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  • Multinational companies, often assisted by accountants, have exploited outdated tax laws and tax mitigation schemes to reduce tax costs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