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IESBA Changes to the Code of Ethics: Application Material Relating to Professional Skepticism and Professional Judgment – Short-term Project (Amendments to Harmonized Rule of Professional Conduct, Rule 204) [Completed]

Ef­fec­tive date:

Parts 1, 2 and 3 of the restructured Code of Conduct will be effective as of June 15, 2019; Part 4A relating to independence for audit and review engagements will be effective for audits and reviews of financial statements for periods beginning on or after June 15, 2019; and Part 4B relating to independence for assurance engagements with respect to subject matter covering periods of time will be effective for periods beginning on or after June 15, 2019; otherwise, it will be effective as of June 15, 2019.

Last up­dated:

April 2018

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.

At its meeting on December 4-8, 2017, the IESBA approved its new application material relating to professional skepticism and professional judgment, developed under the Professional Skepticism (short-term) project.

On April 9, 2018, the IESBA issued its restructured Code of Conduct [renamed the International Code of Ethics for Professional Accountants (including International Independence Standards)], which in­cludes the re­vi­sions relating to this project. Review the press release, the new Code and the related resource page on the IESBA's website.

Previously On May 11, 2017, the IESBA had re­leased for pub­lic com­ment an Ex­po­sure Draft, "Pro­posed Ap­pli­ca­tion Ma­te­r­ial Re­lat­ing to Pro­fes­sional Skep­ti­cism and Pro­fes­sional Judg­ment". The pro­posed guid­ance for the first time links key con­cepts in the IESBA Code of Ethics for Pro­fes­sional Ac­coun­tants (the Code) and clar­i­fies their ap­pli­ca­tion, namely:

  • how com­pli­ance with the fun­da­men­tal prin­ci­ples in the Code sup­ports pro­fes­sional skep­ti­cism by au­di­tors and as­sur­ance prac­ti­tion­ers for au­dit, re­view, and other as­sur­ance en­gage­ments; and
  • the im­por­tance of pro­fes­sional ac­coun­tants ob­tain­ing a suf­fi­cient un­der­stand­ing of the facts and cir­cum­stances known to them when ex­er­cis­ing pro­fes­sional judg­ment in ap­ply­ing the con­cep­tual frame­work un­der­pin­ning the Code.Once fi­nal­ized, this ma­te­r­ial will be in­cluded in the clar­i­fied and re­struc­tured Code that the IESBA plans to com­plete by the end of 2017. Be­yond this, the IESBA will con­tinue to ex­plore fur­ther is­sues re­lat­ing to pro­fes­sional skep­ti­cism in close co­or­di­na­tion with the IAASB and IAESB, and in con­sul­ta­tion with stake­hold­ers. 
  • For fur­ther de­tails, re­fer to the IESBA’s press re­lease.
  • The pro­posed guid­ance ad­dress­ing the fun­da­men­tal prin­ci­ples and pro­fes­sional skep­ti­cism re­sponds to a rec­om­men­da­tion from the tri­par­tite Pro­fes­sional Skep­ti­cism Work­ing Group es­tab­lished by the IESBA, the In­ter­na­tional Au­dit­ing and As­sur­ance Stan­dards Board (IAASB), and the In­ter­na­tional Ac­count­ing Ed­u­ca­tion Stan­dards Board (IAESB).

Other developments

April 2018

On April 9, 2018, the IESBA issued its restructured Code of Conduct (renamed the International Code of Ethics for Professional Accountants (including International Independence Standards)), which includes the revisions relating to this project.

May 2017

On May 11, 2017, the IESBA re­leased for pub­lic com­ment an Ex­po­sure Draft, "Pro­posed Ap­pli­ca­tion Ma­te­r­ial Re­lat­ing to Pro­fes­sional Skep­ti­cism and Pro­fes­sional Judg­ment". Com­ments are re­quested by July 25, 2017.

Related discussions

IESBA Code of Ethics: Ap­pli­ca­tion Ma­te­r­ial Re­lat­ing to Pro­fes­sional Skep­ti­cism and Pro­fes­sional Judg­ment - IESBA

Dec 4, 2017

At its meeting on December 4-8, 2017, the IESBA approved its new application material relating to professional skepticism and professional judgment, developed under the Professional Skepticism (short-term) project. Subject to the Public Interest Oversight Board (PIOB) approval, the restructured Code, which includes these revisions, is expected to be released by early April 2018.

IESBA Code of Ethics: Ap­pli­ca­tion Ma­te­r­ial Re­lat­ing to Pro­fes­sional Skep­ti­cism and Pro­fes­sional Judg­ment - IESBA

Sept 19, 2017

  • At its meeting on September 19-22, 2017, the IESBA considered significant comments raised by respondents on the May 2017 Exposure Draft (ED), and related Task Force responses. The IESBA broadly supported the direction of the changes to the proposed application material in response to the feedback from respondents, subject to refinements and consideration of whether the description of the term “professional judgment” has been fully aligned with that in the IAASB’s standards. The IESBA also was briefed on comments made during the September 2017 IESBA Consultative Advisory Group (CAG) meeting, and by some respondents to the ED regarding the IESBA’s longer term professional skepticism initiative. The longer term initiative will explore, among other matters, whether aspects of the concept of professional skepticism apply to all professional accountants, including those who are not auditors or assurance practitioners. At its December 2017 meeting, the IESBA will consider a revised draft of the proposed application material relating to professional skepticism and professional judgment, with a view to approval for inclusion in the restructured Code.

June 19, 2017

  • At its meet­ing on June 19-21, 2017, the IESBA considered and broadly supported the release of a joint publication developed by the tripartite Professional Skepticism Working Group (PSWG) comprising representatives of the IESBA, International Auditing and Assurance Standards Board (IAASB) and International Accounting Education Standards Board (IAESB). The publication will, among other matters, inform stakeholders about the PSWG’s key observations in light of its work on the topic to date; highlight actions taken by the standard-setting Boards to date and their intended future actions; and emphasize the role that others in the financial reporting supply chain can play in assisting more effective application of PS in audits and other assurance engagements. Subject to the IAASB’s and IAESB’s support, the publication is expected to be issued by early August 2017. The IESBA also considered Task Force proposals for progressing a longer term initiative on PS. Among other matters, the IESBA considered a Task Force analysis to identify the concerns that have led to stakeholder calls for greater exercise of PS, and possible ways in which concerns regarding PS might be addressed and be responsive to root cause issues and public expectations. The IESBA supported development of a consultation paper that will seek stakeholder input on the relevant issues in 2018.

March 13, 2017

  • At its meeting on March 13-15, 2017, the IESBA approved a project to develop application material to explain how compliance with the fundamental principles in the Code supports the application of professional skepticism as defined in the standards of the International Auditing and Assurance Standards Board (IAASB). The IESBA also considered the proposed application material and broadly supported it, subject to some refinements. In addition, the IESBA considered proposed new application material to emphasize the importance of professional accountants obtaining an understanding of the facts and circumstances known to them when exercising professional judgment, in the context of applying the conceptual framework. The IESBA also supported this proposal, subject to some refinements. Subject to feedback from the IAASB and IAESB, the IESBA will consider a final draft of the proposed application material with a view to approving it for exposure during a teleconference in the second half of April 2017.The IESBA will consider a draft of the Professional Skepticism Working Group publication at its June 2017 meeting.draft of the Q&A public

 

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