Proposed changes to independence rules around non-audit services

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21 May, 2014

The International Ethics Standards Board for Accountants (IESBA) has published proposals to enhance the independence provisions in the 'Code of Ethics for Professional Accountants' (the Code). The proposals seek to provide better guidance and clarification around the independence of auditors in relation to the provision of non-audit services.

The exposure draft, Proposed Changes to Certain Provisions of the Code Addressing Non-Assurance Services for Audit Clients, is the result of a project added to the IESBA's agenda in 2012 and contains three key proposals:

  • Management responsibility. The Code requires client management to accept responsibility for non-audit services and to make significant judgements and decisions pertaining to those services. The exposure draft proposes enhanced guidance regarding how the auditor can be satisfied these requirements are met, and also proposes additional guidance and clarification regarding what constitutes 'management responsibility'
  • Preparing accounting records and financial statements. The exposure draft proposes guidance and clarification on the concept of "routine or mechanical" services relating to the preparation of accounting records and financial statements for non-public interest entity audit clients, including additional examples of activities considered to be consistent with the "routine or mechanical" concept
  • Emergency exception. The exposure draft proposes removing the provision that permits an audit firm to provide certain bookkeeping and taxation services to public interest entity audit clients in emergency situations, on the basis it could be perceived to provide opportunities for misuse, misinterpretation, or abuse.

The exposure draft is open for comment until 18 August 2014. Click for IESBA press release (link to IFAC website).

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