Tuesday 14 July 2020

PIOB METHODOLOGY

The PIOB Methodology is based on the following elements and work flow:

Oversight plans Monitoring comment letters Observations Public Interest Responsiveness

OVERSIGHT PLANS

Oversight Plans are developed on a yearly basis to guide the nature and scope of the PIOB oversight work. An oversight team is assigned to each committee to carry out this task together with the PIOB staff based on past experience with each SSB, the PIOB’s confidence in SSB and CAG members, their performance, and the content of their strategy and work program.
The oversight team assignments are changed every year to reduce the risk of “regulatory capture”.
Close cooperation between Board members and between the Board and the Secretariat is crucial to ensure the continuity of oversight processes.
The oversight Plans are published on the PIOB website in December prior to start of the oversight year.

PIOB OVERSIGHT THIS YEAR [2020]

IAASB and IAASB CAG

IESBA and IESBA CAG

NOMINATING COMMITTEE

PREVIOUS YEARS

2019

IAASB and IAASB CAG

IESBA and IESBA CAG

IAESB and IAESB CAG

CAP

NOMINATING COMMITTEE

2018

IAASB and IAASB CAG

IESBA and IESBA CAG

IAESB and IAESB CAG

CAP

NOMINATING COMMITTEE

2017

IAASB and IAASB CAG

IESBA and IESBA CAG

IAESB and IAESB CAG

CAP

NOMINATING COMMITTEE

2016

IAASB and IAASB CAG

IESBA and IESBA CAG

IAESB and IAESB CAG

CAP

NOMINATING COMMITTEE

2015

IAASB and IAASB CAG

IESBA and IESBA CAG

IAESB and IAESB CAG

CAP

NOMINATING COMMITTEE

2014

IAASB and IAASB CAG

IESBA and IESBA CAG

IAESB and IAESB CAG

CAP

NOMINATING COMMITTEE

2013 - 2012

IAASB and IAASB CAG

IESBA and IESBA CAG

IAESB and IAESB CAG

CAP

NOMINATING COMMITTEE

Expected IAASB Activity in 2020

In 2020 the IAASB will finalize and approve the three Quality Management Standards (ISQM 1, ISQM 2 and ISA 220).

On ISQM 1 (Quality Management at audit firm level), the PIOB has stressed the importance to clearly state high quality audits as the objective of a quality management system, rather than focusing only on compliance with professional standards. The audit firms’ business model should not interfere with Audit Quality and the PIOB recommended the IAASB to include consideration of the governance structure of the firm, adherence to ethical requirements by the audit firm management, and the incentive structure of partners and staff. The PIOB has also recommended coordination with the IESBA, and to consider complexity and scalability of the standard, which may impede implementation by smaller firms.

On ISQM 2 (Engagement Quality Reviews), the PIOB recommended to extend Engagement Quality Reviews (EQRs) to all PIEs and to strengthen the requirements for EQR performance, as well as to coordinate with IESBA the overlapping ethical requirements (e.g. auditor independence, objectivity, EQRs, cooling-off period of the Engagement Quality Control Reviewer).

On ISA 220 (Quality Management at audit engagement level), the PIOB suggested to include the respect of public interest and of ethical standards as an important objective of a Quality Management System.

The IAASB will finalize the Extended External Reporting project, which aims at providing non-authoritative guidance to practitioners who perform assurance engagements in accordance with ISAE 3000 (Revised) on the different types of external reporting (financial and non-financial information).

The IAASB plans to publish the ED of ISA 600. The standard deals with Group Audits and the PIOB requested to make clear which public interest issues the IAASB intends to address with the project, given that group audits affect the most systematically important entities.

The IAASB will work on Technology and Audits of Less Complex Entities, as well as on the Information Gathering and Research activities included in its SWP (e.g. fraud and going concern).

Overlapping issues with the IESBA will be discussed by the IAASB and coordination between the two SSBs will continue to take place.

Oversight Activities Planned in 2020

The PIOB oversees the standards developed by the SSBs and monitors the progress of the projects/initiatives undertaken by the SSBs, which are included in their Strategies and Work Plans. The oversight activity includes the review of the Exposure Drafts and their evolution, the comment letters submitted by respondents and all the documentation prepared by the SSBs for each meeting. The PIOB is willing to engage more with the SSBs staff and Task Forces members to enhance the dialogue and the communication.

