NZAuASB Update 2/2020
|This NZAuASB Update provides you with an overview of the New Zealand Auditing and Assurance Standards Board’s recent activities, any new standards or FAQs, as well as other matters of interest.|
NZAuASB February meeting
The next NZAuASB meeting will be held in Wellington on 12 February 2020.
Matters to be discussed include:
- Consideration of the IESBA’s recently released exposure drafts on the following topics:
- Non-assurance services;
- Fees; and
- Objectivity of an engagement quality reviewer.
- Conforming amendments to ISAs (NZ) following approval of ISA (NZ) 315 by the Board at its December 2019 meeting.
- Changes to standards as a result of the change in mandate of the NZAuASB.
- Proposals to incorporate Part 2 of the IESBA Code into Professional and Ethical Standard 1.
- Approval of amendments to Part 4B of Professional and Ethical Standard 1 to make the provisions in that Part consistent with the revised assurance terms and concepts in ISAE 3000 (Revised).
You can register to observe the meeting now and access the meeting papers on the XRB website.
Save the date!
Tom Seidenstein, newly appointed Chair of the International Auditing and Assurance Standards Board (IAASB), and Fiona Campbell, Deputy Chair of the IAASB, will be visiting the XRB in Wellington on 2 March.
Tom will deliver a presentation at 5.30 pm on Monday 2 March in Wellington where he will give a general update on the IAASB’s current projects.
We will be sending out details about the event soon, so keep an eye out and be sure to register for it.
IESBA Proposes Significant Revisions to International Independence Standards
Professional & Ethical
The International Ethics Standards Board for Accountants (IESBA) has released two exposure drafts aimed at strengthening the non-assurance services and the fee-related independence provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards).
“Auditor independence, in fact and in appearance, is fundamental to public confidence in the financial statement audit, and in turn in the integrity of the entire financial system,” said IESBA Chairman Dr. Stavros Thomadakis. “Our proposals are a timely response to growing public perceptions about the need to reinforce auditor independence, as well as specific concerns from the regulatory community and the Public Interest Oversight Board, especially in relation to audits of PIEs. The more stringent provisions concerning the offer of NAS to PIE audit clients, as well as the transparency and other substantive proposals concerning fees, further raise the bar on auditor independence in the public interest.”
Among the key changes proposed to the non-assurance (NAS) provisions are:
- A prohibition on providing NAS to an audit client that is a public interest entity if a self-review threat to independence will be created;
- Further tightening of the circumstances in which materiality may be considered in determining the permissibility of a NAS;
- Strengthened provisions regarding auditor communications with those charged with governance, including, for public interest entities, a requirement for NAS pre-approval by those charged with governance; and
- Stricter requirements regarding the provision of some NAS, including certain tax and corporate finance advice.
The NAS exposure draft also includes enhanced guidance to assist firms in evaluating the level of threats to independence when providing NAS to audit clients.
The proposed revisions to the fee-related provisions of the Code include:
- A prohibition on firms allowing the audit fee to be influenced by the provision of services other than audit to the audit client;
- In the case of public interest entities, a requirement to cease to act as auditor if fee dependency on the audit client continues beyond a specified period; and
- Communication of fee-related information to those charged with governance and to the public to assist their judgements about auditor independence.
The Fees exposure draft also includes enhanced guidance on identifying, evaluating and addressing threats to independence in relation t other fee-related matters, including the proportion of fees for services other than audit to the audit fee.
We encourage you to read both the EDs and submit your views to the NZAuASB, either in writing by 3 April 2020 or by attending one of our planned outreach activities.
Your views will help inform us when developing our response to the IAASB, and when considering whether there are any compelling reasons for the proposals to be modified for application in New Zealand. This is important, as the finalised proposals affect all assurance practitioners in New Zealand that apply our standards.
You can also respond directly to the IESBA on the exposure drafts by 4 May 2020.
We will provide you more details about our planned outreach activities soon.
IESBA Proposed Revision to the International Code Addressing the Objectivity of Engagement Quality Reviewers
Professional & Ethical
The IESBA approved an ED in December 2019 in response to the IAASB’s proposal, in its new standard ISQM 2Engagement Quality Review, to require a mandatory rotation of 2 years before an engagement partner can take on the role of engagement quality reviewer.
In this ED the IESBA proposes to add application material to describe the different types of threat that may be created when an individual is appointed engagement quality reviewer after having served on the audit engagement team, the factors that are relevant in evaluating the level of such threats, and actions that might be safeguards to address the threats.
The proposed revisions do not establish a requirement in the IESBA Code for a specific cooling-off period. Rather, the IESBA has determined to leave it to the IAASB to establish in ISQM 2 whether a cooling-off requirement should be introduced.
We are particularly interested in hearing whether you agree with the IESBA view that it is more appropriate for the IAASB to determine a cooling off period before an individual is appointed to the EQR role after serving as the engagement partner.
 Proposed International Standard on Quality Management 2, Engagement Quality Reviews
 International Auditing and Assurance Standards Board
IESBA Revises Part 4B of the International Code of Ethics
Professional & Ethical
The IESBA has released its revisions to Part 4B of the International Code. The revisions, developed in coordination with the International Auditing and Assurance Standards Board, amend Part 4B to reflect terms and concepts used in ISAE 3000 (Revised).
The main revisions include:
- Changes in key terminology, including a revised definition of the term “assurance client”;
- Amendments to certain independence requirements in light of the revised assurance client definition;
- Greater clarity as to the parties to an assurance engagement and their roles and responsibilities, and the related independence requirements that apply; and
- A clearer distinction between the types of assurance engagement covered in Parts 4A (addressing independence for audit and review engagements) and Part 4B of the Code.
IAASB Releases Auditor Reporting Update
The International Auditing and Assurance Standards Board’s Auditor Reporting Implementation Working Group recently published a project update in the form of a Communique, which provides an update on the IAASB’s auditor reporting post implementation review (PIR) of the revised auditor reporting standards. The Communiqué also includes other relevant news and information about the PIR.
We will be participating in the IAASB’s PIR activities so will be calling on our New Zealand stakeholders for information to assist us and the IAASB in determining what actions need to be taken regarding auditor reporting.
Have your say
We are currently consulting on the matters set out in the table below.
We welcome your comments and feedback, either formal or informal, by the due dates below.
You can submit your comments directly from the Exposure Draft page on our website following the links below.
Proposed Revision to the Code Addressing the Objectivity of Engagement Quality Reviewers
Proposed Revisions to the Non-Assurance Services Provisions of the Code
3 Apr 2020
Proposed Revisions to the Fee-Related Provisions of the Code
3 Apr 2020
This NZAuASB Update is intended to provide subscribers with a summary of the recent activities of the New Zealand Auditing and Assurance Standards Board (NZAuASB). Links to websites are correct at the time of publication. Subscribers should not rely on this newsletter as a definitive publication of updates. The External Reporting Board and its sub-Board the NZAuASB do not guarantee, and accept no legal liability whatsoever arising from or connected to, the accuracy, reliability, currency, timeliness or completeness of this newsletter. The information contained in this newsletter does not constitute advice and should not be relied upon as such.