Technology

1. Technology IESBA CAG Meeting New York, USA March 4, 2019 Patricia Mulvaney, IESBA Member, Technology Working Group Chair

2. Objectives of the Session • To provide: • Background information about IESBA’s technology initiative • Update on the Technology WG activities • To receive CAG input on emerging themes observed by WG to date

3. Background – IESBA Technology Initiatives

4. Background Terms of Reference Objectives of the WG: • Identify implications of technology developments on the robustness and relevance of the Code • Develop proposed responses including revisions to the Code, publication of non-authoritative material and discussion forums • Identify outreach and partnership opportunities to share knowledge and to promote the Code

5. Background Terms of Reference Highlights of other key elements: • A phased approach (Phase 1 to be completed by December 2019) • Initial information gathering focusing on AI/Robotic Process Automation (AI) and Big Data/Data Analytics (Data) • A focus on ethical behavior of both PAPPs and PAIBs • Information gathering encompasses desk research, stakeholder meetings and other channels such as focus groups and panel discussions; also partnership with other professional organizations/stakeholders • Liaise internally with other IESBA TFs as well as coordination with IAASB and IAESB • Phase 1 report to be presented to the Board in December 2019

6. Background Terms of Reference Any questions?

7. Information Gathering Activities to Date • Desk research involving published articles; webcasts/webinars/podcasts • Discussions with academics, ethics org leaders and other representatives from industry associations • Participation at CPA Canada Public Trust Committee and Foresight: Reimagining the Professions meetings • In person outreach meetings • Institute of Chartered Accountants in England and Wales (ICAEW) • Association of Chartered Certified Accountants (ACCA) • Chartered Institute of Management Accountants (CIMA) • Institute of Business Ethics (IBE) • Inflo(audit and accounting software vendor).

8. Key Emerging Themes Five themes have emerged to date: • Common ethical principles are also applicable to AI • PAs need to have a growth mindset • Bias in AI can be a significant risk • Fairness and transparency are important elements in AI ethics • Responsibility to advise on risks and benefits of technologies

9. Emerging Themes Theme A – Common Ethical Principles Also Apply to AI • Stakeholders did not identify noticeable gaps in the FPs or rest of Code • Guidance or supplementary material on how PAs can identify, evaluate and address technology related risks and ethical issues would be more useful than changes to the Code • Frameworks for the development, use and application of AI have been developed - and are also of increasing interest to governmental bodies. Key framework principles include: • Fairness, transparency, inclusiveness, reliability and safety, privacy and security, accountability

10. Emerging Themes Theme B – PAs Need a “Growth Mindset” • Stakeholders mentioned the importance of PAs having a mindset appropriate for the digital age: • Mindset that adapts to new technologies • Shift from a compliance mindset (only) to advisory mindset • Adopting a “growth mindset” • Stakeholders also highlighted the importance of professional judgement in the midst of dynamic changes • The WG intends to explore these concepts with the Role and Mindset TF

11. Emerging Themes Theme C – Bias in AI is a Significant Risk • Bias in AI (machine bias) can be present in the data AI consumes and in the algorithms used to analyze the data • In order to rely on outputs from AI applications PAs need a sufficient understanding of the AI technology used and impact on PAs work • PAs must accept responsibility for machine decisions used in their work • Role and Mindset TF proposals include refinements to the definition of objectivity, including a reference to undue reliance on factors such as technology, and new provisions on bias • The WG will explore our findings on bias with the Role and Mindset TF

12. Emerging Themes Theme D – Addressing Fairness and Transparency • Ethical frameworks for AI often include fairness, transparency and accountability • The WG intends to further explore how these ethical principles might intersect with the Code • Some stakeholders also asked whether PAs might have a broader role in society as ethical leaders and champions in their organizations • The WG will work in collaboration with the Role and Mindset TF to consider whether ethical leadership is behavior that should be expected of PAs

13. Emerging Themes Theme E – Responsibility to Advise on Risks and Benefits • Stakeholders suggested customers should be made aware of the risks and benefits of new technologies • As firms continue to invest in technologies, questions arise as to whether clients and customers have sufficient knowledge of the risks and benefits associated with these technologies • The WG will reflect on whether PAs have an ethical responsibility to their clients to inform them of the risks and benefits of technologies being implemented

14. Emerging Themes Matters for CAG Consideration CAG’s views and reaction to the emerging themes? • Common ethical principles are also applicable to AI • PAs need to have a “growth mindset” • Bias in AI can be a significant risk • Addressing fairness and transparency • Responsibility to advise on risks and benefits of technologies

15. Next Steps

16. Next Steps Matters for CAG Consideration CAG’s views and suggestions on opportunities to promote and discuss the work of the WG