Introduction (411.1 to 411.2)
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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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A firm's evaluation or compensation policies might create a self-interest threat. This section sets out specific requirements and application material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

General (411.3 A1 to R411.4)
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411.3 A1

When an audit team member for a particular audit client is evaluated on or compensated for selling non-assurance services to that audit client, the level of the self-interest threat will depend on:

  • What proportion of the compensation or evaluation is based on the sale of such services;

  • The role of the individual on the audit team; and

  • Whether the sale of such non-assurance services influences promotion decisions.

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411.3 A2

Examples of actions that might eliminate such a self-interest threat include:

  • Revising the compensation plan or evaluation process for that individual.

  • Removing that individual from the audit team.

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411.3 A3

An example of an action that might be a safeguard to address such a self-interest threat is having an appropriate reviewer review the work of the audit team member.

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A firm shall not evaluate or compensate a key audit partner based on that partner's success in selling non-assurance services to the partner's audit client. This requirement does not preclude normal profit-sharing arrangements between partners of a firm.

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December 2021

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