In December 2021, the International Ethics Standards Board for Accountants (IESBA) changed Part 4A of the IESBA Code to enhance confidence in the audit of the financial statements of public interest entities (PIEs). Changes included revising the definitions of PIE and listed entity. The IAASB’s proposed revisions to ISA 700 (Revised) and ISA 260 (Revised) are in response to these changes. The changes to the IESBA Code become effective for audits and reviews of financial statements for periods beginning on or after December 15, 2024.
Part 4A of the IESBA Code sets out independence requirements for audit and review engagements, including differential independence requirements that apply only to PIEs. The IESBA changes include a new requirement for auditors to publicly disclose when they have applied the differential independence requirements for PIEs (the IESBA’s transparency requirement). However, the IESBA Code does not specify the mechanism for such disclosure.
The IAASB determined that proposed revisions to ISA 700 (Revised) and ISA 260 (Revised) are needed to support the operationalization of the IESBA’s transparency requirement. Consequently, in March 2022, the IAASB approved a narrow-scope maintenance project to make revisions to the ISAs.