PIOB staff will keep updating the list of Public Interest Issues on the main IAASB projects, on the basis of the discussion held at the PIOB Board meetings, and will keep communicating them to the IAASB, on a quarterly basis. These lists will keep being published in the PIOB website. The PIOB will monitor how these issues are addressed by the IAASB during the development of standards.

PIOB staff will prepare Briefing Memos for the PIOB Board members who will observe the IAASB and CAG meetings. Observer will prepare their Observation Memos for each meeting, which will be discussed at the PIOB Board quarterly meetings.

Expected IESBA Activity in 2020

In 2020 the IESBA will finalize and approve the “Role and Mindset Expected of Professional Accountants” provisions (R&M - formerly Professional Skepticism). The ED published in 2019 proposed the applicability of professional judgment to all Professional Accountants (PAs) as well as the requirement to exercise professional judgment with an “inquiring mind”. The PIOB had supported the idea that a minimum level of Professional Skepticism, or other suitable term, should be applied by all PAs.

The IESBA will progress its work on the Non-Assurance Services (NAS) and Fees projects and plans to complete them by the end of the year.

The PIOB had recommended a significant revision of NAS, to address independence issues. The IESBA proposals for NAS set a prohibition for audit firms and networks to provide NAS to PIE audit clients whenever a self-review threat is created. The requirement introduced to obtain agreement of Those Charged With Governance (TCWG) before providing NAS to audit clients has responded to PIOB’s suggestions.

On Fees, the IESBA has introduced, among others, new provisions: to establish a quality management system and to determine the sufficiency and appropriateness of resources assigned to the engagement; requirement to communicate fees to TCWG and publicly disclose fee-related information. The PIOB had recommended to consider the impact that fees have on audit quality and on the auditor’s independence.

For both NAS and Fees projects, the definition of PIEs becomes crucial as it determines the categories of entities subject to stricter provisions in the Code. The IESBA decided to accelerate this project, which is included in its 2019-2023 Strategy and Work Plan (SWP).

The Technology Working Group (WG) will provide its report to help determining the direction this initiative will take. It may translate into a project to revise provisions in the Code of Ethics or rather to end up in non-authoritative guidance. As a consequence of the increased use of technology and the current lack of guidance, the PIOB suggested the IESBA to develop a framework for evaluation of ethical issues and biases when firms use automation and artificial intelligence to perform audit procedures.

The Tax Planning initiative will conclude its fact-finding activity and the WG’s report will determine what kind of actions the IESBA will take.

Phase 2 of the E-Code will be finalized during the year.

Overlapping issues with the IAASB will be discussed by the IESBA and coordination between the two SSBs will continue to take place.

Oversight Activities Planned in 2020

The PIOB oversees the standards developed by the SSBs and monitors the progress of the projects/initiatives undertaken by the SSBs, which are included in their Strategies and Work Plans. The oversight activity includes the review of the Exposure Drafts and their evolution, the comment letters submitted by respondents and all the documentation prepared by the SSBs for each meeting. The PIOB is willing to engage more with the SSBs staff and Task Forces members to enhance the dialogue and the communication.

PIOB staff will keep updating the list of Public Interest Issues on the main IESBA projects, on the basis of the discussion held at the PIOB Board meetings, and will keep communicating them to the IESBA, on a quarterly basis. These lists will keep being published in the PIOB website. The PIOB will monitor how these issues are addressed by the IESBA during the development of standards.

PIOB staff will prepare Briefing Memos for the PIOB Board members who will observe the IESBA and CAG meetings. Observer will prepare their Observation Memos for each meeting, which will be discussed at the PIOB Board quarterly meetings.

Expected Nominating Committee (Nom Com) Activity in 2020

The IFAC Nom Com will run the selection process for the 2021 open positions, advertised in the Call for Nominations (CFNs - one for the IAASB, one for the IESBA, one for the IFAC Committees, which includes vacancies of Nom Com members).

The IESBA Chair position has not been advertised as the current Chair is eligible for re-appointment.

The 2021 CFNs continue to refer to three categories of members: Practitioners, Non-Practitioners, and Public Members. The multi-stakeholder approach foreseen in the MG Reforms has not been translated yet into a different composition of the SSBs. However, for Public Members and Non-Practitioners, the CFNs have brought in the categories of institutional investors and nominees from regulatory bodies, among the others.

