IAASB proposes narrow scope amendments to operationalise changes to the IESBA code

The International Auditing and Assurance Standards Board (IAASB) has released proposed narrow scope amendments to initiate changes to the International Ethics Standards Board for Accountants' (IESBA's) code of ethics that enhance transparency and independence.

The proposed amendments will be to International Standard on Auditing 700 (Revised), Forming an Opinion and Reporting on Financial Statements, and ISA 260 (Revised), Communication With Those Charged With Governance.

According to a news release, the proposed amendments will help operationalise recently approved changes to IESBA's International Code of Ethics for Professional Accountants (including International Independence Standards) related to listed and public-interest entities. The changes to the IESBA code require firms to publicly disclose when the independence requirements for public-interest entities have been applied in an audit of financial statements.

"There are heightened expectations about auditor independence for audits of public-interest entities," IAASB Chair Tom Seidenstein said in the news release. "This is a further sign of enhanced IAASB-IESBA coordination, a strategic commitment of both boards in our joint effort to better serve the public interest."

The exposure draft is part of a broader IAASB project that responds to recent revisions to the IESBA code related to listed and public-interest entities. The exposure draft is Track 1, and other narrow scope amendments may be considered in Track 2, on a separate timeline and with a later effective date.

Those other potential amendments, according to the news release, include:

• Aligning "to the greatest extent possible" the definitions and key concepts underlying the definitions in the International Standards on Quality Management (ISQMs) and International Standards on Auditing (ISAs) related to listed and public-interest entities to IESBA's definitions and key concepts in the revisions to the IESBA code; and
• Considering the applicability of existing differential requirements for listed entities in the ISQMs and ISAs and whether these need to be amended, considering IESBA's revisions that address the definition of publicly traded entity and public-interest entities.

Comments on the exposure draft are due 4 October 2022.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.