Brydon Review Calls for Major Disruption in the Audit Profession

1. Having different personnel perform the audit from those that negotiate the fee,
2. Publishing audit profitability, and compensation of the engagement partner along with criteria for setting the compensation,
3. Disclosure of audit hours spent by each level of auditor,
4. Disclosure of reasons for resignation, dismissal or decision not to rebid on an audit,

5. Answer questions at annual meetings.

1. Request for Information - Comprehensive Review of the IFRS for SMEs Standard published January 28, 2020. “The objective of the consultation is to seek views on whether and how to align the IFRS for SMEs Standard with full IFRS Standards…The Request for Information asks for views on different approaches to updating the IFRS for SMEs Standard, as well as views on how the Standard could be aligned with newer IFRS Standards, such as IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases.” The comment period ends on July 27, 2020.

1. International Audit and Assurance Standards Board (IAASB) - International Standard on Auditing (ISA) 315 (Revised 2019), issued December 19, 2019, “made enhancements and clarifications to encourage a more consistent and robust risk assessment, which forms the foundation of the auditor’s efforts to gather sufficient appropriate audit evidence. The revisions also modernize the standard to keep up with the evolving environment in which businesses operate, in particular in relation to technology, as well as a focus on why procedures are required.” Effective generally in 2022.
2. International Ethics Standards Board for Accountants (IESBA) - Revisions to Part 4B of the Code to Reflect Terms and Concepts Used in ISAE 3000 (Revised), issued January 3, 2020, to “change Part 4B of the Code to make the part’s provisions consistent with the revised assurance terms and concepts in the International Auditing and Assurance Standards Board’s (IAASB’s) International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information.
3. International Ethics Standards Board for Accountants (IESBA) - Exposure Draft - Proposed Revisions to the Non-Assurance Services (NAS) Provisions of the Code, issued January 21, 2020, proposes “ a prohibition on providing NAS to an audit client that is a public interest entity (PIE) if a self-review threat to independence will be created;  further tightening of the circumstances in which materiality may be considered in determining the permissibility of a NAS;  strengthened provisions regarding auditor communication with those charged with governance (TCWG), including, for PIEs, a requirement for NAS pre-approval by TCWG; and  stricter requirements regarding the provision of some NAS, including certain tax and corporate finance advice.” The comment period ends on May 4, 2020.
4. International Ethics Standards Board for Accountants (IESBA) - Exposure Draft - Proposed Revisions to the Fee-Related Provisions of the Code, issued January 21, 2020, proposes “ a prohibition on firms allowing the audit fee to be influenced by the provision of services other than audit to the audit client;  in the case of PIEs, a requirement to cease to act as auditor if fee dependency on the audit client continues beyond a specified period; and  communication of fee-related information to TCWG and to the public to assist their judgments about auditor independence.” The comment period ends on May 4, 2020.
5. International Ethics Standards Board for Accountants (IESBA) - Exposure Draft - Proposed Revision to the Code Addressing the Objectivity of Engagement Quality Reviewers, issued January 30, 2020, “ explains the different types of threat to compliance with the fundamental principle of objectivity that might be created in circumstances where an individual is being considered for appointment as an engagement quality reviewer for a given engagement;  sets out factors to consider in evaluating the level of the identified threats; and  suggests actions that might be safeguards to address the threats. The comment period ends on March 16, 2020.
6. International Public Sector Accounting Standards Board (IPSASB)) – Improvements to IPSAS, 2019, issued January 30, 2020, “comprises of minor improvements to IPSAS in order to address issues raised by stakeholders.”

1. Sustainable Development Goals Disclosure (SDGD) Recommendations, report issued January 17, 2020, in conjunction with Chartered Accountants ANZ, the Institute of Chartered Accountants of Scotland (ICAS) the International Federation of Accountants (IFAC), the International Integrated Reporting Council (IIRC) and the World Benchmarking Alliance (WBA), “to help reporting organisations: • develop their SDG Disclosures aligned with the other reporting frameworks that they use; • enhance the credibility of their SDG Disclosures; and • embed SDG considerations into their strategic business decisions to make sure we leave a better planet for future generations.”
2. Explainable AI: Putting the user at the core, professional insight report issued February 12, 2020, “highlights one of the key issues with artificial intelligence: the fact that most of us don't know how it works, and how the algorithms reach the conclusions that drive their outputs.”

1. Integrated Thinking & Strategy - State of play report, published January 21, 2020, “presents a new model for integrated thinking that encourages long term, sustainable decision-making, enabling businesses to play their roles as stakeholders of a sustainable world… Integrated thinking is a multi-capital management approach that enables organizations to deliver their purpose to the benefit of their key stakeholders over time. It is about creating and preserving value and enabling better decision-making based on interconnected, multi-capital information.” The six capitals of integrated reporting are financial, manufactured, intellectual, social & relational, human, and natural.