Following discussions with the MG and IFAC, the PIOB suggested that reforms may be agreed in the course of 2020 and the structure and composition of SSBs may be affected in 2021, having an impact on the structure, the categories, the size of SSBs, and the terms of current and new selected members. The 2021 CFNs acknowledged this possible scenario, mentioning that changes may potentially affect the term of service of current members.

The transition to the new model will require a number of tasks, among which: costing, skill matrix, the establishment of a “new” Nominating Committee, change of SSBs’ Terms of Reference.

Oversight Activities Planned in 2020

The PIOB will continue overseeing the nominations cycle, as part of its mandate. The nominations cycle, including the Nom Com’s activity and the PIOB’s oversight activity, is described in Appendix I.

PIOB staff and the PIOB Board member designated as observer of the Nom Com review the documentation prepared by IFAC staff for each Nom Com meeting and teleconference and identify the relevant public interest issues/recommendations, which are raised by the observer during the meeting. PIOB’s suggestions and recommendations may be submitted to IFAC staff in advance of the meetings. Before the CFN is discussed, the PIOB usually submits its written comments to IFAC staff.

The PIOB follows up on how its recommendations/comments have been addressed by the Nom Com. These comments may relate to the CFN, the composition of SSBs and their categories of members, disciplinary actions on specific members, the travel support program.

The PIOB ultimately needs to deliberate on appointments and re-appointments and provide its approval on membership of the IAASB, the IESBA and the Nom Com (non ex-officio members).

PIOB staff will prepare Briefing Memos for the PIOB Board members who will observe the Nom Com meetings. Observers will prepare their Observation Memos for each meeting, which will be discussed at the PIOB Board quarterly meetings.

EXPECTED ACTIVITY FOR 2019

The IAASB’s agenda for 2019 is ambitious, as the Board will continue working with the priority projects that were not finalized in 2018. This includes: ISA 315, the standard dealing with the identification and assessment of risks of material misstatements; and the three quality management standards (ISQM1, quality at the firm level; ISQM2, engagement quality reviews; and ISA 220, quality at the engagement level). In addition to them, the IAASB will work with the projects on agreed-upon-procedures (ISRS 4400); external enhanced non-financial reporting; Data Analytics; and ISA 600, on Group Audits. These projects would be finalized either in 2019 or during 2020.

The IAASB has finalized its IAASB 2020-2023 SWP early in 2019.

The PIOB expects that the IAASB will continue liaising and working together with the IESBA on common issues.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IAASB Karen Stothers
Karel Van Hulle
Markus Grund
IAASB CAG Maria Helena Pettersson

OVERSIGHT ASSURANCE MODEL FOR 2019

In 2019 the PIOB will apply Oversight Assurance Model 1 (high intensity) with 100% direct observations in 2019.

EXPECTED ACTIVITY FOR 2019

In 2019, the IESBA will be working on the initiatives and projects identified in its 2019-2023 SWP.

In particular, the IESBA will give priority to its pre-commitments (NAS, PS which will be developed under a different title). It will start working on Technology and Service Delivery Models. It will be involved in fact finding on Tax Planning and it will work on the ED of Part 4B of the Restructured Code (vs. ISAE 3000).

The outcome of the roundtables on PS and NAS will help address the relevant issues and determine the direction the IESBA will take on those two projects.

All the projects are highly relevant from a public interest perspective and will be overseen by the PIOB.

The IESBA CAG will elect a new Chair in 2019.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IESBA Jane Diplock
Jules Muis
IESBA CAG Maria Helena Pettersson

OVERSIGHT ASSURANCE MODEL FOR 2019

In 2019 the PIOB will apply Oversight Assurance Model 1 (high intensity) with 100% direct observations in 2019.

EXPECTED ACTIVITY FOR 2019

During the first half of 2019, the IAESB will continue working on the projects on Professional Skepticism (PS) and Information and Communications Technology (ICT); as well as on the Public-Sector Accounting, Reporting and Assurance project (PSARA). The Board plans to finalize these projects by June 2019, just before the Panel takes over. Revisions to the extant standards that result from these projects will be submitted for PIOB approval in September 2019.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IAESB Karen Stothers
IAESB CAG  

OVERSIGHT ASSURANCE MODEL FOR 2019

In 2019 the PIOB will apply Oversight Assurance Model 1 (high intensity).

* The IAESB has been replaced by the International Panel on Accounting Education in September 2019.
This new panel is not under PIOB oversight.

EXPECTED ACTIVITY FOR 2019

The CAP agreed on a 2019 Work Program (WP) during its October meeting. As the Compliance Program is a staff-driven program, staff believes that this program will be carried out no matter what the CAP’s oversight structure is.

