Independence Public Interest Entities

8/12/2019 Independence Public Interest Entities

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Public I nterest Enti ties

Definition of independence

Conceptual framework

Network firms Public interest entities

Related entities

Those charged with governance

General Provisions


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Documentation

Engagement period

Mergers and acquisitions

Otherconsiderations

General Provisionscontd


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Independence of Mind

The state of mind that permits the expression of a conclusion

without being affected by influences that compromise

professional judgment, thereby allowing an individual to act

with integrity and exercise objectivity and professionalskepticism.

Independence in Appearance

The avoidance of facts and circumstances that are so significantthat a reasonable and informed third party would be likely to

conclude, weighing all the specific facts and circumstances, that

a firms, of a member of the audit teams, integrity, objectivity

or professional skepticism has been compromised.

Definition of Independence


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Conceptual Framework Approach

Threats and Safeguards


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Self-interest

The threat that a financial or other interest will inappropriate

influence the professional accountants judgment or behavior.

Self-review The threat that a professional accountant will not appropriately

evaluate the results of a previous judgment made or service

performed on which the accountant will rely when forming a

judgment as part of providing the current service.

Advocacy

The threat that a professional accountant will promote a clients

position to the point that the accountants objectivity is

compromised.

Conceptual FrameworkThreats


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Familiarity

The threat that due to a long or close relationship with a client, a

professional accountant will be too sympathetic to their interests or

too accepting of their work.

Intimidation

The threat that a professional accountant will be deterred from

acting objectively because of actual or perceived pressures,

including attempts to exercise undue influence over the accountant.

Conceptual FrameworkThreats


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Safeguards fall into two broad categories:

Those created by the profession, legislation or regulation; and

Those in the work environment.

Conceptual FrameworkSafeguards


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When safeguards are never adequate

Conceptual FrameworkProhibitions


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Network firms are required to be independent of auditclients of other firms within the network

Network is defined as a larger structure that is:

Aimed at co-operation; and

Clearly aimed at profit or cost sharing or shares common

ownership, control or management, common quality control

policies and procedures, common business strategy, the use of

a common brand-name, or a significant part of professionalresources.

Network Firms


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Public interest entities defined as:

Listed entities; and

Entities

defined by regulation or legislation as a public interest entity, or

for which the audit is required by regulation or legislation to be

conducted in compliance with the same independence

requirements that apply to the audit of listed entities.

Public Interest Entities


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Firms and member bodies are encouraged to determinewhether to treat other entities as public interest entities

because the entities have a large number and wide

range of stakeholders

Factors to be considered include:

The nature of the business, such as the holding of assets in a

fiduciary capacity for a large number of stakeholders;

Size; and

Number of employees.

Public Interest Entities


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Related entities of the audit client are defined as:

An entity that has direct or indirect control over the client if the client is

material to such entity;

An entity with a direct financial interest in the client if that entity has

significant influence over the client and the interest in the client is materialto such entity;

An entity over which the client has direct or indirect control;

An entity in which the client, or an entity over which the client has direct or

indirect control, has a direct financial interest that gives it significant

influence over such entity and the interest is material to the client and itsrelated entity; and

An entity which is under common control with the client (a sister entity) if

the sister entity and the client are both material to the entity that controls

both the client and the sister entity.

Related Entities


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Listed entities

References to audit client include its related entities

Independence is required from all related entities.

Non-listed entities

Independence is required from related entities over which the

audit client has direct or indirect control.

When the audit team knows, or has reason to believe, arelationship or circumstance involving a related entity is relevant

to the evaluation of the firms independence, that related entity

shall be included in the evaluation of independence.

Related Entities


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Regular communication with those charged withgovernance is encouraged.

Communication enables those charged with governance

to: Consider the firms judgments in identifying and evaluating

threats to independence,

Consider the appropriateness of safeguards applied, and

Take appropriate action.

Those Charged with Governance


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The professional accountant shall document conclusionsregarding compliance with independence requirements

and the substance of relevant discussions supporting

conclusions:

When safeguards are required, the nature of the threat and

safeguards in place or applied to reduce threat to an acceptable

level shall be documented.

When a threat required significant analysis to determine

whether safeguards were necessary and the accountant

concluded safeguards were not necessary because the threat

was already at an acceptable level, the nature of the threat and

rationale for the conclusion shall be documented.

Documentation


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Independence is required during the engagement periodand the period covered by the financial statements.

The engagement period starts when the audit team

begins to perform audit services and ends when theaudit report is issued.

