IESBA Exposure Draft: Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code

EFAA for SMEs, representing the voice of SMPs in Europe, asks to ensure that professional standards and regulation is proportionate to the capacities of small- and medium-sized accountancy practices (SMPs) and their small- and medium-sized entity (SMEs) clients and tailored to the needs and characteristics of SMPs and SMEs.

3 May 2021 – EFAA considers that the IESBA project is especially relevant since it effectively determines and clarifies which entities must comply with more stringent ethical requirements. The determination as to which entities are classified as listed entities and public interest entities (PIEs) is integral to the scalability of the International Code of Ethics for Professional Accountants.   

We support in principle the adoption of the board approach to defining PIE as this is consistent with the IESBA’s principles-based approach to standard-setting and allows local regulatory or other authorities to refine the definition of PIEs to best suit their local needs and circumstances. We are, however, unsure of the merits and practicality of the need to refine the list by excluding entities as we fear this may result in inconsistent practices internationally and have potential unintended consequences. We are keen for the IESBA to lead the way in the global convergence effort so would prefer the Code not invite jurisdictions to refine the list by excluding entities. 

We see further scope for greater consistency of definitions and terms used across the international standard setting boards. For example, the IAASB uses the term “entities of significant public interest” (ESPI) while the IASB uses the term “publicly accountable entities”. Such differences are hard to justify and potentially confuse users of corporate reports. Accordingly, we urge the relevant boards to try to harmonize these definitions and terms.