IESBA Releases New Independence Rules for Auditors in Non-Assurance Engagements

By:
Chris Gaetano
Published Date:
Apr 30, 2021
audit

The International Ethics Standards Board for Accountants has released new independence rules for auditors meant to significantly strengthen the guardrails around auditor independence in two important areas that have the potential to create incentives influencing auditor behavior: non-assurance services provided to audit clients and fees. Non-assurance services (NAS) include accounting and bookkeeping services, tax services and management consulting services—services that fall outside the audit engagement. The new measures are in the form of revisions to the Non-Assurance Services (NAS) and fee-related provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code).

The package includes:

  • * A far-reaching prohibition on audit firms from providing a NAS that might create a self-review threat to an audit client that is a public interest entity.

  • * New provisions to enable and promote more robust engagement between auditors and those charged with governance of public interest entities about independence matters relating to NAS and fees.

  • * Strengthened provisions to address undue fee dependency on audit clients.

  • * Provisions to stimulate greater public transparency about fees paid by audit clients that are public interest entities to assist stakeholder judgments about auditor independence.

  • * Comprehensive guidance to steer auditors’ threat assessments and actions in relation to NAS and fees.

“Independence is fundamental to the role of auditors as corporate guardians and ultimately to public confidence in financial reporting and market integrity,” said IESBA Chairman Dr. Stavros Thomadakis. “With the significant strengthening of the NAS and fees provisions, we have taken bold steps to set an even higher bar for the standards of independence required of auditors globally, especially in relation to public interest entities. We believe these changes represent a major advance in the public interest.”

The revised NAS and fee-related provisions become effective for audits of financial statements for periods beginning on or after Dec. 15, 2022. Early adoption is permitted and encouraged.

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