If the engagement is recurring, the period ends at the

later of the notification by either party that the

professional relationship has terminated or the issuanceof the final report.

Engagement Period


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When, as a result of merger or acquisition, an entitybecomes a related entity of the audit client, the firm

shall:

Identify and evaluate previous and current relationships that

could affect independence, and

Take steps necessary by the effective date of the merger or

acquisition to terminate any current interests or relationships

that are not permitted.

Mergers and Acquisitions


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If the firm cannot reasonably terminate an interest orrelationship by the effective date, the firm shall:

Evaluate the significance of the threat, and

Discuss the matter with those charged with governance and ifthose charged with governance request the firm to continue as

auditor, the firm shall do so only if:

The interest or relationship will be terminated as soon as reasonably

possible and in all cases within six months of the effective date;

Any individual with such an interest or relationship is not a member of

the engagement team or the individual responsible for the engagement

quality control review; and

Appropriate transitional measures are applied and discussed with

those charged with governance.



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When the firm has completed a significant amount of audit workbefore the effective date of the merger or acquisition and can

complete the audit in a short period of time, and those charged with

governance request the firm to complete the audit while continuing

with an interest or relationship that would otherwise be prohibited,

the firm shall do so only if :

The firm has evaluated the significance of the threats and discussed such

evaluation with those charged with governance;

The individual with such an interest or relationship is not a member of the

engagement team or the individual responsible for the engagement qualitycontrol review;

Appropriate transitional measures are applied; and

The firm ceases to be the auditor no later than the issuance of the audit

report.



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In all cases, the firm shall determine whether, even if all therequirements can be met, the interests or relationships create

threats that would remain so significant that objectivity would be

compromised .

The firm shall document any prohibited interests or relationshipsthat will not be terminated by the effective date of the merger or

acquisition, including the:

Reasons why the interest or relationship was not terminated;

Transitional measures applied; Results of the discussion with those charged with governance; and

Rationale as to why the threats that remain are not so significant that

objectivity would be compromised.



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An inadvertent violation of an independencerequirement generally will be deemed not to

compromise independence provided:

The firm has appropriate quality control policies and

procedures (equivalent to ISCQ 1) in place to maintain

independence; and

Once discovered, the violation is corrected promptly and any

necessary safeguards are applied to eliminate any threat or

reduce it to an acceptable level.

The firm shall determine whether to discuss the matter

with those charged with governance.

Other Considerations


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General Provision

Financial interests

Loans and guarantees

Business relationship

Family and personal relationships

Employments with an audit client

Key Independence Provisions


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Temporary staff assignments

Recent service with an audit client

Serving as a director or officer

Long association (including partner rotation)

Provision of non-assurance services

Fees


P bli I E i i


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Compensation and evaluation policies

Gifts and hospitality

Actual of threatened litigation

Reports that include a restriction on use or

distribution


P bli I t t E ti ti


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The slides that follow cover particular circumstances orrelationships addressed in Section 290 of the Code.

However, Section 290 does not describe all of the

circumstances or relationships that create or may createthreats to independence.

The firm and members of the audit team shall evaluate

the implications of similar, but different, circumstances

and relationships and determine whether safeguards canbe applied when necessary to eliminate the threats or

reduce them to an acceptable level.

General Provision

P bli I t t E ti ti


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A firm, a member of the audit team, or an immediatefamily member shall not have a direct financial interest

or material indirect financial interest in the audit client.

Financial Interests

P bli I t t E ti ti


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Partners, and their immediate family members, shallnot have a direct financial interest or material indirect

financial interest in any audit client served by

engagement partners located in the same office.

Partners and managerial employees who provide non-

audit services to an audit client, except those whose

involvement is minimal, or their immediate family

members, shall not have a direct financial interest or

material indirect financial interest in such audit client.

Financial Interests

P bli I t t E ti ti


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Financial interests held by immediate family members of:

Partners in the office of the engagement partner, or

Partners or managerial employees who provide non-audit services to

the audit client

will not compromise independence if the interest is received

as a result of the family members employment rights and

safeguards are applied when necessary.

When the immediate family member has the right to disposeof the interest or, in the case of stock options, exercise the

option, the interest shall be disposed of or forfeited as soon

as practicable.