The 2019 WP focuses on promoting and supporting the quality of PAOs; promoting and disseminating information on adoption and implementation of international standards (e.g., through member bodies’ profiles published on the website); and enhancing reporting tools, such as the SMO Action Plans).

OVERSIGHT ASSURANCE MODEL FOR 2019

In 2019 the PIOB will apply Oversight Assurance Model 1 (high intensity).

* The CAP will be replaced by the IFAC Membership Committee starting in January 2020.
This Committee will not be under PIOB oversight.

EXPECTED ACTIVITY FOR 2019

The PIOB will continue monitoring the nominations cycle during 2019, as part of its oversight mandate.

Moreover, the Interim Nominating Committee, in charge of the selection of the new IAASB Chair, will be observed by the PIOB Chair.

Assuming that no change occurs in 2019, the NC will follow the process summarized in Appendix II, to fill the vacancies at the IAASB, the IESBA and the NC. Final nominations, once approved by the IFAC Board, will be submitted for PIOB approval, usually in September.

Under the Oversight Plan approved for the year, PIOB members observing NC meetings may be provided with Briefing Memos (BMs) prepared by the Staff whenever the topics discussed may require it. The BMs would include relevant insight on the specific NC meeting and any issue that would require the observer’s attention or follow up.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
NOMCOM Aileen Pierce

OVERSIGHT ASSURANCE MODEL FOR 2019

In 2019 the PIOB will apply Oversight Assurance Model 1 (high intensity) with 100% direct observations in 2019.

EXPECTED ACTIVITY FOR 2018

The IAASB expects to finalize ISA 540 in 2018, following further revisions to the standard required in response to comment letters. All the other projects should be completed in 2019 or 2020.

The revision of ISA 315 needs to progress during the year given that this standard closely supports the application of ISA 540, which could be completed by June 2018. The exposure drafts for the ISQC1 and ISA 220 are expected by September 2018, and that of ISA 600 would follow.

In the immediate, work from the projects on Professional Skepticism, Data Analytics and EER & Integrated Reporting are expected to materialize, e.g., in the provision of input or proposals for the ISAs being revised.

The PIOB expects that the IAASB, the IESBA and the IAESB will further coordinate their work on common issues.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IAASB Karen Stothers
Karel Van Hulle
Michael Holm
IAASB CAG Maria Helena Pettersson
Karen Stothers

OVERSIGHT ASSURANCE MODEL FOR 2018

In 2018 the PIOB will apply Oversight Assurance Model 1 (high intensity) with 100% direct observations in 2018.

EXPECTED ACTIVITY FOR 2018

In 2018 the IESBA will be completing the review of Part C of the Code – Phase II (Gifts, Hospitality and other Inducements) and will start working on its next Strategy and Work Plan (2019-2023).

It will also have to decide how to review NAS, from a substantial perspective, and how to advance on the long-term initiative on Professional Skepticism.

These projects are highly relevant from a public interest perspective and will be closely overseen by the PIOB.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IESBA Aileen Pierce
Jules Muis
Maria Helena Petterson
IESBA CAG Maria Helena Pettersson
Karen Stothers

OVERSIGHT ASSURANCE MODEL FOR 2018

In 2018 the PIOB will apply Oversight Assurance Model 1 (high intensity) with 100% direct observations in 2018.

EXPECTED ACTIVITY FOR 2018

The IAESB plans to finalize the revision of IES 7 in July 2018, and submit the standard for PIOB approval in September 2018; and to progress the new projects.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IAESB Aileen Pierce
Shigeo Kashiwagi
IAESB CAG Aileen Pierce
Karen Stothers

OVERSIGHT ASSURANCE MODEL FOR 2018

In 2018 the PIOB will apply Oversight Assurance Model 1 (high intensity).

EXPECTED ACTIVITY FOR 2018

The CAP is expected to implement its 2018 Work Program. According to this plan, the CAP will continue with its regular activities related to Action Plans submitted by member bodies and Dashboard Reports, monitoring compliance with SMOs by member bodies under the new enforcement framework, enhancing the Status of Adoption Reports and advancing the analysis of data collected for these reports, reviewing the tools currently used by the program, such as the Action Plans, and dealing with requests for membership with IFAC.

OVERSIGHT ASSURANCE MODEL FOR 2018

In 2018 the PIOB will apply Oversight Assurance Model 2 (medium intensity).

