Apes 110

APES 110 Code of Ethics for Professional
Accountants (including Independence

Standards)
[Supersedes APES 110 Code of Ethics for Professional Accountants
(Issued in December 2010 and amended in December 2011, May 2013, November 2013,
May 2017 and April 2018)]
ISSUED: November 2018
Copyright © 2018 Accounting Professional & Ethical Standards Board Limited (“APESB”). All rights reserved. Apart from fair dealing for the
purpose of study, research, criticism and review as permitted by the Copyright Act 1968, no part of these materials may be reproduced,
modified, or reused or redistributed for any commercial purpose, or distributed to a third party for any such purpose, without the prior written
permission of APESB.
Any permitted reproduction including fair dealing must acknowledge APESB as the source of any such material reproduced and any
reproduction made of the material must include a copy of this original notice.
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) is based on the International Code of Ethics for
Professional Accountants (including International Independence Standards) and the Final Pronouncement: Revisions to the Code Pertaining to
the Offering and Accepting of Inducements of the International Ethics Standards Board for Accountants (IESBA), published by the
International Federation of Accountants (IFAC) in April 2018 and July 2018 respectively, and is used with permission of IFAC.
International Code of Ethics for Professional Accountants (including International Independence Standards) © April 2018 by the International
Federation of Accountants.
Final Pronouncement: Revisions to the Code Pertaining to the Offering and Accepting of Inducements © July 2018 by the International
Federation of Accountants.
Contact [email protected] for permission to reproduce, store or transmit, or to make other similar uses of the International Code of Ethics for
Professional Accountants (including International Independence Standards).
CONTENTS
Page
GUIDE TO THE CODE ............................................................................................................................ 3
CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS (INCLUDING

INDEPENDENCE STANDARDS) ............................................................................................................ 9
SCOPE AND APPLICATION ................................................................................................................. 12
GLOSSARY ........................................................................................................................................... 13
PART 1 – COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND

CONCEPTUAL FRAMEWORK ............................................................................................. 24
PART 2 – MEMBERS IN BUSINESS (INCLUDING EMPLOYMENT RELATIONSHIPS OF

MEMBERS IN PUBLIC PRACTICE) ..................................................................................... 37
PART 3 – MEMBERS IN PUBLIC PRACTICE ...................................................................................... 68
INDEPENDENCE STANDARDS (PARTS 4A AND 4B)
[AUST] PREFACE: PART 4A AND PART 4B........................................................................................107
PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS .................................... 108
PART 4B – INDEPENDENCE FOR ASSURANCE ENGAGEMENTS OTHER

THAN AUDIT AND REVIEW ENGAGEMENTS ............................................................... 177
TRANSITIONAL PROVISIONS ........................................................................................................... 210
CONFORMITY WITH INTERNATIONAL PRONOUNCEMENTS ........................................................ 211
2
GUIDE TO THE CODE
(This Guide is a non-authoritative aid to using the Code.)
Purpose of the Code

1. The Code of Ethics for Professional Accountants (including Independence Standards) (“the
Code”) sets out fundamental principles of ethics for Members, reflecting the profession’s
recognition of its public interest responsibility. These principles establish the standard of
behaviour expected of a Member. The fundamental principles are: integrity, objectivity,
professional competence and due care, confidentiality, and professional behaviour.
2. The Code provides a conceptual framework that Members are to apply in order to identify,
evaluate and address threats to compliance with the fundamental principles. The Code sets out
requirements and application material on various topics to help Members apply the conceptual
framework to those topics.
3. In the case of Audits, Reviews and other assurance engagements, the Code sets out
Independence Standards, established by the application of the conceptual framework to threats
to Independence in relation to these engagements.
How the Code is Structured

4. The Code contains the following material:
• Glossary, which contains defined terms (together with additional explanations where
appropriate) and described terms which have a specific meaning in certain parts of the
Code. For example, as noted in the Glossary, in Part 4A, the term “Audit Engagement”
applies equally to both Audit and Review Engagements.
• Part 1 – Complying with the Code, Fundamental Principles and Conceptual Framework,
which includes the fundamental principles and the conceptual framework and is applicable
to all Members.
• Part 2 – Members in Business (including employment relationships of Members in Public

Practice), which sets out additional material that applies to Members in Business when
performing Professional Activities. Members in Business include Members employed,
engaged or contracted in an executive or non-executive capacity in, for example:
o Commerce, industry or service.
o The public sector.
o Education.
o The not-for-profit sector.

o Regulatory or professional bodies.
Part 2 is also applicable to individuals who are Members in Public Practice when performing
Professional Activities pursuant to their relationship with the Firm, whether as a contractor,
employee or owner.
• Part 3 – Members in Public Practice, which sets out additional material that applies to
Members in Public Practice when providing Professional Services.
• Independence Standards, which sets out additional material that applies to Members in
Public Practice when providing assurance services, as follows:
o Part 4A – Independence for Audit and Review Engagements, which applies when
performing Audit or Review Engagements.
3
o Part 4B – Independence for Assurance Engagements Other than Audit and Review
Engagements, which applies when performing Assurance Engagements that are not
Audit or Review Engagements.
5. The Code contains sections which address specific topics. Some sections contain subsections
dealing with specific aspects of those topics. Each section of the Code is structured, where
appropriate, as follows:
• Introduction – sets out the subject matter addressed within the section, and introduces the
requirements and application material in the context of the conceptual framework.
Introductory material contains information, including an explanation of terms used, which
is important to the understanding and application of each Part and its sections.
• Requirements – establish general and specific obligations with respect to the subject matter
addressed.
• Application material – provides context, explanations, suggestions for actions or matters to

consider, illustrations and other guidance to assist in complying with the requirements.
How to Use the Code

The Fundamental Principles, Independence and Conceptual Framework
6. The Code requires Members to comply with the fundamental principles of ethics. The Code also
requires Members to apply the conceptual framework to identify, evaluate and address threats to
compliance with the fundamental principles. Applying the conceptual framework requires
exercising professional judgement, remaining alert for new information and to changes in facts
and circumstances, and using the reasonable and informed third party test.
7. The conceptual framework recognises that the existence of conditions, policies and procedures
established by the profession, legislation, regulation, the Firm, or the employing organisation
might impact the identification of threats. Those conditions, policies and procedures might also
be a relevant factor in the Member’s evaluation of whether a threat is at an Acceptable Level.
When threats are not at an Acceptable Level, the conceptual framework requires the Member to
address those threats. Applying safeguards is one way that threats might be addressed.
Safeguards are actions individually or in combination that the Member takes that effectively
reduce threats to an Acceptable Level.
8. In addition, the Code requires Members to be independent when performing Audit, Review and
other assurance engagements. The conceptual framework applies in the same way to identifying,
evaluating and addressing threats to Independence as to threats to compliance with the
fundamental principles.
9. Complying with the Code requires knowing, understanding and applying:
• All of the relevant provisions of a particular section in the context of Part 1, together with
the additional material set out in Sections 200, 300, 400 and 900, as applicable.
• All of the relevant provisions of a particular section, for example, applying the provisions
that are set out under the subheadings titled “General” and “All Audit Clients” together with
additional specific provisions, including those set out under the subheadings titled “Audit
Clients that are not Public Interest Entities” or “Audit Clients that are Public Interest
Entities.”
• All of the relevant provisions set out in a particular section together with any additional
provisions set out in any relevant subsection.
4
Requirements and Application Material
10. Requirements and application material are to be read and applied with the objective of complying
with the fundamental principles, applying the conceptual framework and, when performing Audit,
Review and other assurance engagements, being independent.
Requirements
11. Requirements are designated with the letter “R”, denoted in bold-type and, in most cases, include
the word “shall.” The word “shall” in the Code imposes an obligation on a Member or Firm to
comply with the specific provision in which “shall” has been used.
12. In some situations, the Code provides a specific exception to a requirement. In such a situation,
the provision is designated with the letter “R” but uses “may” or conditional wording.
13. When the word “may” is used in the Code, it denotes permission to take a particular action in
certain circumstances, including as an exception to a requirement. It is not used to denote
possibility.
14. When the word “might” is used in the Code, it denotes the possibility of a matter arising, an event
occurring or a course of action being taken. The term does not ascribe any particular level of
possibility or likelihood when used in conjunction with a threat, as the evaluation of the level of a
threat depends on the facts and circumstances of any particular matter, event or course of action.
Application Material
15. In addition to requirements, the Code contains application material that provides context relevant
to a proper understanding of the Code. In particular, the application material is intended to help a
Member to understand how to apply the conceptual framework to a particular set of
circumstances and to understand and comply with a specific requirement. While such application
material does not of itself impose a requirement, consideration of the material is necessary to the
proper application of the requirements of the Code, including application of the conceptual
framework. Application material is designated with the letter “A”.
16. Where application material includes lists of examples, these lists are not intended to be
exhaustive.
Appendix to Guide to the Code
17. Appendix 1 to this Guide provides an overview of the Code.
The Code and other Professional Standards
18. APESB develops and issues in the public interest, professional and ethical pronouncements that
apply to Members of the Professional Bodies and comprise:
• APES 110 Code of Ethics for Professional Accountants (including Independence

Standards);
• professional standards; and
• guidance notes.
19. All Members are required to comply with the Code and relevant Professional Standards, and to
be familiar with guidance notes, when providing Professional Activities.
20. The structure of APESB pronouncements and the pronouncements issued to date are contained
in Appendices 2 and 3 to this Guide.
5
Appendix 1 to Guide to the Code
OVERVIEW OF THE CODE
GLOSSARY
(ALL MEMBERS)
PART 1
COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND CONCEPTUAL FRAMEWORK
(ALL MEMBERS - SECTIONS 100 TO 199)
PART 2 PART 3
MEMBERS IN BUSINESS (INCLUDING EMPLOYMENT MEMBERS IN PUBLIC PRACTICE
RELATIONSHIPS OF MEMBERS IN PUBLIC PRACTICE) (SECTIONS 300 TO 399)
(SECTIONS 200 TO 299)
(PART 2 IS ALSO APPLICABLE TO INDIVIDUAL MEMBERS IN PUBLIC PRACTICE
WHEN PERFORMING PROFESSIONAL ACTIVITIES
PURSUANT TO THEIR RELATIONSHIP WITH THE FIRM) INDEPENDENCE STANDARDS
(PARTS 4A AND 4B)
PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS

PART 4B – INDEPENDENCE FOR ASSURANCE ENGAGEMENTS OTHER

THAN AUDIT AND REVIEW ENGAGEMENTS
6
Structure of APESB pronouncements
Due process and working procedures
Conceptual Framework APES 110: Code of Ethics for

• Principles based Professional Accountants
(including Independence
• Mandatory for professional
accountants
Standards)
Standards APESB Standards

• Introduces principles Members in Members
All Members
• Mandatory requirements in bold-type Public Practice In Business
• Guidance and/or explanation in regular
type
APES 300 APES 400
Series Series
APES 200
Series
Guidance notes Guidance notes

• Do not introduce new principles Members in Members
All Members
• Guidance on a specific matter on which Public Practice In Business
the principles are already stated in a
Standard
• Guidance is only in regular type APES GN 30 APES GN 40
Series Series
APES GN 20
Series
7
APESB issued pronouncements as at November 2018
Professional Standards APES Name of Standard or

Classification and Range Reference Guidance Note
Introductory — Due process and working procedures
Conceptual Framework APES 110 Code of Ethics for Professional Accountants
for all Members (including Independence Standards)
Standards & Guidance Notes for all Members
APES 200-299 APES 205 Conformity with Accounting Standards

APES 210 Conformity with Auditing and Assurance
Standards
APES 215 Forensic Accounting Services
APES 220 Taxation Services
APES 225 Valuation Services
APES 230 Financial Planning Services
APES GN 20-29 APES GN 20 Scope and Extent of Work for Valuation Services
APES GN 21 Valuation Services for Financial Reporting
Standards & Guidance Notes for Members in Public Practice
APES 300-399 APES 305 Terms of Engagement

APES 310 Client Monies
APES 315 Compilation of Financial Information
APES 320 Quality Control for Firms
APES 325 Risk Management for Firms
APES 330 Insolvency Services
APES 345 Reporting on Prospective Financial Information
Prepared in connection with a Disclosure
Document
APES 350 Participation by Members in Public Practice in Due
Diligence Committees in connection with a Public
Document
APES GN 30-39 APES GN 30 Outsourced Services

APES GN 31 Professional and Ethical Considerations relating to
Low Doc Offering Sign-offs
Standards & Guidance Notes for Members in Business

APES 400-499 -
APES GN 40-49 APES GN 40 Ethical Conflicts in the Workplace – Considerations

for Members in Business
APES GN 41 Management Representations
8
CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
(INCLUDING INDEPENDENCE STANDARDS)
TABLE OF CONTENTS
SCOPE AND APPLICATION ............................................................................................................. 12
GLOSSARY ........................................................................................................................................ 13
PART 1 - COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND

CONCEPTUAL FRAMEWORK ............................................................................................. 24
100 COMPLYING WITH THE CODE ............................................................................................ 25
110 THE FUNDAMENTAL PRINCIPLES ...................................................................................... 26
111 - INTEGRITY ................................................................................................................... 27
112 - OBJECTIVITY ............................................................................................................... 27
113 - PROFESSIONAL COMPETENCE AND DUE CARE ................................................... 27
114 - CONFIDENTIALITY ...................................................................................................... 28
115 - PROFESSIONAL BEHAVIOUR .................................................................................... 29
120 THE CONCEPTUAL FRAMEWORK ...................................................................................... 31
PART 2 - MEMBERS IN BUSINESS (INCLUDING EMPLOYMENT RELATIONSHIPS

OF MEMBERS IN PUBLIC PRACTICE) ............................................................................... 37
200 APPLYING THE CONCEPTUAL FRAMEWORK – MEMBERS IN BUSINESS .................... 38
210 CONFLICTS OF INTEREST .................................................................................................. 42
220 PREPARATION AND PRESENTATION OF INFORMATION ............................................... 45
230 ACTING WITH SUFFICIENT EXPERTISE ............................................................................ 49
240 FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES LINKED TO
FINANCIAL REPORTING AND DECISION MAKING ............................................................ 50
250 INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY .................................................. 52
260 RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS ...................... 57
270 PRESSURE TO BREACH THE FUNDAMENTAL PRINCIPLES........................................... 65
PART 3 - MEMBERS IN PUBLIC PRACTICE ................................................................................... 68

300 APPLYING THE CONCEPTUAL FRAMEWORK – MEMBERS IN PUBLIC
PRACTICE ............................................................................................................................. 69
310 CONFLICTS OF INTEREST .................................................................................................. 75
320 PROFESSIONAL APPOINTMENTS ...................................................................................... 80
321 SECOND OPINIONS ............................................................................................................. 84
330 FEES AND OTHER TYPES OF REMUNERATION .............................................................. 85
340 INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY .................................................. 88
350 CUSTODY OF CLIENT ASSETS ........................................................................................... 93
360 RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS ...................... 94
9
[AUST] PREFACE: PART 4A AND PART 4B ................................................................................. 107
PART 4A - INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS ................................. 108

400 APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR
AUDIT AND REVIEW ENGAGEMENTS.............................................................................. 109
410 FEES .................................................................................................................................... 121
411 COMPENSATION AND EVALUATION POLICIES .............................................................. 125
420 GIFTS AND HOSPITALITY .................................................................................................. 126
430 ACTUAL OR THREATENED LITIGATION .......................................................................... 127
510 FINANCIAL INTERESTS ..................................................................................................... 128
511 LOANS AND GUARANTEES ............................................................................................... 132
520 BUSINESS RELATIONSHIPS ............................................................................................. 134
521 FAMILY AND PERSONAL RELATIONSHIPS ..................................................................... 136
522 RECENT SERVICE WITH AN AUDIT CLIENT .................................................................... 139
523 SERVING AS A DIRECTOR OR OFFICER OF AN AUDIT CLIENT ................................... 140
524 EMPLOYMENT WITH AN AUDIT CLIENT .......................................................................... 142
525 TEMPORARY PERSONNEL ASSIGNMENTS .................................................................... 145
540 LONG ASSOCIATION OF PERSONNEL (INCLUDING PARTNER ROTATION)
WITH AN AUDIT CLIENT..................................................................................................... 146
600 PROVISION OF NON-ASSURANCE SERVICES TO AN AUDIT CLIENT ......................... 152
601 - ACCOUNTING AND BOOKKEEPING SERVICES .................................................... 156
602 - ADMINISTRATIVE SERVICES ................................................................................... 158
603 - VALUATION SERVICES ............................................................................................ 158
604 - TAX SERVICES .......................................................................................................... 160
605 - INTERNAL AUDIT SERVICES ................................................................................... 164
606 - INFORMATION TECHNOLOGY SYSTEMS SERVICES ........................................... 167
607 - LITIGATION SUPPORT SERVICES .......................................................................... 168
608 - LEGAL SERVICES ..................................................................................................... 169
609 - RECRUITING SERVICES .......................................................................................... 170
610 - CORPORATE FINANCE SERVICES ......................................................................... 172
800 REPORTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS THAT
INCLUDE A RESTRICTION ON USE AND DISTRIBUTION (AUDIT AND
REVIEW ENGAGEMENTS) ................................................................................................. 174
PART 4B - INDEPENDENCE FOR ASSURANCE ENGAGEMENTS OTHER THAN

