About IAASB (original) (raw)

1.0 BACKGROUND

1.1 The International Foundation for Ethics and Audit (the Foundation) was formed to house the International Auditing and Assurance Standards Board (IAASB) to function as an expert and objective independent standard-setting body under the oversight of the Public Interest Oversight Board (PIOB). The IAASB is designated as the responsible body, under its own authority and within its stated terms of reference, to develop and issue in the public interest high-quality auditing and assurance standards and other pronouncements for adoption and application around the world.

1.2 The PIOB has approved, and the Foundations’ Board of Trustees has adopted, these terms of reference[1]. Any proposed changes thereto shall require public consultation (unless the changes are of an inconsequential or operating nature) and PIOB approval.

2.0 OBJECTIVE

2.1 The IAASB’s objective is to serve the public interest by setting high-quality auditing, assurance, and other related standards and by facilitating the convergence of international and national auditing and assurance standards. In doing so, the IAASB enhances the quality and consistency of practice throughout the world and strengthens public confidence in the global auditing and assurance profession.

3.0 PRONOUNCEMENTS

3.1 The IAASB develops and issues the following International Standards, which are the IAASB’s authoritative pronouncements, in accordance with the due process approved by the PIOB:

3.2 The IAASB may also publish non-authoritative guidance addressing the intended application of the International Standards, or other material on auditing and assurance matters thereby advancing public understanding of the roles and responsibility of professional auditors and assurance service providers.

3.3 The official text of the International Standards and other material is that published by the IAASB in the English language.

4.0 MEMBERSHIP

4.1 The IAASB is a multi-stakeholder board comprised of a balanced group of individuals drawn from diverse stakeholder groups. The Chair, Vice Chair, and members of the IAASB bring a strategic mindset to advancing the timely development in the public interest of new or revised standards. As a whole, the Board along with its staff collectively shall have the necessary technical competence, and appropriate expertise to be able to deliver their roles effectively.

4.2 After an agreed transition period, the IAASB shall have 16 members, including the Chair and Vice Chair, all committed to acting in the public interest. Appointments of audit practitioners are limited to five members.[2] The work of the Board shall not be invalidated by its failure at any time to have a full complement of members.

4.3 Members shall be selected through an open call and appointed by the PIOB on the recommendation of the PIOB’s SSBs Nominations Committee. The selection process is based on a skills framework that prioritizes the public interest and fosters leadership, expertise, and diversity of thought, gender and geography. A primary selection criterion is the individual qualities and abilities of the candidate.

4.4 Except for the Chair, IAASB members serve on a part-time basis. Members shall be compensated at rates commensurate with the responsibilities assumed; such rates shall be determined by the Foundation’s Trustees.[3]

4.5 All IAASB members are required to adhere to the IAASB Code of Conduct, including the Board’s policy governing potential conflicts of interest, as approved by the PIOB. Members shall also sign an annual statement declaring they will act in the public interest, apply the Public Interest Framework in standard-setting decisions, and act with integrity in discharging their responsibilities. All IAASB members serve in their individual personal capacities and not as representatives of any employing or nominating organization.

4.6 IAASB members are expected to attend IAASB meetings regularly and actively participate. In the case of unsatisfactory performance or attendance, the IAASB Chair notifies the PIOB regarding the concerns.

4.7 On a transitional basis, IAASB members may be accompanied at meetings by a technical advisor.

4.8 The IAASB may also include up to three observers with privilege of the floor, appointed at the discretion of the IAASB in consultation with the PIOB.

4.9 The PIOB has the right to attend, or be represented at, all IAASB meetings, including closed sessions.

5.0 THE IAASB CHAIR AND IAASB VICE CHAIR

5.1 The IAASB Chair shall be an independent, full-time remunerated position.[4] The IAASB Chair must agree to be bound by independence requirements in order to assume the position. The Chair is selected through an open call, evaluated and recommended by the SSBs Nomination Committee, and appointed by the PIOB in consultation with the Monitoring Group.

5.2 The IAASB Vice Chair is a leadership position in support of the IAASB Chair. The IAASB Chair annually nominates, or may re-nominate, a member to serve as Vice Chair. The appointment as IAASB Vice Chair does not imply that the individual concerned is the Chair-elect. The Vice Chair is evaluated and recommended by the SSBs Nominations Committee, and appointed by the PIOB in consultation with the Monitoring Group.

