APESB finalises its amendments to Public Interest Entities

Key Points

  • The APESB has issued amendments to the definition of Public Interest Entities
  • A guidance paragraph has been added to APES 110 which identifies types of entities in Australia which are likely to be classified as Public Interest Entities
  • These provisions are effective from 1 January 2013 with early adoption permitted.

On 7 December 2011, the Accounting Professional & Ethical Standards Board (APESB) issued a document that represents the finalisation of its recent deliberations on the definition of Public Interest Entities in the Australian context.

The Technical Update 2011/5 issued by the APESB identifies that the following amendments have been made to APES 110 Code of Ethics for Professional Accountants:

  • Changes the definition of Public Interest Entity to clarify that the definition has two limbs separated by the word or rather than the word and, so that an entity will be a Public Interest Entity if is satisfies either the first limb (a) or the second limb (b) of the definition.
  • Amends the wording of paragraph 290.25 to express the definition of Public Interest Entity in the singular, rather than the plural, sense. This makes the paragraph consistent with the wording of the definition of Public Interest Entity in Section 2 of the Code.
  • Footnotes paragraph 290.25 to state that a listed entity as defined in Section 9 of the Corporations Act 2001 is included within the definition of a Public Interest Entity.
  • Amends paragraph 290.26 to remove the reference to member bodies, as the APESB has determined that this reference, inherited from the international code on which APES 110 is based, is not relevant in the Australian context.
  • Amends the wording of paragraph 290.26 to make it mandatory for firms to determine whether additional entities should be treated as Public Interest Entities "because they have a large number and wide range of stakeholders". Prior to this amendment, firms were merely "encouraged" to consider this issue.
  • Inserts an additional Australian paragraph AUST290.26.1 setting out those types of Australian entities which in the APESB's view will generally satisfy the conditions in paragraph 290.26 and therefore are likely to be classified as Public Interest Entities. These include authorised deposit-taking institutions, life insurance companies and disclosing entities.

The effective date for these provisions has also been clarified to be 1 January 2013, with early adoption permitted.

The revised wording of the paragraphs is available in the APESB document, and will be added to the Members' Handbook at the next available opportunity.

What are the consequences of an entity being a Public Interest Entity?
In determining whether an assurance practitioner is independent of a Public Interest Entity, there are specific provisions that must be taken into account by a firm conducting an audit or review of that entity. These provisions are concerned with:

  • Where a former key audit partner or the firm's former senior or managing partner has obtained employment with an audit client (see paragraphs 290.139 to 290.141)
  • Where there has been a long association of senior firm personnel with an audit client (including a requirement for key audit partner rotation after specified periods) (see paragraphs 290.151 to 290.155)
  • Where non-assurance services are provided by the firm to audit clients, specifically:
    • Accounting and bookkeeping services (paragraphs 290.172 to 290.173)
    • Valuation services (paragraph 290.180)
    • Certain taxation services (paragraph 290.185)
    • Internal audit services (paragraph 290.200)
    • Certain IT Systems services (paragraph 290.206)
    • Certain recruiting services (paragraph 290.215)
  • Where total fees from the audit client and its related entities exceed 15% of the total fees received by the firm (paragraph 290.222).


Article last updated 5 January 2012