AUDIT AND REVIEW ENGAGEMENTS ............................................................................. 177
900 APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR
ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
ENGAGEMENTS ................................................................................................................. 178
905 FEES .................................................................................................................................... 185
906 GIFTS AND HOSPITALITY .................................................................................................. 187
907 ACTUAL OR THREATENED LITIGATION .......................................................................... 188
910 FINANCIAL INTERESTS ..................................................................................................... 189
10
911 LOANS AND GUARANTEES ............................................................................................... 192
920 BUSINESS RELATIONSHIPS ............................................................................................. 194
921 FAMILY AND PERSONAL RELATIONSHIPS ..................................................................... 196
922 RECENT SERVICE WITH AN ASSURANCE CLIENT ........................................................ 199
923 SERVING AS A DIRECTOR OR OFFICER OF AN ASSURANCE CLIENT ....................... 200
924 EMPLOYMENT WITH AN ASSURANCE CLIENT .............................................................. 201
940 LONG ASSOCIATION OF PERSONNEL WITH AN ASSURANCE CLIENT ...................... 203
950 PROVISION OF NON-ASSURANCE SERVICES TO ASSURANCE CLIENTS
OTHER THAN AUDIT AND REVIEW ENGAGEMENT CLIENTS ....................................... 205
990 REPORTS THAT INCLUDE A RESTRICTION ON USE AND DISTRIBUTION
(ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
ENGAGEMENTS) ................................................................................................................ 208
TRANSITIONAL PROVISIONS ........................................................................................................ 210
CONFORMITY WITH INTERNATIONAL PRONOUNCEMENTS .................................................... 211
11
SCOPE AND APPLICATION
1.1 Accounting Professional & Ethical Standards Board Limited (APESB) issues APES 110
Code of Ethics for Professional Accountants (including Independence Standards) (this
Code). This Code is operative from 1 January 2020 and supersedes APES 110 Code of
Ethics for Professional Accountants (issued in December 2010 and subsequently amended
in December 2011, May 2013, November 2013, May 2017 and April 2018). Earlier adoption
of this Code is permitted. The transitional provision relating to Key Audit Partner rotation
shall apply up to the date specified in the transitional provision on page 210.
R1.2 Subject to paragraph 1.5, all Members in Australia shall comply with APES 110
including when providing Professional Services in an honorary capacity.
R1.3 All Members practising outside of Australia shall comply with APES 110 to the extent
to which they are not prevented from so doing by specific requirements of local laws
and/or regulations.
R1.4 In addition to the Members’ obligation to comply with the Code, Members shall
comply with other applicable Professional Standards and be familiar with relevant
guidance notes when providing Professional Activities.
1.5 This Code is not intended to detract from any responsibilities which may be imposed by law
or regulation. The AUASB has issued auditing standards as legislative instruments under
the Corporations Act 2001 (the Act). For audits and reviews under the Act, those standards
have legal enforceability. To the extent that those auditing standards make reference to
relevant ethical requirements, the requirements of APES 110 have legal enforceability due
to Auditing Standard ASA 102 Compliance with Ethical Requirements when Performing
Audits, Reviews and Other Assurance Engagements.
1.6 All references to Professional Standards, guidance notes and legislation are references to
those provisions as amended from time to time.
1.7 In applying the requirements outlined in this Code, Members shall be guided not merely by
the words but also by the spirit of this Code.
1.8 In this Code, unless otherwise specified, words in the singular include the plural and vice
versa, words of one gender include another gender, and words referring to persons include
corporations or organisations, whether incorporated or not.
12
GLOSSARY
In the Code of Ethics for Professional Accountants (including Independence Standards) the terms below
have the following meanings assigned to them.
In this Glossary, definitions are named in bold-type font with the explanations of defined terms shown
in regular font; italics are used for explanations of described terms which have a specific meaning in
certain parts of the Code or for additional explanations of defined terms. References are also provided
to terms described in the Code.
Defined terms are shown in the body of the Code in title case.
[AUST] AASB The Australian statutory body called the Australian Accounting Standards
Board that was established under section 226 of the Australian Securities
and Investments Commission Act 1989 and is continued in existence by
section 261 of the Australian Securities and Investments Commission Act
2001.
Acceptable Level A level at which a Member using the reasonable and informed third party
test would likely conclude that the Member complies with the fundamental
principles.
[AUST] Administration An insolvency arrangement arising from an appointment, other than a

members' voluntary liquidation, under which an insolvent entity operates.
Advertising The communication to the public of information as to the services or skills

provided by Members in Public Practice with a view to procuring
professional business.
Appropriate reviewer An appropriate reviewer is a professional with the necessary knowledge,

skills, experience and authority to review, in an objective manner, the
relevant work performed or service provided. Such an individual might be
a Member.
This term is described in paragraph 300.8 A4.
Assurance Client The responsible party that is the person (or persons) who:
(a) In a direct reporting engagement, is responsible for the subject

matter; or
(b) In an assertion-based engagement, is responsible for the subject
matter information and might be responsible for the subject matter.
Assurance An engagement in which a Member in Public Practice aims to obtain

Engagement sufficient appropriate evidence in order to express a conclusion designed
to enhance the degree of confidence of the intended users other than the
responsible party about the subject matter information (that is, the outcome
of the measurement or evaluation of an underlying subject matter against
criteria).
This includes an engagement in accordance with the Framework for

Assurance Engagements issued by the AUASB or in accordance with
specific relevant standards, such as International Standards on Auditing,
for Assurance Engagements.
13
(For guidance on Assurance Engagements, see the Framework for
Assurance Engagements issued by the AUASB. The Framework for
Assurance Engagements describes the elements and objectives of an
Assurance Engagement and identifies engagements to which Australian
Auditing Standards (ASAs), Standards on Review Engagements (ASREs)
and Standards on Assurance Engagements (ASAEs) apply.)
Assurance Team (a) All members of the Engagement Team for the Assurance
Engagement;
(b) All others within a Firm who can directly influence the outcome of the
Assurance Engagement, including:
(i) Those who recommend the compensation of, or who provide direct
supervisory, management or other oversight of the Assurance
Engagement Partner in connection with the performance of the
Assurance Engagement;
(ii) Those who provide consultation regarding technical or industry

specific issues, transactions or events for the Assurance
Engagement; and
(iii) Those who provide quality control for the Assurance Engagement,
including those who perform the Engagement Quality Control
Review for the Assurance Engagement.
[AUST] AUASB The Australian statutory body called the Auditing and Assurance Standards
Board established under section 227A of the Australian Securities and
Investments Commission Act 2001.
Audit In Part 4A, the term “audit” applies equally to “review.”
Audit Client An entity in respect of which a Firm conducts an Audit Engagement. When the
client is a Listed Entity, Audit Client will always include its Related Entities.
When the Audit Client is not a Listed Entity, Audit Client includes those Related
Entities over which the client has direct or indirect control. (See also paragraph
R400.20.)
In Part 4A, the term “Audit Client” applies equally to “Review Client.”
Audit Engagement A reasonable Assurance Engagement in which a Member in Public Practice

expresses an opinion whether Financial Statements are prepared, in all
material respects (or give a true and fair view or are presented fairly, in all
material respects), in accordance with an applicable financial reporting
framework, such as an engagement conducted in accordance with Auditing
and Assurance Standards. This includes a statutory audit, which is an audit
required by legislation or other regulation.
In Part 4A, the term “Audit Engagement” applies equally to

“Review Engagement.”
Audit report In Part 4A, the term “audit report” applies equally to “review report.”
14
Audit Team (a) All members of the Engagement Team for the Audit Engagement;
(b) All others within a Firm who can directly influence the outcome of
the Audit Engagement, including:
(i) Those who recommend the compensation of, or who provide

direct supervisory, management or other oversight of the
Engagement Partner in connection with the performance of
the Audit Engagement, including those at all successively
senior levels above the Engagement Partner through to the
individual who is the Firm’s senior or managing partner (chief
executive or equivalent);
(ii) Those who provide consultation regarding technical or industry-

specific issues, transactions or events for the engagement; and
(iii) Those who provide quality control for the engagement, including
those who perform the Engagement Quality Control Review for
the engagement; and
(c) All those within a Network Firm who can directly influence
the outcome of the Audit Engagement.
In Part 4A, the term “Audit Team” applies equally to “Review Team.”
[AUST] Auditing and The AUASB standards, as described in ASA 100 Preamble to AUASB
Assurance Standards Standards, ASA 101 Preamble to Australian Auditing Standards and the
Foreword to AUASB Pronouncements, issued by the AUASB, and
operative from the date specified in each standard.
[AUST] Australian The Accounting Standards (including Australian Accounting Interpretations)

Accounting Standards promulgated by the AASB.
Close Family A parent, child or sibling who is not an Immediate Family member.
Conceptual framework This term is described in Section 120.
Contingent Fee A fee calculated on a predetermined basis relating to the outcome of a

transaction or the result of the services performed by the Firm. A fee that is
established by a court or other public authority is not a Contingent Fee.
Cooling-off period This term is described in paragraph R540.5 for the purposes of paragraphs
R540.11 to AUST R540.19.1.
Direct Financial A Financial Interest:

Interest (a) Owned directly by and under the control of an individual or entity
(including those managed on a discretionary basis by others); or
(b) Beneficially owned through a collective investment vehicle, estate, trust

or other intermediary over which the individual or entity has control, or
the ability to influence investment decisions.
15
Director or Officer Those charged with the governance of an entity, or acting in an equivalent
capacity, regardless of their title.
This includes a Director or Officer as defined in Section 9 of the

Corporations Act 2001.
Eligible Audit This term is described in paragraph 800.2 for the purposes of Section 800.
Engagement
Eligible Assurance This term is described in paragraph 990.2 for the purposes of Section 990.
Engagement
Engagement Partner The partner or other person in the Firm who is responsible for the engagement
and its performance, and for the report that is issued on behalf of the Firm, and
who, where required, has the appropriate authority from a professional, legal
or regulatory body.
Engagement Period The Engagement Period starts when the Audit Team begins to perform the
audit. The Engagement Period ends when the audit report is issued. When the
(Audit and Review engagement is of a recurring nature, it ends at the later of the notification
Engagements) by either party that the professional relationship has ended or the issuance
of the final audit report.
Engagement Period The Engagement Period starts when the Assurance Team begins to
perform assurance services with respect to the particular engagement. The
(Assurance Engagement Period ends when the assurance report is issued. When the
Engagements Other than engagement is of a recurring nature, it ends at the later of the notification
Audit and Review by either party that the professional relationship has ended or the issuance
Engagements) of the final assurance report.
Engagement Quality A process designed to provide an objective evaluation, on or before the report
Control Review is issued, of the significant judgements the Engagement Team made and the
conclusions it reached in formulating the report.
Engagement Team1 All partners and staff performing the engagement, and any individuals engaged
by the Firm or a Network Firm who perform assurance procedures on the
engagement. This excludes External Experts engaged by the Firm or by a
Network Firm.
Existing Accountant A Member in Public Practice currently holding an audit appointment or

carrying out accounting, tax, consulting or similar Professional Services for
a client.
External Expert An individual (who is not a partner or a member of the professional staff,
including temporary staff, of the Firm or a Network Firm) or organisation
possessing skills, knowledge and experience in a field other than
accounting or auditing, whose work in that field is used to assist the
Member in obtaining sufficient appropriate evidence.
1 The definition of Engagement Team in APES 110 has been amended from the International equivalent to
remove the reference to individuals within the client’s internal audit function who provide direct assistance on
an Audit Engagement as the AUASB has prohibited the use of direct assistance in Auditing and Assurance
Standard ASA 610 Using the Work of Internal Auditors (November 2013).
16
Financial Interest An interest in an equity or other security, debenture, loan or other debt
instrument of an entity, including rights and obligations to acquire such an
interest and derivatives directly related to such interest.
Financial Statements A structured representation of Historical Financial Information, including related

notes, intended to communicate an entity’s economic resources or obligations
at a point in time or the changes therein for a period of time in accordance with
a financial reporting framework. The related notes ordinarily comprise a
summary of significant accounting policies and other explanatory information.
The term can relate to a complete set of Financial Statements, but it can also
refer to a single Financial Statement, for example, a balance sheet, or a
statement of revenues and expenses, and related explanatory notes. The
requirements of the financial reporting framework determine the form and
content of the Financial Statements and what constitutes a complete set of
Financial Statements. For the purposes of this Code, financial report is
considered to be an equivalent term to Financial Statements.
Financial Statements In the case of a single entity, the Financial Statements of that entity. In the
on which the Firm will case of consolidated Financial Statements, also referred to as group
express an Opinion Financial Statements, the consolidated Financial Statements.
Firm (a) A sole practitioner, partnership or corporation or other entity of

professional accountants;
(b) An entity that controls such parties, through ownership, management

or other means;
(c) An entity controlled by such parties, through ownership,

management or other means; or
(d) An Auditor-General’s office or department.

Paragraphs 400.4 and 900.3 explain how the word “Firm” is used to
address the responsibility of Members and Firms for compliance with
Parts 4A and 4B, respectively.
Fundamental principles This term is described in paragraph 110.1 A1. Each of the fundamental
principles is, in turn, described in the following paragraphs:
Integrity R111.1
Objectivity R112.1
Professional competence and due care R113.1
Confidentiality R114.1
Professional behaviour R115.1
Historical Financial Information expressed in financial terms in relation to a particular entity, derived
Information primarily from that entity’s accounting system, about economic events
occurring in past time periods or about economic conditions or circumstances
at points in time in the past.
Immediate Family A spouse (or equivalent) or dependant.
17
Independence Independence comprises:
(a) Independence of mind – the state of mind that permits the expression
of a conclusion without being affected by influences that compromise
professional judgement, thereby allowing an individual to act with
integrity, and exercise objectivity and professional scepticism.
(b) Independence in appearance – the avoidance of facts and

circumstances that are so significant that a reasonable and informed
third party would be likely to conclude that a Firm’s, or an Audit or
Assurance Team member’s integrity, objectivity or professional
scepticism has been compromised.
As set out in paragraphs 400.5 and 900.4, references to an individual or

Firm being “independent” mean that the individual or Firm has complied
with Parts 4A and 4B, as applicable.
Indirect Financial A Financial Interest beneficially owned through a collective investment

Interest vehicle, estate, trust or other intermediary over which the individual or entity
has no control or ability to influence investment decisions.
Inducement An object, situation, or action that is used as a means to influence another

individual’s behaviour, but not necessarily with the intent to improperly
influence that individual’s behaviour.
Inducements can range from minor acts of hospitality between business

colleagues (for Members in Business), or between Members and existing
or prospective clients (for Members in Public Practice), to acts that result in
non-compliance with laws and regulations (“NOCLAR”). An Inducement
can take many different forms, for example:
• Gifts.
• Hospitality.
• Entertainment.
• Political or charitable donations.
• Appeals to friendship and loyalty.

• Employment or other commercial opportunities.
• Preferential treatment, rights or privileges.
Key Audit Partner The Engagement Partner, the individual responsible for the Engagement
Quality Control Review, and other audit partners, if any, on the Engagement
Team who make key decisions or judgements on significant matters with
respect to the audit of the Financial Statements on which the Firm will express
an Opinion. Depending upon the circumstances and the role of the individuals
on the audit, “other audit partners” might include, for example, audit partners
responsible for significant subsidiaries or divisions.
Listed Entity An entity whose shares, stock or debt are quoted or listed on a recognised
stock exchange, or are marketed under the regulations of a recognised stock
exchange or other equivalent body.
18
May This term is used in the Code to denote permission to take a particular
action in certain circumstances, including as an exception to a requirement.
It is not used to denote possibility.
[AUST] Member A member of a Professional Body that has adopted this Code as applicable to
their membership, as defined by that Professional Body.
In Part 1, the term “Member” refers to individual Members in Business and to

Members in Public Practice and their Firms.
In Part 2, the term “Member” refers to Members in Business, and also to

Members in Public Practice when performing Professional Activities pursuant
to their relationship with the Firm, whether as a contractor, employee or owner.
In Parts 3, 4A and 4B, the term “Member” refers to Members in Public Practice
and their Firms.
Member in Business A Member working in areas such as commerce, industry, service, the public
sector, education, the not-for-profit sector, or in regulatory or professional
bodies, who might be an employee, contractor, partner, Director (executive
or non-executive), owner-manager or volunteer.
Member in Public A Member, irrespective of functional classification (for example, audit, tax
Practice or consulting) in a Firm that provides Professional Services. This term is
also used to refer to a Firm of Members in Public Practice and means a
practice entity and a participant in that practice entity as defined by the
applicable Professional Body.
Might This term is used in the Code to denote the possibility of a matter arising,
an event occurring or a course of action being taken. The term does not
ascribe any particular level of possibility or likelihood when used in
conjunction with a threat, as the evaluation of the level of a threat depends
on the facts and circumstances of any particular matter, event or course of
action.
Network A larger structure:

(a) That is aimed at cooperation; and
(b) That is clearly aimed at profit or cost sharing or shares common

ownership, control or management, common quality control policies
and procedures, common business strategy, the use of a common
brand-name, or a significant part of professional resources.
Network Firm A Firm or entity that belongs to a Network.
For further information, see paragraphs 400.50 A1 to 400.54 A1.
19
Non-compliance with Non-compliance with laws and regulations (“NOCLAR”) comprises acts of
laws and regulations omission or commission, intentional or unintentional, which are contrary to
the prevailing laws or regulations committed by the following parties:
(Members in Business)
(a) The Member’s employing organisation;
(b) Those Charged with Governance of the employing organisation;
(c) Management of the employing organisation; or
(d) Other individuals working for or under the direction of the employing
organisation.
Non-compliance with Non-compliance with laws and regulations (“NOCLAR”) comprises acts of
laws and regulations omission or commission, intentional or unintentional, which are contrary to
the prevailing laws or regulations committed by the following parties:
(Members in Public
Practice) (a) A client;
(b) Those Charged with Governance of a client;
(c) Management of a client; or
(d) Other individuals working for or under the direction of a client.
Office A distinct sub-group, whether organised on geographical or practice lines.
Predecessor A Member in Public Practice who most recently held an audit appointment
Accountant or carried out accounting, tax, consulting or similar Professional Services
for a client, where there is no Existing Accountant.
Professional Activity An activity requiring accountancy or related skills undertaken by a Member,

including accounting, auditing, tax, management consulting, and financial
management.
[AUST] Professional Chartered Accountants Australia and New Zealand, CPA Australia and the
Bodies Institute of Public Accountants.
Professional Services Professional Activities performed for clients.
[AUST] Professional All standards issued by Accounting Professional & Ethical Standards Board
Standards Limited and all professional and ethical requirements of the applicable
Professional Bodies.
Proposed Accountant A Member in Public Practice who is considering accepting an audit

appointment or an engagement to perform accounting, tax, consulting or
similar Professional Services for a prospective client (or in some cases, an
existing client).
20
Public Interest Entity (a) A Listed Entity*; or
(b) An entity:
(i) Defined by regulation or legislation as a public interest entity; or
(ii) For which the audit is required by regulation or legislation to be

conducted in compliance with the same Independence
requirements that apply to the audit of Listed Entities. Such
regulation might be promulgated by any relevant regulator,
including an audit regulator.
* Includes a listed entity as defined in Section 9 of the Corporations Act

