INTERNATIONAL AUDITING AND ASSURANCE STANDARDS quality, professional skepticism, independence, ethical

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  • Meeting:

    IAASB Consultative Advisory Group Agenda Item

    A Meeting Location: New York Meeting Date: September 11, 2012

    Minutes of the Public Session of the Meeting of the

    INTERNATIONAL AUDITING AND ASSURANCE STANDARDS BOARD CONSULTATIVE ADVISORY GROUP (CAG)

    Held on March 6-7, 2012 Brussels, Belgium

    APPROVED

    PRESENT

    Members

    Linda de Beer

    Amir Jusuf

    Vãnia Borgerth

    Kristian Koktvedgaard

    Matthew Waldron

    Jan Robberect

    Federico Diomeda

    Marie Lang

    Jean-Luc Peyret

    Hilde Blomme

    Philip Johnson

    Paul Koster

    John Kuyers

    Glenn Darinzo

    Michael Stewart

    William Hines

    George White

    Chairman

    Asian Financial Executives Institutes

    Associação Brasileira de Instituições Financeiras de Desenvolviment

    BUSINESSEUROPE (BE)

    Certified Financial Analysts Institute (CFA)

    European Commission (EC)

    European Federation of Accountants and Auditors for SMEs (EFAA)

    European Federation of Accountants and Auditors for SMEs (EFAA)

    European Financial Executives Institutes (EFEI)

    Fédération des Experts Comptables Européens (FEE)

    Fédération des Experts Comptables Européens (FEE)

    Gulf States Regulatory Authorities

    Information Systems Audit and Control Association (ISACA)

    Institute of Internal Auditors (IIA)

    International Accounting Standards Board (IASB)

    International Actuarial Association (IAA)

    International Bar Association (IBA)

    Prepared by: IAASB Staff (July 2012) Page 1 of 32

  • IAASB CAG Public Session Minutes – March 6-7 2012 IAASB CAG Public Session (September 2012)

    Bengt Hallqvist

    Markus Grund

    Koichiro Kuramochi

    Frank Bollmann

    Jaseem Ahmed

    Hayanari Uchino

    Gaylen Hansen

    David Morris

    Dominique Pannier

    Ajith S. Ratnayake

    Simon Bradbury

    ZhiRong Mao

    Observers

    Martin Baumann*

    Brian Bluhm

    Pat Sucher

    IAASB

    Prof. Arnold Schilder

    Dan Montgomery

    Phil Cowperthwaite(March 7 – for Agenda Item N only)+

    William Kinney (March 7 – for Agenda Item M only)+

    Caithlin McCabe(March 6 – for Agenda Item C only)+

    Roger Simnett(March 6 – for Agenda Item C only)+

    Jon Grant

    Jim Sylph

    James Gunn

    International Corporate Governance Network (ICGN)

    International Organization of Securities Commissions (IOSCO)

    International Organization of Securities Commissions (IOSCO)

    International Valuation Standards Council (IVSC)

    Islamic Financial Services Board (IFSB)

    Japan Securities Dealers Association (JSDA)

    National Association of State Boards of Accountancy (NASBA)

    North American Financial Executives Institutes (NAFEI)

    Organization for Economic Cooperation and Development (OECD)

    Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB)

    World Bank (WB)

    World Federation of Exchanges (WFE)

    U.S. Public Company Accounting Oversight Board (PCAOB)

    IFAC Small and Medium Practices Committee, Deputy Chair (SMPC)

    Basel Committee on Banking Supervision (BCBS)

    IAASB Chairman

    IAASB Deputy Chair and Task Force (TF) Chair

    IAASB TF Chair

    IAASB Member and Subcommittee Chair

    IAASB Member and TF Co-Chair

    IAASB TF Co-Chair

    IAASB Member and Subcommittee Chair

    IFAC Executive Director, Professional Standards and External Relations

    IAASB Technical Director

    * Views expressed by PCAOB Representatives represent their views and do not necessarily reflect the view of the PCAOB

    Board or other Board members or staff.