EXPECTED ACTIVITY FOR 2018

At the time this document is drafted, it is not known how the reform process will influence the composition and the working cycle of the Nominating Committee. Assuming that things will not change in 2018, the PIOB will continue reviewing the CFN and observing the full nominations cycle.

The NC will follow the process summarized in Appendix II, to fill the vacancies at SSBs, NC and CAP. Final nominations, once approved by the IFAC Board, will be submitted for PIOB approval, usually in September.

However, as the terms of the three SSBs Chairs have been extended until the end of 2018, before that deadline a decision must be made on the renewal/reappointment of those positions.

While the 2019 CFN acknowledges the vacancies of the three SSBs Chairs, a call for applications for the IAASB Chair is foreseen early in 2018, while for the other two SSB Chairs, it will be determined whether there is a need to issue call for applications.

Under the Oversight Plan approved for the year, PIOB members observing NC meeting may be provided with Briefing Memos (BMs) prepared by the Staff whenever the topics discussed may require it. The BMs would include relevant insight on the specific NC meeting and any issue that would require the observer’s attention or follow up.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
NOMCOM Eddy Wymeersch
Maria Helena Pettersson

OVERSIGHT ASSURANCE MODEL FOR 2018

Given the importance of nominations to the SSBs, the outstanding topics such as the definitions of public members and non-practitioners, and the suggestions for reform leading to a more independent Nom Com, we have concluded that an Oversight Model 1 (high intensity) will be applied in 2018 and 100% of the meetings will be observed.

EXPECTED ACTIVITY FOR 2017

During 2017, the Board will progress work on its current projects, but none of the projects will be finalized. ISA 540, originally scheduled for final approval in December 2017, will be approved in March 2018. The ED of ISA 540 is planned for March 2017. The EDs for Quality Control and Group Audits are expected during 2017 and 2018, respectively. A draft of the ED for ISA 315 may be ready during the second half of the year.

In relation to PS, the IAASB is planning to consider PS-related revisions for each one of the ISAs included in the current and new projects (e.g.: ISA 540, ISA 315, ISA 600, etc.). Bilateral and trilateral coordination on this project is expected between the IAASB, the IESBA and IAESB during 2017.

The IAASB 2017-2018 Work Plan includes a new project on “Audit Evidence”, which would include Data Analytics, PS and ISA 500, “Audit Evidence”; and will consider revisions to ISA 230, “Audit Documentation”; ISA 520, “Analytical Procedures”; and ISA 530, “Audit Sampling”, and could commence later in 2017.

It is expected that the IAASB will meet with IFIAR and regulators (e.g.; Basel and IOSCO) during 2017, to discuss progress and details of its priority projects. Similarly, liaison with the IASB on matters related to disclosures and materiality; ISA 540; Audit Quality and Professional Skepticism could take place during the year.

In 2017 expires the term of Professor Arnold Schilder as the IAASB’s Chair. The process to select his successor will be overseen by the PIOB.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IAASB Karel Van Hulle
Michael Holm
IAASB CAG Maria Helena Pettersson

OVERSIGHT ASSURANCE MODEL FOR 2017

Several elements advise keeping an Model 1 (High Intensity) in 2017, with 100% direct observation of all Board and CAG meetings. Specifically: (i) the number of significant projects under development is high. They are projects with interrelated issues which deal with areas where stakeholders (MG members, regulators, inspection bodies, investors) have expressed concerns with the work performed by auditors; (ii) the number and complexity of the projects could create some tensions in the Board, in terms of resources available; the need for additional time to discuss the projects and produce exposure drafts; and the need to move forward at a pace that will ensure timely delivery of the final outcomes, while not compromising quality; and (iii) several of the projects will require effective and timely coordination between IAASB Task Forces, and with the IESBA and the IAESB. On top of this, the IAASB plans to consider activities on a new project (Audit Evidence), under its 2017-2018 Work Program.

EXPECTED ACTIVITY FOR 2017

In 2017 the IESBA will be working on the restructuring of the different parts of the Code (already approved as close-off documents, such as Part C – Phase I, Long Association and NOCLAR) and will be completing the Structure of the Code itself (Phase I and II) and the Safeguards project (Phase I and II). Only by the end of the year (December 2017) the IESBA plans to approve all those standards, which will be therefore submitted to the PIOB for approval in March 2018.