2001.
Other entities might also be considered to be Public Interest Entities, as set

out in paragraphs 400.8 to AUST 400.8.1 A1.
Reasonable and The reasonable and informed third party test is a consideration by the
informed third party Member about whether the same conclusions would likely be reached by
another party. Such consideration is made from the perspective of a
Reasonable and reasonable and informed third party, who weighs all the relevant facts and
informed third party test circumstances that the Member knows, or could reasonably be expected to
know, at the time that the conclusions are made. The reasonable and
informed third party does not need to be a Member, but would possess the
relevant knowledge and experience to understand and evaluate the
appropriateness of the Member’s conclusions in an impartial manner.
These terms are described in paragraph 120.5 A4.
Related Entity An entity that has any of the following relationships with the client:
(a) An entity that has direct or indirect control over the client if the client
is material to such entity;
(b) An entity with a Direct Financial Interest in the client if that entity has
significant influence over the client and the interest in the client is
material to such entity;
(c) An entity over which the client has direct or indirect control;
(d) An entity in which the client, or an entity related to the client under
(c), has a Direct Financial Interest that gives it significant influence
over such entity and the interest is material to the client and its related
entity in (c); and
(e) An entity which is under common control with the client (a “sister
entity”) if the sister entity and the client are both material to the entity
that controls both the client and sister entity.
Review Client An entity in respect of which a Firm conducts a Review Engagement.
21
Review Engagement An Assurance Engagement, conducted in accordance with Auditing and
Assurance Standards on Review Engagements or equivalent, in which a
Member in Public Practice expresses a conclusion on whether, on the basis of
the procedures which do not provide all the evidence that would be required in
an audit, anything has come to the Member’s attention that causes the Member
to believe that the Historical Financial Information is not prepared, in all material
respects, in accordance with an applicable financial reporting framework.
Review Team (a) All members of the Engagement Team for the Review Engagement;
and
(b) All others within a Firm who can directly influence the outcome of the
Review Engagement, including:
(i) Those who recommend the compensation of, or who provide

direct supervisory, management or other oversight of the
Engagement Partner in connection with the performance
of the Review Engagement, including those at all
successively senior levels above the Engagement Partner
through to the individual who is the Firm’s senior or
managing partner (chief executive or equivalent);
(ii) Those who provide consultation regarding technical or industry

specific issues, transactions or events for the engagement;
and
(iii) Those who provide quality control for the

engagement, including those who perform the Engagement
Quality Control Review for the engagement; and
(c) All those within a Network Firm who can directly influence
the outcome of the Review Engagement.
Safeguards Safeguards are actions, individually or in combination, that the Member

takes that effectively reduce threats to compliance with the fundamental
principles to an Acceptable Level.
Senior Member in Senior Members in Business are Directors, Officers or senior employees
Business able to exert significant influence over, and make decisions regarding, the
acquisition, deployment and control of the employing organisation’s human,
financial, technological, physical and intangible resources.
Substantial harm This term is described in paragraphs 260.5 A3 and 360.5 A3.
Special Purpose Financial Statements prepared in accordance with a financial reporting

Financial Statements framework designed to meet the financial information needs of specified
users.
22
Those Charged with The person(s) or organisation(s) (for example, a corporate trustee) with
Governance responsibility for overseeing the strategic direction of the entity and
obligations related to the accountability of the entity. This includes
overseeing the financial reporting process. For some entities in some
jurisdictions, Those Charged with Governance might include management
personnel, for example, executive members of a governance board of a
private or public sector entity, or an owner-manager.
Threats This term is described in paragraph 120.6 A3 and includes the following
categories:
Self interest 120.6 A3(a)
Self-review 120.6 A3(b)
Advocacy 120.6 A3(c)

Familiarity 120.6 A3(d)
Intimidation 120.6 A3(e)
Time-on period This term is described in paragraph R540.5.
23
PART 1 – COMPLYING WITH THE CODE, FUNDAMENTAL
PRINCIPLES AND CONCEPTUAL FRAMEWORK
Section Page
100 Complying with the Code ....................................................................................................... 25
110 The Fundamental Principles .................................................................................................. 26
Subsection 111 - Integrity....................................................................................................... 27
Subsection 112 - Objectivity ................................................................................................... 27
Subsection 113 - Professional Competence and Due Care .................................................. 27
Subsection 114 - Confidentiality ............................................................................................. 28
Subsection 115 - Professional Behaviour .............................................................................. 29
120 The Conceptual Framework ................................................................................................... 31
24
SECTION 100
COMPLYING WITH THE CODE
General
100.1 A1 A distinguishing mark of the accountancy profession is its acceptance of the responsibility
to act in the public interest. A Member’s responsibility is not exclusively to satisfy the
needs of an individual client or employing organisation. Therefore, the Code
contains requirements and application material to enable Members to meet their
responsibility to act in the public interest.
100.2 A1 The requirements in the Code, designated with the letter “R” and denoted in bold-type impose
obligations.
100.2 A2 Application material, designated with the letter “A”, provides context, explanations,
suggestions for actions or matters to consider, illustrations and other guidance relevant to
a proper understanding of the Code. In particular, the application material is intended to
help a Member to understand how to apply the conceptual framework to a particular set of
circumstances and to understand and comply with a specific requirement. While such
application material does not of itself impose a requirement, consideration of the material
is necessary to the proper application of the requirements of the Code, including application
of the conceptual framework.
R100.3 A Member shall comply with the Code. There might be circumstances where laws or
regulations preclude a Member from complying with certain parts of the Code. In
such circumstances, those laws and regulations prevail, and the Member shall
comply with all other parts of the Code.
100.3 A1 The principle of professional behaviour requires a Member to comply with relevant laws
and regulations. Some jurisdictions might have provisions that differ from or go beyond
those set out in the Code. Members in those jurisdictions need to be aware of those
differences and comply with the more stringent provisions unless prohibited by law or
regulation.
100.3 A2 A Member might encounter unusual circumstances in which the Member believes that the
result of applying a specific requirement of the Code would be disproportionate or might
not be in the public interest. In those circumstances, the Member is encouraged to consult
with a professional or regulatory body.
Breaches of the Code
R100.4 Paragraphs R400.80 to R400.89 and R900.50 to R900.55 address a breach of

Independence Standards. A Member who identifies a breach of any other provision
of the Code shall evaluate the significance of the breach and its impact on the
Member’s ability to comply with the fundamental principles. The Member shall also:
(a) Take whatever actions might be available, as soon as possible, to address the
consequences of the breach satisfactorily; and
(b) Determine whether to report the breach to the relevant parties.
100.4 A1 Relevant parties to whom such a breach might be reported include those who might have
been affected by it, a professional or regulatory body or an oversight authority.
25
SECTION 110
THE FUNDAMENTAL PRINCIPLES
General
110.1 A1 There are five fundamental principles of ethics for Members:
(a) Integrity – to be straightforward and honest in all professional and business

relationships.
(b) Objectivity – not to compromise professional or business judgements because of

bias, conflict of interest or undue influence of others.
(c) Professional Competence and Due Care – to:
(i) Attain and maintain professional knowledge and skill at the level required to
ensure that a client or employing organisation receives competent
Professional Activities, based on current technical and professional standards
and relevant legislation; and
(ii) Act diligently and in accordance with applicable technical and professional
standards.
(d) Confidentiality – to respect the confidentiality of information acquired as a result of
professional and business relationships.
(e) Professional Behaviour – to comply with relevant laws and regulations and avoid any
conduct that the Member knows or should know might discredit the profession.
R110.2 A Member shall comply with each of the fundamental principles.
110.2 A1 The fundamental principles of ethics establish the standard of behaviour expected of a
Member. The conceptual framework establishes the approach which a Member is required to
apply to assist in complying with those fundamental principles. Subsections 111 to 115 set
out requirements and application material related to each of the fundamental principles.
110.2 A2 A Member might face a situation in which complying with one fundamental principle
conflicts with complying with one or more other fundamental principles. In such a situation,
the Member might consider consulting, on an anonymous basis if necessary, with:
• Others within the Firm or employing organisation.
• Those Charged with Governance.
• A professional body.
• A regulatory body.
• Legal counsel.
However, such consultation does not relieve the Member from the responsibility to exercise
professional judgement to resolve the conflict or, if necessary, and unless prohibited by law
or regulation, disassociate from the matter creating the conflict.
110.2 A3 The Member is encouraged to document the substance of the issue, the details of any
discussions, the decisions made and the rationale for those decisions.
26
SUBSECTION 111 – INTEGRITY
R111.1 A Member shall comply with the principle of integrity, which requires a Member to be
straightforward and honest in all professional and business relationships.
111.1 A1 Integrity implies fair dealing and truthfulness.
R111.2 A Member shall not knowingly be associated with reports, returns, communications
or other information where the Member believes that the information:
(a) Contains a materially false or misleading statement;
(b) Contains statements or information provided recklessly; or
(c) Omits or obscures required information where such omission or obscurity

would be misleading.
111.2 A1 If a Member provides a modified report in respect of such a report, return, communication
or other information, the Member is not in breach of paragraph R111.2.
R111.3 When a Member becomes aware of having been associated with information
described in paragraph R111.2, the Member shall take steps to be disassociated from
that information.
SUBSECTION 112 – OBJECTIVITY
R112.1 A Member shall comply with the principle of objectivity, which requires a Member
not to compromise professional or business judgement because of bias, conflict of
interest or undue influence of others.
R112.2 A Member shall not undertake a Professional Activity if a circumstance or

relationship unduly influences the Member’s professional judgement regarding that
activity.
SUBSECTION 113 – PROFESSIONAL COMPETENCE AND DUE CARE
R113.1 A Member shall comply with the principle of professional competence and due care,
which requires a Member to:
(a) Attain and maintain professional knowledge and skill at the level required to
ensure that a client or employing organisation receives competent
Professional Activities, based on current technical and professional
standards and relevant legislation; and
(b) Act diligently and in accordance with applicable technical and professional
standards.
113.1 A1 Serving clients and employing organisations with professional competence requires the
exercise of sound judgement in applying professional knowledge and skill when
undertaking Professional Activities.
113.1 A2 Maintaining professional competence requires a continuing awareness and an

understanding of relevant technical, professional and business developments. Continuing
professional development enables a Member to develop and maintain the capabilities to
perform competently within the professional environment.
27
113.1 A3 Diligence encompasses the responsibility to act in accordance with the requirements of an
assignment, carefully, thoroughly and on a timely basis.
R113.2 In complying with the principle of professional competence and due care, a Member
shall take reasonable steps to ensure that those working in a professional capacity
under the Member’s authority have appropriate training and supervision.
R113.3 Where appropriate, a Member shall make clients, the employing organisation, or
other users of the Member’s Professional Services or Activities, aware of the
limitations inherent in the Professional Services or Activities.
SUBSECTION 114 – CONFIDENTIALITY
R114.1 A Member shall comply with the principle of confidentiality, which requires a Member
to respect the confidentiality of information acquired as a result of professional and
business relationships. A Member shall:
(a) Be alert to the possibility of inadvertent disclosure, including in a social
environment, and particularly to a close business associate or an Immediate
or a Close Family member;
(b) Maintain confidentiality of information within the Firm or employing

organisation;
(c) Maintain confidentiality of information disclosed by a prospective client or

employing organisation;
(d) Not disclose confidential information acquired as a result of professional and

business relationships outside the Firm or employing organisation without
proper and specific authority, unless there is a legal or professional duty or
right to disclose;
(e) Not use confidential information acquired as a result of professional and

business relationships for the personal advantage of the Member or for the
advantage of a third party;
(f) Not use or disclose any confidential information, either acquired or received
as a result of a professional or business relationship, after that relationship
has ended; and
(g) Take reasonable steps to ensure that personnel under the Member’s control,
and individuals from whom advice and assistance are obtained, respect the
Member’s duty of confidentiality.
114.1 A1 Confidentiality serves the public interest because it facilitates the free flow of information
from the Member’s client or employing organisation to the Member in the knowledge that
the information will not be disclosed to a third party. Nevertheless, the following are
circumstances where Members are or might be required to disclose confidential information
or when such disclosure might be appropriate:
(a) Disclosure is required by law, for example:
(i) Production of documents or other provision of evidence in the course of legal

proceedings; or
(ii) Disclosure to the appropriate public authorities of infringements of the law that
come to light;
(b) Disclosure is permitted by law and is authorised by the client or the employing
organisation; and
28
(c) There is a professional duty or right to disclose, when not prohibited by law:
(i) To comply with the quality review of a Professional Body;
(ii) To respond to an inquiry or investigation by a professional or regulatory body;
(iii) To protect the professional interests of a Member in legal proceedings; or
(iv) To comply with technical and professional standards, including ethics

requirements.
AUST 114.1 A1.1 The circumstances described in paragraph 114.1 A1 do not take into account Australian
legal and regulatory requirements. A Member considering disclosing confidential
information about a client or employer without their consent is advised to first obtain
legal advice.
114.1 A2 In deciding whether to disclose confidential information, factors to consider, depending on

the circumstances, include:
• Whether the interests of any parties, including third parties whose interests might be
affected, could be harmed if the client or employing organisation consents to the
disclosure of information by the Member.
• Whether all the relevant information is known and substantiated, to the extent
practicable. Factors affecting the decision to disclose include:
o Unsubstantiated facts.
o Incomplete information.
o Unsubstantiated conclusions.
• The proposed type of communication, and to whom it is addressed.
• Whether the parties to whom the communication is addressed are appropriate

recipients.
R114.2 A Member shall continue to comply with the principle of confidentiality even after the
end of the relationship between the Member and a client or employing organisation.
When changing employment or acquiring a new client, the Member is entitled to use
prior experience but shall not use or disclose any confidential information acquired
or received as a result of a professional or business relationship.
SUBSECTION 115 – PROFESSIONAL BEHAVIOUR
R115.1 A Member shall comply with the principle of professional behaviour, which requires
a Member to comply with relevant laws and regulations and avoid any conduct that
the Member knows or should know might discredit the profession. A Member shall
not knowingly engage in any business, occupation or activity that impairs or might
impair the integrity, objectivity or good reputation of the profession, and as a result
would be incompatible with the fundamental principles.
115.1 A1 Conduct that might discredit the profession includes conduct that a reasonable and
informed third party would be likely to conclude adversely affects the good reputation of
the profession.
29
R115.2 When undertaking marketing or promotional activities, a Member shall not bring the
profession into disrepute. A Member shall be honest and truthful and shall not make:
(a) Exaggerated claims for the services offered by, or the qualifications or
experience of, the Member; or
(b) Disparaging references or unsubstantiated comparisons to the work of

others.
115.2 A1 If a Member is in doubt about whether a form of Advertising or marketing is appropriate,

the Member is encouraged to consult with the relevant Professional Body.
30
SECTION 120
THE CONCEPTUAL FRAMEWORK
Introduction
120.1 The circumstances in which Members operate might create threats to compliance with the
fundamental principles. Section 120 sets out requirements and application material,
including a conceptual framework, to assist Members in complying with the fundamental
principles and meeting their responsibility to act in the public interest. Such requirements
and application material accommodate the wide range of facts and circumstances,
including the various Professional Activities, interests and relationships, that create threats
to compliance with the fundamental principles. In addition, they deter Members from
concluding that a situation is permitted solely because that situation is not specifically
prohibited by the Code.
120.2 The conceptual framework specifies an approach for a Member to:
(a) Identify threats to compliance with the fundamental principles;
(b) Evaluate the threats identified; and

(c) Address the threats by eliminating or reducing them to an Acceptable Level.
General
R120.3 The Member shall apply the conceptual framework to identify, evaluate and address
threats to compliance with the fundamental principles set out in Section 110.
120.3 A1 Additional requirements and application material that are relevant to the application of the
conceptual framework are set out in:
(a) Part 2 – Members in Business (including employment relationships of Members in

Public Practice);
(b) Part 3 – Members in Public Practice; and
(c) Independence Standards, as follows:
(i) Part 4A – Independence for Audit and Review Engagements; and

(ii) Part 4B – Independence for Assurance Engagements Other than Audit and
Review Engagements.
R120.4 When dealing with an ethics issue, the Member shall consider the context in which
the issue has arisen or might arise. Where an individual who is a Member in Public
Practice is performing Professional Activities pursuant to the Member’s relationship
with the Firm, whether as a contractor, employee or owner, the individual shall
comply with the provisions in Part 2 that apply to these circumstances.
R120.5 When applying the conceptual framework, the Member shall:
(a) Exercise professional judgement;

(b) Remain alert for new information and to changes in facts and circumstances;
and
31
(c) Use the reasonable and informed third party test described in paragraph 120.5
A4.
Exercise of Professional Judgement
120.5 A1 Professional judgement involves the application of relevant training, professional

knowledge, skill and experience commensurate with the facts and circumstances, including
the nature and scope of the particular Professional Activities, and the interests and
relationships involved. In relation to undertaking Professional Activities, the exercise of
professional judgement is required when the Member applies the conceptual framework in
order to make informed decisions about the courses of actions available, and to determine
whether such decisions are appropriate in the circumstances.
120.5 A2 An understanding of known facts and circumstances is a prerequisite to the proper

application of the conceptual framework. Determining the actions necessary to obtain this
understanding and coming to a conclusion about whether the fundamental principles have
been complied with also require the exercise of professional judgement.
120.5 A3 In exercising professional judgement to obtain this understanding, the Member might
consider, among other matters, whether:
• There is reason to be concerned that potentially relevant information might be

missing from the facts and circumstances known to the Member.
• There is an inconsistency between the known facts and circumstances and the
Member’s expectations.
• The Member’s expertise and experience are sufficient to reach a conclusion.
• There is a need to consult with others with relevant expertise or experience.
• The information provides a reasonable basis on which to reach a conclusion.
• The Member’s own preconception or bias might be affecting the Member’s exercise
of professional judgement.
• There might be other reasonable conclusions that could be reached from the
available information.
Reasonable and Informed Third Party
120.5 A4 The reasonable and informed third party test is a consideration by the Member about
whether the same conclusions would likely be reached by another party. Such
consideration is made from the perspective of a reasonable and informed third party, who
weighs all the relevant facts and circumstances that the Member knows, or could
reasonably be expected to know, at the time the conclusions are made. The reasonable
and informed third party does not need to be a Member, but would possess the relevant
knowledge and experience to understand and evaluate the appropriateness of the
Member’s conclusions in an impartial manner.
Identifying Threats
R120.6 The Member shall identify threats to compliance with the fundamental principles.
120.6 A1 An understanding of the facts and circumstances, including any Professional Activities,
interests and relationships that might compromise compliance with the fundamental
principles, is a prerequisite to the Member’s identification of threats to such compliance.
The existence of certain conditions, policies and procedures established by the profession,
32
legislation, regulation, the Firm, or the employing organisation that can enhance the
Member acting ethically might also help identify threats to compliance with the fundamental
principles. Paragraph 120.8 A2 includes general examples of such conditions, policies and
procedures which are also factors that are relevant in evaluating the level of threats.
120.6 A2 Threats to compliance with the fundamental principles might be created by a broad range
of facts and circumstances. It is not possible to define every situation that creates threats.
In addition, the nature of engagements and work assignments might differ and,
consequently, different types of threats might be created.
120.6 A3 Threats to compliance with the fundamental principles fall into one or more of the following
categories:
(a) Self-interest threat – the threat that a financial or other interest will inappropriately
influence a Member’s judgement or behaviour;
(b) Self-review threat – the threat that a Member will not appropriately evaluate the
results of a previous judgement made, or an activity performed by the Member, or
by another individual within the Member’s Firm or employing organisation, on which
the Member will rely when forming a judgement as part of performing a current
activity;
(c) Advocacy threat – the threat that a Member will promote a client’s or employing
organisation’s position to the point that the Member’s objectivity is compromised;
(d) Familiarity threat – the threat that due to a long or close relationship with a client, or
employing organisation, a Member will be too sympathetic to their interests or too
accepting of their work; and
(e) Intimidation threat – the threat that a Member will be deterred from acting objectively
because of actual or perceived pressures, including attempts to exercise undue
influence over the Member.
120.6 A4 A circumstance might create more than one threat, and a threat might affect compliance
with more than one fundamental principle.
Evaluating Threats
R120.7 When the Member identifies a threat to compliance with the fundamental principles,
the Member shall evaluate whether such a threat is at an Acceptable Level.
Acceptable Level
120.7 A1 An Acceptable Level is a level at which a Member using the reasonable and informed third
party test would likely conclude that the Member complies with the fundamental principles.
Factors Relevant in Evaluating the Level of Threats
120.8 A1 The consideration of qualitative as well as quantitative factors is relevant in the Member’s
evaluation of threats, as is the combined effect of multiple threats, if applicable.
120.8 A2 The existence of conditions, policies and procedures described in paragraph 120.6 A1
might also be factors that are relevant in evaluating the level of threats to compliance with
fundamental principles. Examples of such conditions, policies and procedures include:
• Corporate governance requirements.
• Educational, training and experience requirements for the profession.
33
• Effective complaint systems which enable the Member and the general public to draw
attention to unethical behaviour.
• An explicitly stated duty to report breaches of ethics requirements.
• Professional or regulatory monitoring and disciplinary procedures.
Consideration of New Information or Changes in Facts and Circumstances
R120.9 If the Member becomes aware of new information or changes in facts and
circumstances that might impact whether a threat has been eliminated or reduced
to an Acceptable Level, the Member shall re-evaluate and address that threat
accordingly.
120.9 A1 Remaining alert throughout the Professional Activity assists the Member in determining
whether new information has emerged or changes in facts and circumstances have
occurred that:
(a) Impact the level of a threat; or
(b) Affect the Member’s conclusions about whether safeguards applied continue to be
appropriate to address identified threats.
120.9 A2 If new information results in the identification of a new threat, the Member is required to
evaluate and, as appropriate, address this threat. (Ref: Paras. R120.7 and R120.10).
Addressing Threats
R120.10 If the Member determines that the identified threats to compliance with the
fundamental principles are not at an Acceptable Level, the Member shall address the
threats by eliminating them or reducing them to an Acceptable Level. The Member
shall do so by:
(a) Eliminating the circumstances, including interests or relationships, that are

