Man­age­ment and the In­ter­na­tional Stan­dards on Au­dit­ing to include public interest entities which are defined to be entities which are any of the following:  (i) a publicly traded entity; (ii) an entity one of whose main functions is to take deposits from the public; (iii)an entity one of whose main functions is to provide insurance to the public; or (iv) an entity specified as such by law, regulation or professional requirements related to the significance of the public interest in the financial condition of the entity; further, law, regulation or professional requirements may define more explicitly the categories of entities in (i)–(iii) as PIE.

Additional requirements for these entities include:

• en­gage­ment qual­ity re­views.
• additional information in the au­di­tor’s re­port on spe­cific as­pects of the au­dit, in­clud­ing au­di­tor in­de­pen­dence, key au­dit mat­ters, and en­gage­ment part­ner’s name; and
• additional communications with those charged with gov­er­nance to help them ful­fill their re­spon­si­bil­ity over­see­ing the fi­nan­cial re­port­ing process.

On February 28, 2024, the Auditing and Assurance Standards Board (AASB) issued an Exposure Draft that proposes, subject to comments received following exposure, not to adopt at this time the IAASB’s narrow-scope amendments to the International Standards on Quality Management (ISQM) and the International Standards on Auditing (ISA). 

The AASB sees merit in deferring the consideration of adopting the IAASB’s narrow-scope amendments until the process to finalize a Canadian “PIE” definition for the Canadian Independence Standard initiated by the Independence Standing Committee (ISC) is completed. In Canada, until the Canadian revised PIE definition and the narrow-scope amendments are made effective, the firms will continue to apply the existing Canadian rules.

In addition, the IAASB’s Exposure Draft includes proposed narrow-scope amendments to International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. These revisions address circumstances when the relevant ethical requirements require public disclosure that specific independence requirements for reviews of financial statements of certain entities were applied. Unlike the IESBA Code, the Canadian Independence Standards do not currently include this requirement. Therefore, the AASB is not making similar narrow-scope amendments to the Canadian Standards on Review Engagements (CSRE) 2400, Engagements to Review Historical Financial Statements.

The deadline for providing comments to the AASB on the above exposure draft was April 8, 2024.

Down­load:

• IAASB – Exposure Draft
• IAASB – Response Template
• AASB – Exposure Draft

For more information and updates on this project, visit the IAASB's project page and the AASB’s project page.