Introduction (921.1 to 921.2)
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921.1

Firms are required to comply with the fundamental principles, be independent and apply the conceptual framework set out in Section 120 to identify, evaluate and address threats to independence.

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921.2

Family or personal relationships with client personnel might create a self-interest, familiarity or intimidation threat. This section sets out specific requirements and application material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

General (921.3 A1 to 921.3 A2)
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921.3 A1

A self-interest, familiarity or intimidation threat might be created by family and personal relationships between an assurance team member and a director or officer or, depending on their role, certain employees of the assurance client.

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921.3 A2

Factors that are relevant in evaluating the level of such threats include:

  • The individual's responsibilities on the assurance team.

  • The role of the family member or other individual within the assurance client, and the closeness of the relationship.

Immediate Family of an Assurance Team Member (921.4 A1 to R921.5)
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921.4 A1

A self-interest, familiarity or intimidation threat is created when an immediate family member of an assurance team member is an employee in a position to exert significant influence over the underlying subject matter of the assurance engagement.

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921.4 A2

Factors that are relevant in evaluating the level of such threats include:

  • The position held by the immediate family member.

  • The role of the assurance team member.

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921.4 A3

An example of an action that might eliminate such a self-interest, familiarity or intimidation threat is removing the individual from the assurance team.

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921.4 A4

An example of an action that might be a safeguard to address such a self-interest, familiarity or intimidation threat is structuring the responsibilities of the assurance team so that the assurance team member does not deal with matters that are within the responsibility of the immediate family member.

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R921.5

An individual shall not participate as an assurance team member when any of that individual's immediate family:

  • Is a director or officer of the assurance client;

  • In an attestation engagement, is an employee in a position to exert significant influence over the subject matter information of the assurance engagement; or

  • Was in such a position during any period covered by the engagement or the subject matter information.

Close Family of an Assurance Team Member (921.6 A1 to 921.6 A4)
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921.6 A1

A self-interest, familiarity or intimidation threat is created when a close family member of an assurance team member is:

  • A director or officer of the assurance client; or

  • An employee in a position to exert significant influence over the underlying subject matter or, in an attestation engagement, an employee in a position to exert significant influence over the subject matter information of the assurance engagement.

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921.6 A2

Factors that are relevant in evaluating the level of such threats include:

  • The nature of the relationship between the assurance team member and the close family member.

  • The position held by the close family member.

  • The role of the assurance team member.

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921.6 A3

An example of an action that might eliminate such a self-interest, familiarity or intimidation threat is removing the individual from the assurance team.

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921.6 A4

An example of an action that might be a safeguard to address such a self-interest, familiarity or intimidation threat is structuring the responsibilities of the assurance team so that the assurance team member does not deal with matters that are within the responsibility of the close family member.

Other Close Relationships of an Assurance Team Member (R921.7 to 921.7 A3)
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R921.7

An assurance team member shall consult in accordance with firm policies and procedures if the assurance team member has a close relationship with an individual who is not an immediate or close family member, but who is:

  • A director or officer of the assurance client; or

  • An employee in a position to exert significant influence over the underlying subject matter or, in an attestation engagement, an employee in a position to exert significant influence over the subject matter information of the assurance engagement.
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921.7 A1

Factors that are relevant in evaluating the level of a self-interest, familiarity or intimidation threat created by such relationships include:

  • The nature of the relationship between the individual and the assurance team member.

  • The position the individual holds with the client.

  • The role of the assurance team member.

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921.7 A2

An example of an action that might eliminate such a self-interest, familiarity or intimidation threat is removing the individual from the assurance team.

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921.7 A3

An example of an action that might be a safeguard to address such a self-interest, familiarity or intimidation threat is structuring the responsibilities of the assurance team so that the assurance team member does not deal with matters that are within the responsibility of the individual with whom the assurance team member has a close relationship.

Relationships of Partners and Employees of the Firm (921.8 A1 to 921.8 A3)
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921.8 A1

A self-interest, familiarity or intimidation threat might be created by a personal or family relationship between:

  • A partner or employee of the firm who is not an assurance team member; and

  • Any of the following individuals at the assurance client:

    1. director or officer;

    2. An employee in a position to exert significant influence over the underlying subject matter, or in an attestation engagement, an employee in a position to exert significant influence over the subject matter information of the assurance engagement.

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921.8 A2

Factors that are relevant in evaluating the level of such threats include:

  • The nature of the relationship between the partner or employee of the firm and the director or officer or employee of the client.

  • The degree of interaction of the partner or employee of the firm with the assurance team.

  • The position of the partner or employee within the firm.

  • The role of the individual within the client.

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921.8 A3

Examples of actions that might be safeguards to address such self-interest, familiarity or intimidation threats include:

  • Structuring the partner's or employee's responsibilities to reduce any potential influence over the assurance engagement.

  • Having an appropriate reviewer review the relevant assurance work performed.

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June 2021

You are now leaving the extant Code to view another version that contains passages that have either been superseded or that have been issued but are not yet effective.

This version of the eCode incorporates changes to Part 4B.

Part 4B relating to independence for assurance practitioners with respect to underlying subject matter covering periods is effective for periods beginning on or after June 15, 2021; otherwise, it is effective as of June 15, 2021. Early adoption is permitted.

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