creating the threats;
(b) Applying safeguards, where available and capable of being applied, to reduce
the threats to an Acceptable Level; or
(c) Declining or ending the specific Professional Activity.
Actions to Eliminate Threats
120.10 A1 Depending on the facts and circumstances, a threat might be addressed by eliminating the
circumstance creating the threat. However, there are some situations in which threats can
only be addressed by declining or ending the specific Professional Activity. This is because
the circumstances that created the threats cannot be eliminated and safeguards are not
capable of being applied to reduce the threat to an Acceptable Level.
Safeguards
120.10 A2 Safeguards are actions, individually or in combination, that the Member takes that
effectively reduce threats to compliance with the fundamental principles to an Acceptable
Level.
34
Consideration of Significant Judgements Made and Overall Conclusions Reached
R120.11 The Member shall form an overall conclusion about whether the actions that the
Member takes, or intends to take, to address the threats created will eliminate those
threats or reduce them to an Acceptable Level. In forming the overall conclusion, the
Member shall:
(a) Review any significant judgements made or conclusions reached; and
(b) Use the reasonable and informed third party test.
Considerations for Audits, Reviews and Other Assurance Engagements
Independence
120.12 A1 Members in Public Practice are required by Independence Standards to be independent

when performing Audits, Reviews, or other assurance engagements. Independence
is linked to the fundamental principles of objectivity and integrity. It comprises:
(a) Independence of mind – the state of mind that permits the expression of a conclusion
without being affected by influences that compromise professional judgement,
thereby allowing an individual to act with integrity, and exercise objectivity and
professional scepticism.
(b) Independence in appearance – the avoidance of facts and circumstances that are so
significant that a reasonable and informed third party would be likely to conclude that
a Firm’s or an Audit or Assurance Team member’s integrity, objectivity or
professional scepticism has been compromised.
120.13 A1 Independence Standards set out requirements and application material on how to apply
the conceptual framework to maintain Independence when performing Audits, Reviews or
other assurance engagements.2 Members and Firms are required to comply with these
standards in order to be independent when conducting such engagements. The conceptual
framework to identify, evaluate and address threats to compliance with the fundamental
principles applies in the same way to compliance with Independence requirements. The
categories of threats to compliance with the fundamental principles described in paragraph
120.6 A3 are also the categories of threats to compliance with Independence requirements.
Professional Scepticism
120.12 A2 Under auditing, review and other assurance standards, including those issued by the
AUASB, Members in Public Practice are required to exercise professional
scepticism when planning and performing Audits, Reviews and other assurance
engagements. Professional scepticism and the fundamental principles that are
described in Section 110 are inter-related concepts.
2 The Corporations Act 2001 contains independence obligations that Members in Public Practice must also
comply with when Audit and Review Engagements are performed in accordance with the Act.
35
120.13 A2 In an audit of Financial Statements, compliance with the fundamental principles,
individually and collectively, supports the exercise of professional scepticism, as shown in
the following examples:
• Integrity requires the Member in Public Practice to be straightforward and honest.

For example, the Member complies with the principle of integrity by:
(a) Being straightforward and honest when raising concerns about a position
taken by a client; and
(b) Pursuing inquiries about inconsistent information and seeking further audit
evidence to address concerns about statements that might be materially false
or misleading in order to make informed decisions about the appropriate
course of action in the circumstances.
In doing so, the Member demonstrates the critical assessment of audit evidence that
contributes to the exercise of professional scepticism.
• Objectivity requires the Member in Public Practice not to compromise professional or

business judgement because of bias, conflict of interest or the undue influence of
others. For example, the Member complies with the principle of objectivity by:
(a) Recognising circumstances or relationships such as familiarity with the client,

that might compromise the Member’s professional or business judgement; and
(b) Considering the impact of such circumstances and relationships on the

Member’s judgement when evaluating the sufficiency and appropriateness of
audit evidence related to a matter material to the client's Financial Statements.
In doing so, the Member behaves in a manner that contributes to the exercise of
• Professional competence and due care requires the Member in Public Practice to
have professional knowledge and skill at the level required to ensure the provision of
competent Professional Service, and to act diligently in accordance with applicable
standards, laws and regulations. For example, the Member complies with the
principle of professional competence and due care by:
(a) Applying knowledge that is relevant to a particular client’s industry and

business activities in order to properly identify risks of material misstatement;
(b) Designing and performing appropriate audit procedures; and
(c) Applying relevant knowledge when critically assessing whether audit evidence
is sufficient and appropriate in the circumstances.
In doing so, the Member behaves in a manner that contributes to the exercise of
36
PART 2 – MEMBERS IN BUSINESS (INCLUDING EMPLOYMENT
RELATIONSHIPS OF MEMBERS IN PUBLIC PRACTICE)
Section Page
200 Applying the Conceptual Framework – Members in Business............................................... 38
210 Conflicts of Interest ................................................................................................................. 42
220 Preparation and Presentation of Information ......................................................................... 45
230 Acting with Sufficient Expertise .............................................................................................. 49
240 Financial Interests, Compensation and Incentives Linked to
Financial Reporting and Decision Making .............................................................................. 50
250 Inducements, Including Gifts and Hospitality ......................................................................... 52
260 Responding to Non-Compliance with Laws and Regulations ................................................ 57
270 Pressure to Breach the Fundamental Principles .................................................................... 65
37
SECTION 200
APPLYING THE CONCEPTUAL FRAMEWORK – MEMBERS IN BUSINESS
Introduction
200.1 This Part of the Code sets out requirements and application material for Members in
Business when applying the conceptual framework set out in Section 120. It does not
describe all of the facts and circumstances, including Professional Activities, interests and
relationships, that could be encountered by Members in Business, which create or might
create threats to compliance with the fundamental principles. Therefore, the conceptual
framework requires Members in Business to be alert for such facts and circumstances.
Roles of Members in Business
200.2 Investors, creditors, employing organisations and other sectors of the business community,
as well as governments and the general public, might rely on the work of Members in
Business. Members in Business might be solely or jointly responsible for the preparation
and reporting of financial and other information, on which both their employing
organisations and third parties might rely. They might also be responsible for providing
effective financial management and competent advice on a variety of business-related
matters.
200.3 A Member in Business might be an employee, contractor, partner, Director (executive or

non-executive), owner-manager, or volunteer of an employing organisation. The legal form
of the relationship of the Member with the employing organisation has no bearing on the
ethical responsibilities placed on the Member.
200.4 In this Part, the term “Member” refers to:

(a) A Member in Business; and
(b) An individual who is a Member in Public Practice when performing Professional

Activities pursuant to the Member’s relationship with the Member’s Firm, whether as
a contractor, employee or owner. More information on when Part 2 is applicable to
Members in Public Practice is set out in paragraphs R120.4, R300.5 and 300.5 A1.
General
R200.5 A Member shall comply with the fundamental principles set out in Section 110 and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to compliance with the fundamental principles.
200.5 A1 A Member has a responsibility to further the legitimate objectives of the Member’s
employing organisation. The Code does not seek to hinder Members from fulfilling that
responsibility, but addresses circumstances in which compliance with the fundamental
principles might be compromised.
200.5 A2 Members may promote the position of the employing organisation when furthering the
legitimate goals and objectives of their employing organisation, provided that any
statements made are neither false nor misleading. Such actions usually would not create
an advocacy threat.
38
200.5 A3 The more senior the position of a Member, the greater will be the ability and opportunity to
access information, and to influence policies, decisions made and actions taken by others
involved with the employing organisation. To the extent that they are able to do so, taking
into account their position and seniority in the organisation, Members are expected to
encourage and promote an ethics-based culture in the organisation. Examples of actions
that might be taken include the introduction, implementation and oversight of:
• Ethics education and training programs.
• Ethics and whistleblowing policies.3
• Policies and procedures designed to prevent non-compliance with laws and

regulations (“NOCLAR”).
Identifying Threats
of facts and circumstances. The categories of threats are described in paragraph 120.6 A3.
The following are examples of facts and circumstances within each of those categories that
might create threats for a Member when undertaking a Professional Activity:
(a) Self-interest Threats:
• A Member holding a Financial Interest in, or receiving a loan or guarantee

from the employing organisation.
• A Member participating in incentive compensation arrangements offered by

the employing organisation.
• A Member having access to corporate assets for personal use.
• A Member being offered a gift or special treatment from a supplier of the

employing organisation.
(b) Self-review Threats:
• A Member determining the appropriate accounting treatment for a business

combination after performing the feasibility study supporting the purchase
decision.
(c) Advocacy Threats:
• A Member having the opportunity to manipulate information in a prospectus

in order to obtain favourable financing.
(d) Familiarity Threats:
• A Member being responsible for the financial reporting of the employing

organisation when an Immediate or Close Family member employed by the
organisation makes decisions that affect the financial reporting of the
organisation.
• A Member having a long association with individuals influencing business

decisions.
3 In Australia, whistleblower protection is addressed in the Corporations Act 2001 (for the private sector) and in
other legislation in place federally and in states and territories (for the public sector). In 2017, the Australian
government released draft federal legislation to strengthen protection for whistleblowers in the private sector.
As at the Code's publication date, the draft legislation is under consideration by the Parliament of Australia.
39
(e) Intimidation Threats:
• A Member or Immediate or Close Family member facing the threat of

dismissal or replacement over a disagreement about:
o The application of an accounting principle.
o The way in which financial information is to be reported.
• An individual attempting to influence the decision making process of the

Member, for example with regard to the awarding of contracts or the
application of an accounting principle.
Evaluating Threats
200.7 A1 The conditions, policies and procedures described in paragraphs 120.6 A1 and 120.8 A2
might impact the evaluation of whether a threat to compliance with the fundamental
principles is at an Acceptable Level.
200.7 A2 The Member’s evaluation of the level of a threat is also impacted by the nature and scope
of the Professional Activity.
200.7 A3 The Member’s evaluation of the level of a threat might be impacted by the work
environment within the employing organisation and its operating environment. For
example:
• Leadership that stresses the importance of ethical behaviour and the expectation
that employees will act in an ethical manner.
• Policies and procedures to empower and encourage employees to communicate

ethics issues that concern them to senior levels of management without fear of
retribution.
• Policies and procedures to implement and monitor the quality of employee

performance.
• Systems of corporate oversight or other oversight structures and strong internal

controls.
• Recruitment procedures emphasising the importance of employing high calibre

competent personnel.
• Timely communication of policies and procedures, including any changes to them,

to all employees, and appropriate training and education on such policies and
procedures.
• Ethics and code of conduct policies.
200.7 A4 Members might consider obtaining legal advice where they believe that unethical behaviour
or actions by others have occurred, or will continue to occur, within the employing
organisation.
Addressing Threats
200.8 A1 Sections 210 to 270 describe certain threats that might arise during the course of
performing Professional Activities and include examples of actions that might address such
threats.
40
200.8 A2 In extreme situations, if the circumstances that created the threats cannot be eliminated
and safeguards are not available or capable of being applied to reduce the threat to an
Acceptable Level, it might be appropriate for a Member to resign from the employing
organisation.
Communicating with Those Charged with Governance
R200.9 When communicating with Those Charged with Governance in accordance with the
Code, a Member shall determine the appropriate individual(s) within the employing
organisation’s governance structure with whom to communicate. If the Member
communicates with a subgroup of Those Charged with Governance, the Member
shall determine whether communication with all of Those Charged with Governance
is also necessary so that they are adequately informed.
200.9 A1 In determining with whom to communicate, a Member might consider:

(a) The nature and importance of the circumstances; and
(b) The matter to be communicated.
200.9 A2 Examples of a subgroup of Those Charged with Governance include an audit committee
or an individual member of Those Charged with Governance.
R200.10 If a Member communicates with individuals who have management responsibilities

as well as governance responsibilities, the Member shall be satisfied that
communication with those individuals adequately informs all of those in a
governance role with whom the Member would otherwise communicate.
200.10 A1 In some circumstances, all of Those Charged with Governance are involved in managing
the employing organisation, for example, a small business where a single owner manages
the organisation and no one else has a governance role. In these cases, if matters are
communicated with individual(s) with management responsibilities, and those individual(s)
also have governance responsibilities, the Member has satisfied the requirement to
communicate with Those Charged with Governance.
41
SECTION 210
CONFLICTS OF INTEREST
Introduction
210.1 Members are required to comply with the fundamental principles and apply the conceptual
framework set out in Section 120 to identify, evaluate and address threats.
210.2 A conflict of interest creates threats to compliance with the principle of objectivity and might
create threats to compliance with the other fundamental principles. Such threats might be
created when:
(a) A Member undertakes a Professional Activity related to a particular matter for two or
more parties whose interests with respect to that matter are in conflict; or
(b) The interest of a Member with respect to a particular matter and the interests of a
party for whom the Member undertakes a Professional Activity related to that matter
are in conflict.
A party might include an employing organisation, a vendor, a customer, a lender, a

shareholder, or another party.
210.3 This section sets out specific requirements and application material relevant to applying
the conceptual framework to conflicts of interest.
General
R210.4 A Member shall not allow a conflict of interest to compromise professional or

business judgement.
210.4 A1 Examples of circumstances that might create a conflict of interest include:
• Serving in a management or governance position for two employing organisations

and acquiring confidential information from one organisation that might be used by
the Member to the advantage or disadvantage of the other organisation.
• Undertaking a Professional Activity for each of two parties in a partnership, where

both parties are employing the Member to assist them to dissolve their partnership.
• Preparing financial information for certain members of management of the Member’s

employing organisation who are seeking to undertake a management buy-out.
• Being responsible for selecting a vendor for the employing organisation when an
Immediate Family member of the Member might benefit financially from the
transaction.
• Serving in a governance capacity in an employing organisation that is approving

certain investments for the company where one of those investments will increase
the value of the investment portfolio of the Member or an Immediate Family member.
42
Conflict Identification
R210.5 A Member shall take reasonable steps to identify circumstances that might create a
conflict of interest, and therefore a threat to compliance with one or more of the
fundamental principles. Such steps shall include identifying:
(a) The nature of the relevant interests and relationships between the parties
involved; and
(b) The activity and its implication for relevant parties.
R210.6 A Member shall remain alert to changes over time in the nature of the activities,
interests and relationships that might create a conflict of interest while performing
a Professional Activity.
Threats Created by Conflicts of Interest
210.7 A1 In general, the more direct the connection between the Professional Activity and the matter
on which the parties’ interests conflict, the more likely the level of the threat is not at an
Acceptable Level.
210.7 A2 An example of an action that might eliminate threats created by conflicts of interest is
withdrawing from the decision making process related to the matter giving rise to the
conflict of interest.
210.7 A3 Examples of actions that might be safeguards to address threats created by conflicts of
interest include:
• Restructuring or segregating certain responsibilities and duties.
• Obtaining appropriate oversight, for example, acting under the supervision of an

executive or non-executive Director.
Disclosure and Consent
General
210.8 A1 It is generally necessary to:
(a) Disclose the nature of the conflict of interest and how any threats created were
addressed to the relevant parties, including to the appropriate levels within the
employing organisation affected by a conflict; and
(b) Obtain consent from the relevant parties for the Member to undertake the
Professional Activity when safeguards are applied to address the threat.
210.8 A2 Consent might be implied by a party’s conduct in circumstances where the Member has
sufficient evidence to conclude that the parties know the circumstances at the outset and
have accepted the conflict of interest if they do not raise an objection to the existence of
the conflict.
210.8 A3 If such disclosure or consent is not in writing, the Member is encouraged to document:
(a) The nature of the circumstances giving rise to the conflict of interest;
(b) The safeguards applied to address the threats when applicable; and
(c) The consent obtained.
43
Other Considerations
210.9 A1 When addressing a conflict of interest, the Member is encouraged to seek guidance from
within the employing organisation or from others, such as a professional body, legal
counsel or another Member. When making such disclosures or sharing information within
the employing organisation and seeking guidance of third parties, the principle of
confidentiality applies.
44
SECTION 220
PREPARATION AND PRESENTATION OF INFORMATION
Introduction
220.2 Preparing or presenting information might create a self-interest, intimidation or other threats
to compliance with one or more of the fundamental principles. This section sets out specific
requirements and application material relevant to applying the conceptual framework in
such circumstances.
General
220.3 A1 Members at all levels in an employing organisation are involved in the preparation or
presentation of information both within and outside the organisation.
220.3 A2 Stakeholders to whom, or for whom, such information is prepared or presented, include:
• Management and Those Charged with Governance.
• Investors and lenders or other creditors.
• Regulatory bodies.
This information might assist stakeholders in understanding and evaluating aspects of the
employing organisation’s state of affairs and in making decisions concerning the
organisation. Information can include financial and non-financial information that might be
made public or used for internal purposes.
Examples include:
• Operating and performance reports.
• Decision support analyses.

