Introduction (350.1 to 350.2)
350.1
Professional accountants are required to comply with the fundamental principles and apply the conceptual framework set out in Section 120 to identify, evaluate and address threats.
350.2
Holding client assets creates a self-interest or other threat to compliance with the principles of professional behavior and objectivity. This section sets out specific requirements and application material relevant to applying the conceptual framework in such circumstances.
Requirements and Application Material
Before Taking Custody (R350.3 to 350.4 A1)
R350.3
A professional accountant shall not assume custody of client money or other assets unless permitted to do so by law and in accordance with any conditions under which such custody may be taken.
R350.4
As part of client and engagement acceptance procedures related to assuming custody of client money or assets, a professional accountant shall:
350.4 A1
Inquiries about the source of client assets might reveal, for example, that the assets were derived from illegal activities, such as money laundering. In such circumstances, a threat would be created and the provisions of Section 360 would apply.
After Taking Custody (R350.5)
R350.5
A professional accountant entrusted with money or other assets belonging to others shall:
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Comply with the laws and regulations relevant to holding and accounting for the assets;
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Keep the assets separately from personal or firm assets;
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Use the assets only for the purpose for which they are intended; and
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Be ready at all times to account for the assets and any income, dividends, or gains generated, to any individuals entitled to that accounting.
Building Blocks Approach
Complying with Part 3 requires knowing, understanding and applying:
- Part 1 - The fundamental principles and the conceptual framework
- Part 2 – Part 2 is also applicable to individual professional accountants in public practice (PAPPs) when performing professional activities pursuant to their relationship with the firm
- Part 3 - All of the relevant provisions set out in a particular section (Each 3xx section is also linked to 300)
The IESBA has applied a building blocks approach in establishing the structure of the Code. The conceptual framework set out in Part 1, Section 120, applies to all professional accountants (PAs) and is not repeated in subsequent Parts or sections but is expected to be applied by all PAs in the conduct of professional activities.
As an illustration of the building blocks approach:
- In all situations, paragraphs 120.8 A1 to 120.8 A2 of the conceptual framework identify conditions, policies and procedures that might be “factors relevant to evaluating the level of threats.”
- Incremental application material for evaluating threats is provided for PAPPs in paragraphs 300.7 A1 to 300.7 A2.
- Incremental context-specific factors are then included in each section and in each Part of the Code to emphasize the factors that are relevant to evaluating the level of the threat created by the specific circumstance. For instance, in relation to threats created by providing non-assurance services (NAS) to audit clients, paragraphs 600.5 A1 to 600.5 A4 include examples of factors that are relevant to all types of NAS that might be provided. Additionally, within each subsection of Section 600, as appropriate, there are additional examples of factors that also apply based on the specific type of NAS.
Building Blocks Approach
Complying with Part 3 requires knowing, understanding and applying:
- Part 1 - The fundamental principles and the conceptual framework
- Part 2 – Part 2 is also applicable to individual professional accountants in public practice (PAPPs) when performing professional activities pursuant to their relationship with the firm
- Part 3 - All of the relevant provisions set out in a particular section (Each 3xx section is also linked to 300)
The IESBA has applied a building blocks approach in establishing the structure of the Code. The conceptual framework set out in Part 1, Section 120, applies to all professional accountants (PAs) and is not repeated in subsequent Parts or sections but is expected to be applied by all PAs in the conduct of professional activities.
As an illustration of the building blocks approach:
- In all situations, paragraphs 120.8 A1 to 120.8 A2 of the conceptual framework identify conditions, policies and procedures that might be “factors relevant to evaluating the level of threats.”
- Incremental application material for evaluating threats is provided for PAPPs in paragraphs 300.7 A1 to 300.7 A2.
- Incremental context-specific factors are then included in each section and in each Part of the Code to emphasize the factors that are relevant to evaluating the level of the threat created by the specific circumstance. For instance, in relation to threats created by providing non-assurance services (NAS) to audit clients, paragraphs 600.5 A1 to 600.5 A4 include examples of factors that are relevant to all types of NAS that might be provided. Additionally, within each subsection of Section 600, as appropriate, there are additional examples of factors that also apply based on the specific type of NAS.
Non-Authoritative Guidance
Building Blocks
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