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Part C - Pressure

Part C - Pressure. Jim Gaa, Task Force Chair and IESBA Member IESBA Meeting September 16-18, 2013 Sydney. Background. March 2013: Project Proposal approved by IESBA: - Issues: Pressure; Faithful Representation; Inducements June 2013: IESBA considered application of Part C to PAPPs

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Part C - Pressure

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  1. Part C - Pressure Jim Gaa, Task Force Chair and IESBA Member IESBA Meeting September 16-18, 2013 Sydney

  2. Background • March 2013: Project Proposal approved by IESBA: - Issues: Pressure; Faithful Representation; Inducements • June 2013: IESBA considered application of Part C to PAPPs • September 2013: TF proposes straw man on Pressure to engage in unethical or illegal acts

  3. New Section addressing Pressure • Should Pressure be addressed as a new Section 3x0 in addition to Section 340, rather than replacing it? • Section 3x0 • Directly addresses primary concern of PAIBs (in surveys done by working group) – pressure from others • Provides general guidance on pressure to support PAIBs • Provides additional guidance to support 310, 320, 330, 340, 350 • Retains specific guidance in 340 • Self-interest threats in financial reporting

  4. Type of Activities vs. Type of Pressure • Address “unethical and illegal activities” rather than “undue or inappropriate pressure” • “Undue influence” occurs in the Code – (Objectivity) • “Undue” and “influence” appear subjective and imprecise. • The issue revealed in the surveys was pressure. Pressure is not unethical per se. A PAIB needs to evaluate the threat that may lead to unethical and illegal activities.

  5. Description of unethical and illegal activities • Whether an activity is illegal is a matter for legal determination by a court of law. (SIA June 2013) • An unethical activity is one that breaches any of the fundamental principles contained in Part A of the Code or the interpretative guidance contained in Part C. • The PAIB shall not yield to pressure to engage in activities that the professional accountant knows or has reason to believe are unethical or illegal.

  6. Recognition of diversity of ethical norms? • Consideration of the effect that the culture of the organization, or subset thereof, the industry and the country may have on ethical norms may assist the professional accountant when evaluating such threats. • The culture of some organizations may slowly erode the professional accountant’s awareness of unethical activities.

  7. Straw Man: New Section 3x0 • Description of pressure and linkage to fundamental principle(s) • Examples of pressure • Identification of threats to compliance • Evaluation of threats • Application of safeguards

  8. September CAG input included: • Q1. Support for an additional Section 3x0 • Q2. Unethical or illegal activities may be connected to pressure. They are not an either/or choice • Q3. Amend descriptions. Illegal to SIA. Narrow unethical • Q4. Alerting PAIB to high risk environments is understood but need to avoid different standards in different cultures

  9. Questions? • Comments or questions on the straw man Section 3x0?

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