All these projects are highly relevant from a public interest perspective and will be closely overseen by the PIOB.

The IESBA Chair will end his first term in 2017 and is eligible for re-appointment.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IESBA Aileen Pierce
Jules Muis
Maria Helena Petterson
IESBA CAG Maria Helena Pettersson
Jules Muis

OVERSIGHT ASSURANCE MODEL FOR 2017

Considering the agenda of the IESBA in 2017 and the projects which will need to be completed, especially on the restructuring exercise, the PIOB will apply Oversight Assurance Model 1 (high intensity) with 100% direct observations in 2017.

EXPECTED ACTIVITY FOR 2017

There is still uncertainty surrounding the structure of the Board and of the CAG. The IAESB needs to make a final decision regarding its future structure and operational features. The same applies to the CAG.

In 2017, under its new Strategy, the IAESB will continue working with the revision of IES 7, with the aim to finalize this standard in 2018. In addition, the Board plans to develop additional non-authoritative guidance material for specific IESs; enhance engagements with key stakeholders to raise awareness of the IESs and help increase adoption of the standards. The IAESB plans to start a post-implementation review of the revised IESs in 2018.

The IAESB will continue participating in the joint IAASB/IESBA/IAESB Task Force for Professional Skepticism (PS), a new project under its 2017-2018 Work Program. The Board will start this project by performing a literature review, to determine the next steps regarding PS in education standards. The IAESB will also start a new project on Information and Communications Technology during 2017.

Chris Austin, the IAESB’s Chair, and Keith Bowman, the IAESB CAG’s Chair, will end their terms on December 31, 2017.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
IAESB Aileen Pierce
IAESB CAG Aileen Pierce
Jules Muis

OVERSIGHT ASSURANCE MODEL FOR 2017

Based on the uncertainty on the future structure and/or operations of the Board and the CAG and the fact that the Board will start new activities in the context of implementing its 2017-2021 Strategy and 2017-2018 Work Program, an Model 1 (High Intensity) with a 100% direct observation of all Board and CAG meetings will be applied in 2017.

EXPECTED ACTIVITY FOR 2017

The CAP is expected to implement its 2016-2018 Strategy and its 2017 Work Program:

  • To continue working with enhancements to the monitoring of, and reporting by, IFAC member bodies; and the implementation of the revised enforcement framework for IFAC member bodies;
  • Encouraging member bodies to adopt and implement international standards and best practices for the accountancy profession;
  • Providing support to member bodies.

The CAP will also continue with its regular activities related to Action Plans submitted by member bodies and requests received for membership with IFAC.

One of the most important CAP activities, from the PIOB’s perspective, will be the CAP reporting on, and monitoring of, the status of adoption of international standards in different jurisdictions. Accurate information on the status of adoption and implementation of the standards would be the goal. The CAP’s work in monitoring adoption and implementation would enable the CAP to provide feedback to SSBs about problems or practical issues encountered by member bodies or jurisdictions in the adoption or implementation of the standards, which could trigger SSBs’ remedial actions to address those matters.

Following the first draft of a report prepared in October 2016, an updated report on the status of adoption of international standards could be expected during 2017.

The PIOB will monitor these activities throughout the year, including how the different categories (e.g.: adoption, partial adoption and no-adoption) are defined and offer accurate information, mainly through the observation of CAP meetings; and will continue offering its public interest perspectives to the Program.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
CAP Jules Muis

OVERSIGHT ASSURANCE MODEL FOR 2017

In view of the activity expected for the CAP in 2017, and the role the CAP would play in relation to monitoring adoption and implementation of the standards, an Oversight Model 2 (medium intensity), with a medium intensity of observations, will be applied during 2017. This model is the same than in 2016..

EXPECTED ACTIVITY FOR 2017

The PIOB will continue reviewing the CFN and observing the full nominations cycle. The NC will follow the process summarized in Appendix II, to fill the vacancies at SSBs, NC and CAP. Final nominations, once approved by the IFAC Board, will be submitted for PIOB approval, usually in September.

The public interest issues mentioned in the previous paragraph will need to be closely followed up and the PIOB expects that they will be closed in the year (i.e. PM definition).

The other public interest issue, discussed in the last years and still not solved, is the independence of the nominating Committee, in particular of the NC Chair (IFAC President). Having a Chair, independent from IFAC would help addressing the independence issues raised by the PIOB and by the MG.

