ICAS response to the IESBA Collective Investment Vehicles (CIV) and Pension Schemes consultation

We have submitted our response to the International Ethics Standards Board for Accountants (IESBA) Collective Investment Vehicles and Pension Schemes – Auditor Independence - consultation on 30 June 2025. This was informed by insights from our Ethics Board.

Context of IESBA Consultation

On 31 March 2025, the IESBA launched a public consultation to gather feedback on auditor independence for audits of Collective Investment Vehicles ("CIVs") and Pension Funds (“Investment Schemes”). The consultation paper sought views on whether revisions to the International Code of Ethics for Professional Accountants, including International Independence Standards, are necessary to address the independence of auditors when they audit these Investment Schemes. 

ICAS response to IESBA 

In our response, we highlighted that CIVs is a topic that has featured on IESBA’s pipeline of projects for some considerable time and that we are not aware of major issues in practice in relation to audits of such entities. Therefore, we don’t believe revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (“the Code”) are warranted in relation to such entities, and the same applies to Pension Funds. Rather, we believe that the conceptual framework in the IESBA Code remains robust and fit for purpose in addressing auditor independence in these contexts, including application of the reasonable and informed third party test. 

We also noted that given the complexities that are often associated with the operations of such entities, we believe application of the conceptual framework by auditors to be the optimum approach in properly assessing any threats to independence that may exist, ensuring that these are appropriately addressed in the context of the particular facts and circumstances and the jurisdiction concerned.

Definition of “related entity”

In its consultation paper, the IESBA explained that the Code’s definitions of “audit client” and “related entity” might not capture certain parties that are (a) responsible for decision-making and operation of an Investment Scheme, (b) able to substantially affect the financial performance of the Scheme, or (c) in a position to exert significant influence over the preparation of the Scheme’s accounting records or financial statements (referred to as “Connected Parties”). 

IESBA therefore specifically sought comment as to whether the Code’s definition of related entity captures all relevant parties that need to be included in the auditor’s independence assessment when auditing CIVs/pension funds. 

We responded that while we believe that the Code’s definitions of “audit client” and “related entity” would not necessarily directly capture “Connected Parties”, we don’t believe this to be the crux of the matter. Auditors are required to apply professional judgement in applying the conceptual framework to identify, evaluate and address any threats to their independence. This assessment is not limited by the boundaries of the definition of a related party. We believe this is the approach that’s currently applied, with audit firms placing considerable focus on ensuring that any threats are identified and appropriately addressed, and we are not aware that there’s currently an issue in practice. Indeed, it can be argued that this approach ensures that appropriate consideration is given to identifying any such risks that may be present and that they are appropriately addressed. 

We added that we don’t believe that there’s a need for further criteria to be introduced into the Code. As such, an approach would potentially add to the complexity of it.  Furthermore, given their very nature, the structure of such entities may change in a fairly short space of time. Therefore, there’s a risk that if IESBA was to impose further specific restrictions, that such an approach might inadvertently have the unintended consequence of further reducing choice for CIVs and pension schemes in certain jurisdictions. 

To share best practice for the auditors of such entities, we encouraged IESBA to consider producing non-authoritative guidance.

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