• Budgets and forecasts.
• Information provided to the internal and external auditors.
• Risk analyses.
• General and Special Purpose Financial Statements.
• Tax returns.
• Reports filed with regulatory bodies for legal and compliance purposes.
220.3 A3 For the purposes of this section, preparing or presenting information includes recording,
maintaining and approving information.
45
R220.4 When preparing or presenting information, a Member shall:
(a) Prepare or present the information in accordance with a relevant reporting

framework, where applicable;
(b) Prepare or present the information in a manner that is intended neither to

mislead, nor to influence contractual or regulatory outcomes inappropriately;
(c) Exercise professional judgement to:
(i) Represent the facts accurately and completely in all material respects;
(ii) Describe clearly the true nature of business transactions or activities;

and
(iii) Classify and record information in a timely and proper manner; and
(d) Not omit anything with the intention of rendering the information misleading
or of influencing contractual or regulatory outcomes inappropriately.
220.4 A1 An example of influencing a contractual or regulatory outcome inappropriately is using an

unrealistic estimate with the intention of avoiding violation of a contractual requirement such
as a debt covenant or of a regulatory requirement such as a capital requirement for a
financial institution.
Use of Discretion in Preparing or Presenting Information
R220.5 Preparing or presenting information might require the exercise of discretion in

making professional judgements. The Member shall not exercise such discretion
with the intention of misleading others or influencing contractual or regulatory
outcomes inappropriately.
220.5 A1 Examples of ways in which discretion might be misused to achieve inappropriate outcomes
include:
• Determining estimates, for example, determining fair value estimates in order to

misrepresent profit or loss.
• Selecting or changing an accounting policy or method among two or more

alternatives permitted under the applicable financial reporting framework, for
example, selecting a policy for accounting for long-term contracts in order to
misrepresent profit or loss.
• Determining the timing of transactions, for example, timing the sale of an asset near
the end of the fiscal year in order to mislead.
• Determining the structuring of transactions, for example, structuring financing

transactions in order to misrepresent assets and liabilities or classification of cash
flows.
• Selecting disclosures, for example, omitting or obscuring information relating to

financial or operating risk in order to mislead.
R220.6 When performing Professional Activities, especially those that do not require
compliance with a relevant reporting framework, the Member shall exercise
professional judgement to identify and consider:
(a) The purpose for which the information is to be used;
(b) The context within which it is given; and
(c) The audience to whom it is addressed.
46
220.6 A1 For example, when preparing or presenting pro forma reports, budgets or forecasts, the
inclusion of relevant estimates, approximations and assumptions, where appropriate,
would enable those who might rely on such information to form their own judgements.
220.6 A2 The Member might also consider clarifying the intended audience, context and purpose of
the information to be presented.
Relying on the Work of Others
R220.7 A Member who intends to rely on the work of others, either internal or external to the
employing organisation, shall exercise professional judgement to determine what
steps to take, if any, in order to fulfil the responsibilities set out in paragraph R220.4.
220.7 A1 Factors to consider in determining whether reliance on others is reasonable include:
• The reputation and expertise of, and resources available to, the other individual or
organisation.
• Whether the other individual is subject to applicable professional and ethics
standards.
Such information might be gained from prior association with, or from consulting others
about, the other individual or organisation.
Addressing Information that Is or Might be Misleading
R220.8 When the Member knows or has reason to believe that the information with which
the Member is associated is misleading, the Member shall take appropriate actions
to seek to resolve the matter.
220.8 A1 Actions that might be appropriate include:
• Discussing concerns that the information is misleading with the Member’s superior
and/or the appropriate level(s) of management within the Member’s employing
organisation or Those Charged with Governance, and requesting such individuals to
take appropriate action to resolve the matter. Such action might include:
o Having the information corrected.
o If the information has already been disclosed to the intended users, informing
them of the correct information.
• Consulting the policies and procedures of the employing organisation (for example,
an ethics or whistleblowing policy) regarding how to address such matters internally.
220.8 A2 The Member might determine that the employing organisation has not taken appropriate
action. If the Member continues to have reason to believe that the information is misleading,
the following further actions might be appropriate provided that the Member remains alert
to the principle of confidentiality:
• Consulting with:
o A relevant Professional Body.
o The internal or external auditor of the employing organisation.
o Legal counsel.
47
• Determining whether any requirements exist to communicate to:
o Third parties, including users of the information.
o Regulatory and oversight authorities.
AUST R220.8.1 Where a Member referred to in paragraph R220.4 is not satisfied that the Financial
Statements of an employing organisation are presented in accordance with
applicable Australian Accounting Standards, the Member shall:
(a) in all cases, notify Those Charged with Governance and document the
communication; and
(b) qualify any declarations given by the Member in compliance with legislative
and regulatory requirements or the organisation's reporting requirements.
R220.9 If after exhausting all feasible options, the Member determines that appropriate
action has not been taken and there is reason to believe that the information is still
misleading, the Member shall refuse to be or to remain associated with the
information.
220.9 A1 In such circumstances, it might be appropriate for a Member to resign from the employing
organisation.
Documentation
220.10 A1 The Member is encouraged to document:
• The facts.
• The accounting principles or other relevant professional standards involved.
• The communications and parties with whom matters were discussed.
• The courses of action considered.
• How the Member attempted to address the matter(s).
220.11 A1 Where threats to compliance with the fundamental principles relating to the preparation or
presentation of information arise from a Financial Interest, including compensation and
incentives linked to financial reporting and decision making, the requirements and
application material set out in Section 240 apply.
220.11 A2 Where the misleading information might involve non-compliance with laws and regulations
(“NOCLAR”), the requirements and application material set out in Section 260 apply.
220.11 A3 Where threats to compliance with the fundamental principles relating to the preparation or
presentation of information arise from pressure, the requirements and application material
set out in Section 270 apply.
48
SECTION 230
ACTING WITH SUFFICIENT EXPERTISE
Introduction
230.2 Acting without sufficient expertise creates a self-interest threat to compliance with the
principle of professional competence and due care. This section sets out specific
such circumstances.
General
R230.3 A Member shall not intentionally mislead an employing organisation as to the level
of expertise or experience possessed.
230.3 A1 The principle of professional competence and due care requires that a Member only
undertake significant tasks for which the Member has, or can obtain, sufficient training or
experience.
230.3 A2 A self-interest threat to compliance with the principle of professional competence and due
care might be created if a Member has:
• Insufficient time for performing or completing the relevant duties.
• Incomplete, restricted or otherwise inadequate information for performing the duties.
• Insufficient experience, training and/or education.
• Inadequate resources for the performance of the duties.
230.3 A3 Factors that are relevant in evaluating the level of such a threat include:
• The extent to which the Member is working with others.
• The relative seniority of the Member in the business.
• The level of supervision and review applied to the work.
230.3 A4 Examples of actions that might be safeguards to address such a self-interest threat include:
• Obtaining assistance or training from someone with the necessary expertise.
• Ensuring that there is adequate time available for performing the relevant duties.
R230.4 If a threat to compliance with the principle of professional competence and due care
cannot be addressed, a Member shall determine whether to decline to perform the
duties in question. If the Member determines that declining is appropriate, the
Member shall communicate the reasons.
230.5 A1 The requirements and application material in Section 270 apply when a Member is
pressured to act in a manner that might lead to a breach of the principle of professional
competence and due care.
49
SECTION 240
FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES LINKED TO

FINANCIAL REPORTING AND DECISION MAKING
Introduction
240.2 Having a Financial Interest, or knowing of a Financial Interest held by an Immediate or

Close Family member might create a self-interest threat to compliance with the principles
of objectivity or confidentiality. This section sets out specific requirements and application
material relevant to applying the conceptual framework in such circumstances.
General
R240.3 A Member shall not manipulate information or use confidential information for
personal gain or for the financial gain of others.
240.3 A1 Members might have Financial Interests or might know of Financial Interests of Immediate
or Close Family members that, in certain circumstances, might create threats to compliance
with the fundamental principles. Financial Interests include those arising from
compensation or incentive arrangements linked to financial reporting and decision making.
240.3 A2 Examples of circumstances that might create a self-interest threat include situations in
which the Member or an Immediate or Close Family member:
• Has a motive and opportunity to manipulate price-sensitive information in order to

gain financially.
• Holds a Direct or Indirect Financial Interest in the employing organisation and the
value of that Financial Interest might be directly affected by decisions made by the
Member.
• Is eligible for a profit-related bonus and the value of that bonus might be directly
affected by decisions made by the Member.
• Holds, directly or indirectly, deferred bonus share rights or share options in the
employing organisation, the value of which might be affected by decisions made by
the Member.
• Participates in compensation arrangements which provide incentives to achieve
targets or to support efforts to maximise the value of the employing organisation’s
shares. An example of such an arrangement might be through participation in
incentive plans which are linked to certain performance conditions being met.
• The significance of the Financial Interest. What constitutes a significant Financial

Interest will depend on personal circumstances and the materiality of the Financial
Interest to the individual.
• Policies and procedures for a committee independent of management to determine

the level or form of senior management remuneration.
50
• In accordance with any internal policies, disclosure to Those Charged with
Governance of:
o All relevant interests.
o Any plans to exercise entitlements or trade in relevant shares.
• Internal and external audit procedures that are specific to address issues that give
rise to the Financial Interest.
240.3 A4 Threats created by compensation or incentive arrangements might be compounded by

explicit or implicit pressure from superiors or colleagues. See Section 270, Pressure to
Breach the Fundamental Principles.
51
SECTION 250
INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY
Introduction
250.2 Offering or accepting Inducements might create a self-interest, familiarity or intimidation

threat to compliance with the fundamental principles, particularly the principles of integrity,
objectivity and professional behaviour.
250.3 This section sets out requirements and application material relevant to applying the
conceptual framework in relation to the offering and accepting of Inducements when
undertaking Professional Activities that does not constitute non-compliance with laws and
regulations (“NOCLAR”). This section also requires a Member to comply with relevant laws
and regulations when offering or accepting Inducements.
General
250.4 A1 An Inducement is an object, situation, or action that is used as a means to influence another
individual’s behaviour, but not necessarily with the intent to improperly influence that
individual’s behaviour. Inducements can range from minor acts of hospitality between
business colleagues to acts that result in non-compliance with laws and regulations
(“NOCLAR”). An Inducement can take many different forms, for example:
• Gifts.
• Hospitality.
• Entertainment.
Inducements Prohibited by Laws and Regulations
R250.5 In many jurisdictions, there are laws and regulations, such as those related to
bribery and corruption, that prohibit the offering or accepting of Inducements in
certain circumstances. The Member shall obtain an understanding of relevant laws
and regulations and comply with them when the Member encounters such
circumstances.
Inducements Not Prohibited by Laws and Regulations
250.6 A1 The offering or accepting of Inducements that is not prohibited by laws and regulations
might still create threats to compliance with the fundamental principles.
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Inducements with Intent to Improperly Influence Behaviour
R250.7 A Member shall not offer, or encourage others to offer, any Inducement that is made,
or which the Member considers a reasonable and informed third party would be
likely to conclude is made, with the intent to improperly influence the behaviour of
the recipient or of another individual.
R250.8 A Member shall not accept, or encourage others to accept, any Inducement that the
Member concludes is made, or considers a reasonable and informed third party
would be likely to conclude is made, with the intent to improperly influence the
behaviour of the recipient or of another individual.
250.9 A1 An Inducement is considered as improperly influencing an individual’s behaviour if it causes

the individual to act in an unethical manner. Such improper influence can be directed either
towards the recipient or towards another individual who has some relationship with the
recipient. The fundamental principles are an appropriate frame of reference for a Member
in considering what constitutes unethical behaviour on the part of the Member and, if
necessary by analogy, other individuals.
250.9 A2 A breach of the fundamental principle of integrity arises when a Member offers or accepts,
or encourages others to offer or accept, an Inducement where the intent is to improperly
influence the behaviour of the recipient or of another individual.
250.9 A3 The determination of whether there is actual or perceived intent to improperly influence
behaviour requires the exercise of professional judgement. Relevant factors to consider
might include:
• The nature, frequency, value and cumulative effect of the Inducement.
• Timing of when the Inducement is offered relative to any action or decision that it
might influence.
• Whether the Inducement is a customary or cultural practice in the circumstances, for

example, offering a gift on the occasion of a religious holiday or wedding.
• Whether the Inducement is an ancillary part of a Professional Activity, for example,

offering or accepting lunch in connection with a business meeting.
• Whether the offer of the Inducement is limited to an individual recipient or available

to a broader group. The broader group might be internal or external to the employing
organisation, such as other customers or vendors.
• The roles and positions of the individuals offering or being offered the Inducement.
• Whether the Member knows, or has reason to believe, that accepting the Inducement
would breach the policies and procedures of the counterparty’s employing
organisation.
• The degree of transparency with which the Inducement is offered.

• Whether the Inducement was required or requested by the recipient.
• The known previous behaviour or reputation of the offeror.
Consideration of Further Actions
250.10 A1 If the Member becomes aware of an Inducement offered with actual or perceived intent to
improperly influence behaviour, threats to compliance with the fundamental principles might
still be created even if the requirements in paragraphs R250.7 and R250.8 are met.
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250.10 A2 Examples of actions that might be safeguards to address such threats include:
• Informing senior management or Those Charged with Governance of the employing

organisation of the Member or the offeror regarding the offer.
• Amending or terminating the business relationship with the offeror.
Inducements with No Intent to Improperly Influence Behaviour
250.11 A1 The requirements and application material set out in the conceptual framework apply when
a Member has concluded there is no actual or perceived intent to improperly influence the
behaviour of the recipient or of another individual.
250.11 A2 If such an Inducement is trivial and inconsequential, any threats created will be at an
Acceptable Level.
250.11 A3 Examples of circumstances where offering or accepting such an Inducement might create
threats even if the Member has concluded there is no actual or perceived intent to
improperly influence behaviour include:
• Self-interest threats
o A Member is offered part-time employment by a vendor.
• Familiarity threats
o A Member regularly takes a customer or supplier to sporting events.
• Intimidation threats
o A Member accepts hospitality, the nature of which could be perceived to be
inappropriate were it to be publicly disclosed.
250.11 A4 Relevant factors in evaluating the level of such threats created by offering or accepting
such an Inducement include the same factors set out in paragraph 250.9 A3 for determining
intent.
250.11 A5 Examples of actions that might eliminate threats created by offering or accepting such an
Inducement include:
• Declining or not offering the Inducement.
• Transferring responsibility for any business-related decision involving the

counterparty to another individual who the Member has no reason to believe would
be, or would be perceived to be, improperly influenced in making the decision.
250.11 A6 Examples of actions that might be safeguards to address such threats created by offering
or accepting such an Inducement include:
• Being transparent with senior management or Those Charged with Governance of

the employing organisation of the Member or of the counterparty about offering or
accepting an Inducement.
• Registering the Inducement in a log maintained by the employing organisation of the

Member or the counterparty.
• Having an appropriate reviewer, who is not otherwise involved in undertaking the

Professional Activity, review any work performed or decisions made by the Member
with respect to the individual or organisation from which the Member accepted the
Inducement.
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• Donating the Inducement to charity after receipt and appropriately disclosing the
donation, for example, to Those Charged with Governance or the individual who
offered the Inducement.
• Reimbursing the cost of the Inducement, such as hospitality, received.
• As soon as possible, returning the Inducement, such as a gift, after it was initially
accepted.
Immediate or Close Family Members
R250.12 A Member shall remain alert to potential threats to the Member’s compliance with
the fundamental principles created by the offering of an Inducement:
(a) By an Immediate or Close Family member of the Member to a counterparty with

whom the Member has a professional relationship; or
(b) To an Immediate or Close Family member of the Member by a counterparty

with whom the Member has a professional relationship.
R250.13 Where the Member becomes aware of an Inducement being offered to or made by an
Immediate or Close Family member and concludes there is intent to improperly
influence the behaviour of the Member or of the counterparty, or considers a
reasonable and informed third party would be likely to conclude such intent exists,
the Member shall advise the Immediate or Close Family member not to offer or
accept the Inducement.
250.13 A1 The factors set out in paragraph 250.9 A3 are relevant in determining whether there is
actual or perceived intent to improperly influence the behaviour of the Member or of the
counterparty. Another factor that is relevant is the nature or closeness of the relationship,
between:
(a) The Member and the Immediate or Close Family member;
(b) The Immediate or Close Family member and the counterparty; and
(c) The Member and the counterparty.
For example, the offer of employment, outside of the normal recruitment process, to the
spouse of the Member by a counterparty with whom the Member is negotiating a significant
contract might indicate such intent.
250.13 A2 The application material in paragraph 250.10 A2 is also relevant in addressing threats that
might be created when there is actual or perceived intent to improperly influence the
behaviour of the Member or of the counterparty even if the Immediate or Close Family
member has followed the advice given pursuant to paragraph R250.13.
Application of the Conceptual Framework
250.14 A1 Where the Member becomes aware of an Inducement offered in the circumstances
addressed in paragraph R250.12, threats to compliance with the fundamental principles
might be created where:
(a) The Immediate or Close Family member offers or accepts the Inducement contrary
to the advice of the Member pursuant to paragraph R250.13; or
(b) The Member does not have reason to believe an actual or perceived intent to
improperly influence the behaviour of the Member or of the counterparty exists.
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250.14 A2 The application material in paragraphs 250.11 A1 to 250.11 A6 is relevant for the purposes
of identifying, evaluating and addressing such threats. Factors that are relevant in
evaluating the level of threats in these circumstances also include the nature or closeness
of the relationships set out in paragraph 250.13 A1.
250.15 A1 If a Member is offered an Inducement by the employing organisation relating to Financial

Interests, compensation and incentives linked to performance, the requirements and
application material set out in Section 240 apply.
250.15 A2 If a Member encounters or is made aware of Inducements that might result in NOCLAR or
suspected NOCLAR by other individuals working for or under the direction of the employing
organisation, the requirements and application material set out in Section 260 apply.
250.15 A3 If a Member faces pressure to offer or accept Inducements that might create threats to
compliance with the fundamental principles, the requirements and application material set
out in Section 270 apply.
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SECTION 260
RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS
Introduction
260.2 A self-interest or intimidation threat to compliance with the principles of integrity and
professional behaviour is created when a Member becomes aware of non-compliance or
suspected non-compliance with laws and regulations (“NOCLAR”).
260.3 A Member might encounter or be made aware of NOCLAR or suspected NOCLAR in the
course of carrying out Professional Activities. This section guides the Member in assessing
the implications of the matter and the possible courses of action when responding to
NOCLAR or suspected NOCLAR with:
(a) Laws and regulations generally recognised to have a direct effect on the
determination of material amounts and disclosures in the employing organisation’s
Financial Statements; and
(b) Other laws and regulations that do not have a direct effect on the determination of the
amounts and disclosures in the employing organisation’s Financial Statements, but
compliance with which might be fundamental to the operating aspects of the employing
organisation’s business, to its ability to continue its business, or to avoid material
penalties.
Objectives of the Member in Relation to NOCLAR
260.4 A distinguishing mark of the accountancy profession is its acceptance of the responsibility
to act in the public interest. When responding to NOCLAR or suspected NOCLAR, the
objectives of the Member are:
(a) To comply with the principles of integrity and professional behaviour;
(b) By alerting management or, where appropriate, Those Charged with Governance of
the employing organisation, to seek to:
(i) Enable them to rectify, remediate or mitigate the consequences of the

identified or suspected NOCLAR; or
(ii) Deter the NOCLAR where it has not yet occurred; and
(c) To take such further action as appropriate in the public interest.
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General
260.5 A1 Non-compliance with laws and regulations (“NOCLAR”) comprises acts of omission or
commission, intentional or unintentional, which are contrary to the prevailing laws or
regulations committed by the following parties:
(a) The Member’s employing organisation;

(b) Those Charged with Governance of the employing organisation;
(c) Management of the employing organisation; or
(d) Other individuals working for or under the direction of the employing organisation.
260.5 A2 Examples of laws and regulations which this section addresses include those that deal
with:
• Fraud, corruption and bribery.

