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Preparation and Presentation of Information for PAIBs: A Comprehensive Guide

This guide provides comprehensive guidance on the preparation and presentation of information for Professional Accountants in Business (PAIBs). It covers various topics such as the fair and honest principle, misuse of discretion, and the scope of information PAIBs prepare and present.

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Preparation and Presentation of Information for PAIBs: A Comprehensive Guide

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  1. Part C Jim Gaa, Chair Part C Task Force IESBA Meeting June 30, 2015 New York

  2. Timeline -- 2015 • August 2015: TF meeting (3 days) • 320, 370 • November 2015: TF meeting • November/December 2015: Board meeting • 1st read Post-ED (320), Review of ED responses (370)

  3. Timeline -- 2016 • March 2016: Board meeting • Approve close-off • June 2016: Board meeting • Approve Restructured Phase 1 (320, 370) • September 2016: Board meeting • Issues (Phase 2 – 350 and applicability to PAPPs) • December 2016: Board meeting • 1st Read (Phase 2)

  4. NSS Comments – Phase I Comments • Caution when referring to faithful representation of the economics of transactions. Consideration needed on type of financial information being prepared which depends on whether framework is general purpose or special purpose • TF had earlier considered and rejected general special consideration for Special Purpose and General Purpose financial statements • Reconsider the proposed deletion of the extant requirement on 320.2 • TF: addressed below in response to comment letter

  5. NSS Comments – Phase II Comments • Differentiating between senior PAIBs and junior PAIBs • TF: this is addressed in 300.5; may consider providing more guidance in sec 320 • Applicability of Part C to professional accountants in public practice should have been addressed before Part C is revised • TF: Board decided earlier to defer this issue to Phase II

  6. Overview of Responses to ED • Regulators and Public Authorities 4 • IFAC Member Bodies 26 • Firms 3 • National Standard Setters 1 • Other Professional Organizations 6 • Individuals & Others 2 42

  7. Section 320 Title • Proposed Title: “Presentation of Information” • Respondent comments: • Suggest: “Preparation and Presentation of Information” • Align with ISA 200: “preparation of financial statements” • TF response: • Change title to “Preparation and Presentation of Information”

  8. Scope • Respondent comments: • Inclusion of “non-financial information” is beyond the PAIB’s expertise • Approval of the information should also be added to the guidance • TF: Approval added • TF Response: • Scope is appropriate to range of information PAIBs prepare and present

  9. Section 320 “Fair and Honest” principle – Para. 320.2 • TF observations • Current Code: little guidance • ED: provides more guidance • Respondent comments: • Clarity over how “fair and honest” connected to five fundamental principles • TF: Not a new fundamental principle (in current Code, 320.1) • TF: Relates to all five fundamental principles • Alternative - “true and fair” • TF: “True and fair” is too narrow in scope

  10. “Fair and Honest” principle – Para. 320.2 • Respondent comments: • Should focus on obligation of PAIB, not intent – difficulty in determining intent • TF: Code is principle-based, provides guidance • TF: First sentence of 320.2 states the obligation • TF: Intent is enforceable • Deletion of requirement in extant paragraph 320.2 • TF: Requirement not deleted • Consider unintentionally misleading information • Outside scope of sec. 320; sec. 130 and 330 may be relevant

  11. “Fair and Honest” principle – Para. 320.2 • Respondent comments: • Deletion of requirement in extant paragraph 320.2 • TF: Requirement not deleted • TF: Part C refers only to PAIBs – employees of employing organizations • TF: Disagree that financial reporting for external parties is the most common task of PAIBs • Focus on “misleading” and “contractual and regulator outcomes” too specific • TF believes this covers the areas of concern • Clarify focus on compliance with the fundamental principles • TF: Compliance with fundamental principles is implicit; explicit in Part A (100.5)

  12. “Fair and Honest” principle – Para. 320.2 • Respondent comments: • Applicability of a relevant reporting framework • TF: 320.2, third bullet addresses this • Outsourcing situations • TF: Outsourcing arrangements are included by the definition of PAIB

  13. Section 320 Misuse of Discretion – 320.3 • TF approach: ED provides enhanced guidance addressing misuse of discretion • Respondent comments: • Guidance should cover non-financial information as well as financial information • TF: Addressed in 320.1; “financial” deleted from 320.3 • Discretion vs. judgment in choosing between accounting standards • TF agrees: Clarification has been made • No control over the discretion being exercised in timing and structuring transactions • TF: 320 addresses situations where PAIB has discretion and/or knowledge of intentions of others. 320 does not apply otherwise

  14. Misuse of Discretion – 320.3 • Respondent comments: • Better and more appropriate examples • TF: examples have been reconsidered, some changes made • Legitimate difference of opinion – no intention to misuse discretion • TF agrees; 320.2 implicitly recognizes “honest” differences of opinion; 320.3 addresses situations in which intention is or may be to violate fundamental principles • Safeguard - document thought process behind decision • TF: guidance in 320.9 is sufficient • Specific reference to fundamental principles of integrity and objectivity • TF: All fundamental principles are relevant

  15. Misuse of Discretion – 320.3 • Respondent comments: • Improved consistency - align with ISA 540 and stronger guidance • TF: 320 addresses situations in which information may be intentionally misleading or intended to influence contractual or regulatory outcomes inappropriately, but does not violate a law or regulation. Reference is made to Section 360

  16. Section 320 Purpose, Context and Audience – 320.4 • TF approach: In making judgments about preparing and presenting information, PAIBs need to consider: purpose, context and audience • Respondent comments: • Proposed guidance is limited, does not provide sufficiently clear direction where no relevant reporting framework exists • TF: Variety of situations makes a few examples not useful • Factors should be incorporated into overarching principles in 320.2 • TF agrees and will consider including this in 320.2. 320.4 is intended to focus on situations in which a reporting framework does not exist.