5.3 In the event of a vacancy by reason of incapacity, resignation, removal or death of the Chair, the Vice Chair shall assume the duties of Chair as acting chair, assuming full power, authority and responsibility of the Chair to manage the Board’s agenda and work program until the appointment of an interim or a new Chair.

6.0 TERMS OF SERVICE

6.1 Each term of service for an IAASB member shall be for a period of not more than three years, with an intention for approximately one-third of the membership rotating each year. A member may serve consecutive terms, for up to an aggregate term of six years. When a member is eligible for re-appointment by the PIOB, the IAASB Chair will report to the SSBs Nominations Committee on the member’s past performance, including written performance evaluations. Initial or subsequent appointments may be for a period shorter than three years to allow for a gradual rotation of Board members or to address imbalance in rotations during any given year, or for other reasons. In exceptional circumstances, the term of a member may be extended for up to one additional year, for a total term as member not exceeding seven years.

6.2 The IAASB Chair is appointed for a term of up to three years and could be recommended by the SSB Nominations Committee for reappointment for additional terms not exceeding three years until he/she has reached the maximum of nine consecutive years. Any preceding years of service as an IAASB member, if applicable, does not limit the maximum nine years of service as Chair. In exceptional circumstances where necessary for succession purposes, the term of the Chair may be extended for up to one additional year, for a total term as Chair not exceeding ten years.

6.3 The PIOB may, in consultation with the IAASB Chair, remove an IAASB member before the end of the member’s term of service for poor performance, incapacity, conflict of interest, or other conduct not consistent with IAASB Code of Conduct.

6.4 The PIOB may remove the IAASB Chair before the end of the member’s term of service in consultation with the Monitoring Group for poor performance, incapacity, conflict of interest, or other conduct not consistent with IAASB Code of Conduct.

7.0 MEETING PROCEDURES

7.1 Each IAASB meeting requires the presence, in person or by simultaneous telecommunications or video link, of at least eleven appointed members.

7.2 IAASB meetings shall be chaired by the Chair or, in his/her absence, by the Vice Chair. In the event of the absence of both, the members present shall select one among the longest serving members to take the chair for the duration of the meeting, or of the absence of the Chair and Vice Chair.

7.3 Each member of the IAASB has one vote which can be exercised only by the appointed member. On both technical and other matters, proxy voting shall not be permitted nor shall members of the Board be entitled to appoint alternates to attend meetings. The affirmative vote of at least eleven[5] of those present at a meeting in person or by simultaneous telecommunications link is required to approve or withdraw International Standards, or amendments thereto, and to approve strategy and work plan documents, exposure drafts or re-exposure drafts, or other consultation documents that form part of due process. [6]

7.4 Other decisions of the Board, for example the publication of a Discussion Paper or a decision on a matter of policy, shall require a simple majority of the members of the Board present, in person or by simultaneous telecommunications link, at a meeting. In the event of a tied vote on a decision that is to be made by a simple majority of the members, the Chair shall have an additional casting vote.

7.5 IAASB meetings are open to the public. Matters of a general administrative nature or with privacy implications may be dealt with in closed sessions of the IAASB; no decisions that would affect the content of the International Standards and other pronouncements issued by the IAASB are made in a closed session.

7.6 Agenda papers for open sessions, including minutes of the meetings of the IAASB, are published on the IAASB website. The IAASB meetings and agenda papers are in English, which is the official working language of IAASB.

8.0 PUBLIC INTEREST FRAMEWORK AND DUE PROCESS

8.1 The IAASB shall undertake its standard-setting activities with transparency and in accordance with the Public Interest Framework, and shall adhere to due process as approved by the PIOB. This shall include regular engagement on public interest and due process considerations, including matters of global applicability of the standards, with the PIOB throughout the development cycle of each standard. Where the PIOB communicates recommendations or concerns around how the public interest is being addressed during development of a particular standard, the IAASB will consider the issue and basis thereof set out by the PIOB and seek an appropriate response to the matter raised by the PIOB.

