The International Ethics Standards Board for Accountants (IESBA) has revised its definition of public interest entities (PIE).

The revised provisions specify a broader list of categories of entities as PIEs whose audits should be subject to additional independence requirements to meet stakeholders’ heightened expectations concerning auditor independence when an entity is a PIE.

The revisions:

  • Articulate an overarching objective for additional independence requirements for audits of financial statements of PIEs.
  • Provide guidance on factors to consider when determining the level of public interest in an entity.
  • Replace the term “listed entity” with a new term “publicly traded entity,” providing a definition of the latter term.
  • Recognise the essential role local bodies responsible for the adoption of the Code play in delineating the specific entities that should be scoped in as PIEs in their jurisdictions, encouraging them to properly refine the PIE categories and adding any other categories relevant to their environments.
  • Introduce a transparency requirement for firms to publicly disclose the application of independence requirements for PIEs where they have done so.

IESBA chair Gabriella Figueiredo Dias said: “The concept of a PIE is central to the application of the IIS and determines how far an auditor must go in meeting the fundamental requirement to be independent. The revised definition and related provisions represent the third pillar in our package of measures to significantly strengthen auditor independence in the public interest, following the release of our revised Non-Assurance Services and Fees standards last year.”

The revised PIE definition and related provisions become effective for audits of financial statements for periods beginning on or 15 December 2024. Early adoption is permitted and encouraged.