The XRB is proposing to adopt the IESBA revisions to the Code of Ethics relating to the provision of non-assurance services (NAS) to audit clients. It is also proposing additional NZ-specific amendments that go further than the IESBA revisions – namely a prohibition on tax advisory and tax planning services to an audit client that is a PIE. 

We support the NZAuASB’s proposals to incorporate into PES 1 the revised NAS provisions in the IESBA Code.  The revised IESBA Code substantially raises the bar on auditor independence with a far-reaching prohibition on audit firms from providing a NAS to an audit client that is a PIE that might create a self-review threat.

We support an evidence-based approach to strengthening and clarifying the audit independence standards. At this stage we do not consider that the NZAuASB has sufficiently developed a user-needs case that there is a compelling reason to modify the revised IESBA Code for application in New Zealand. We also outline several potential unintended consequences of the proposed prohibition on tax advisory and tax planning services.

We recommend a much more robust survey and broader review of research literature is required to meaningfully add to understanding of investor perceptions regarding NAS. To address user perceptions around independence in relation to NAS we suggest greater disaggregation and clarity in the financial statement disclosure of fees paid or payable to auditors – into audit, assurance, audit related, and non-audit related services.