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290.45 If the firm determines that action cannot be taken to satisfactorilyaddress the consequences of the breach, the firm shall, after discussionwith informing those charged with governance of the need toterminate the engagement, take the steps necessary to terminate theaudit engagement in compliance with any applicable legal or regulatoryrequirements relevant to terminating the audit engagement.290.48 Ultimately, if those charged with governance do not agree that theaction satisfactorily addresses the consequences of the breach, the firmshall take the steps necessary to terminate the audit engagement incompliance with any applicable legal or regulatory requirementsrelevant to terminating the audit engagement.3. Do respondents agree that a firm should be required to communicate all breaches ofan independence requirement to those charged with governance? If not, why not andwhat should be the threshold for reporting?We would not expect breaches to be commonplace and therefore the requirement tocommunicate all breaches that have been identified to those charged with governancewould not be too onerous. However, should there be situations where multiple breachesdo occur, there is no mechanism for those charged with governance to set limits as towhich they might consider to be insignificant and perhaps where periodic aggregatedreporting might be appropriate. If the proposed changes to the code were refined in orderto allow for such an approach then it should provide a mechanism for those charged withgovernance to control the flow of information whilst at the same time highlighting themore significant breaches immediately.4. Do respondents agree that the reasonable and informed third party test should be usedin determining whether an action satisfactorily addresses the consequences of abreach of an independence requirement? If not, why not and what should the test be?We agree that the reasonable and informed third party test should be used in determiningwhether an action satisfactorily addresses the consequences of a breach of anindependence requirement. This approach is consistent with existing paragraph 290.6(b)and 291.5(b) Independence in Appearance.5. Do respondents agree that the matters that should be discussed with those chargedwith governance as proposed in section 290.46 are appropriate? If not, why not? Arethere other matters that should be included, or matters that should be excluded?We agree with the matters listed in 290.46 however to ensure reporting does not becomeextensive and is relevant to the breach identified we would recommend the followingamendments to the third item listed:• A description of the firm’s relevant policies and procedures relevant to thebreach designed to provide it with reasonable assurance that independence ismaintained;We acknowledge that the code establishes ethical requirements for professionalaccountants and is unable to place requirements on those charged with governance of anentity. However, we are of the opinion that client systems which include policies aroundthe entities interactions with its auditor, for example the provision of non audit services bythe auditor, are important to maintaining independence. For this reason, we would like tosee the following requirement added to the list of matters in 290.46 that should bediscussed with those charged with governance in the event of a breach occurring.2
• The entity’s policies, where they exist, designed to provide those charged withgovernance with assurance that independence is maintained and any apparentbreach of those policies;6. Do respondents agree with the impact analysis as presented? Are there any otherstakeholders, or other impacts on stakeholders, that should be considered andaddressed by the IESBA?We agree with the impact analysis as presented. We did not identify any otherstakeholders, or other impacts on stakeholders, that should be considered and addressedby the IESBA.7. Would the proposal require firms to make significant changes to their systems orprocesses to enable them to properly implement the requirements? If so, does theproposed effective date provide sufficient time to make such changes?In countries where more developed professional ethical standards already exist we do notbelieve the proposals will require firms to make significant changes to their systems orprocesses in order to properly implement the requirements. Some other countries mayhave changes to implement but we believe the proposed timescale seems adequate.8. Is the abbreviated version of the framework described in Section 290 for dealing with abreach of an independence requirement suitable for Section 291? If not, what dorespondents believe Section 291 should contain?We consider the abbreviated version of the framework described in Section 290 for dealingwith a breach of an independence requirement is suitable for Section 291. However, weconsider the proposed requirements contained in Section 290 provide useful guidance inapplying the requirements. Therefore, we recommend that the abbreviated versionproduced for Section 291 include references to Section 290 where relevant, with theexception of the matters listed in paragraph 290.46 which we feel should be reproduced inparagraph 291.35 as shown in Appendix A to our response.Please contact me should you wish to discuss any of these comments.Yours sincerely,BDO International LimitedWayne KolinsGlobal Head of Audit and Accounting3
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