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I.
Self-Interest threats
Financial interest in a client or jointly holding a
financial interest with a client
Undue Dependence on total fees from a client
Having a close business relationship with a
client
Concern about the possibility of losing a client
Potential employment with a client
Contingent fees
relating to an assurance
engagement
Self-review threats
The discovery of a significant error during a reevaluation of the work of the professional
accountant in public practice.
Reporting on the operation of financial systems
after being involved in their design or
implementation.
Having prepared the original data used to
generate records that are the subject matter of the
engagement.
A member of the assurance team being, or having
recently been, a director or officer* of that client.
A member of the assurance team being, or having
recently been, employed by the client in a position
to exert direct and significant influence over the
subject matter of the engagement.
Performing a service for a client that directly
affects the subject matter of the assurance
engagement.
Advocacy
Promoting shares in a listed entity when that entity
is a financial statement audit client.
Acting as an advocate on behalf of an assurance
client in litigation or disputes with third parties.
Familiarity
A member of the engagement team having a close
or immediate family relationship with a director or
officer of the client.
A member of the engagement team having a close
or immediate family relationship with an employee
of the client who is in a position to exert direct and
significant influence over the subject matter of the
engagement.
A former partner of the firm being a director or
officer of the client or an employee in a position to
exert direct and significant influence over the
subject matter of the engagement.
Accepting gifts or preferential treatment from a
client, unless the value is clearly insignificant.
Long association of senior personnel with the
assurance client.
Intimidation
Being threatened with dismissal or replacement in
relation to a client engagement.
Being threatened with litigation.
Being pressured to reduce inappropriately the
extent of work performed in order to reduce fees.
SAFEGUARDS
May eliminate or reduce threats to an acceptable
level fall into two broad categories: (a) Safeguards
created by the profession, legislation or
regulation and (b) Safeguard in the work
environment.
Work environment safeguards comprise
1.Firm-wide safeguards and
2.Engagement specific safeguards.
Client Acceptance
Before accepting a new client relationship, a
professional accountant in public practice should
consider whether acceptance would create any
threats to compliance with the fundamental
principles
Client issues that could threaten compliance with
the fundamental principles include, for example,
client involvement in illegal activities, dishonesty or
questionable financial reporting practices.
Engagement Acceptance
A professional accountant in public practice should
agree to provide only those services that the
professional accountant in public practice is
competent to perform.
When a professional accountant in public practice
intends to rely on the advice or work of an expert,
he should evaluate whether such reliance is
warranted.
Immediate family.
A spouse (or equivalent) or
dependent.
Independence is:
XXXVI. (a) Independence of mind the states of
mind that permits the provision of an opinion without
being affected by influences that compromise
professional judgment, allowing an individual to act
with integrity, and exercise objectivity and
professional judgment
XXXVII. (b) Independence in appearance the
avoidance of facts and circumstances that are so
significant a reasonable and informed third party,
having knowledge of all relevant information,
including any safeguards applied, would reasonably
conclude a firms, or a member of the assurance
teams, integrity, objectivity or professional scepticism
had been compromised.
Indirect financial interest
XXXVIII. A financial interest beneficially owned
through a collective investment vehicle, estate, trust
or other intermediary over which the individual or
entity has no control.
Listed entity. An entity whose shares, stock or debt
are quoted or listed on a recognized stock exchange,
or are marketed under the regulations of a
recognized stock exchange or other equivalent body.
Network. A larger structure:
XXXIX. (a) That is aimed at co-operation,
and
XL.
(b) That is 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
professional resources.
Network firm. A firm or entity that belongs to a
network.
Professional accountant
XLI.
An individual who holds a valid certificate
issued by the Board of Accountancy (i.e., Certified
Public Accountant), whether he/she be in public
practice, industry, commerce, the public sector or
education.
Professional accountant in public practice
XLII.
A sole proprietor, or each partner or person
occupying a position similar to that of a partner
and each staff in a practice providing professional
services to a client irrespective of their functional
classification (e.g., audit, tax or consulting) and
professional accountants in a practice having
managerial responsibilities. This term is also used
XLV.
(b) An entity with a direct financial interest
in the client provided that such entity has significant
influence over the client and the interest in the client
is material to such entity;
XLVI.
(c) An entity over which the client has direct
or indirect control;
XLVII. (d) An entity in which the client, or an entity
related to the client under (c) above, has a direct
financial interest that gives it significant influence over
such entity and the interest is material to the client
and its related entity in (c); and
XLVIII. (e)An entity which is under common control
with the client (hereinafter a sister entity) provided
the sister entity and the client are both material to the
entity that controls both the client and sister entity.
XLIX.