Another aspect the PIOB will pay attention to is the geographical representation across the SSBs and the categories of nominating organizations behind the candidates (i.e. IFAC member bodies vs. others and/or self-nominations), especially for the category of PMs.

In line with the 2017-2019 PIOB strategy plans, oversight on the NC in 2017 will be strengthened by focusing more on the first phase of the selection process. This phase refers to the shortlisting of candidates once all cv’s are received. Greater scrutiny will be paid to the screening of the cv’s and to the rationale for determining the short list of candidates. This approach should help understanding why, for example, self-nominations, though increasing in number during the years, rarely reach the interview stage and the final appointments.

Under the Oversight Plan approved for the year, PIOB members observing NC meeting may be provided with Briefing Memos (BMs) prepared by the Staff whenever the topics discussed may require it. The BMs would include relevant insight on the specific NC meeting and any issue that would require the observer’s attention or follow up.

OVERSIGHT ASSURANCE TEAM

TEAM MEMBER
NOMCOM Jane Diplock
Eddy Wymeersch

OVERSIGHT ASSURANCE MODEL FOR 2017

Given the importance of nominations to the SSBs, the outstanding topics such as the definitions of public members and non-practitioners, and the suggestions for reform leading to a more independent Nom Com, we have concluded that an Oversight Model 1 (high intensity) will be applied in 2018 and 100% of the meetings will be observed.

EXPECTED ACTIVITY FOR 2016

During 2016, the IAASB will continue progressing work on its new projects (Quality Control, Group Audits; Professional Skepticism, and ISA 540), although none of them will be finalized during the year. The IAASB agenda for the year will be very challenging, considering that these projects relate to complex subject matters, in areas where stakeholders (MG members, regulators, inspection bodies, investors) have expressed concerns with the work performed by auditors. The project on ISA 250 could be finalized by September 2016.

OVERSIGHT ASSURANCE TEAM

TEAM LEADER TEAM MEMBER
2016 Karel Van Hulle Maria Helena Pettersson
Chandu Bhave

OVERSIGHT ASSURANCE MODEL FOR 2016

Following the PIOB conclusions regarding treatment of going concern in the recent revision of the auditor’s report; the relevance of the revision of ISA 540 for the audits of financial instruments (IFRS 9); the impact of the exposed Invitation to Comment on Group Audits, Quality Control, Professional Skepticism; and the need to ensure consistency of the revisions to ISA 250 in relation to the IESBA’s NOCLAR, the PIOB will apply an Oversight Assurance 2 (high intensity) with 100% direct observation of all Board and CAG meetings in 2016.

EXPECTED ACTIVITY FOR 2016

In 2016 the IESBA will be approving the close-off documents of NOCLAR and Long Association and will be further progressing with projects such as the Structure of the Code and Safeguards.

All these projects are highly relevant from the PIOB’s public interest perspective and will be closely overseen by the PIOB.

OVERSIGHT ASSURANCE TEAM

TEAM LEADER TEAM MEMBER
2016 Jane Diplock Michael Holm

OVERSIGHT ASSURANCE MODEL FOR 2016

Considering the busy agenda of the IESBA in 2016 and the progress it will have to achieve on the important and complex projects, the PIOB will apply Oversight Assurance Model 2 (high intensity) with 100% direct observations in 2016.

EXPECTED ACTIVITY FOR 2016

At the top of the IAESB activity for 2016 will be the exposure, discussion of comment letters and finalization of its new 2017-2021 Strategy, which -as exposed- includes new IESs/guidance on professional skepticism and IT competences (data analytics, cloud-based accounting), in addition to enhancements to current IESs (e.g.: IES 7, "Continuing Professional Development").

In addition to the Strategy, the IAESB is expected to finalize implementation guidance and approve a process for maintenance of the IESs. The implementation guidance will not require the PIOB approval, given its non-authoritative nature.

OVERSIGHT ASSURANCE TEAM

TEAM LEADER TEAM MEMBER
2016 Aileen Pierce Michael Holm
Karel Van Hulle

OVERSIGHT ASSURANCE MODEL FOR 2016

Based on the relevant role the PIOB recognizes for the IAESB and the fact that in 2016 the Board will finalize its new Strategy for the next five years, the PIOB will apply an Oversight Assurance Model 3 (medium intensity) with a 100% direct observation of all Board and CAG meetings in 2016.