Financial Interestscontd

P bli I t t E ti ti


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Those prohibited from having a direct or materialindirect financial interest in an audit client shall not

hold such interest as trustee unless:

The trustee, or immediate family member, or the firm are not

beneficiaries of the trust;

The interest in the audit client is not material to the trust;

The trust cannot exercise significant influence over the audit

client; and

The trustee, or immediate family member, or the firm cannot

significantly influence any investment decision involving a

financial interest in the audit client.

Financial Interests

P bli I t t E ti ti


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A firm, a member of the audit team, or an immediatefamily member shall not have a financial interest in an

entity that the audit client also has an interest in if the

interest is material to any party and the audit client can

exercise significant influence over the entity.

Financial Interests



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If the firm, a partner or employee of the firm, or immediatefamily member, receives a financial interest that would not

be permitted, for example by way of an inheritance, gift or

as a result of a merger:

If received by the firm, a member of the audit team, or immediatefamily member, the interest shall be disposed of immediately, or if

the interest is indirect, a sufficient amount shall be disposed of such

that the remaining interest is immaterial

If received by an individual who is not a member of the audit team,

or immediate family member, the interest shall be disposed of as

soon as possible, or if the interest is indirect, a sufficient amount

shall be disposed of such that the remaining interest is immaterial

Financial Interests



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Threats may be created:

If a member of audit team knows a close family member, or

other individuals ,such as professionals in the firm or close

personal friends, holds a direct financial interest or material

indirect financial interest in the audit client

A firms retirement benefit plan holds a direct financial

interest or material indirect financial interest in an audit client

A firm, a member of the audit team, or immediate family

member, has a financial interest in an entity and a director,

officer or controlling owner of the audit client is also known to

have a financial interest in that entity

Financial Interests



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Audit clients that are banks or similar institutions

A firm, a member of the audit team, or immediate family member,

may not have a loan or guarantee of a loan provided it is made under

normal lending procedures, terms and conditions.

If a loan to a firm is permitted under the above and is material to theaudit client or the firm, it may be possible to apply safeguards to

reduce the threat to an acceptable level.

Audit clients that are not banks or similar institutions

A firm, a member of the audit team, or immediate family member,may have a loan or guarantee of a loan unless it is immaterial to the

firm or member of the audit team and the immediate family member,

and the client.

Loans and Guarantees



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A firm, a member of the audit team, or an immediatefamily member, shall not make or guarantee a loan to

an audit client unless the loan or guarantee is

immaterial to both the firm or member of the audit team

and the immediate family member, and the client.

Loans and Guarantees



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A firm shall not have a business relationship with an audit clientor its management unless any financial interest is immaterial and

the business relationship is insignificant to the firm and the client

or its management.

If any financial interest from a business relationship between amember of the audit team and the audit client or its management

is material or the relationship is significant to that member, the

individual should be removed from the audit team.

If the business relationship is between an immediate family

member of a member of the audit team and the audit client or its

managements, any threat shall be evaluated and safeguards

applied when necessary.

Business Relationships



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The purchase of goods and services from an audit clientby the firm, or a member of the audit team or an

immediate family member, does not generally create

threats to independence if the transaction is in the

normal course of business and at arms length.

If the nature or magnitude of the transactions is such

that a self-interest threat is created, safeguards shall be


Business Relationships



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An individual who has an immediate family member inone of the following positions at an audit client, or who

was in the position during any period covered by the

engagement or financial statements, shall not be a

member of the audit team:

A director or officer; or

An employee in a position to exert significant influence over

the preparation of the accounting records or the financial

statements.

Family and Personal Relationships



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Threats to independence are created when a member ofthe audit team has an immediate family member who is

an employee in a position to exert significant influence

over the clients financial position, financial

performance or cash flows.

The significance of the threats shall be evaluated and

safeguards applied when necessary.




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Threats to independence are created when a member ofthe audit team has a close family member in one of the

following positions at an audit client:


An employee in a position to exert significant influence over

the preparation of the accounting records of the financial

statements.

The significance of the threats shall be evaluated andsafeguards applied when necessary.

Family and Personal Relationshipscontd



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Threats to independence are created if a member of the auditteam has a close relationship with other persons in one of the

following positions at an audit client:


An employee in a position to exert significant influence over the

preparation of the accounting records of the financial statements.

A member of the audit team who has such a relationship shall

consult in accordance with firm policies and procedures.

The significance of the threats shall be evaluated and





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A former member of audit team or partner of the firmshall not join an audit client as director or officer or an

employee in a position to exert significant influence

over the accounting records or financial statements

unless:

The individual is not entitled to any benefits or payments from

the firm, unless made in accordance with fixed pre-determined

arrangements and any amount owed to the individual is not

material to the firm; and

The individual does not continue to participate, or appear to

participate, in the firms business or professional activities.

