Introduction (525.1 to 525.2)
525.1
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.
525.2
The loan of personnel to an audit client might create a self-review, advocacy or familiarity threat. This section sets out specific requirements and application material relevant to applying the conceptual framework in such circumstances.
Requirements and Application Material
General
(525.3 A1 to R525.4)
525.3 A1
Examples of actions that might be safeguards to address threats created by the loan of personnel by a firm or a network firm to an audit client include:
Conducting an additional review of the work performed by the loaned personnel might address a self-review threat.
Not including the loaned personnel as an audit team member might address a familiarity or advocacy threat.
Not giving the loaned personnel audit responsibility for any function or activity that the personnel performed during the loaned personnel assignment might address a self-review threat.
525.3 A2
When familiarity and advocacy threats are created by the loan of personnel by a firm or a network firm to an audit client, such that the firm or the network firm becomes too closely aligned with the views and interests of management, safeguards are often not available.
R525.4
A firm or network firm shall not loan personnel to an audit client unless:
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Such assistance is provided only for a short period of time;
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The personnel are not involved in providing non-assurance services that would not be permitted under Section 600 and its subsections; and
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The personnel do not assume management responsibilities and the audit client is responsible for directing and supervising the activities of the personnel.
Building Blocks Approach
Complying with Part 4A 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)
- Part 4A – All the relevant provisions set out in a particular section (Each 4xx, 5xx, 6xx and 8xx section is also linked to 300 and 400)
- All the relevant provisions of a particular section (“general” and “all audit clients” together with additional specific provisions under sub-headings “audit clients that are Public Interest Entities” or “Audit Clients that are not Public Interest Entities” together with any additional provisions set out in any relevant subsection).
Alert: Part 4A applies to both audit and review engagements. The terms “audit,” “audit team,” “audit engagement,” “audit client,” and “audit report” apply equally to review, review team, review engagement, review client, and review engagement report.
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 4A 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)
- Part 4A – All the relevant provisions set out in a particular section (Each 4xx, 5xx, 6xx and 8xx section is also linked to 300 and 400)
- All the relevant provisions of a particular section (“general” and “all audit clients” together with additional specific provisions under sub-headings “audit clients that are Public Interest Entities” or “Audit Clients that are not Public Interest Entities” together with any additional provisions set out in any relevant subsection).
Alert: Part 4A applies to both audit and review engagements. The terms “audit,” “audit team,” “audit engagement,” “audit client,” and “audit report” apply equally to review, review team, review engagement, review client, and review engagement report.
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.
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Non-Authoritative Guidance
Building Blocks
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