Introduction (920.1 to 920.2)
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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 close business relationship with an assurance client or its management might create a self-interest 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 (920.3 A1 to 920.3 A2)
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920.3 A1

This section contains references to the "materiality" of a financial interest and the "significance" of a business relationship. In determining whether such a financial interest is material to an individual, the combined net worth of the individual and the individual's immediate family members may be taken into account.

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920.3 A2

Examples of a close business relationship arising from a commercial relationship or common financial interest include:

  • Having a financial interest in a joint venture with either the assurance client or a controlling owner, director or officer or other individual who performs senior managerial activities for that client.

  • Arrangements to combine one or more services or products of the firm with one or more services or products of the client and to market the package with reference to both parties.

  • Distribution or marketing arrangements under which the firm distributes or markets the client's products or services, or the client distributes or markets the firm's products or services.

Firm, Assurance Team Member or Immediate Family Business Relationships (R920.4 to 920.4 A1)
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A firm or an assurance team member shall not have a close business relationship with an assurance client or its management unless any financial interest is immaterial and the business relationship is insignificant to the client or its management and the firm or the assurance team member, as applicable.

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920.4 A1

A self-interest or intimidation threat might be created if there is a close business relationship between the assurance client or its management and the immediate family of an assurance team member.

Buying Goods or Services (920.5 A1 to 920.5 A2)
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920.5 A1

The purchase of goods and services from an assurance client by a firm, or an assurance team member, or any of that individual's immediate family does not usually create a threat to independence if the transaction is in the normal course of business and at arm's length. However, such transactions might be of such a nature and magnitude that they create a self-interest threat.

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920.5 A2

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

  • Eliminating or reducing the magnitude of the transaction.

  • Removing the individual from the assurance team.

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December 2021

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Revisions to the Code to promote the role and mindset expected of professional accountants will be effective as of December 31, 2021. Early adoption will be permitted


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