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 3-6, 2019, the IESBA approved a project to review the definitions of the terms “listed entity” and “public interest entity” (PIE) in the Code, with the aim of revising them as necessary so that they remain relevant and fit for purpose.

The concept of a PIE overlaps with the concept of an “entity of significant public interest” (ESPI) in the standards of the International Auditing and Assurance Standards Board (IAASB) in some respects. Therefore, part of the project objectives is to develop a pathway that would achieve convergence between the two concepts to the greatest extent possible. The IESBA will coordinate this project closely with the IAASB.

On Jan­u­ary 29, 2021, the IESBA re­leased for pub­lic com­ment the Ex­po­sure Draft, "Pro­posed Re­vi­sions to the De­f­i­n­i­tions of Listed En­tity and Pub­lic In­ter­est En­tity in the Code".

The proposed revisions broaden the definition of a public interest entity (PIE) to include more categories of entities, given the level of public interest in their financial condition, for the purposes of additional independence requirements to enhance confidence in their audits.

On April 11, 2022, the IESBA released a revised definition of a PIE together with other revised provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards). The revised provisions specify a broader list of categories of entities as PIEs whose audits should be subject to additional independence requirements to meet stakeholders’ heightened expectations concerning auditor independence when an entity is a PIE.

Among other matters, the revisions also:

• Articulate an overarching objective for additional independence requirements for audits of financial statements of PIEs.
• Provide guidance on factors to consider when determining the level of public interest in an entity.
• Replace the term “listed entity” with a new term “publicly traded entity,” providing a definition of the latter term.
• Recognize the essential role local bodies responsible for the adoption of the Code play in delineating the specific entities that should be scoped in as PIEs in their jurisdictions, encouraging them to properly refine the PIE categories and adding any other categories relevant to their environments.
• Introduce a transparency requirement for firms to publicly disclose the application of independence requirements for PIEs where they have done so.

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

Recent de­vel­op­ments

April 2022

On April 11, 2022, the IESBA released a revised definition of a PIE together with other revised provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards). The revised provisions specify a broader list of categories of entities as PIEs whose audits should be subject to additional independence requirements to meet stakeholders’ heightened expectations concerning auditor independence when an entity is a PIE.

January 2021

On January 29, 2021, the IESBA released for public comment the Exposure Draft, "Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code". Comments are requested by May 3, 2021.

December 2019

At its meeting on December 3-6, 2019, the IESBA approved this project to review the definitions of the terms “listed entity” and “public interest entity” (PIE) in the Code, with the aim of revising them as necessary so that they remain relevant and fit for purpose.

Related Discussions

Definitions of Listed Entity and Public Interest Entity (PIE) - IESBA

June 6, 2022

At its meeting on June 6-8, 2022, the IESBA received an update from the PIE Rollout Working Group on activities to promote adoption and implementation of the final provisions relating to the revised definitions of listed entity and PIE which were issued in April 2022. The IESBA additionally considered a draft of an IESBA Staff Questions & Answers (Q&A) publication being developed to support the effective implementation of the revised PIE provisions. The Q&A publication is expected to be issued by Q4/2022.

December 2021

At its meetings on November 30 – December 16, 2021, the IESBA  unanimously approved revisions to the definitions of “listed entity” and “public interest entity” (PIE) in the Code. The revisions were developed in close coordination with the IAASB within the established coordination framework of the two Boards. The IAASB will consider undertaking a narrow-scope maintenance of standards project in 2022 to explore potential revisions to its standards arising from the revised definitions of “listed entity” and “PIE” in the Code. Subject to Public Interest Oversight Board (PIOB) approval, the final pronouncement is expected to be released by April 2022. It will be effective for audits of financial statements for periods beginning on or after December 15, 2024.

September 2021

At its meetings on September 13-17 & 27, 2021, the IESBA considered the significant comments raised by respondents to the Exposure Draft and a first read draft of the Task Force’s post-ED proposals. Among other matters, the IESBA considered the Task Force’s responses to stakeholders’ comments on the overarching objective for PIE requirements in the Code; the approach to developing the revised PIE definition; the proposed replacement of the term “listed entity” with “publicly traded entity” in the Code; the proposed categories in the PIE definition; the role of national standard setters and other relevant local bodies with respect to refining the PIE definition; the role of firms; and, in cases where PIE independence requirements have been applied, public disclosure of that fact. The IESBA will consider a revised draft of the provisions with a view to approving the final pronouncement in December 2021.

June 2021

At its meetings on June 9-11, 14 & 25, 2021 the IESBA considered a high level overview of the key issues and comments raised by respondents to the January 2021 Exposure Draft, Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code (PIE ED) and the Task Force’s preliminary views about how to address them. Among other matters, the IESBA considered respondents’ feedback on the overarching objective for PIE requirements in the Code; the approach to developing the PIE definition; the proposed replacement of the term “listed entity” with “publicly traded entity” in the Code; the proposed categories in the PIE definition; and the role of firms with respect to identifying additional entities as PIEs and public disclosure when an entity has been treated as such. The IESBA will undertake a full review of respondents’ comments and a revised draft of the proposed changes to the Code at its September 2021 meeting.

November 30, 2020

At its meeting on November 30 and December 4, 8 and 9, 2020, the IESBA approved for exposure proposed revisions to broaden the Code’s definition of “public interest entity” (PIE) and to revise the definition of “listed entity.” The proposals were developed in close coordination with the International Auditing and Assurance Standards Board (IAASB) within the established coordination framework of the two Boards.

September 14, 2020

At its meet­ing on September 14-21, 29 and October 1, 2020, the IESBA considered issues and comments raised by respondents to Question #4 of the Exposure Draft and a first read of the Task Force proposals, including revisions to the proposed list of high-level categories of PIEs and the Task Force’s reflections on other types of entities that could be included in the list. The IESBA also considered the timing of the PIE Exposure Draft and how to coordinate the effective date of the final PIE provisions with the effective date of the revisions to the NAS and Fees provisions. The IESBA will consider revised proposals from the Task Force at its December 2020 meeting with a view to approving an Exposure Draft.

June 8, 2020

At its meet­ing on June 8-12 and 15, 2020, the IESBA considered issues and revised Task Force proposals reflecting input from the IESBA’s March 2020 discussion as well as feedback from the CAG and NSS. Among other matters, the IESBA considered: (i) a revised overarching objective clarifying that there is public interest in the financial condition of certain entities that is relevant to those entities being classified as PIEs; (ii) possible terms that might replace the term “listed entity;” (iii) a draft list of PIE categories as well as other possible categories considered by the Task Force;  and (iv) the role of firms, including a proposal for a firm to include in its audit report whether the audit client has been treated as a PIE. The IESBA will continue its deliberations on the issues and consider revised Task Force proposals at its meeting in September 2020.

March 16, 2020

At its meeting on March 16-18, 2020, the IESBA considered issues and a strawman draft outlining the Task Force’s initial views and a possible approach to redefining the concept of a public interest entity (PIE) in the Code. Among other matters, the IESBA considered a proposed overarching objective for requiring more stringent independence requirements for certain entities; a proposed expanded list of categories of entities within the PIE umbrella, subject to further calibration by national regulators or other authorities; and a strengthened role for firms in evaluating whether entities should be treated as PIEs. The IESBA will continue to work closely with the IAASB to achieve a common revised definition of “listed entity” in both Boards’ standards and, as far as possible, convergence between the concepts of PIE in the Code and “entity of significant public interest” in the IAASB standards. At its June 2020 meeting, the IESBA will continue its deliberations on the issues and consider revised proposals from the Task Force.