Public Policy and Technical Alert | February 2022
Monday, March 7, 2022
As part of the Center for Audit Quality’s (CAQ) ongoing effort to keep members and stakeholders informed on significant public policy and accounting matters, we are pleased to offer the Public Policy and Technical Alert (PPTA). Each month, the PPTA highlights and examines the regulatory, standard-setting, legislative, and broader financial reporting developments impacting the public company audit profession. Please note that the PPTA is intended as general information and should not be relied upon as being definitive or all-inclusive. The CAQ encourages member firms to refer to the rules, standards, guidance, and other resources in their entirety at the hyperlinks provided below. All entities should carefully evaluate which requirements apply to their respective organizations.
Statement from the Acting Chief Accountant on the FASB’s agenda consultation: Engagement with investors and other stakeholders vital to development of high quality accounting standards
SEC Acting Chief Accountant Paul Munter issued a statement on the FASB’s agenda consultation soliciting feedback about its standard-setting process and its future standard-setting agenda. Munter lauded the “volume of feedback provided to the FASB, with thoughtful responses from a diverse set of stakeholders, including many investors.” He said it is “critically important that the FASB, and the Trustees of the Financial Accounting Foundation in its important oversight role over the FASB, continue to improve processes for obtaining and considering investor and other stakeholder feedback, and for clearly communicating with those stakeholders regarding how that feedback has impacted the standard-setting process.”
Nominations open for qualified candidates to join IESBA as board members
The International Ethics Standard Board for Accountants (IESBA) announced that a global search has begun for highly qualified individuals to fill four volunteer openings for an initial term of service of up to 3 years, commencing January 1, 2023. The Public Interest Oversight Board’s newly formed Standard Setting Boards’ Nominations Committee has issued Invitations for Application, which includes the calls for both IESBA members and members of the International Auditing and Assurance Standards Board (IAASB). The application period will be open until March 30, 2022.
FRC: Guidance – auditor climate related reporting responsibilities under ISA (UK) 720
The Financial Reporting Council (FRC) published a new FRC Staff Guidance, Auditor responsibilities under ISA (UK) 720 in respect of climate related reporting by companies required by the Financial Conduct Authority. This staff guidance also includes a brief reminder of an auditor’s responsibilities under ISA (UK) 720 in respect of the company’s Streamlined Energy and Carbon Reporting disclosures.
IASB issues IFRS Accounting Taxonomy update for disclosure of accounting policies and definition of accounting estimates
The International Accounting Standards Board (IASB) issued an update to the IFRS Accounting Taxonomy 2021 to reflect the amendments:
- Disclosure of Accounting Policies, issued in February 2021, which amended IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements; and
- Definition of Accounting Estimates, issued in February 2021, which amended IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
IAASB: New implementation guide available for quality management for audits of financial statements
The IAASB released First-time Implementation Guide for ISA 220, Quality Management for an Audit of Financial Statements. The guide aims to help stakeholders understand the standard and properly implement its requirements as intended. It does not amend or override ISA 220 or ISQM 1 or 2, the text of which alone are authoritative, and reading it is not a substitute for reading the ISQMs.
IESBA takes action to respond to transformative effects of technology
The IESBA released for public comment proposed revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards). Among other matters, the proposals:
- Draw special attention to the professional competence and confidentiality imperatives of the digital age;
- Address the ethical dimension of professional accountants’ reliance on, or use of, the output of technology in carrying out their work;
- Further enhance considerations relating to threats from the use of technology as well as considerations relating to complex circumstances in applying the Code’s conceptual framework;
- And more.
IESBA addresses independence expectations in group audits
The IESBA released for public comment the Exposure Draft Proposed Revisions to the Code Relating to the Definition of Engagement Team and Group Audits. Among other matters, the proposals:
- Establish new defined terms and revise a number of existing terms, including for application with respect to independence in a group audit context;
- Clarify and enhance the independence principles that apply to individuals involved in a group audit, as well as firms engaged in the group audit;
- More explicitly set out the process to address a breach of an independence provision at a component auditor firm, including reinforcing the need for appropriate communication between the relevant parties and with those charged with governance of the group; and
- Align a number of provisions in the Code to conform to changes in the IAASB’s Quality Management standards.
FRC consults on revised guidance for recognizing key audit partners for local audit
The FRC issued a consultation on proposed changes to its statutory Guidance to the Recognized Supervisory Bodies on the recognition of Key Audit Partners for local audit. The changes have been proposed to address a recommendation made by Sir Tony Redmond in his review of local audit, published in November 2020, to address the issue of capacity in this market. Comments on the consultation are invited by March 28.
PwC’s Tim Ryan Tapped to Lead CAQ Governing Board
Tim Ryan, US Senior Partner and Chair, PwC, has been elected Chair of the Center for Audit Quality’s Governing Board, effective February 28, 2022. The CAQ’s Governing Board is comprised of chief executive officers from leading public company auditing firms and the American Institute of CPAs, as well as three independent board members from investor and issuer communities. The Governing Board provides oversight for the CAQ and leads development of the organization’s strategic agenda.
The Center for Audit Quality is an autonomous, nonpartisan, nonprofit organization dedicated to enhancing investor confidence and public trust in the global capital markets by fostering high-quality public company audits; collaborating with other stakeholders to advance the discussion of critical issues; and advocating policies and standards that promote public company auditors’ objectivity, effectiveness and responsiveness to dynamic market conditions. Based in Washington, D.C., the CAQ is affiliated with the American Institute of CPAs.
The CAQ Public Policy and Technical Alert (PPTA) is intended as general information and should not be relied upon as being definitive or all-inclusive. As with all other CAQ resources, this is not authoritative and readers are urged to refer to relevant rules and standards. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The CAQ makes no representations, warranties, or guarantees about, and assumes no responsibility for, the content or application of the material contained herein and expressly disclaims all liability for any damages arising out of the use of, reference to, or reliance on such material. This publication does not represent an official position of the CAQ, its board, or its members.
Questions and comments about the Public Policy & Technical Alert can be addressed to Matt Sickmiller, Senior Manager, Professional Practice (firstname.lastname@example.org).