1. Inclusive Deployment of Blockchain: Case Studies and Learnings from the United Arab Emirates, White Paper published January 15, 2020. “By bringing together public- and private-sector entities to share their lessons and insights on blockchain deployment, this project aims to reduce missteps and anchor effective methodologies within the technology.”
2. Toward Common Metrics and Consistent Reporting of Sustainable Value Creation, White Paper published January 22, 2019, “proposes a common, core set of metrics and recommended disclosures that International Business Council members could use to align their mainstream reporting and, in so doing, reduce fragmentation and encourage faster progress towards a systemic solution, perhaps to include a generally accepted international accounting standard.”

1. Accounting, Reporting, and Auditing during transition period following exit from the EU. Letters were issued February 14, 2020, to accountants and auditors with guidance during this period. Generally, there is no change in accounting, reporting and auditing frameworks during the transition. Assessments of equivalency and adequacy with the EU are expected by June 20, 2020.
2. Consultation on proposed revision of auditing standard for identifying and assessing risks of material misstatement, issued January 28, 2020. The proposed “changes reflect revisions made by the International Auditing and Assurance Standards Board (IAASB) and are designed to establish a more robust and consistent risk identification and assessment. A more robust risk assessment process enhances the basis upon which auditors design and perform audit procedures that are responsive to the risks of material misstatement and, thereby, obtain sufficient appropriate audit evidence to provide a basis for the audit opinion.” The comment period ends April 4, 2020.
3. Conforming Amendments to Standards Arising From ISA (UK) 540 (Revised), issued January 14, 2020. Eight International Standards on Auditing, including ISA’s (UK) 200, 230, 240, 260, 500, 580, 700 and 701, were amended to conform with ISA (UK) 540 (Revised) – Auditing Accounting Estimates and Related disclosures. Effective generally in 2020.

1. No New Developments

1. How to improve climate-related reporting –  A summary of good practices from Europe and beyond, published February 6, 2020, by EFRAG’s Project Task Force of Climate-related Reporting (PTF-CRR) of the European Lab. “The primary focus of the PTF-CRR was on identifying good reporting practices and assessing the level of maturity in the implementation of the TCFD recommendations, while also taking into consideration the climate-related reporting elements of the EU Non-financial Reporting Directive and the related European Commission non-binding guidelines.”

1. Accounting and Review Services Committee (ARSC) - Statement on Standards for Accounting and Review Services No. 25 – Materiality in a Review of Financial Statements and Adverse Conclusions, issued February 11, 2020, “amends AR-C sections 60, 70, 80, and 90 in AICPA Professional Standards. This SSARS further converges AR-C section 90, Review of Financial Statements, with International Standard for Review Engagements 2400 (Revised), Engagements to Review Historical Financial Statements… SSARS No. 25 also aligns certain concepts with the auditing standards.” Effective generally in 2021.

1. Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842) Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), ASU No. 2020-02, issued February 12, 2020, to add and amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard.
2. Exposure Draft – Not-for-Profit Entities (Topic 958) - Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, issued February 10, 2020, “intended to improve transparency around how not-for-profit organizations present and disclose contributed nonfinancial assets, also known as gifts-in-kind…The proposed ASU would require a not-for-profit organization to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.” Also, certain disclosures are required. The comment period ends April 10, 2020.
3. Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force), ASU No. 2020-01, issued January 16, 2020, clarifies the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives. Effective generally for years beginning in 2021 for public companies and 2022 for other entities. Early adoption is generally permitted.

1. GASB Statement No. 92, Omnibus 2020, issued February 5, 2020, “addressing various accounting and financial reporting issues identified during the implementation and application of certain GASB pronouncements.” Effective at various dates.

1. Creating and Protecting Value: Understanding and Implementing Enterprise Risk Management, guidance issued February 4, 2020, “offering succinct, tangible steps to implement an effective ERM program.”
2. Managing Cyber Risk in a Digital Age, guidance issued December 17, 2019. See article in this issue for details.

1. Potential Approach to Revisions to PCAOB Quality Control Standards, Concept Release issued December 17, 2019, intended to “inform the Board on the approach and what changes it might propose in the future to strengthen the PCAOB's requirements for audit firms' quality control systems.” The comment period ends March 16, 2020.

1. SASB Implementation Primer, launched on February 4, 2020, as “an online resource for companies seeking to incorporate SASB standards into their core communications with investors.”

1. Proposed Simplification and Modernization of Regulation S-K Items 301, 302, and 303 and MD&A Metrics Guidance, issued January 30, 2020, proposes “amendments to modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K. The proposed amendments would eliminate duplicative disclosures and modernize and enhance Management's Discussion and Analysis disclosures for the benefit of investors, while simplifying compliance efforts for companies. The Commission also announced that it is providing guidance on key performance indicators and metrics in Management's Discussion and Analysis.” The comment period ends 60 days after publication date in the Federal Register.
2. Proposed Amendments to Rule 2-01, Qualification of Accountants, issued December 30, 2019, “to codify certain staff consultations and modernize certain aspects of its auditor independence framework. The proposed amendments would update select aspects of the nearly two-decade-old auditor independence rule set to more effectively structure the independence rules and analysis so that relationships and services that would not pose threats to an auditor’s objectivity and impartiality do not trigger non-substantive rule breaches or potentially time consuming audit committee review of non-substantive matters.” The comment period ends 60 days after publication date in the Federal Register.