The International Ethics Standards Board for Accountants has released for public exposure proposed changes to the definition of “engagement team” in the IESBA Code of Ethics for Professional Accountants.

The proposals address comments received by the International Auditing and Assurance Standards Board on its exposure draft on ISA 610, Using the Work of Internal Auditors. A number of respondents to the exposure draft pointed to a perceived inconsistency between the independence requirements for external auditors under the Code and the use of internal auditors to perform external audit procedures.

“Through this exposure draft, the IESBA seeks to ascertain whether the proposed changes to the definition adequately clarify the term ‘engagement team’ and eliminate the perception that the Code and the ISA are in conflict,” said IESBA chair Ken Dakdduk. “The IESBA believes this will contribute to more consistent application of the Code, which is critical to our mission to support the global adoption and implementation of the Code of Ethics.”

Several respondents to the exposure draft commented on the apparent inconsistency between the use of internal auditors to perform external audit procedures and the requirement under the Code for external auditors to be independent of the audit client. Some of these respondents expressed the view that internal auditors performing external audit procedures, by definition, would be part of the engagement team and noted that the Code required the engagement team to be independent of the audit client. The IESBA concluded that it should consider the comments related to direct assistance and the definition of the engagement team.

“The requirements of ISA 610 now include a number of restrictions on internal auditors providing direct assistance to external auditors,” the IESBA noted. “In addition, a new requirement was introduced at the suggestion of the IESBA regarding the need to communicate to those charged with governance the planned use of internal auditors to provide direct assistance so as to reach a mutual understanding that such use is not excessive in the circumstances. The IESBA felt this was a necessary safeguard because, notwithstanding the direction, supervision, and review by the external auditor, excessive direct assistance by internal auditors may affect perceptions regarding the independence of the audit.”

The IESBA, which operates under the auspices of the International Federation of Accountants, is asking for comments on its proposals in the exposure draft, Proposed Change to the Definition of “Engagement Team.” To submit a comment, visit the IESBA Web site at www.ifac.org/ethics. Comments on the exposure draft are requested by May 31, 2012.

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