Employment with an Audit Client



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If no significant connection remains between the firmand the former member of the audit team or partner, the

significance of the threats shall be evaluated and


Firm policies and procedures shall require members of

the audit team to notify the firm when entering

employment negotiations with an audit client.

Safeguards shall be applied when necessary.

Employment with an Audit Clientcontd



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Independence is compromised if a key audit partneror thefirms Senior or Managing Partner joins the audit client as a

director or officer or an employee in a position to exert

significant influence over the accounting records or

financial statements unless aspecified period has passed.

An exception exists if a former key audit partner or the

firms Senior or Managing Partner is in such a position as a

result of a business combination, provided certain criteria

are satisfied.




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Key audit partners include the:

Engagement partner;

Individual responsible for the engagement quality control review; and

Other audit partners on the engagement team who make key decisions

or judgments on significant matters with respect to the audit.

Specified period

In the case of key audit partners, the client has issued audited

financial statements covering a period of not less than twelve monthsand the partner was not a member of the audit team with respect to the

audit of those financial statements.

In the case of the former Senior or Managing Partner, twelve

months have passed since the individual held that role.




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Such assistance may be given only for a short period oftime.

Firm personnel shall not:

Provide a non-assurance service that would not be permitted under

section 290; or

Assume a management responsibility.

In all cases the audit client shall be responsible for directing

and supervising the activities of the loaned staff.

The significance of any threats shall be evaluated and


Temporary Staff Assignments



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A partner or employee of the firm shall not serve as adirector or officer of an audit client.

A partner or employee may serve as Company

Secretary if:

The practice is specifically permitted under local laws and

professional rules of practice;

Management makes all relevant decision;

The duties are routine and administrative; and

The significance of the threats are evaluated and safeguards


Serving as a Director or Officer



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Using the same senior personnel on an auditengagement over a long period of time creates threats

to independence, which should be evaluated and


Key audit partners shall rotate after seven years and

shall not be a member of the engagement team or a key

audit partner for the client for two years.

Long Associationof Senior Personnel



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Where continuity is especially important to audit quality,key audit partners may, in rare cases due to unforeseen

circumstances outside of the firms control, be permitted

one additional year as long as threats to independence can

be eliminated or reduced to an acceptable level by applying

safeguards.

The time served as a key audit partner is taken into account

when the audit client becomes a public interest entity.

An additional year is permitted only when the individual has servedas a key audit partner for six or more years when the audit client

becomes a public interest entity.

Long Association of Senior Personnel



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During the two year time out period, the individualshall not:

Participate in the audit of the entity;

Provide quality control for the engagement; Consult with the engagement team or the client regarding

technical or industry-specific issues, transactions or events; or

Otherwise directly influence the outcome of the engagement.

Long Association of Senior Personnelcontd



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ub c te est t t es

Rotation is not required if:

The firm has only a few people with the necessary knowledge

and experience to serve as a key audit partner;

An independent regulator has provided an exemption from

rotation in such circumstances;

The independent regulator has specified alternative safeguards;

and

The alternative safeguards are applied.

Long Association of Senior Personnel



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Before the firm accepts an engagement to provide anon-assurance service to an audit client, a

determination shall be made whether providing the

service creates a threat to independence.

The firm shall not provide the service if the threats

cannot be reduced to an acceptable level by the

application of safeguards.

Provision of Non-assurance Services



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A firm may provide a non-assurance service that wouldotherwise be restricted to the following related entities,

provided the results of the services will not be subject to

audit procedures:

An entity that has direct or indirect control over the audit client;

An entity with a direct financial interest in the audit client if that

entity has significant influence over the client and the interest in

the client is material to the entity; or

An entity under common control with the audit client.

The significance of any threats shall be evaluated and


Provision of Non-assurance Services



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A non-assurance service provided to the audit clientbefore the client becomes a public interest entity does

not compromise the firms independence if:

The service was permissible for audit clients that are not

public interest entities;

The service that is not permitted for public interest entities is

terminated before or as soon as practicable after the client

becomes a public interest entity; and

Safeguards are applied when necessary.

Provision of Non-assurance Servicescontd



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A firm shall not assume a management responsibility foran audit client.