    + Via teleconference

    Agenda Item A Page 2 of 32

  • IAASB CAG Public Session Minutes – March 6-7 2012 IAASB CAG Public Session (September 2012)

    Kathleen Healy+

    Brett James

    Diane Jules

    IESBA CAG

    Richard Fleck

    IESBA

    Jan Munro

    Public Interest Oversight Board

    European Commission (by invitation for presentation)

    Arvind Wadhera(March 6 – for Agenda Item F only)

    Raluca Painter (March 6 – for Agenda Item F only)

    Anja Kunath (March 6 – for Agenda Item F only)

    APOLOGIES

    Members

    Han Fang

    Conchita Manabat

    Dr. Obaid Saif Hamad Ali Al Zaabi

    Nigel James

    Yoseph Asmelash

    Observers

    Norio Igarashi

    IAASB Senior Technical Manager

    IAASB Technical Manager

    IAASB Technical Manager

    IESBA CAG Chairman

    IESBA Deputy Director

    Susana Novoa

    Asian Financial Executives Institutes

    Asian Financial Executives Institutes

    Gulf States Regulatory Authorities

    International Organization of Securities Commissions

    United Nations Conference on Trade and Development

    Japanese Financial Services Agency

    Agenda Item A Page 3 of 32

  • IAASB CAG Public Session Minutes – March 6-7 2012 IAASB CAG Public Session (September 2012)

    March 6, 20121

    Welcome and Approval of Minutes of Previous Meeting (Item A)

    To APPROVE the minutes of the September 2011 CAG public session.

    OPENING REMARKS

    Ms. de Beer welcomed the Representatives and Observers, including new Representatives Mr. John Kuyers, (ISACA, replacing Mr. Roussey who rotated), Mr. William Hines, (IAA - replacing Mr.Gutterman who rotated), Mr. Jassem Ahmed (IFSB, replacing Dr. Karim who rotated), Mr. Glenn Darzino (IIA, replacing Ms. Bastolla who rotated) and Mr. Zhirong Mao (WFE, replacing Mr. Krantz who rotated).

    She also welcomed Ms. Novoa as the representative of the Public Interest Oversight Board (PIOB).

    MINUTES OF THE PREVIOUS MEETING

    The minutes of the September 2011 meeting were approved.

    BCBS Presentation (Item B)

    To RECEIVE an update on the BCBS’s project to revise its guidance on the relationship between external auditors and banking supervisors

    Ms. Sucher, presenting on behalf of the BCBS, noted that the BCBS is currently working on two projects: one addressing internal audit guidance; and the other, external audit guidance. About both projects, Ms. Sucher noted that the financial crisis has raised interest in whether auditors (internal and external) and bank supervisors can work together to better share information.

    INTERNAL AUDIT GUIDANCE

    Ms. Sucher noted that the BCBS issued in December 2011 a draft paper entitled, The Internal Audit Function in Banks. A final version of this guidance document is expected by mid-2012. Its focus will be geared towards revamping existing internal guidance, more clearly articulate the BCBS’s position on the relationship expected between bank supervisors and the internal audit function, and providing additional guidance on supervisory assessments of the internal audit function.

    EXTERNAL AUDIT GUIDANCE

    Ms. Sucher noted that the BCBS’s project on external audit is aimed at updating the BCBS publication entitled, The Relationship between Banking Supervisors and Banks’ External Auditors, and incorporating elements of the BCBS’s document entitled, External Audit Quality and Banking Supervision.

    Ms. Sucher explained that the topics that may be covered in the new guidance document include audit quality, professional skepticism, independence, ethical standards, non-audit services, going concern,

    1 The minutes present the discussions in the order that they were taken. This may not be the same as that indicated on the

    agenda.

    Agenda Item A Page 4 of 32

  • IAASB CAG Public Session Minutes – March 6-7 2012 IAASB CAG Public Session (September 2012)

    disclosures, the objective of the relationship between external auditors and supervisors, and supervisors’ expectations with regards to the conduct of the external audit.

    Ms. Sucher noted that the BCBS believes IAPN 1000, Special Considerations in Auditing Financial Instruments (IAPN 1000) is useful and that elements may be incorporated into the BCBS’s external audit document. Ms. Sucher explained that document would be a principles-based paper and is ambitiously planned for delivery to the BCBS by the end of 2012. She also stated that the IAASB will be given the opportunity to comment on an early draft of the document.

    The Representatives and Observers commented as follows:

    • Ms. de Beer asked for clarification on the authority of the external audit document. Ms. Sucher explained that guidance would be aimed at clarifying the relationship between auditors and supervisors, and would set forth the BCBS’s expectations. She noted that, as the BCBS does not have authority over auditors, the document will not impose requirements.

    • Mr. Baumann asked whether recent papers issued by the Netherlands and Ireland addressing similar topics had authority over auditors. Ms. Sucher noted that the UK Code is specific for banks within that jurisdiction, and indicates that there should be open, regular and timely communications between audit firms and bank supervisors. Ms. Sucher added that the UK is unique because there are safe harbor laws for external au