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IESBA releases final code revisions to group audits

March 2, 2023

The International Ethics Standards Board for Accountants (IESBA) released final revisions to the code to holistically address independence considerations in an audit of group financial statements.

"For a long time, there was a vacuum in international standards addressing the independence of audit firms and individuals involved in group audits, leading to uncertainty and inconsistent practice around the world," IESBA Chair Gabriela Figueiredo Dias said in a news release. "This standard effectively closes that gap and responds in a timely manner to a public interest need for robust and clear requirements for independence in this important area."

The revisions, according to the release:

  1. Strengthen and clarify the independence principles that apply to:
    1. Individuals involved in a group audit, including those within, or engaged by, firms that audit components within a group.
    2. Firms engaged in the group audit, including firms within and outside the group auditor firm's network.
  2. Specify the need for, and content of, appropriate communication on independence matters between the group auditor firm and component auditor firms participating in the group audit.
  3. More explicitly set out the process to address a breach of an independence provision at a component auditor firm, reinforcing the importance of transparency and appropriate communication with those charged with governance of the group.
  4. Amend the definitions of the terms "engagement team" and "audit team" in the code to recognise the different and evolving engagement team structures and address the implications of those definitional changes.
  5. Provide guidance to facilitate the determination of who is included in an engagement team or an audit team.
  6. Revise the definitions of a number of existing terms and establish new defined terms with respect to independence in a group audit context.
  7. The pronouncement will be effective for audits of financial statements and group financial statements for periods beginning on or after 15 December 2023, with early adoption permitted.

[Financial Management Magazine]

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