• Money laundering, terrorist financing and proceeds of crime.
• Securities markets and trading.
• Banking and other financial products and services.
• Data protection.
• Tax and pension liabilities and payments.
• Environmental protection.
• Public health and safety.
260.5 A3 NOCLAR might result in fines, litigation or other consequences for the employing
organisation, potentially materially affecting its Financial Statements. Importantly, such
NOCLAR might have wider public interest implications in terms of potentially substantial
harm to investors, creditors, employees or the general public. For the purposes of this
section, NOCLAR that causes substantial harm is one that results in serious adverse
consequences to any of these parties in financial or non-financial terms. Examples include
the perpetration of a fraud resulting in significant financial losses to investors, and breaches
of environmental laws and regulations endangering the health or safety of employees or
the public.
R260.6 In some jurisdictions, there are legal or regulatory provisions governing how
Members are required to address NOCLAR or suspected NOCLAR. These legal or
regulatory provisions might differ from or go beyond the provisions in this section.
When encountering such NOCLAR or suspected NOCLAR, the Member shall obtain
an understanding of those legal or regulatory provisions and comply with them,
including:
(a) Any requirement to report the matter to an appropriate authority; and
(b) Any prohibition on alerting the relevant party.
260.6 A1 A prohibition on alerting the relevant party might arise, for example, pursuant to anti-money
laundering legislation.
260.7 A1 This section applies regardless of the nature of the employing organisation, including
whether or not it is a Public Interest Entity.
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260.7 A2 A Member who encounters or is made aware of matters that are clearly inconsequential is
not required to comply with this section. Whether a matter is clearly inconsequential is to
be judged with respect to its nature and its impact, financial or otherwise, on the employing
organisation, its stakeholders and the general public.
260.7 A3 This section does not address:
(a) Personal misconduct unrelated to the business activities of the employing

organisation; and
(b) NOCLAR by parties other than those specified in paragraph 260.5 A1.
The Member might nevertheless find the guidance in this section helpful in considering how
to respond in these situations.
Responsibilities of the Employing Organisation’s Management and Those Charged with

Governance
260.8 A1 The employing organisation’s management, with the oversight of Those Charged with
Governance, is responsible for ensuring that the employing organisation’s business
activities are conducted in accordance with laws and regulations. Management and Those
Charged with Governance are also responsible for identifying and addressing any
NOCLAR by:
(a) The employing organisation;
(b) An individual charged with governance of the employing organisation;
(c) A member of management; or
(d) Other individuals working for or under the direction of the employing organisation.
Responsibilities of All Members
R260.9 If protocols and procedures exist within the Member’s employing organisation to
address NOCLAR or suspected NOCLAR, the Member shall consider them in
determining how to respond to such NOCLAR.
260.9 A1 Many employing organisations have established protocols and procedures regarding how
to raise NOCLAR or suspected NOCLAR internally. These protocols and procedures
include, for example, an ethics policy or internal whistleblowing mechanism.4 Such
protocols and procedures might allow matters to be reported anonymously through
designated channels.
R260.10 Where a Member becomes aware of a matter to which this section applies, the steps
that the Member takes to comply with this section shall be taken on a timely basis.
For the purpose of taking timely steps, the Member shall have regard to the nature
of the matter and the potential harm to the interests of the employing organisation,
investors, creditors, employees or the general public.
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Responsibilities of Senior Members in Business
260.11 A1 Senior Members in Business are Directors, Officers or senior employees able to exert
significant influence over, and make decisions regarding, the acquisition, deployment and
control of the employing organisation’s human, financial, technological, physical and
intangible resources. There is a greater expectation for such individuals to take whatever
action is appropriate in the public interest to respond to NOCLAR or suspected NOCLAR
than other Members within the employing organisation. This is because of senior Members
in Business’ roles, positions and spheres of influence within the employing organisation.
Obtaining an Understanding of the Matter
R260.12 If, in the course of carrying out Professional Activities, a senior Member in Business
becomes aware of information concerning NOCLAR or suspected NOCLAR, the
Member shall obtain an understanding of the matter. This understanding shall include:
(a) The nature of the NOCLAR or suspected NOCLAR and the circumstances in
which it has occurred or might occur;
(b) The application of the relevant laws and regulations to the circumstances; and
(c) An assessment of the potential consequences to the employing organisation,

investors, creditors, employees or the wider public.
260.12 A1 A senior Member in Business is expected to apply knowledge and expertise, and exercise
professional judgement. However, the Member is not expected to have a level of
understanding of laws and regulations greater than that which is required for the
Member’s role within the employing organisation. Whether an act constitutes NOCLAR is
ultimately a matter to be determined by a court or other appropriate adjudicative body.
260.12 A2 Depending on the nature and significance of the matter, the senior Member in Business
might cause, or take appropriate steps to cause, the matter to be investigated internally.
The Member might also consult on a confidential basis with others within the employing
organisation or a Professional Body, or with legal counsel.
Addressing the Matter
R260.13 If the senior Member in Business identifies or suspects that NOCLAR has occurred
or might occur, the Member shall, subject to paragraph R260.9, discuss the matter
with the Member’s immediate superior, if any. If the Member’s immediate superior
appears to be involved in the matter, the Member shall discuss the matter with the
next higher level of authority within the employing organisation.
260.13 A1 The purpose of the discussion is to enable a determination to be made as to how to address
the matter.
R260.14 The senior Member in Business shall also take appropriate steps to:
(a) Have the matter communicated to Those Charged with Governance;
(b) Comply with applicable laws and regulations, including legal or regulatory
provisions governing the reporting of NOCLAR or suspected NOCLAR to an
appropriate authority;
(c) Have the consequences of the NOCLAR or suspected NOCLAR rectified,

remediated or mitigated;
(d) Reduce the risk of recurrence; and
60
(e) Seek to deter the commission of the NOCLAR if it has not yet occurred.
260.14 A1 The purpose of communicating the matter to Those Charged with Governance is to obtain
their concurrence regarding appropriate actions to take to respond to the matter and to
enable them to fulfil their responsibilities.
260.14 A2 Some laws and regulations might stipulate a period within which reports of NOCLAR or
suspected NOCLAR are to be made to an appropriate authority.
R260.15 In addition to responding to the matter in accordance with the provisions of this
section, the senior Member in Business shall determine whether disclosure of the
matter to the employing organisation’s external auditor, if any, is needed.
260.15 A1 Such disclosure would be pursuant to the senior Member in Business’ duty and legal
obligation to provide all information necessary to enable the auditor to perform the audit.
Determining Whether Further Action Is Needed
R260.16 The senior Member in Business shall assess the appropriateness of the response of
the Member’s superiors, if any, and Those Charged with Governance.
260.16 A1 Relevant factors to consider in assessing the appropriateness of the response of the senior
Member in Business’ superiors, if any, and Those Charged with Governance include
whether:
• The response is timely.
• They have taken or authorised appropriate action to seek to rectify, remediate or

mitigate the consequences of the NOCLAR, or to avert the NOCLAR if it has not yet
occurred.
• The matter has been disclosed to an appropriate authority where appropriate and, if
so, whether the disclosure appears adequate.
R260.17 In light of the response of the senior Member in Business’ superiors, if any, and
Those Charged with Governance, the Member shall determine if further action is
needed in the public interest.
260.17 A1 The determination of whether further action is needed, and the nature and extent of it, will
depend on various factors, including:
• The legal and regulatory framework.
• The urgency of the situation.

• The pervasiveness of the matter throughout the employing organisation.
• Whether the senior Member in Business continues to have confidence in the integrity
of the Member’s superiors and Those Charged with Governance.
• Whether the NOCLAR or suspected NOCLAR is likely to recur.
• Whether there is credible evidence of actual or potential substantial harm to the

interests of the employing organisation, investors, creditors, employees or the
general public.
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260.17 A2 Examples of circumstances that might cause the senior Member in Business no longer to
have confidence in the integrity of the Member’s superiors and Those Charged with
Governance include situations where:
• The Member suspects or has evidence of their involvement or intended involvement

in any NOCLAR.
• Contrary to legal or regulatory requirements, they have not reported, or authorised

the reporting of, the matter to an appropriate authority within a reasonable period.
R260.18 The senior Member in Business shall exercise professional judgement in

determining the need for, and nature and extent of, further action. In making this
determination, the Member shall take into account whether a reasonable and
informed third party would be likely to conclude that the Member has acted
appropriately in the public interest.
260.18 A1 Further action that the senior Member in Business might take includes:
• Informing the management of the parent entity of the matter if the employing
organisation is a member of a group.
• Disclosing the matter to an appropriate authority even when there is no legal or
regulatory requirement to do so.
• Resigning from the employing organisation.
260.18 A2 Resigning from the employing organisation is not a substitute for taking other actions that
might be needed to achieve the senior Member in Business’ objectives under this section.
In some jurisdictions, however, there might be limitations as to the further actions available
to the Member. In such circumstances, resignation might be the only available course of
action.
Seeking Advice
260.19 A1 As assessment of the matter might involve complex analysis and judgements, the senior
Member in Business might consider:
• Consulting internally.
• Obtaining legal advice to understand the Member’s options and the professional or
legal implications of taking any particular course of action.
• Consulting on a confidential basis with a regulatory or Professional Body.
Determining Whether to Disclose the Matter to an Appropriate Authority
260.20 A1 Disclosure of the matter to an appropriate authority would be precluded if doing so would
be contrary to law or regulation. Otherwise, the purpose of making disclosure is to enable
an appropriate authority to cause the matter to be investigated and action to be taken in
the public interest.
260.20 A2 The determination of whether to make such a disclosure depends in particular on the nature
and extent of the actual or potential harm that is or might be caused by the matter to
investors, creditors, employees or the general public. For example, the senior Member in
Business might determine that disclosure of the matter to an appropriate authority is an
appropriate course of action if:
• The employing organisation is engaged in bribery (for example, of local or foreign

government officials for purposes of securing large contracts).
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• The employing organisation is regulated and the matter is of such significance as to
threaten its license to operate.
• The employing organisation is listed on a securities exchange and the matter might
result in adverse consequences to the fair and orderly market in the employing
organisation’s securities or pose a systemic risk to the financial markets.
• It is likely that the employing organisation would sell products that are harmful to
public health or safety.
• The employing organisation is promoting a scheme to its clients to assist them in

evading taxes.
260.20 A3 The determination of whether to make such a disclosure will also depend on external
factors such as:
• Whether there is an appropriate authority that is able to receive the information, and
cause the matter to be investigated and action to be taken. The appropriate authority
will depend upon the nature of the matter. For example, the appropriate authority
would be a securities regulator in the case of fraudulent financial reporting or an
environmental protection agency in the case of a breach of environmental laws and
regulations.
• Whether there exists robust and credible protection from civil, criminal or professional
liability or retaliation afforded by legislation or regulation, such as under
whistleblowing legislation or regulation.
• Whether there are actual or potential threats to the physical safety of the senior
Member in Business or other individuals.
R260.21 If the senior Member in Business determines that disclosure of the matter to an
appropriate authority is an appropriate course of action in the circumstances, that
disclosure is permitted pursuant to paragraph R114.1(d) of the Code. When making
such disclosure, the Member shall act in good faith and exercise caution when
making statements and assertions.
Imminent Breach
R260.22 In exceptional circumstances, the senior Member in Business might become aware
of actual or intended conduct that the Member has reason to believe would
constitute an imminent breach of a law or regulation that would cause substantial
harm to investors, creditors, employees or the general public. Having first
considered whether it would be appropriate to discuss the matter with management
or Those Charged with Governance of the employing organisation, the Member shall
exercise professional judgement and determine whether to disclose the matter
immediately to an appropriate authority in order to prevent or mitigate the
consequences of such imminent breach. If disclosure is made, that disclosure is
permitted pursuant to paragraph R114.1(d) of the Code.
Documentation
260.23 A1 In relation to NOCLAR or suspected NOCLAR that falls within the scope of this section, the
senior Member in Business is encouraged to have the following matters documented:
• The matter.
• The results of discussions with the Member’s superiors, if any, and Those Charged
with Governance and other parties.
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• How the Member’s superiors, if any, and Those Charged with Governance have
responded to the matter.
• The courses of action the Member considered, the judgements made and the
decisions that were taken.
• How the Member is satisfied that the Member has fulfilled the responsibility set out
in paragraph R260.17.
Responsibilities of Members Other than Senior Members in Business
R260.24 If, in the course of carrying out Professional Activities, a Member becomes aware of
information concerning NOCLAR or suspected NOCLAR, the Member shall seek to
obtain an understanding of the matter. This understanding shall include the nature of
the NOCLAR or suspected NOCLAR and the circumstances in which it has occurred
or might occur.
260.24 A1 The Member is expected to apply knowledge and expertise, and exercise professional
judgement. However, the Member is not expected to have a level of understanding of
laws and regulations greater than that which is required for the Member’s role
within the employing organisation. Whether an act constitutes NOCLAR is ultimately a
matter to be determined by a court or other appropriate adjudicative body.
260.24 A2 Depending on the nature and significance of the matter, the Member might consult on a
confidential basis with others within the employing organisation or a Professional Body, or
with legal counsel.
R260.25 If the Member identifies or suspects that NOCLAR has occurred or might occur, the
Member shall, subject to paragraph R260.9, inform an immediate superior to enable
the superior to take appropriate action. If the Member’s immediate superior appears
to be involved in the matter, the Member shall inform the next higher level of
authority within the employing organisation.
R260.26 In exceptional circumstances, the Member may determine that disclosure of the
matter to an appropriate authority is an appropriate course of action. If the Member
does so pursuant to paragraphs 260.20 A2 and A3, that disclosure is permitted
pursuant to paragraph R114.1(d) of the Code. When making such disclosure, the
Member shall act in good faith and exercise caution when making statements and
assertions.
Documentation
Member is encouraged to have the following matters documented:
• The matter.
• The results of discussions with the Member’s superior, management and, where
applicable, Those Charged with Governance and other parties.
• How the Member’s superior has responded to the matter.
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SECTION 270
PRESSURE TO BREACH THE FUNDAMENTAL PRINCIPLES
Introduction
270.2 Pressure exerted on, or by, a Member might create an intimidation or other threat to
compliance with one or more of the fundamental principles. This section sets out specific
such circumstances.
General
R270.3 A Member shall not:

(a) Allow pressure from others to result in a breach of compliance with the
fundamental principles; or
(b) Place pressure on others that the Member knows, or has reason to believe,
would result in the other individuals breaching the fundamental principles.
270.3 A1 A Member might face pressure that creates threats to compliance with the fundamental
principles, for example an intimidation threat, when undertaking a Professional Activity.
Pressure might be explicit or implicit and might come from:
• Within the employing organisation, for example, from a colleague or superior.
• An external individual or organisation such as a vendor, customer or lender.
• Internal or external targets and expectations.
270.3 A2 Examples of pressure that might result in threats to compliance with the fundamental
principles include:
• Pressure related to conflicts of interest:
o Pressure from a family member bidding to act as a vendor to the Member’s

employing organisation to select the family member over another prospective
vendor.
See also Section 210, Conflicts of Interest.
• Pressure to influence preparation or presentation of information:

o Pressure to report misleading financial results to meet investor, analyst or
lender expectations.
o Pressure from elected officials on public sector accountants to misrepresent

programs or projects to voters.
o Pressure from colleagues to misstate income, expenditure or rates of return to

bias decision making on capital projects and acquisitions.
o Pressure from superiors to approve or process expenditures that are not

legitimate business expenses.
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o Pressure to suppress internal audit reports containing adverse findings.
See also Section 220, Preparation and Presentation of Information.
• Pressure to act without sufficient expertise or due care:
o Pressure from superiors to inappropriately reduce the extent of work

performed.
o Pressure from superiors to perform a task without sufficient skills or training or

within unrealistic deadlines.
See also Section 230, Acting with Sufficient Expertise.
• Pressure related to Financial Interests:
o Pressure from superiors, colleagues or others, for example, those who might
benefit from participation in compensation or incentive arrangements to
manipulate performance indicators.
See also Section 240, Financial Interests, Compensation and Incentives Linked to
Financial Reporting and Decision Making.
• Pressure related to Inducements:

o Pressure from others, either internal or external to the employing organisation,
to offer Inducements to influence inappropriately the judgement or decision
making process of an individual or organisation.
o Pressure from colleagues to accept a bribe or other Inducement, for example

to accept inappropriate gifts or entertainment from potential vendors in a
bidding process.
See also Section 250, Inducements, Including Gifts and Hospitality.
• Pressure related to non-compliance with laws and regulations (“NOCLAR”):
o Pressure to structure a transaction to evade tax.
See also Section 260, Responding to Non-compliance with Laws and Regulations.
270.3 A3 Factors that are relevant in evaluating the level of threats created by pressure include:
• The intent of the individual who is exerting the pressure and the nature and extent of
the pressure.
• The application of laws, regulations, and professional standards to the

circumstances.
• The culture and leadership of the employing organisation including the extent to
which they reflect or emphasise the importance of ethical behaviour and the
expectation that employees will act ethically. For example, a corporate culture that
tolerates unethical behaviour might increase the likelihood that the pressure would
result in a threat to compliance with the fundamental principles.
• Policies and procedures, if any, that the employing organisation has established,
such as ethics or human resources policies that address pressure.
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270.3 A4 Discussing the circumstances creating the pressure and consulting with others about those
circumstances might assist the Member to evaluate the level of the threat. Such discussion
and consultation, which requires being alert to the principle of confidentiality, might include:
• Discussing the matter with the individual who is exerting the pressure to seek to
resolve it.
• Discussing the matter with the Member’s superior, if the superior is not the individual
exerting the pressure.
• Escalating the matter within the employing organisation, including when appropriate,
explaining any consequential risks to the organisation, for example with:
o Higher levels of management.
o Internal or external auditors.
o Those Charged with Governance.

