NZAuASB Meeting 6 December 2018
Date And Time
- Level 7
50 Manners Street
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Here is a summary of the main matters considered:
PES 1, International Code of Ethics for Assurance Practitioners
The Board approved revised and restructured Professional and Ethical Standard (PES) 1. The revised and restructured PES 1, based on the International Ethics Standards Board for Accountants’ revised and restructured Code packages together all substantive advancements in ethics and independence over the last four years into a single document, including the new provisions relating to non-compliance with laws and regulations, which came into effect in July 2017 and the revised independence provisions relating to long association and definition of public interest entity which come into effect in December 2018. It also includes recently approved changes related to offering and accepting inducements, including gifts and hospitality.
What has changed?
In addition to significant structural revisions made to the entire Code, the substantive revisions include:
- An enhanced conceptual framework, which includes extensive revisions to “safeguards” throughout the Code that are better aligned to threats;
- Clarification about the applicability of the provisions pertaining to professional accountants in business to assurance practitioners;
- New material to emphasise the importance of understanding facts and circumstances when exercising professional judgement; and
- New material to explain how compliance with the fundamental principles supports the exercise of professional scepticism in an audit or other assurance engagements.
Domestically, the NZAuASB reconsidered whether the compelling reason test continues to be met in respect of previous modifications made to the International Code. Previously the Board had included NZ modifications to align the independence provisions for other assurance engagements with the more prescriptive independence provisions for audit and review engagements. The NZAuASB has now agreed to remove these New Zealand modifications.
The revised and restructured Professional and Ethical Standard 1 becomes effective in June 2019.
Prospective Financial Information
The Board received an update on the progress of the prospective financial information project which has been delayed due to other priorities.
The Board agreed that:
- a New Zealand assurance standard should be principles based and framework neutral;
- the scope of the standard will include pro forma and prospective financial information, but not historical financial information as this is already addressed by the professional standards;
- the standard will build on ISAE (NZ) 3000 (Revised) but not duplicate the requirements of that standard.
The Board will further consider whether to address both financial and non financial information in one standard, noting the IAASB’s progress to date on its EER project.
The Board provided initial feedback on a recommendation from a working group, consisting of nominated Board members and staff, on a possible approach for an alternative engagement (other than an audit or review) for small not-for-profits.
The working group’s recommendation is to investigate using a similar approach /model as that of the Independent Examination regime in the UK to develop the engagement, by engaging with relevant stakeholders and considering the results of the NZAuASB’s previous research on user needs of small New Zealand charities.
The Board has noted its tentative support for the recommended approach, with the need to be very clear that the alternative engagement is not an audit or review, and to engage with expected users of this service to ensure it will meet their needs.
The Board has deferred detailed consideration of the recommended approach to the February 2019 meeting.
Briefing on blockchain and cryptocurrency assurance challenges
The Board is monitoring developments in technology challenges and the use of technologies in the audit, to be prepared for implications to the auditing and assurance standards in New Zealand.
CPA Canada has recently published guidance on Audit Considerations related to Cryptocurrency Assets and Transactions.
The Board received a very informative briefing from a member of the Canadian Audit and Assurance Standards Board and the Director, Audit and Assurance Research from CPA Canada, on the recently published guidance on audit challenges in relation to cryptocurrencies, and the key challenges in terms of assertions and assurance included in the guidance.
This was a good two way exchange about the impact of new technologies on the audit process in our respective jurisdictions and any possible future collaboration.
The Board will continue to discuss possible future collaboration with Canada and other national standard setters as part of the monitoring of technology challenges for audits in New Zealand.