To avoid the risk of assuming a management

responsibility, the firm shall be satisfied that a member

of management is responsible for:

Making the significant judgments and decisions that are the

proper responsibility of management;

Evaluating the results of the service; and

Accepting responsibility for the actions to be taken from results

of the service.

Management Responsibilities



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Except in emergency situations, a firm shall not provide

accounting and bookkeeping services, including payroll services ,

to an audit client or prepare financial statements on which the

firm will express an opinion or financial information which forms

the basis of financial statements. A firm may provide services of a routine and mechanical nature

for divisions or related entities if the personnel providing the

service are not on the audit team and:

The divisions or related entities are collectively immaterial; or

The services relate to matters which are collectively immaterial to the

financial statements of the division or related entity.

Preparing Accounting Records andFinancial Statements



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Emergency Situations

In emergency or other unusual situations when it is

impractical for the audit client to make other

arrangements, accounting and bookkeeping services thatwould otherwise be prohibited may be provided if:

Those who provide the services are not on the audit team;

The services provided only for a short period of time and are

not expected to recur; and

The situation is discussed with those charged with governance.

Preparing Accounting Records andFinancial Statements



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Valuation services may create a self-review threat,which shall be evaluated and safeguards applied

when necessary.

A firm shall not provide valuation services if thevaluations would have a material effect, separately

or in the aggregate, on the financial statements.

Valuation Services



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Tax Return Preparation

Providing tax return preparation services does not

generally create a threat to independence if

management takes responsibility for the returns and any

significant judgments made.

Taxation Services



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Tax Calculations

Preparing calculations of current and deferred tax

liabilities (or assets) for purpose of preparing

accounting entries that will be subsequently audited by

the firm creates a self-review threat.

The significance shall be evaluated and safeguards


Taxation Servicescontd



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Tax Planning and Other Tax Advisory Services

A self-review threat may be created when advice will affect

matters to be reflected in the financial statements. The threat

shall be evaluated and safeguards applied when necessary.

A firm shall not provide tax advice if the effectiveness of

the advice depends on a particular accounting treatment or

financial statement presentation and:

The audit team has reasonable doubt as to the appropriateness of therelated accounting treatment or presentation; and

The outcome or consequence of the corporate finance advice would

have a material effect on the financial statements.

Taxation Services



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Assistance in the Resolution of Tax Disputes

An advocacy or self-review threat may be created when the

firm assists the audit client with the resolution of a tax dispute

once the tax authorities have notified the client that they have

rejected the clients arguments and the matter is beingreferred for determination in a formal proceeding. The threats

shall be evaluated and safeguards applied when necessary.

A firm shall not act as an advocate for the audit client before a

public tribunal or court in the resolution of a tax matter if theamounts involved are material to the financial statements.

Taxation Services



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When providing internal audit services to an audit client, firmpersonnel shall not assume a management responsibility, and the

firm shall be satisfied that:

The client designates an appropriate and competent resource to be in

charge and acknowledge responsibility for internal controls;

Management or those charged with governance review, assess and

approve the scope, risk and frequency of the services;

Management evaluates the adequacy and results;

Management decides which recommendations to implement; and

Management reports to those charge with governance the significant

findings and recommendations.

Internal Audit Services



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If the firm provides internal audit services and the results of thoseservices will be used in conducting the external audit, a self-

review threat is created, which shall be evaluated and safeguards


A firm shall not provide internal audit services that relate to:

A significant part of the internal controls over financial

reporting;

Financial accounting systems that generate information that is,

separately or in the aggregate, significant to the clientsaccounting records or financial statements; or

Amounts or disclosures that are, separately or in the aggregate,

material to the clients financial statements.

Internal Audit Services



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The firm may provide the following services provided firmpersonnel do not assume a management responsibility:

Designing or implementing IT systems that are unrelated to internal

control over financial reporting;

Designing or implementing IT systems that do not generateinformation forming a significant part of the accounting records or

financial statements;

Implementation of off-the-shelf accounting or financial

information reporting software not developed by the firm if no

significant customization is required to meet the clients needs; and

Evaluating and making recommendations on a system designed,

implemented or operated by another or the client.

IT Systems Services



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A firm shall not provide services involving the designor implementation of IT systems that:

Form a significant part of the internal control over financial

reporting; or

Generate information that is significant to the accounting

records or financial statements.

IT Systems Services



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If the firm provides litigation support servicesinvolving estimating damages or other amounts that

affect the financial statements, the requirements

regarding valuation services shall be followed.