• Disclosing the matter in line with the employing organisation’s policies, including
ethics and whistleblowing policies, using any established mechanism, such as a
confidential ethics hotline.
• Consulting with:
o A colleague, superior, human resources personnel, or another Member;
o Relevant professional or regulatory bodies or industry associations; or
o Legal counsel.
270.3 A5 An example of an action that might eliminate threats created by pressure is the Member’s
request for a restructure of, or segregation of, certain responsibilities and duties so that the
Member is no longer involved with the individual or entity exerting the pressure.
Documentation
270.4 A1 The Member is encouraged to document:
• The facts.
• The communications and parties with whom these matters were discussed.
• The courses of action considered.
• How the matter was addressed.
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PART 3 – MEMBERS IN PUBLIC PRACTICE
Section Page
300 Applying the Conceptual Framework – Members in Public Practice ..................................... 69
310 Conflicts of Interest ................................................................................................................. 75
320 Professional Appointments..................................................................................................... 80
321 Second Opinions .................................................................................................................... 84
330 Fees and Other Types of Remuneration ................................................................................ 85
340 Inducements, Including Gifts and Hospitality ......................................................................... 88
350 Custody of Client Assets ........................................................................................................ 93
360 Responding to Non-Compliance with Laws and Regulations ................................................ 94
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SECTION 300
APPLYING THE CONCEPTUAL FRAMEWORK – MEMBERS IN PUBLIC PRACTICE
Introduction
300.1 This Part of the Code sets out requirements and application material for Members in Public
Practice when applying the conceptual framework set out in Section 120. It does not
describe all of the facts and circumstances, including Professional Activities, interests and
relationships, that could be encountered by Members in Public Practice, which create or
might create threats to compliance with the fundamental principles. Therefore, the
conceptual framework requires Members in Public Practice to be alert for such facts and
circumstances.
300.2 The requirements and application material that apply to Members in Public Practice are set
out in:
• Part 3 – Members in Public Practice, Sections 300 to 399, which applies to all
Members in Public Practice, whether they provide assurance services or not.
• Independence Standards as follows:

o Part 4A – Independence for Audit and Review Engagements, Sections 400 to
899, which applies to Members in Public Practice when performing Audit and
Review Engagements.
o Part 4B – Independence for Assurance Engagements Other than Audit and

Review Engagements, Sections 900 to 999, which applies to Members in
Public Practice when performing Assurance Engagements other than Audit or
Review Engagements.
300.3 In this Part, the term “Member” refers to individual Members in Public Practice and their
Firms.
General
R300.4 A Member in Public Practice shall comply with the fundamental principles set out in
Section 110 and apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to compliance with the fundamental principles.
R300.5 When dealing with an ethics issue, the Member in Public Practice shall consider the
context in which the issue has arisen or might arise. Where an individual who is a
Member in Public Practice is performing Professional Activities pursuant to the
Member’s relationship with the Firm, whether as a contractor, employee or
owner, the individual shall comply with the provisions in Part 2 that apply
to these circumstances.
300.5 A1 Examples of situations in which the provisions in Part 2 apply to a Member in Public
Practice include:
• Facing a conflict of interest when being responsible for selecting a vendor for the
Firm when an Immediate Family member of the Member might benefit financially
from the contract. The requirements and application material set out in Section 210
apply in these circumstances.
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• Preparing or presenting financial information for the Member’s client or Firm. The
requirements and application material set out in Section 220 apply in these
circumstances.
• Being offered an Inducement such as being regularly offered complimentary tickets
to attend sporting events by a supplier of the Firm. The requirements and application
material set out in Section 250 apply in these circumstances.
• Facing pressure from an Engagement Partner to report chargeable hours
inaccurately for a client engagement. The requirements and application material set
out in Section 270 apply in these circumstances.
Identifying Threats
of facts and circumstances. The categories of threats are described in paragraph 120.6 A3.
The following are examples of facts and circumstances within each of those categories of
threats that might create threats for a Member in Public Practice when undertaking a
Professional Service:
(a) Self-interest Threats:
• A Member having a Direct Financial Interest in a client.
• A Member quoting a low fee to obtain a new engagement and the fee is so low
that it might be difficult to perform the Professional Service in accordance with
applicable technical and professional standards for that price.
• A Member having a close business relationship with a client.
• A Member having access to confidential information that might be used for

personal gain.
• A Member discovering a significant error when evaluating the results of a

previous Professional Service performed by a member of the Member’s Firm.
(b) Self-review Threats:
• A Member issuing an assurance report on the effectiveness of the operation of

financial systems after implementing the systems.
• A Member having prepared the original data used to generate records that are
the subject matter of the Assurance Engagement.
(c) Advocacy Threats:
• A Member promoting the interests of, or shares in, a client.
• A Member acting as an advocate on behalf of a client in litigation or disputes

with third parties.
• A Member lobbying in favour of legislation on behalf of a client.
(d) Familiarity Threats:

• A Member having a Close or Immediate Family member who is a Director or
Officer of the client.
• A Director or Officer of the client, or an employee in a position to exert

significant influence over the subject matter of the engagement, having
recently served as the Engagement Partner.
• An Audit Team member having a long association with the Audit Client.
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(e) Intimidation Threats:
• A Member being threatened with dismissal from a client engagement or the

Firm because of a disagreement about a professional matter.
• A Member feeling pressured to agree with the judgement of a client because

the client has more expertise on the matter in question.
• A Member being informed that a planned promotion will not occur unless the
Member agrees with an inappropriate accounting treatment.
• A Member having accepted a significant gift from a client and being threatened
that acceptance of this gift will be made public.
Evaluating Threats
300.7 A1 The conditions, policies and procedures described in paragraph 120.6 A1 and 120.8 A2
might impact the evaluation of whether a threat to compliance with the fundamental
principles is at an Acceptable Level. Such conditions, policies and procedures might relate
to:
(a) The client and its operating environment; and

(b) The Firm and its operating environment.
300.7 A2 The Member in Public Practice’s evaluation of the level of a threat is also impacted by the
nature and scope of the Professional Service.
The Client and its Operating Environment
300.7 A3 The Member in Public Practice’s evaluation of the level of a threat might be impacted by
whether the client is:
(a) An Audit Client and whether the Audit Client is a Public Interest Entity;
(b) An Assurance Client that is not an Audit Client; or
(c) A non-assurance client.

For example, providing a non-assurance service to an Audit Client that is a Public Interest
Entity might be perceived to result in a higher level of threat to compliance with the principle
of objectivity with respect to the audit.
300.7 A4 The corporate governance structure, including the leadership of a client might promote
compliance with the fundamental principles. Accordingly, a Member in Public Practice’s
evaluation of the level of a threat might also be impacted by a client’s operating
environment. For example:
• The client requires appropriate individuals other than management to ratify or

approve the appointment of a Firm to perform an engagement.
• The client has competent employees with experience and seniority to make
managerial decisions.
• The client has implemented internal procedures that facilitate objective choices in
tendering non-assurance engagements.
• The client has a corporate governance structure that provides appropriate oversight
and communications regarding the Firm’s services.
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The Firm and its Operating Environment
300.7 A5 A Member in Public Practice’s evaluation of the level of a threat might be impacted by the
work environment within the Member’s Firm and its operating environment. For example:
• Leadership of the Firm that promotes compliance with the fundamental principles
and establishes the expectation that Assurance Team members will act in the public
interest.
• Policies or procedures for establishing and monitoring compliance with the

fundamental principles by all personnel.
• Compensation, performance appraisal and disciplinary policies and procedures that

promote compliance with the fundamental principles.
• Management of the reliance on revenue received from a single client.
• The Engagement Partner having authority within the Firm for decisions concerning
compliance with the fundamental principles, including decisions about accepting or
providing services to a client.
• Educational, training and experience requirements.

• Processes to facilitate and address internal and external concerns or complaints.
Consideration of New Information or Changes in Facts and Circumstances
300.7 A6 New information or changes in facts and circumstances might:
(a) Impact the level of a threat; or
(b) Affect the Member in Public Practice’s conclusions about whether safeguards
applied continue to address identified threats as intended.
In these situations, actions that were already implemented as safeguards might no longer
be effective in addressing threats. Accordingly, the application of the conceptual framework
requires that the Member re-evaluate and address the threats accordingly. (Ref: Paras.
R120.9 and R120.10).
300.7 A7 Examples of new information or changes in facts and circumstances that might impact the
level of a threat include:
• When the scope of a Professional Service is expanded.
• When the client becomes a Listed Entity or acquires another business unit.
• When the Firm merges with another Firm.

• When the Member in Public Practice is jointly engaged by two clients and a dispute
emerges between the two clients.
• When there is a change in the Member in Public Practice’s personal or Immediate

Family relationships.
Addressing Threats
300.8 A1 Paragraphs R120.10 to 120.10 A2 set out requirements and application material for
addressing threats that are not at an Acceptable Level.
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Examples of Safeguards
300.8 A2 Safeguards vary depending on the facts and circumstances. Examples of actions that in
certain circumstances might be safeguards to address threats include:
• Assigning additional time and qualified personnel to required tasks when an

engagement has been accepted might address a self-interest threat.
• Having an appropriate reviewer who was not a member of the team review the work
performed or advise as necessary might address a self-review threat.
• Using different partners and Engagement Teams with separate reporting lines for the
provision of non-assurance services to an Assurance Client might address self-
review, advocacy or familiarity threats.
• Involving another Firm to perform or re-perform part of the engagement might

address self-interest, self-review, advocacy, familiarity or intimidation threats.
• Disclosing to clients any referral fees or commission arrangements received for
recommending services or products might address a self-interest threat.
• Separating teams when dealing with matters of a confidential nature might address
a self-interest threat.
300.8 A3 The remaining sections of Part 3 and Independence Standards describe certain threats that
might arise during the course of performing Professional Services and include examples of
actions that might address threats.
Appropriate Reviewer
300.8 A4 An appropriate reviewer is a professional with the necessary knowledge, skills, experience
and authority to review, in an objective manner, the relevant work performed or service
provided. Such an individual might be a Member.
Communicating with Those Charged with Governance
R300.9 When communicating with Those Charged with Governance in accordance with the
Code, a Member in Public Practice shall determine the appropriate individual(s)
within the entity's governance structure with whom to communicate. If the Member
communicates with a subgroup of Those Charged with Governance, the Member
shall determine whether communication with all of Those Charged with Governance
is also necessary so that they are adequately informed.
300.9 A1 In determining with whom to communicate, a Member in Public Practice might consider:
(a) The nature and importance of the circumstances; and
(b) The matter to be communicated.
300.9 A2 Examples of a subgroup of Those Charged with Governance include an audit committee
or an individual member of Those Charged with Governance.
R300.10 If a Member in Public Practice communicates with individuals who have

management responsibilities as well as governance responsibilities, the Member
shall be satisfied that communication with those individuals adequately informs all
of those in a governance role with whom the Member would otherwise communicate.
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300.10 A1 In some circumstances, all of Those Charged with Governance are involved in managing
the entity, for example, a small business where a single owner manages the entity and no
one else has a governance role. In these cases, if matters are communicated to
individual(s) with management responsibilities, and those individual(s) also have
governance responsibilities, the Member in Public Practice has satisfied the requirement
to communicate with Those Charged with Governance.
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SECTION 310
CONFLICTS OF INTEREST
Introduction
310.1 Members in Public Practice are required to comply with the fundamental principles and
apply the conceptual framework set out in Section 120 to identify, evaluate and address
threats.
310.2 A conflict of interest creates threats to compliance with the principle of objectivity and might
create threats to compliance with the other fundamental principles. Such threats might be
created when:
(a) A Member in Public Practice provides a Professional Service related to a particular

matter for two or more clients whose interests with respect to that matter are in
conflict; or
(b) The interests of a Member in Public Practice with respect to a particular matter and
the interests of the client for whom the Member provides a Professional Service
related to that matter are in conflict.
310.3 This section sets out specific requirements and application material relevant to applying
the conceptual framework to conflicts of interest. When a Member in Public Practice
provides an audit, review or other assurance service, Independence is also required in
accordance with Independence Standards.
General
R310.4 A Member in Public Practice shall not allow a conflict of interest to compromise
professional or business judgement.
310.4 A1 Examples of circumstances that might create a conflict of interest include:
• Providing a transaction advisory service to a client seeking to acquire an Audit Client,

where the Firm has obtained confidential information during the course of the audit
that might be relevant to the transaction.
• Providing advice to two clients at the same time where the clients are competing to
acquire the same company and the advice might be relevant to the parties’
competitive positions.
• Providing services to a seller and a buyer in relation to the same transaction.
• Preparing valuations of assets for two parties who are in an adversarial position with
respect to the assets.
• Representing two clients in the same matter who are in a legal dispute with each
other, such as during divorce proceedings, or the dissolution of a partnership.
• In relation to a license agreement, providing an assurance report for a licensor on

the royalties due while advising the licensee on the amounts payable.
• Advising a client to invest in a business in which, for example, the spouse of the
Member in Public Practice has a Financial Interest.
• Providing strategic advice to a client on its competitive position while having a joint
venture or similar interest with a major competitor of the client.
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• Advising a client on acquiring a business which the Firm is also interested in
acquiring.
• Advising a client on buying a product or service while having a royalty or commission

agreement with a potential seller of that product or service.
Conflict Identification
General
R310.5 Before accepting a new client relationship, engagement, or business relationship, a

Member in Public Practice shall take reasonable steps to identify circumstances that
might create a conflict of interest, and therefore a threat to compliance with one or
more of the fundamental principles. Such steps shall include identifying:
(a) The nature of the relevant interests and relationships between the parties
involved; and
(b) The service and its implication for relevant parties.
310.5 A1 An effective conflict identification process assists a Member in Public Practice when taking
reasonable steps to identify interests and relationships that might create an actual or
potential conflict of interest, both before determining whether to accept an engagement and
throughout the engagement. Such a process includes considering matters identified by
external parties, for example clients or potential clients. The earlier an actual or potential
conflict of interest is identified, the greater the likelihood of the Member being able to
address threats created by the conflict of interest.
310.5 A2 An effective process to identify actual or potential conflicts of interest will take into account
factors such as:
• The nature of the Professional Services provided.
• The size of the Firm.
• The size and nature of the client base.
• The structure of the Firm, for example, the number and geographic location of
Offices.
310.5 A3 More information on client acceptance is set out in Section 320, Professional Appointments.
Changes in Circumstances
R310.6 A Member in Public Practice shall remain alert to changes over time in the nature of
services, interests and relationships that might create a conflict of interest while
performing an engagement.
310.6 A1 The nature of services, interests and relationships might change during the engagement.
This is particularly true when a Member in Public Practice is asked to conduct an
engagement in a situation that might become adversarial, even though the parties who
engage the Member initially might not be involved in a dispute.
Network Firms
R310.7 If the Firm is a member of a Network, a Member in Public Practice shall consider
conflicts of interest that the Member has reason to believe might exist or arise due
to interests and relationships of a Network Firm.
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310.7 A1 Factors to consider when identifying interests and relationships involving a Network Firm
include:
• The nature of the Professional Services provided.
• The clients served by the Network.
• The geographic locations of all relevant parties.
Threats Created by Conflicts of Interest
310.8 A1 In general, the more direct the connection between the Professional Service and the matter
on which the parties’ interests conflict, the more likely the level of the threat is not at an
Acceptable Level.
310.8 A2 Factors that are relevant in evaluating the level of a threat created by a conflict of interest
include measures that prevent unauthorised disclosure of confidential information when
performing Professional Services related to a particular matter for two or more clients
whose interests with respect to that matter are in conflict. These measures include:
• The existence of separate practice areas for specialty functions within the Firm,
which might act as a barrier to the passing of confidential client information between
practice areas.
• Policies and procedures to limit access to client files.
• Confidentiality agreements signed by personnel and partners of the Firm.
• Separation of confidential information physically and electronically.
• Specific and dedicated training and communication.
310.8 A3 Examples of actions that might be safeguards to address threats created by a conflict of
interest include:
• Having separate Engagement Teams who are provided with clear policies and
procedures on maintaining confidentiality.
• Having an appropriate reviewer, who is not involved in providing the service or

otherwise affected by the conflict, review the work performed to assess whether the
key judgements and conclusions are appropriate.
Disclosure and Consent
General
R310.9 A Member in Public Practice shall exercise professional judgement to determine

whether the nature and significance of a conflict of interest are such that specific
disclosure and explicit consent are necessary when addressing the threat created
by the conflict of interest.
310.9 A1 Factors to consider when determining whether specific disclosure and explicit consent are
necessary include:
• The circumstances creating the conflict of interest.

• The parties that might be affected.
• The nature of the issues that might arise.
• The potential for the particular matter to develop in an unexpected manner.
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310.9 A2 Disclosure and consent might take different forms, for example:
• General disclosure to clients of circumstances where, as is common commercial

practice, the Member in Public Practice does not provide Professional Services
exclusively to any one client (for example, in a particular Professional Service and
market sector). This enables the client to provide general consent accordingly. For
example, a Member might make general disclosure in the standard terms and
conditions for the engagement.
• Specific disclosure to affected clients of the circumstances of the particular conflict

in sufficient detail to enable the client to make an informed decision about the matter
and to provide explicit consent accordingly. Such disclosure might include a detailed
presentation of the circumstances and a comprehensive explanation of any planned
safeguards and the risks involved.
• Consent might be implied by clients’ conduct in circumstances where the Member in

Public Practice has sufficient evidence to conclude that clients know the
circumstances at the outset and have accepted the conflict of interest if they do not
raise an objection to the existence of the conflict.
310.9 A3 It is generally necessary:
(a) To disclose the nature of the conflict of interest and how any threats created were
addressed to clients affected by a conflict of interest; and
(b) To obtain consent of the affected clients to perform the Professional Services when
safeguards are applied to address the threat.
310.9 A4 If such disclosure or consent is not in writing, the Member in Public Practice is encouraged
to document:
(a) The nature of the circumstances giving rise to the conflict of interest;
(b) The safeguards applied to address the threats when applicable; and
(c) The consent obtained.
When Explicit Consent is Refused
R310.10 If a Member in Public Practice has determined that explicit consent is necessary in
accordance with paragraph R310.9 and the client has refused to provide consent,
the Member shall either:
(a) End or decline to perform Professional Services that would result in the
conflict of interest; or
(b) End relevant relationships or dispose of relevant interests to eliminate the

threat or reduce it to an Acceptable Level.
Confidentiality
General
R310.11 A Member in Public Practice shall remain alert to the principle of confidentiality,
including when making disclosures or sharing information within the Firm or
Network and seeking guidance from third parties.
310.11 A1 Subsection 114 sets out requirements and application material relevant to situations that
might create a threat to compliance with the principle of confidentiality.
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When Disclosure to Obtain Consent would Breach Confidentiality
R310.12 When making specific disclosure for the purpose of obtaining explicit consent would
result in a breach of confidentiality, and such consent cannot therefore be obtained,
the Firm shall only accept or continue an engagement if:
(a) The Firm does not act in an advocacy role for one client in an adversarial
position against another client in the same matter;
(b) Specific measures are in place to prevent disclosure of confidential
information between the Engagement Teams serving the two clients; and
(c) The Firm is satisfied that a reasonable and informed third party would be likely
to conclude that it is appropriate for the Firm to accept or continue the
engagement because a restriction on the Firm’s ability to provide the
Professional Service would produce a disproportionate adverse outcome for
the clients or other relevant third parties.
310.12 A1 A breach of confidentiality might arise, for example, when seeking consent to perform:
• A transaction-related service for a client in a hostile takeover of another client of the

