ISCA Issues EP 100 Exposure Draft to Strengthen Non-Assurances Services and Fee-related Provisions of the Code

ISCA issues EP 100 Exposure Draft (ED) to adopt two IESBA’s final pronouncements and revised SG Provisions:

• Revisions to the Non-Assurances Services Provisions of the Code (“NAS final pronouncement”);

• Revisions to the Fee-related Provisions of the Code (“Fees final pronouncement”); and

• Revised SG provisions, SG410.27A and SG410.27B applicable to audit clients that are listed entities.

In recent years, audit firms’ provision of non-assurance services (NAS) to audit clients has come up as an issue that is perceived to affect auditor independence. To recap, the ISCA Ethics Committee set up a working group in 2019 to formulate recommended practices that will strengthen auditor independence in relation to the provision of NAS.

ISCA’s publication on 22 October 2020, Auditor Independence When Providing Non-Assurance Services, captures findings from a survey of audit committee members in March 2020 regarding the recommendations as well as matters which impact auditor independence when offering NAS. 

The EP 100 ED proposes to replace extant SG410.4A with revised SG provisions, SG410.27A and SG410.27B applicable to audit clients that are listed entities, and to include a new term, “audit-related services” in the Glossary of EP 100 to incorporate the key recommendations arising from ISCA’s survey to better inform the views and decisions of those charged with governance (TCWG).

Other than the revised SG provisions, key revisions to EP 100 to adopt the NAS & Fees final pronouncements include:

• A new prohibition on the provision of NAS that might create a self-review threat to an audit client that is a public interest entity (PIE).

• Elimination of materiality as a factor in determining NAS permissibility for PIE audit clients.

• Strengthened provisions to address undue fee dependency on audit clients.

• New provisions to enable more robust engagement between firms and TCWG of PIE audit clients about independence matters relating to NAS and fees.

• New provisions to enhance transparency of fees paid by PIE audit clients to assist stakeholder judgments about auditor independence.

Please send your comments to professionalstandards@isca.org.sg by 2 December 2021.