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IESBA Proposed Changes to the Code of Ethics: Revisions to address Engagement Team –Group Audits Independence (Potential Amendments to Harmonized Rule of Professional Conduct, Rule 204) [Research]

Next steps:

The IESBA will continue its deliberations of the Task Force’s proposals at its June 2021 meeting.

Last updated:

March 2021


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.

The pro­ject proposal  for this project was ap­proved by the IESBA at its meet­ing in March 2020.

The objectives of the project are two-fold:
(a) To align the definition of the term “engagement team” in the Code with the revised definition of the same term in proposed ISA 220 (Revised) while ensuring that the independence requirements in the International Independence Standards (IIS) are clear and appropriate and apply only to those individuals within the scope of the revised definition who must be independent in the context of the particular audit engagement; and
(b) To revise the IIS so that they are robust, comprehensive and clear when applied in a group audit context, including with respect to independence for non-network component auditors.

The project is focused on audits of financial statements and auditor independence (Part 4A of the Code). The implications for Part 4B of the Code (other assurance engagements) will be taken into account and addressed as necessary.

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

Other developments

March 2020

At its meet­ing on March 16-18, 2020, the IESBA ap­proved the pro­posal for this pro­ject.

Related discussions

Engagement Team – Group Audits Independence – IESBA

March 15, 2021

At its meetings on 15-17, 23 & 31, 2021 the IESBA received an update from the Engagement Team – Group Audits Independence (ETGA) Task Force on its coordination activities with the International Auditing and Assurance Standards Board’s (IAASB’s) ISA 600 Task Force during Q1 2021. Among other matters, the IESBA also considered the Task Force’s responses to the matters the IESBA raised on topics discussed at the December 2020 meeting, including a revised approach to the definition of “engagement team,” independence considerations for engagement quality reviewers (EQRs) engaged by the firm, and breaches of independence requirements at a component auditor in the context of group audits. The IESBA will continue its deliberations of the Task Force’s proposals at its June 2021 meeting.

Engagement Team – Group Audits Independence – IESBA

November 30, 2020

At its meet­ing on November 30 and December 4, 8 and 9, 2020, the IESBA continued its deliberations regarding potential revisions to: (a) align the Code’s concept of an “engagement team” with the revised definition of the same term in the ISA 220 (Revised); and (b) clarify the meaning of the phrase “ethical requirements that are relevant to the group audit engagement, including those related to independence,” a concept that is in both the extant ISA 600, and the IAASB’s ISA 600 Exposure Draft. Among other matters, the IESBA considered Task Force proposals in relation to the two parts of the project, including a “strawman” of a proposed new Section 405, Group Audits. The IESBA took into account the relevant stakeholder feedback to the ISA 600 Exposure Draft and the ISA 600 Task Force’s current thinking as presented in the IAASB’s December 2020 meeting materials. The IESBA will continue its deliberations at its March 2021 meeting.

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