The NZICA Regulatory Board of New Zealand Institute of Chartered Accountants (NZICA) proposes to revise the NZICA Code of Ethics (NZICA Code).

The revisions proposed to the NZICA Code are designed to align with recent amendments made or expected to be made by New Zealand Auditing and Assurance Standards Board (NZAuASB) to Professional and Ethical Standard 1, International Code of Ethics for Assurance Practitioners (including International Independence standards) (New Zealand) (PES 1) to align with amendments made by IESBA to the International Code as reflected in the Final Pronouncements:

• Revisions to the Code addressing objectivity of engagement quality reviewer and other appropriate reviewers (Objectivity project);
• Revisions to non-assurance service provisions of the Code (Non-assurance services project);
• Revisions to the fee-related provisions of the Code (Fees project).
• Quality management related conforming amendments to the Code (QM conforming amendments project)

An overview of the proposed changes is provided below together with a “summary of proposed changes” that shows how these amendments impact the NZICA Code.

Short-form process (see NZICA Due Process and Working Procedures for further details)

The Regulatory Board has approved the use of the “short-form process” for the approval of these amendments. This process involves advising members of the proposed changes and requesting notification of critical issues via this news article rather than undertaking the usual full consultation process starting with the release of an exposure draft.

The “short-form process” may be used where the Regulatory Board considers the resource requirements of NZICA embarking on a full consultation process are likely to exceed the benefit of that consultation. This will usually only occur, where:

• the amendments arise due to changes in international standards (i.e. IESBA Code); and
  • are minor amendments to guidance material that are consistent with NZ best practice; and/or
  • relate primarily to assurance practitioners (and, therefore, have been subject to the due process of NZAuASB); and
• any member feedback is unlikely to result in amendments based on the modification criteria contained in NZICA Due Process and Working Procedures.

Submissions invited

Members are invited to advise the Regulatory Board of any critical NZ specific issues that might preclude the changes illustrated in the attached summary of proposed changes being made to the NZICA Code without amendment by 8 September 2022. Issues should be raised by e-mail to [email protected].

If no issues are raised, the proposed amendments will be made without further consultation and will apply to all members of CA ANZ in NZ from 15 December 2022 (early adoption allowed). The full due process timeline is provided further below.

Overview of changes

Objectivity project

The original objective of the objectivity project was to ensure that the IESBA Code addresses threats that might be created when an individual who was previously involved in an assurance engagement (whether as the engagement partner or as another member of the engagement team) is appointed as the engagement quality reviewer of the same engagement pursuant to the proposed quality management standards.

However, IESBA’s deliberations expanded the scope of the proposed amendments to include guidance material that might apply to circumstances where an appropriate reviewer, as described in the IESBA Code, is appointed by a professional accountant to review work performed as a safeguard to address identified threats.

In September 2020, IESBA approved a new section 325 to the IESBA Code that provides guidance material on how to apply the conceptual framework to address threats to the objectivity of an appropriate reviewer (including an engagement quality reviewer).

Consequential amendments were also approved to section 300 and the Glossary.

The NZAuASB has issued an amending standard PES 1 – Objectivity Amendments in July 2021 that is designed to incorporate the amendments to the International Code arising from the Objectivity project into PES 1. These amendments to PES 1 will apply from 15 December 2022 (early adoption allowed).

Members should refer to the attached summary of proposed changes for details of how these amendments impact the NZICA Code. Parts 4A and 4B are not reproduced in the NZICA Code and, instead, members must refer to parts 4A and 4B of PES 1. Therefore, changes to these parts of the NZICA Code will automatically be imported into the NZICA Code by changes to PES 1.

Non-assurance services project

The objective of the non-assurance services project was to ensure that all the non-assurance services provisions in the international independence standards (Parts 4A and 4B) of the IESBA Code are robust and of high quality for global application to maintain and enhance confidence in the independence of assurance firms.

In December 2020, IESBA approved revisions to Part 4A (section 600 – provision of non-assurance to an audit (or review) client) and confirming and consequential amendments to Parts 4A and 4B (section 400 – applying the conceptual framework to independence for audit and review engagements; section 525 – temporary personnel assignment; section 900 – applying the conceptual framework to independence for assurance engagements other than audit and review engagements; section 950 – provision of non- assurance services to assurance clients other than audit and review engagement clients).

NZAuASB has issued an amending standard PES 1 – Non-assurance Services Amendments in June 2022, that is designed to incorporate the amendments to the International Code arising from the Non-Assurance Services project into PES 1, with an effective date of 15 December 2022 (early adoption allowed).

As parts 4A and 4B are not reproduced in the NZICA Code and, instead, members must refer to parts 4A and 4B of PES 1, these changes will automatically be imported into the NZICA Code and no further changes will be required.

Fees project

The objective of the non-assurance services project was to review provisions in the international independence standards (Parts 4A and 4B) of the IESBA Code that relate to fee-related matters. IESBA had identified a public interest need for it to address fee-related matters, in particular, those matters that impact or are perceived to impact the independence of assurance practitioners.

In December 2020, IESBA approved revisions to Part 4A (section 410 – fees) and Part 4B (section 905 – Fees). Consequential amendments were also approved to paragraphs 120.15 A3; 270.3 A2; 320.3 A4; 330.3 A1; 330.3A3.

The NZAuASB has issued an amending standard PES 1 – Revisions to the Fee-related Provisions of the Code in March 2022 that is designed to incorporate the amendments to the International Code arising from the Fees project into PES 1. These amendments to PES 1 will apply from 15 December 2022 (early adoption allowed).

Members should refer to the attached summary of proposed changes for details of how these amendments impact the NZICA Code. Parts 4A and 4B are not reproduced in the NZICA Code and, instead, members must refer to parts 4A and 4B of PES 1. Therefore, changes to these parts of the NZICA Code will automatically be imported into the NZICA Code by changes to PES 1.

QM conforming amendments

The objective of the QM conforming amendments project was to develop conforming amendments to the IESBA Code so that the IESBA Code is aligned and interoperable with the International Audit and Assurance Standards Board’s (IAASB) Quality Management Standards (QM Standards). The project focused on the relevant provisions of the IESBA Code that refer to the IAASB QM standards or terms and concepts used or defined in those standards.

In December 2021, IESBA approved consequential amendments to sections 120, 300, 320, 330 and Parts 4A (sections 400, 410 and 540) and 4B (section 900) and the Glossary.

The NZAuASB issued PES 3: Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance Engagements and PES 4: Engagement Quality Reviews that align with the IAASB QM standards in July 2021. Consequently, NZAuASB has issued an amending standard, that is designed to incorporate the amendments to the International Code arising from the QM conforming amendments project into PES 1, with an effective date of 15 December 2022.

Similarly, the Regulatory Board has recently issued an updated quality management standard, PS-1: Quality Management. As a consequence, additional editorial amendments will be required to reflect this updated standard.

Members should refer to the attached summary of proposed changes for details of how these amendments impact the NZICA Code. Parts 4A and 4B are not reproduced in the NZICA Code and, instead, members must refer to parts 4A and 4B of PES 1. Therefore, changes to these parts of the NZICA Code will automatically be imported into the NZICA Code by changes to PES 1.

Timeline

* Subject to Parliamentary Calendar