Overview

Har­mo­nized provin­cial Rule 204 sets out the Cana­dian pro­fes­sion’s stan­dards that en­sure Char­tered Pro­fes­sional Ac­coun­tants (CPAs) main­tain au­di­tor in­de­pen­dence dur­ing en­gage­ments they un­der­take or par­tic­i­pate in. It sets the stan­dards and re­quire­ments CPAs must main­tain as part of their pro­fes­sional con­duct. Ethics stan­dards adopted by Cana­dian provin­cial bod­ies are cre­ated in align­ment with the Code of Ethics for Pro­fes­sional Ac­coun­tants is­sued by the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA).  Hence, changes to the IESBA Code of Ethics will need to be re­flected in Rule 204.

This project was ap­proved by the IESBA at its meet­ing in March 2021 and is to be carried out in two phases.

Phase I will review the implementation status of the five-year cooling-off requirement for Engagement Partners (Eps) on audits of Public Interest Entities (PIEs), and any issues arising from the implementation of such requirement before the expiry of the transition period for the jurisdictional provision.

Phase II, which is to commence in Q2/2023, will review how effectively the other revised long association provisions in the Code are being implemented in practice, taking into account legislative or regulatory developments relating to other regimes around the world intended to address long association, such as mandatory firm rotation (MFR) and mandatory retendering (MRT). To achieve synergies, Phase II will be undertaken in conjunction with the post-implementation review of the restructured Code.

For fur­ther de­tails about the pro­ject, re­fer to the IESBA’s pro­ject sum­mary.

At its meetings on November 30 – December 16, 2021, the IESBA received the final report of the LAPIR Working Group on Phase 1 of the Long Association Post-Implementation Review (LAPIR). The final report summarizes the key comments and suggestions raised by respondents to the IESBA’s LAPIR Questionnaire.

The IESBA agreed with the Working Group’s recommendation that no action be taken to extend or otherwise vary the “jurisdictional provision.” The jurisdictional provision allows jurisdictions to implement a cooling-off period for engagement partners on audits of financial statements of PIEs shorter than the five years required by the IIS, subject to a minimum of three years, provided certain conditions are met. The jurisdictional provision will expire for audits of financial statements for periods beginning on or after December 15, 2023, in accordance with the Long Association Close-Off Document.

The IESBA formally communicated its decision in January 2022. In accordance with the IESBA’s Strategy & Work Plan 2019-2023, Phase 2 of LAPIR is expected to commence in Q2 2023.

Other de­vel­op­ments

May 2021

On May 28, 2021, the IESBA extended the closing date for stakeholders to submit responses to its Long Association Post-Implementation Review (LAPIR) questionnaire to June 30, 2021.

April 2021

On April 14, 2021, the IESBA's Long Association Post-Implementation Review (LAPIR) Working Group released a questionnaire seeking stakeholder feedback on key matters relating to Phase 1 of the LAPIR. Responses are required by May 31, 2021.

On April 1, 2021, the IESBA released an update on its Long Association Post-Implementation Review (LAPIR) project. This update provides an overview of Phase 1 of the LAPIR which will review the implementation of a specific partner rotation provision for engagement partners around the world with respect to audits of public interest entities.

Related discussions

December 2021

At its meetings on November 30 – December 16, 2021, the IESBA received the final report of the LAPIR Working Group on Phase 1 of the Long Association Post-Implementation Review (LAPIR). The final report summarizes the key comments and suggestions raised by respondents to the IESBA’s LAPIR Questionnaire. The IESBA agreed with the Working Group’s recommendation that no action be taken to extend or otherwise vary the “jurisdictional provision.” The jurisdictional provision allows jurisdictions to implement a cooling-off period for engagement partners on audits of financial statements of PIEs shorter than the five years required by the IIS, subject to a minimum of three years, provided certain conditions are met. The jurisdictional provision will expire for audits of financial statements for periods beginning on or after December 15, 2023, in accordance with the Long Association Close-Off Document. The IESBA will formally communicate its decision in January 2022. In accordance with the IESBA’s Strategy & Work Plan 2019-2023, Phase 2 of LAPIR is expected to commence in Q2 2023.

September 2021

At its meetings on September 13-17 & 27, 2021, the IESBA discussed the key issues and comments raised by respondents to the questionnaire circulated as part of the Working Group’s information gathering and the Working Group’s related responses. Among other matters, the IESBA considered respondents’ various suggestions, including to: extend the jurisdictional provision; convert the jurisdictional provision to a permanent requirement; consider adding a size exemption to paragraph R540.5 based on size, similar to the one that exists in paragraph R540.9; and consider the implications of jurisdictions not moving to 5-year cooling off period. The IESBA will consider the Working Group’s final report and recommendations in December 2021.

March 2021

At its meetings on 15-17, 23 & 31, 2021 the IESBA received its first update from the Long Association Post-Implementation Review (LAPIR) Working Group. The IESBA’s Strategy and Work Plan 2019-2023 sets out two phases of the LAPIR. Phase 1 began in Q1 2021 and will review the implementation status of the five-year cooling-off requirement for engagement partners on audits of PIEs, and any potential challenges from the expiry of the “jurisdictional provision” for audits of financial statements for periods beginning on or after December 15, 2023. Phase 2 will commence in Q2 2023 and will review how effectively the other revised long association provisions in the Code have been implemented in practice, taking into account developments in regulatory regimes around the world addressing long association. The IESBA provided input to the Working Group’s proposed scope of, and approach to, Phase 1. This phase will focus on the use of the jurisdictional provision and how jurisdictions will transition to the five year cooling-off requirement for engagement partners with respect to PIE audits. To inform its work, the Working Group released a questionnaire in April 2021 seeking input from stakeholders and will undertake targeted outreach activities between April-September 2021 with global, regional and local stakeholders. The IESBA will receive an update at its June 2021 meeting.