EXPECTED ACTIVITY FOR 2016

In 2016 the CAP will start implementing its new 2016-2018 Strategy: (i) enhancing monitoring of and reporting by IFAC member bodies with the objective to have CAP staff produce qualitative and quantitative analyses (including statistics) regarding the status of adoption of international standards and compliance with the SMOs by member bodies. This could require coordination or joint-work with the SSBs. The new Dashboard Reports (DBRs) and new DBR database would support this. The CAP plans to publish all DBRs in the CAP’s website; and (ii) reviewing the current enforcement framework for IFAC member bodies, in order to focus on the qualitative progress made by IFAC member bodies in the implementation of the SMOs.

OVERSIGHT ASSURANCE TEAM

TEAM LEADER TEAM MEMBER
2016 Jules Muis Chuck Hortsmann

OVERSIGHT ASSURANCE MODEL FOR 2016

In view of the activity expected for the CAP in 2016, and the role the CAP play in relation to monitoring adoption and implementation of the standards, the PIOB will apply an Oversight Assurance Model 3 (medium intensity), with direct observation of 3 out of 4 meetings in 2016.

EXPECTED ACTIVITY FOR 2016

The PIOB will continue reviewing the CFN and observing the full nominations cycle.

Some PIOB concerns will still deserve some discussions in 2016. Some progress was reached with the Public Member (PM) definition used in the 2016 CFN. However the feature of the independence from the profession, along with the sourcing and funding of PMs, still needs to be stressed. That will imply a revision of the definition of Non-Practitioners (NPs), to make it consistent with that of PMs and avoid any overlap within the two categories.

The other public interest issue is the independence of the NC Chair (IFAC President). Having a Chair, independent from IFAC, would help addressing the perception issues, raised by regulators.

The NC will have to deal also with topics such as the rotation cliffs at SSBs, the way to improve geographic representation and consequently how to perform outreach.

OVERSIGHT ASSURANCE TEAM

TEAM LEADER TEAM MEMBER
2016 Eddy Wymeersch Jules Muis

OVERSIGHT ASSURANCE MODEL FOR 2016

Given the importance of nominations to the SSBs, the pending review of the definitions of categories of public members and non-practitioners, we have concluded that an Oversight Model 2 (High Intensity) will be applied in 2016, with a 100% of direct observations.

MONITORING COMMENT LETTERS

In 2014 the PIOB implemented the procedure agreed with the MG in 2013, documenting the treatment of the main recommendations made by members of the MG in comment letters submitted to exposure drafts.

PIOB Staff monitors the status of the disposition of MG comments throughout the different SSB and CAG meetings, asks for clarifications on the concerns raised, and documents this process in a database that includes how the comments are dealt with by the SSB and into the standard.

An identical monitoring system is applied to other stakeholders, such as the comments of EAIG and IFIAR members to standards and strategies.

The database for the different projects is shared with MG and the other stakeholders.

OBSERVATIONS

PUBLIC INTEREST ISSUES LISTS

PIOB staff prepares and updates the Public Interest issues pertaining to each standard under development on a quarterly basis, communicates the list of issues to the SSBs and CAG Chairs.

The PI Lists are also included in the PIOB annual report together with other PIOB recommendations.

BRIEFING NOTES

These are PIOB internal documents prepared by PIOB staff prior to an oversight assignment. They draw attention to important PI issues, including those previously identified by PIOB observers and staff as needing follow-up

OBSERVATION MEMOS

PIOB observers prepare internal observation memos (OM) to formally document each observation and guarantee continuity of oversight. Oms:

  • Reflect the PIOB observer’s assessment on the meeting and the issues discussed.
  • Identify the public interest aspects related to the standards discussed and how they have been dealt with.
  • Highlight the points that would require further action and follow up by the PIOB or PIOB staff.
  • Identify any point that should be reported to the Board, as applicable.

PIOB OVERSIGHT ACTIVITIES

Events calendar

ANALYSIS OF PUBLIC INTEREST RESPONSIVENESS (APIR)

APIRs are analyses of the process of standard development that focus on the review of comment letters received to exposure drafts.

APIRs serve to help determine whether relevant comments have been properly considered, especially those coming from public interest institutions, securities regulators, and investors. CAG chair reports, Task Force documents, and basis-for-conclusions documents are also reviewed. APIRs are prepared by PIOB staff and assist the PIOB in concluding whether to approve a standard or a strategy submitted for approval. In addition, they may include recommendations for a particular SSB, CAG or CAP. APIRs are issued once a standard or a strategy has been completed and is submitted for PIOB approval.