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Emerging Issues and Outreach. Gary Hannaford, Chair, Emerging Issues and Outreach Committee IESBA Meeting New York, USA April 7-9, 2014. Background. Emerging Issues & Outreach (EIO) December 2013 – EIO working processes finalized and EIO Committee (EIOC) established

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Emerging issues and outreach

Emerging Issues and Outreach

Gary Hannaford, Chair, Emerging Issues and Outreach Committee

IESBA Meeting

New York, USA

April 7-9, 2014


Background
Background

  • Emerging Issues & Outreach (EIO)

    • December 2013 – EIO working processes finalized and EIO Committee (EIOC) established

    • January 2014 – 1st EIOC teleconference. Issues considered:

      • MG Rover

      • Aggressive Tax Avoidance

      • EU Reform


Mg rover case
MG Rover Case

  • Considered in Dec. 2013 Exec. Session

  • Presented at March 2014 CAG

  • Tribunal report unclear on:

    • Circumstances in which accountants must consider the public interest

    • What it means to consider the public interest

    • What constitutes a PIE

    • How to document public interest considerations

  • Is additional guidance needed in the Code?


Mg rover case1
MG Rover Case

  • CAG Comments:

    • Consider the totality of issue

    • Do non-accountants have to consider the public interest

    • Regulator could be setting a precedent which may warrant further attention

    • Consider the need for a better explanation of the public interest

    • Would the public interest have been considered if the transaction had been a success

    • Consider the political dimension

    • Would tribunal findings differed under the IESBA Code


Mg rover case2
MG Rover Case

  • Matters for Consideration:

    • Specific actions re. definition of public interest

    • Public interest – only applicable to PIEs or all entities?

    • Other matters, e.g. revisiting definition of a PIE


Aggressive tax avoidance
Aggressive Tax Avoidance

  • Multinational companies, often assisted by accountants, have exploited outdated tax laws and tax mitigation schemes to reduce tax costs

  • Strong statements from ICAEW and prominent politicians on role of accountants in assisting in aggressive tax avoidance and ignoring public interest concerns

  • G20 countries exchanging information to tighten loopholes


Aggressive tax avoidance1
Aggressive Tax Avoidance

  • CAG Comments:

    • European Commission has initiated group to consider tax issues

    • Could accountants be held liable if don’t provide client with the best tax advice

    • Advice is not illegal. Governments use tax as an incentive.


Aggressive tax avoidance2
Aggressive Tax Avoidance

  • Matters for Consideration:

    • Is specific action needed or is monitoring sufficient?

    • What would that specific action be?


Eu audit reform
EU Audit Reform

  • Final vote on adoption in Q2 2014

  • Translate in various EU languages and incorporate into official EU text by Q3 2014

  • Members then have two years to adopt – i.e. Q3 2016

  • Partner rotation - 7yr. Time-on and 3yr cooling-off

  • Firm rotation must be overlaid with this

  • UK has bifurcated rotation, but no mandatory firm rotation


Eu audit reform1
EU Audit Reform

  • At least 2 firms must tender

  • Recommendation from TCWG needed

  • Min engagement 1 yr. Members states can increase this

  • Max engagement 10 yrs. Member states can decrease this

  • Patchwork implementation between Members likely


Eu audit reform2
EU Audit Reform

  • Dec 2013, preliminary agreement on audit reform:

    • Mandatory rotation every 10 yrs.

    • Can extend tenure for 10 yrs. on tender-hence max 20 yrs.

    • Joint audits can extend for 14 years (hence max 24 yrs.)

    • Extraordinary circumstances can increase by a further 2 years (hence max 26 yrs.)

    • Implementation will be staggered


Eu audit reform3
EU Audit Reform

  • Rotation requirements for senior personnel, but no definition of senior personnel

  • Limit on NAS to 70% of audit fees over three years, but no guidance on how to calculate

  • Restrictions of permissible activities during cooling-off – no indicate in extent of restrictions

  • Prohibited services list. No leeway on prohibitions.


Eu audit reform other developments
EU Audit Reform / Other Developments

  • Matters for Consideration:

    • Are specific actions needed as relates to EU Audit Developments?

    • Other international developments for the EIOC to consider?


Outreach
Outreach

  • Increased dialogue with profession and other stakeholders

  • Commitment to dialogue with CAG member organizations

  • No immediate suggestions from CAG Reps on additional outreach opportunities


Outreach1
Outreach

  • Matters for Consideration:

    • Comments in Outreach performed

    • Possible additional Outreach opportunities


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