For other litigation support services, the significance of

any threat created shall be evaluated and safeguards


Litigation Support Services



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A firm shall not act in an advocacy role for an auditclient in resolving a dispute or litigation when the

amounts involved are material to the financial

statements.

A partner or employee shall not act as General Counsel

for legal affairs of an audit client.

For other legal services, the significance of any threat

created shall be evaluated and safeguards applied whennecessary.

Legal Services

Public Interest Enti ties


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Providing recruiting services may create threats toindependence, which shall be evaluated and safeguards


A firm may generally provide services such as:

Reviewing the professional qualifications of candidates and

providing advice on their suitability for a position; and

Interviewing candidates and advising on their competence for

financial accounting, administrative or control positions.

Recruiting Services



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A firm shall not provide the following services withrespect to a director or officer of the audit client or

senior management in a position to exert significant

influence over the clients accounting records or

financial statements: Searching for or seeking out candidates for such positions; and

Undertaking reference checks of prospective candidates for

such positions.

Recruiting Services



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Providing corporate finance services may create threatsto independence, which shall be evaluated and


A firm shall not provide corporate finance advice if the

effectiveness of the advice depends on a particular

accounting treatment or financial statement

presentation and:

The audit team has reasonable doubt as to the appropriatenessof the accounting treatment or presentation; and

The outcome or consequence of the tax advice would have a

material effect on the financial statements.

Corporate Finance Services



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Threats are created when fees from an audit clientrepresent a large proportion of the total fees of the firm

or a large proportion of the total revenue of an

individual partner or an individual office of the firm.

The threats shall be evaluated and safeguards applied

when necessary.

FeesRelative Size



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If the total fees from the client are more than 15% of the firmstotal fees for two years, the firm shall discuss which of the

following safeguards to apply with those charged with

governance:

A pre-issuance engagement quality control review performed by a

professional accountant who is not a member of the firm; or

A post-issuance review equivalent to an engagement quality control

performed by a professional accountant who is not a member of the firm.

If the total fees significantly exceed 15% of the firms total fees ,

the firm shall determine whether the significance of the threat issuch that a pre-issuance review is necessary.

FeesRelative Sizecontd



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A threat may be created when fees from an audit clientremain unpaid for a long time.

Generally, the firm is excepted to require payment of

any significant unpaid fees before the issue of the audit

report for the following year.

If fees remain unpaid after the report has been issued,

any threat shall be evaluated and safeguards applied

when necessary.

FeesOverdue



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A contingent fee shall not be charged in respect of an auditengagement.

A contingent fee shall not be charged for a non-assurance

service provided to an audit client if:

The fee is charged by the firm and the fee is material or expected to

be material to the firm;

The fee is charged by a network firm that participates in a significant

part of the audit and the fee is material or expect to be material to the

network firm; or

The outcome of the non-assurance service, and therefore the amount

of the fee, is dependent on a future or contemporary judgment related

to the audit of a material amount in the financial statements.

Contingent Fees



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For other contingent fee arrangements, threats toindependence shall be evaluated and safeguards applied

when necessary.

Contingent Fees



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Key audit partners shall not be evaluated on orcompensated for the partners success in selling non-

assurance services to their audit clients.

A threat may be created if other members of the audit

team are evaluated on or compensated for their success

in selling non-assurance services to their audit clients.

The threat shall be evaluated and safeguards applied

when necessary.

Compensation and Evaluation Policies



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A firm or member of the audit team shall not acceptgifts or hospitality from an audit client unless the value

is trivial and inconsequential.

Gifts and Hospitality



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Litigation between the firm or a member of the auditteam and an audit client creates a threat to

independence.

The significance of the threat shall be evaluated and


If safeguards do not reduce the threats to an acceptable

level, the firm shall withdraw from the audit

engagement.

Actual or Threatened Litigation



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The Code provides for some modifications to theindependence requirements for audit engagements where

the report includes a restriction on use and distribution,

unless the audit is required by law or regulation.

The modifications are permitted if the intended users of

the report:

Are knowledgeable as to the purpose and limitations of the

report; and

Explicitly agree to the application of the modified independence

requirements.

Reports that Include a Restriction on Use orDistribution



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The revised Code is effective on January 1, 2011.

Certain transitional provisions apply to the following:

Public interest entities;

Partner rotation;

Non-assurance services;

Feesrelative size; and

Compensation and evaluation policies.

Effective Date


81/81

International Federation of Accountants

www.ifac.org

Independence Public Interest Entities

Documents

Transcript of Independence Public Interest Entities