The provisions on long association of senior personnel with an audit or assurance client in EP 100 (Long Association provisions) deal with familiarity and self-interest threats created when the firm uses the same senior personnel on an audit or assurance engagement over a long period of time.
The proposed changes in this Exposure Draft (ED) are based on the final proposed amendments to the Long Association provisions issued by the International Ethics Standards Board for Accountants (IESBA) as part of its Long Association Project. The Long Association Project reviews the Long Association provisions to ensure that they continue to provide robust and appropriate safeguards against the familiarity and self-interest threats arising from long association with an audit or assurance client.
The key proposed changes include:
Increase in the cooling-off period for Engagement Partners (EPs) of public interest entity (PIE) audit clients from 2 years to 5 years;
Increase in the cooling-off period for Engagement Quality Control Review Partners (EQCRs) of PIEs from 2 years to 3 years;
Additional restrictions placed on a former key audit partner (KAP), during the cooling-off period, prohibiting him or her from leading or coordinating the firm’s professional services to the audit client or overseeing the firm’s relationship with the audit client; and
The former KAP is also prohibited, during the cooling-off period, from undertaking any other role, including provision of non-assurance services, that would result in frequent interaction with senior management or those charged with governance.
Please refer to the Explanatory Memorandum of this ED for a summery of the key changes proposed.
The ISCA Ethics Committee (EC) takes a leading role in the development of ethics standards in Singapore to enhance public trust and confidence in the accounting profession in Singapore. Cognisant of the possible impact of the proposed changes in the Long Association provisions, the ISCA EC would hence like to seek views from key stakeholders in Singapore on the following questions:
Questions for respondents
Do respondents agree with the final proposal to make the restrictions on activities during cooling-off stricter by removing the clauses which allowed the former EP and EQCR to provide technical consultation to the engagement team, subject to some conditions being met? (See pages 5-6 of ED for details).
Do respondents agree with the final proposal not to adopt the transitional provision because that would facilitate a proper “fresh look” by the new EP? (see pages 6-7 of ED for details).
Recognising that the proposed changes are substantive, would the proposals require firms to make significant changes to their systems or processes to enable them to properly implement the requirements? If yes, would the proposed effective dates provide sufficient time to make such changes? (See page 7 of ED for details).