8.2 Once a new or revised standard is approved, the IAASB will provide a public written statement certifying that the IAASB developed the new or revised standard in accordance with agreed due process; and the new or revised standard is responsive to the public interest, in accordance with the Public Interest Framework. If in the very unlikely circumstance the PIOB is unable to issue its own certification in accordance with the Public Interest Framework, the PIOB will publicly state its reasons, along with the evidence for reaching its conclusions. In this circumstance, the IAASB will consider the issues and basis thereof identified by the PIOB in determining the best way to resolve the matter, including whether revisions to the standard are appropriate. Notwithstanding the certification process described above, the IAASB has the ultimate responsibility and accountability for the approval and withdrawal of standards.

8.3 The IAASB shall also publish a Basis for Conclusions document that explains the objectives of the new or revised standard, the key issues the standard intends to address, and the IAASB’s viewpoints, including on the applicability and public interest implications of the standard and how the IAASB considered and responded to input received during the consultation process.

8.4 The IAASB is responsible for developing a comprehensive and integrated strategy and work program for standards and related agenda priorities. In setting its strategy and work program, the IAASB shall obtain the PIOB’s conclusion as to whether the strategy and work program was developed in a manner consistent with agreed due process and whether the strategy and work program is responsive to the public interest. The IAASB also obtains the PIOB’s conclusion, as at the date of that conclusion, on the appropriateness of the items on the work program, and the completeness of the strategy and work program from a public interest perspective. The IAASB adds to its work program those items that the PIOB resolves should, from a public interest perspective, form part of the IAASB’s work plan.

9.0 STAKEHOLDER ADVISORY COUNCIL

9.1 The IAASB and International Ethics Standards Board for Accountants (IESBA) will establish a joint Stakeholder Advisory Council (SAC) to provide a forum for them to obtain independent strategic input from, and engage with, a diverse range of stakeholders on matters or topics relevant to their remits. The IAASB consults with the SAC on strategy, major projects and work priorities. The terms of reference of the SAC are approved by the PIOB.

10.0 SENIOR AND TECHNICAL STAFF

10.1 The IAASB and IESBA Chairs, as Co-CEOs of the Foundation, are responsible for decisions regarding appointment and related employment matters of the Managing Director – Professional Standards who serves as the senior staff of the IAASB and the IESBA. The IAASB Chair is responsible for decisions regarding appointment and related employment matters of the IAASB technical staff team. Operational responsibilities are delegated to the Managing Director by decision of the Chairs of the IAASB and IESBA.

10.2 All staff are required to adhere to the IAASB Code of Conduct, including the Board’s policy governing potential conflicts of interest, as approved by the PIOB.

11.0 COORDINATION AND COOPERATION WITH OTHERs

11.1 Without prejudicing its independence, the IAASB engages in strategic and technical coordination with the IESBA to enable each Board to work closely on key projects that impact their respective mandates.

11.2 Without prejudicing its independence, the IAASB also cooperates with national standard setters to link their work with IAASB’s own in preparing and issuing International Standards with an aim to share resources, minimize duplication of effort and reach consensus and convergence in standards at an early stage in their development. It also promotes the endorsement of the International Standards by national standard setters, legislators and securities exchanges and promotes debate with users, regulators and practitioners throughout the world to identify user needs for new international standards and guidance.

12.0 OTHER

12.1 The IAASB publishes an annual report, outlining its work program, activities and progress made in achieving its objectives during the year.

[1] See The Foundations’ Bylaws, Art. VI, section 1.

[2] An audit practitioner is defined as an individual who is or has been a member or employee of or otherwise affiliated with a public accounting firm within the last four years, determined at the time of appointment. The classification of a Board member as an audit practitioner shall remain unchanged throughout the individual’s board term, including during a period of his/her reappointment.

[3] As a transitional measure until such time funding is available for purposes of member remuneration, IAASB members may serve on a non-remunerated basis.

[4] The Chair is also a Co-Chief Executive Officer of the Foundation, with remuneration fixed by the Foundation’s Board of Trustees.

[5] The minimum affirmative vote of eleven members, representing a two-thirds majority, is established to not only support a strong consensus, and thereby reinforce legitimacy of the decision, but also to prevent a blocking minority by the accountancy profession. This principle of prohibiting a blocking minority shall also be upheld within IAASB’s operating procedures.’

[6] The merits of a ballot voting process will be reviewed once IAASB has gained experience with a full complement of technical staff with the capability to take forward the development of relevant, timely, high-quality standards.

*As a transitional measure, certain provisions of the Terms of Reference are being implemented gradually over time