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Part C – Section 370 Pressure

Part C – Section 370 Pressure . Jim Gaa , Chair, Part C Task Force IESBA Meeting Toronto, Canada April 7, 2014. Background. March 2013: Project Proposal approved by IESBA September 2013: IESBA and CAG consider Pressure(370) December 2013: IESBA considered Section 320

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Part C – Section 370 Pressure

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  1. Part C – Section 370Pressure Jim Gaa, Chair, Part C Task Force IESBA Meeting Toronto, Canada April 7, 2014

  2. Background • March 2013: Project Proposal approved by IESBA • September 2013: IESBA and CAG consider Pressure(370) • December 2013: IESBA considered Section 320 • March 2014: CAG considered Section 320 • April 2014: IESBA considers Section 370

  3. Description and Examples • Change description from “engage in unethical or illegal activities” to “pressure to breach fundamental principles”. • PAIB shall not yield to pressure. • PAIB shall not place pressure on others. • Examples categorized by 310/320/330/340/350/360.

  4. Determine whether pressure may lead to a breach of the fundamental principles • Threats and safeguards approach difficult to use in Part C. • Safeguards may not be real safeguards • PAIBs may be unfamiliar with Conceptual Framework. • Section redrafted to avoid conceptual framework language. • Factors the PAIB may consider in determination. • Actions for PAIB to take in determination.

  5. Steps to mitigate pressure • If pressure would result in a breach, PAIB shall take steps that are available to mitigate pressure. • Mitigate: reduce to a level that can be resisted • Mitigate - elimination may not be possible. • Some steps may not be available to the PAIB. • Examples: policies & procedures; challenge; restructuring; obtain oversight; escalation; disclosure; consultation. • If necessary: decline, discontinue or resign.

  6. Diversity of ethical norms • Different opinions on CAG on recognizing diversity of ethical norms. • Diversity of ethical norms is a reality. • But its recognition appears to condone a “movable bar”. • TF suggests that including “the corporate culture and leadership of the employing organization” as a factor to consider recognizes this diversity.

  7. Creating an Ethics Based Culture • 300.5 creates expectation of an ethics based-culture. • This was developed as an important step to address pressure. • May be more generally applicable and moved back to 300. • Further work needed on drafting as references to fundamental principles apply to the Code and would not apply in business’s ethics codes.

  8. Matters for Consideration • Does the Board have any comments on the draft wording of proposed Section 370? • Does the Board have any comments on the way that the diversity of ethical norms is addressed in the draft wording?

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