  17. Purpose, Context and Audience – 320.4 • Respondent comments: • Example provided does not support purpose, context and audience • TF agrees; greater focus on judgment has been added

  18. Purpose, Context and Audience – 320.4 • Respondent comments: • Need guidance on extent of effort required to ascertain the use of the information • TF agrees that PAIBs may have limited information about use of information, and can only act on basis of available information or reasonably obtainable information. 320.2 (together with 330.2) imply that PAIBs are responsible to some degree for the work of others • TF does not agree that 320.3 and 320.4 should be guidance rather than requirements • TF has clarified that information may have more than one use, context and audience • TF has considered whether this responsibility may vary by seniority and if so whether to include it in section 320 in addition to 300.5

  19. Purpose, Context and Audience – 320.4 • Respondent comments: • Requiring estimates, etc. reduces relevance of PAIBs’ judgments; especially important for SMEs • TF does not agree. In SME setting, the relevance of judgment may be more important • Extent of “due diligence” regarding uses of information • TF agrees: Wording has been added • Judgments of fairness and honesty should take into account context and use of information – more guidance needed • TF agrees: Wording has been added • TF: Additional guidance about judgments re. context and use not necessary

  20. Purpose, Context and Audience – 320.4 • Respondent comments: • Guidance on presentation is needed • TF: Presentation would be determined in part on basis of consideration of use, context and audience • TF: Where a reporting framework applies, it may provide guidance or requirements about presentation

  21. Section 320 Reliance on the Work of Others – 320.5 • Current Code: PAIB shall take “reasonable steps” to maintain information for which the PAIB is responsible (320.3) • TF approach: extend this requirement to address explicitly reliance on the work of others. • Respondents comments: • Consider the competence of individual providing and preparing information • TF: This is covered by Sec. 130 and 330

  22. Reliance on the Work of Others – 320.5 • Respondents comments: • Clarity is needed over “reasonable steps” • TF: “Reasonable steps” is used in Code, but usually doesn’t have additional guidance • TF: Meaningful guidance is precluded by the variety of concrete situations • TF: Will consider this further at next meeting • “Reasonable steps” is vague, “professional judgment” is more appropriate • TF agrees: Wording changed to “professional judgment”

  23. Reliance on the Work of Others – 320.5 • Respondents comments: • Code may impose a higher standard of behavior on PAIBs than employing organization imposes on PAIBs and non-professional accountants • TF agrees, but it is part of being a PAIB • Align guidance with Part B, which has similar guidance • TF: Part B does not have a section comparable to section 320 • TF: This issue will be addressed in Phase

  24. Section 320 Disassociation from Misleading Information – 320.6 • TF Approach: Enhanced guidance for sec. 110.2 requirement to “take steps” to be disassociated from misleading information • Respondent comments: • More extensive and alternative wording on legal requirements to breach fundamental principle of confidentiality, while noting that legal protection can vary by jurisdiction • Reference to confidentiality is contained in 320.7 • Whistle blower protection laws generally protect employees only for violations of a law or regulation; such acts are outside the scope of sec. 320 • Reminder of obligations of confidentiality under the fundamental principles • Reference to confidentiality is contained in 320.7

  25. Disassociation from Misleading Information – 320.6-320.8 • Respondent comments: • Insufficient guidance once a matter has been escalated • TF believes guidance in 320.7 is sufficient • SME specific guidance • TF: Some of the guidance is helpful to SMEs; some guidance does not apply • Clarify that resigning may not be plausible in certain circumstances • Section 110.2 requires that PAIBs disassociate themselves from misleading. Resignation is one of a number of alternative actions to achieve that are described in 320.6-320.8

  26. Disassociation from Misleading Information – 320.6-320.8 • Respondent comments: • Clarify that resigning does not remove the PAIB from any further obligations • The TF agrees, and has incorporated language from the NOCLAR ED • Sec. 320 cannot have a higher standard for unethical but legal acts than is in the NOCLAR standard • Emphasize need to keep clear documentation • The TF believes that the guidance in 320.9 is sufficient.

  27. Matters Relating to Section 320 and 370 • Respondent comments: • Negative tone of Proposed Sections 320 and 370 • The TF believes that the appropriate tone has been achieved • List of Examples • TF: The extent of guidance via examples is an ongoing issue

  28. Matters Relating to Section 320 and 370 • Respondent comments: • Tailoring Guidance to the PAIB’s Level of Seniority • TF: 300.5 addresses the extra responsibilities that accompany increasing seniority • TF: The guidance in section 320 is sufficient • TF: This issue is related to the issue of providing additional guidance concerning making judgments and taking reasonable steps • The TF will consider these issues further at its next meeting

  29. Matters Relating to Section 320 and 370 • Respondent comments: • Clarify that executive management may include PAIBs • TF: 300.3 and the definition of PAIB make this clear • Section 320 should clarify that PAIBs should exercise professional skepticism • TF: Incorporating this is premature because professional skepticism is being addressed by a joint working group of the IESBA, the IAASB, and the IAESB

  30. Other Matters • Other Matters Raised by Respondents • Respondent comments: • Concerns over piecemeal approach to changes to the Code • Part C should be applicable to PAs working within the public sector • Enforceability could be improved if structure was improved to make it less unwieldy

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