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IFAC Code of Ethics. Relevance to SMPs Abuja, Nigeria October 13, 2008. Prof. Dr. Jens Poll Deputy Chair IFAC SMP Committee Partner RöverBrönner & Moore Stephens Berlin, Germany. Proposed Revised Section 290/291. New Code of Ethics effective June 30, 2006

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IFAC Code of Ethics

Relevance to SMPs

Abuja, Nigeria

October 13, 2008

Prof. Dr. Jens Poll

Deputy Chair IFAC SMP Committee

Partner RöverBrönner & Moore Stephens Berlin, Germany


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Proposed Revised Section 290/291

  • New Code of Ethics effective June 30, 2006

  • Revision of Section 290 issued July 2006, effective December 31, 2008 (Network definition 290.14-290.26)

  • Revision of Section 290/291 (“Independence I”): Exposure Draft December 2006 (approved by the board in the unclarified version)

  • Revision of Section 290/291 (“Independence II”): Exposure Draft July 2007, Re-Exposure Draft May 2008 (board will decide on the December 2008 meeting of the board)

  • Revision of Code of Ethics (“Clarity”): Exposure Draft July 2008 (comment period October 15, 2008)


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Proposed Revised Section 290/291

  • Public Interest

    • Improving the Code of Ethics to strengthen the independence

    • Wong Report identified concern as to relevancy and appropriateness of international standards of accounting, auditing and ethics to SMEs and SMPs

    • Overregulation for SMPs


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Proposed Revised Section 290/291

  • Research

    • How best to serve the public interest in the revision of the Code

  • Applicability

    • Providing an optimal solution for larger firms and engagements

    • SMP input in to the drafting process


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    Proposed Revised Section 290/291

    • Conceptual Framework

      • Idea of principle-based Code

  • Cost-Benefit

    • Compliance costs

    • Public interest perspective

    • Differential approach (e.g. safeguards)


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    Proposed Revised Section 290/291

    • Some Concerns are picked up

      • Absolute prohibitions vs. safeguard approach

      • Stricter independence rules for Entities of Significant Public Interest


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    Proposed Revised Section 290/291

    • Timetable

      • High degree of urgency

      • Driven by regulators for large listed companies

  • Entities of Significant Public Interest (ESPI)

    • Fundamental differences between ESPI and other entities

    • But: The principles are relevant for all Audits and Auditors (independence in mind, independence in appearance)


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    Proposed Revised Section 290/291

    • Independence of Appearance and in Mind

      • Auditor must be independent in mind on all audits

      • Independence in appearance differ on the special circumstances; in a SME-environment fewer shareholders, more closely connected, direct access to the auditor

      • Identification of threats in a more direct way


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    Proposed Revised Section 290/291

    • Independence and Audit Quality

    • Clarification very much needed and welcomed

    • Specific Issues

      • Tax Services: Extension of differential rules

      • Mandatory Partner Rotation

      • Cooling-Off

      • Provision of Non-Assurance Services

      • Valuation Services


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    Proposed Revised Section 290/291

    • Specific Issues (contd.)

      • IT System Services

      • MDPs

      • Compensation and Evaluation Policies

      • Experts Definition

      • Network Definition

  • No further relevant changes to be expected

  • The clarified Code (including Independence I + II should become effective December 15, 2010)


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    Thank You!

    • www.ifac.org/smp

    • Contact Details:

    • Jens Poll

    • j.poll@roeverbroenner.de