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IESBA Proposed Changes to the Code of Ethics: Addressing the Objectivity of Engagement Quality Reviewers (Potential Amendments to Harmonized Rule of Professional Conduct, Rule 204) [ED]

The comment period ends on March 16, 2020

Next steps:

The IESBA will review the comments from stakeholders on the Exposure Draft in Q2/2020

Last up­dated:

January 2020

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.

    On January 30, 2020, the International Ethics Standards Board for Accountants (IESBA) released for public comment an 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. 

    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.  

    Comments on the Exposure Draft are requested by March 16, 2020 from all stakeholders.

     

    Other developments

    January 2020

    On January 30, 2020, the IESBA released for public comment an Exposure Draft, Proposed Revision to the Code Addressing the Objectivity of Engagement Quality Reviewers. Comments on the Exposure Draft are requested by March 16, 2020.

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