Firm.
• A forensic investigation for a client regarding a suspected fraud, where the Firm has
confidential information from its work for another client who might be involved in the
fraud.
Documentation
R310.13 In the circumstances set out in paragraph R310.12, the Member in Public Practice
shall document:
(a) The nature of the circumstances, including the role that the Member is to
undertake;
(b) The specific measures in place to prevent disclosure of information between

the Engagement Teams serving the two clients; and
(c) Why it is appropriate to accept or continue the engagement.
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SECTION 320
PROFESSIONAL APPOINTMENTS
Introduction
threats.
320.2 Acceptance of a new client relationship or changes in an existing engagement might create
a threat to compliance with one or more of the fundamental principles. This section sets
out specific requirements and application material relevant to applying the conceptual
framework in such circumstances.
AUST 320.2.1 The requirements of Section 320 also apply where a Member in Public Practice is replacing
or being replaced by an accountant who is not a Member.
Client and Engagement Acceptance
General
320.3 A1 Threats to compliance with the principles of integrity or professional behaviour might be
created, for example, from questionable issues associated with the client (its owners,
management or activities). Issues that, if known, might create such a threat include client
involvement in illegal activities, dishonesty, questionable financial reporting practices or
other unethical behaviour.
• Knowledge and understanding of the client, its owners, management and Those
Charged with Governance and business activities.
• The client’s commitment to address the questionable issues, for example, through
improving corporate governance practices or internal controls.
320.3 A3 A self-interest threat to compliance with the principle of professional competence and due
care is created if the Engagement Team does not possess, or cannot acquire, the
competencies to perform the Professional Services.
• An appropriate understanding of:

o The nature of the client’s business;
o The complexity of its operations;
o The requirements of the engagement; and
o The purpose, nature and scope of the work to be performed.
• Knowledge of relevant industries or subject matter.
• Experience with relevant regulatory or reporting requirements.
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• The existence of quality control policies and procedures designed to provide
reasonable assurance that engagements are accepted only when they can be
performed competently.
320.3 A5 Examples of actions that might be safeguards to address a self-interest threat include:
• Assigning sufficient engagement personnel with the necessary competencies.
• Agreeing on a realistic time frame for the performance of the engagement.
• Using experts where necessary.
Changes in a Professional Appointment
General
R320.4 A Member in Public Practice shall determine whether there are any reasons for not
accepting an engagement when the Member:
(a) Is asked by a potential client to replace another accountant;

(b) Considers tendering for an engagement held by another accountant; or
(c) Considers undertaking work that is complementary or additional to that of

another accountant.
320.4 A1 There might be reasons for not accepting an engagement. One such reason might be if a
threat created by the facts and circumstances cannot be addressed by applying
safeguards. For example, there might be a self-interest threat to compliance with the
principle of professional competence and due care if a Member in Public Practice accepts
the engagement before knowing all the relevant facts.
320.4 A2 If a Member in Public Practice is asked to undertake work that is complementary or

additional to the work of an Existing or Predecessor Accountant, a self-interest threat to
compliance with the principle of professional competence and due care might be created,
for example, as a result of incomplete information.
320.4 A3 A factor that is relevant in evaluating the level of such a threat is whether tenders state that,
before accepting the engagement, contact with the Existing or Predecessor Accountant will
be requested. This contact gives the Member in Public Practice the opportunity to inquire
whether there are any reasons why the engagement should not be accepted.
• Asking the Existing or Predecessor Accountant to provide any known information of

which, in the Existing or Predecessor Accountant’s opinion, the Member in Public
Practice needs to be aware before deciding whether to accept the engagement. For
example, inquiry might reveal previously undisclosed pertinent facts and might
indicate disagreements with the Existing or Predecessor Accountant that might
influence the decision to accept the appointment.
• Obtaining information from other sources such as through inquiries of third parties or
background investigations regarding senior management or Those Charged with
Governance of the client.
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Communicating with the Existing or Predecessor Accountant
320.5 A1 A Member in Public Practice will usually need the client’s permission, preferably in writing,
to initiate discussions with the Existing or Predecessor Accountant.
R320.6 If unable to communicate with the Existing or Predecessor Accountant, the Member
in Public Practice shall take other reasonable steps to obtain information about any
possible threats.
Communicating with the Proposed Accountant
R320.7 When a Member in Public Practice is asked to respond to a communication from a

Proposed Accountant, the Member shall:
(a) Comply with relevant laws and regulations governing the request; and
(b) Provide any information honestly and unambiguously.
320.7 A1 A Member in Public Practice is bound by confidentiality. Whether the Member is permitted
or required to discuss the affairs of a client with a Proposed Accountant will depend on the
nature of the engagement and:
(a) Whether the Member has permission from the client for the discussion; and
(b) The legal and ethics requirements relating to such communications and disclosure.
320.7 A2 Circumstances where a Member in Public Practice is or might be required to disclose

confidential information, or when disclosure might be appropriate, are set out in paragraph
114.1 A1 of the Code.
Changes in Audit or Review Appointments
R320.8 In the case of an audit or review of Financial Statements, a Member in Public Practice
shall request the Existing or Predecessor Accountant to provide known information
regarding any facts or other information of which, in the Existing or Predecessor
Accountant’s opinion, the Member needs to be aware before deciding whether
to accept the engagement. Except for the circumstances involving NOCLAR or
suspected NOCLAR set out in paragraphs R360.21 and R360.22:
(a) If the client consents to the Existing or Predecessor Accountant disclosing any
such facts or other information, the Existing or Predecessor Accountant shall
provide the information honestly and unambiguously; and
(b) If the client fails or refuses to grant the Existing or Predecessor Accountant
permission to discuss the client’s affairs with the Member in Public Practice,
the Existing or Predecessor Accountant shall disclose this fact to the Member,
who shall carefully consider such failure or refusal when determining whether
to accept the appointment.
Client and Engagement Continuance
R320.9 For a recurring client engagement, a Member in Public Practice shall periodically
review whether to continue with the engagement.
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320.9 A1 Potential threats to compliance with the fundamental principles might be created after
acceptance which, had they been known earlier, would have caused the Member in Public
Practice to decline the engagement. For example, a self-interest threat to compliance with
the principle of integrity might be created by improper earnings management or balance
sheet valuations.
Using the Work of an Expert
R320.10 When a Member in Public Practice intends to use the work of an expert, the Member
shall determine whether the use is warranted.
320.10 A1 Factors to consider when a Member in Public Practice intends to use the work of an expert
include the reputation and expertise of the expert, the resources available to the expert,
and the professional and ethics standards applicable to the expert. This information might
be gained from prior association with the expert or from consulting others.
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SECTION 321
SECOND OPINIONS
Introduction
threats.
321.2 Providing a second opinion to an entity that is not an existing client might create a self-
interest or other threat to compliance with one or more of the fundamental principles. This
section sets out specific requirements and application material relevant to applying the
conceptual framework in such circumstances.
General
321.3 A1 A Member in Public Practice might be asked to provide a second opinion on the application
of Australian Accounting Standards, Auditing and Assurance Standards, reporting or other
standards or principles to (a) specific circumstances, or (b) transactions by, or on behalf of
a company or an entity that is not an existing client. A threat, for example, a self-interest
threat to compliance with the principle of professional competence and due care, might be
created if the second opinion is not based on the same facts that the Existing or
Predecessor Accountant had, or is based on inadequate evidence.
321.3 A2 A factor that is relevant in evaluating the level of such a self-interest threat is the
circumstances of the request and all the other available facts and assumptions relevant to
the expression of a professional judgement.
• With the client’s permission, obtaining information from the Existing or Predecessor
Accountant.
• Describing the limitations surrounding any opinion in communications with the client.
• Providing the Existing or Predecessor Accountant with a copy of the opinion.
When Permission to Communicate is Not Provided
R321.4 If an entity seeking a second opinion from a Member in Public Practice will not permit
the Member to communicate with the Existing or Predecessor Accountant, the
Member shall determine whether the Member may provide the second opinion
sought.
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SECTION 330
FEES AND OTHER TYPES OF REMUNERATION
Introduction
threats.
330.2 The level and nature of fee and other remuneration arrangements might create a self-
interest threat to compliance with one or more of the fundamental principles. This section
sets out specific application material relevant to applying the conceptual framework in such
circumstances.
Level of Fees
330.3 A1 The level of fees quoted might impact a Member in Public Practice’s ability to perform
Professional Services in accordance with professional standards.
330.3 A2 A Member in Public Practice might quote whatever fee is considered appropriate. Quoting
a fee lower than another accountant is not in itself unethical. However, the level of fees
quoted creates a self-interest threat to compliance with the principle of professional
competence and due care if the fee quoted is so low that it might be difficult to perform the
engagement in accordance with applicable technical and professional standards.
• Whether the client is aware of the terms of the engagement and, in particular, the
basis on which fees are charged and which Professional Services the quoted fee
covers.
• Whether the level of the fee is set by an independent third party such as a regulatory
body.
• Adjusting the level of fees or the scope of the engagement.

• Having an appropriate reviewer review the work performed.
Contingent Fees
330.4 A1 Contingent Fees are used for certain types of non-assurance services. However,
Contingent Fees might create threats to compliance with the fundamental principles,
particularly a self-interest threat to compliance with the principle of objectivity, in certain
circumstances.
330.4 A2 Factors that are relevant in evaluating the level of such threats include:
• The nature of the engagement.
• The range of possible fee amounts.

• The basis for determining the fee.
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• Disclosure to intended users of the work performed by the Member in Public Practice
and the basis of remuneration.
• Quality control policies and procedures.
• Whether an independent third party is to review the outcome or result of the

transaction.
• Whether the level of the fee is set by an independent third party such as a regulatory
body.
• Having an appropriate reviewer who was not involved in performing the non-
assurance service review the work performed by the Member in Public Practice.
• Obtaining an advance written agreement with the client on the basis of remuneration.
AUST R330.4.1 A Member in Public Practice shall not enter into a Contingent Fee arrangement or
receive a Contingent Fee in specific engagement circumstances as prohibited in:
• APES 215 Forensic Accounting Services;
• APES 225 Valuation Services;

• APES 330 Insolvency Services;
• APES 345 Reporting on Prospective Financial Information Prepared in

Connection with a Disclosure Document; and
• APES 350 Participation by Members in Public Practice in Due Diligence

Committees in connection with a Public Document.
330.4 A4 Requirements and application material related to Contingent Fees for services provided to
Audit or Review Clients and other assurance clients are set out in Independence
Standards.
Referral Fees or Commissions
330.5 A1 A self-interest threat to compliance with the principles of objectivity and professional
competence and due care is created if a Member in Public Practice pays or receives a
referral fee or receives a commission relating to a client. Such referral fees or commissions
include, for example:
• A fee paid to another Member in Public Practice for the purposes of obtaining new
client work when the client continues as a client of the Existing Accountant but
requires specialist services not offered by that accountant.
• A fee received for referring a continuing client to another Member in Public Practice
or other expert where the Existing Accountant does not provide the specific
Professional Service required by the client.
• A commission received from a third party (for example, a software vendor) in

connection with the sale of goods or services to a client.
• Obtaining an advance agreement from the client for commission arrangements in

connection with the sale by another party of goods or services to the client might
address a self-interest threat.
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• Disclosing to clients any referral fees or commission arrangements paid to, or
received from, another Member in Public Practice or third party for recommending
services or products might address a self-interest threat.
AUST R330.5.1 A Member in Public Practice who is undertaking an engagement in Australia and
receives a referral fee or commission shall inform the client in writing of:
• the existence of such arrangement;
• the identity of the other party or parties; and
• the method of calculation of the referral fee, commission or other benefit

accruing directly or indirectly to the Member.
AUST R330.5.2 A Member in Public Practice shall not receive commissions or other similar benefits
in connection with an Assurance Engagement.
AUST 330.5.2 A1 The receipt of commissions or other similar benefits in connection with an Assurance
Engagement creates a threat to Independence that no safeguards could reduce to an
Acceptable Level.
Purchase or Sale of a Firm
330.6 A1 A Member in Public Practice may purchase all or part of another Firm on the basis that
payments will be made to individuals formerly owning the Firm or to their heirs or estates.
Such payments are not referral fees or commissions for the purposes of this section.
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SECTION 340
INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY
Introduction
threats.
340.2 Offering or accepting Inducements might create a self-interest, familiarity or intimidation

threat to compliance with the fundamental principles, particularly the principles of integrity,
objectivity and professional behaviour.
conceptual framework in relation to the offering and accepting of Inducements when
performing Professional Services that does not constitute non-compliance with laws and
regulations (“NOCLAR”). This section also requires a Member in Public Practice to comply
with relevant laws and regulations when offering or accepting Inducements.
General
340.4 A1 An Inducement is an object, situation, or action that is used as a means to influence another
individual’s behaviour, but not necessarily with the intent to improperly influence that
individual’s behaviour. Inducements can range from minor acts of hospitality between
Members in Public Practice and existing or prospective clients to acts that result in non-
compliance with laws and regulations (“NOCLAR”). An Inducement can take many different
forms, for example:
• Gifts.
• Hospitality.
• Entertainment.

Inducements Prohibited by Laws and Regulations
R340.5 In many jurisdictions, there are laws and regulations, such as those related to
bribery and corruption, that prohibit the offering or accepting of Inducements in
certain circumstances. The Member in Public Practice shall obtain an understanding
of relevant laws and regulations and comply with them when the Member
encounters such circumstances.
Inducements Not Prohibited by Laws and Regulations
340.6 A1 The offering or accepting of Inducements that is not prohibited by laws and regulations
might still create threats to compliance with the fundamental principles.
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Inducements with Intent to Improperly Influence Behaviour
R340.7 A Member in Public Practice shall not offer, or encourage others to offer, any
Inducement that is made, or which the Member considers a reasonable and informed
third party would be likely to conclude is made, with the intent to improperly
influence the behaviour of the recipient or of another individual.
R340.8 A Member in Public Practice shall not accept, or encourage others to accept, any
Inducement that the Member concludes is made, or considers a reasonable and
informed third party would be likely to conclude is made, with the intent to
improperly influence the behaviour of the recipient or of another individual.
340.9 A1 An Inducement is considered as improperly influencing an individual’s behaviour if it causes

the individual to act in an unethical manner. Such improper influence can be directed either
towards the recipient or towards another individual who has some relationship with the
recipient. The fundamental principles are an appropriate frame of reference for a Member
in Public Practice in considering what constitutes unethical behaviour on the part of the
Member and, if necessary by analogy, other individuals.
340.9 A2 A breach of the fundamental principle of integrity arises when a Member in Public Practice
offers or accepts, or encourages others to offer or accept, an Inducement where the intent
is to improperly influence the behaviour of the recipient or of another individual.
340.9 A3 The determination of whether there is actual or perceived intent to improperly influence
behaviour requires the exercise of professional judgement. Relevant factors to consider
might include:
• The nature, frequency, value and cumulative effect of the Inducement.
• Timing of when the Inducement is offered relative to any action or decision that it
might influence.
• Whether the Inducement is a customary or cultural practice in the circumstances, for

example, offering a gift on the occasion of a religious holiday or wedding.
• Whether the Inducement is an ancillary part of a Professional Service, for example,

offering or accepting lunch in connection with a business meeting.
• Whether the offer of the Inducement is limited to an individual recipient or available

to a broader group. The broader group might be internal or external to the Firm, such
as other suppliers to the client.
• The roles and positions of the individuals at the Firm or the client offering or being
offered the Inducement.
• Whether the Member in Public Practice knows, or has reason to believe, that
accepting the Inducement would breach the policies and procedures of the client.
• The degree of transparency with which the Inducement is offered.

• Whether the Inducement was required or requested by the recipient.
• The known previous behaviour or reputation of the offeror.
Consideration of Further Actions
340.10 A1 If the Member in Public Practice becomes aware of an Inducement offered with actual or
perceived intent to improperly influence behaviour, threats to compliance with the
fundamental principles might still be created even if the requirements in paragraphs R340.7
and R340.8 are met.
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• Informing senior management of the Firm or Those Charged with Governance of the
client regarding the offer.
• Amending or terminating the business relationship with the client.
Inducements with No Intent to Improperly Influence Behaviour
340.11 A1 The requirements and application material set out in the conceptual framework apply when
a Member in Public Practice has concluded there is no actual or perceived intent to
improperly influence the behaviour of the recipient or of another individual.
340.11 A2 If such an Inducement is trivial and inconsequential, any threats created will be at an
Acceptable Level.
340.11 A3 Examples of circumstances where offering or accepting such an Inducement might create
threats even if the Member in Public Practice has concluded there is no actual or perceived
intent to improperly influence behaviour include:
• Self-interest threats
o A Member in Public Practice is offered hospitality from the prospective acquirer
of a client while providing corporate finance services to the client.
• Familiarity threats
o A Member in Public Practice regularly takes an existing or prospective client
to sporting events.
• Intimidation threats
o A Member in Public Practice accepts hospitality from a client, the nature of
which could be perceived to be inappropriate were it to be publicly disclosed.
340.11 A4 Relevant factors in evaluating the level of such threats created by offering or accepting
such an Inducement include the same factors set out in paragraph 340.9 A3 for determining
intent.
340.11 A5 Examples of actions that might eliminate threats created by offering or accepting such an
Inducement include:
• Declining or not offering the Inducement.
• Transferring responsibility for the provision of any Professional Services to the client
to another individual who the Member in Public Practice has no reason to believe
would be, or would be perceived to be, improperly influenced when providing the
services.
340.11 A6 Examples of actions that might be safeguards to address such threats created by offering
or accepting such an Inducement include:
• Being transparent with senior management of the Firm or of the client about offering
or accepting an Inducement.
• Registering the Inducement in a log monitored by senior management of the Firm or

another individual responsible for the Firm’s ethics compliance or maintained by the
client.
• Having an appropriate reviewer, who is not otherwise involved in providing the
Professional Service, review any work performed or decisions made by the Member
in Public Practice with respect to the client from which the Member accepted the
Inducement.
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• Donating the Inducement to charity after receipt and appropriately disclosing the
donation, for example, to a member of senior management of the Firm or the
individual who offered the Inducement.
• Reimbursing the cost of the Inducement, such as hospitality, received.
• As soon as possible, returning the Inducement, such as a gift, after it was initially
accepted.
Immediate or Close Family Members
R340.12 A Member in Public Practice shall remain alert to potential threats to the Member’s
compliance with the fundamental principles created by the offering of an
Inducement:
(a) By an Immediate or Close Family member of the Member to an existing or

prospective client of the Member.
(b) To an Immediate or Close Family member of the Member by an existing or
prospective client of the Member.
R340.13 Where the Member in Public Practice becomes aware of an Inducement being offered
to or made by an Immediate or Close Family member and concludes there is intent
to improperly influence the behaviour of the Member or of an existing or prospective
client of the Member, or considers a reasonable and informed third party would be
likely to conclude such intent exists, the Member shall advise the Immediate or Close
Family member not to offer or accept the Inducement.
340.13 A1 The factors set out in paragraph 340.9 A3 are relevant in determining whether there is
actual or perceived intent to improperly influence the behaviour of the Member in Public
Practice or of the existing or prospective client. Another factor that is relevant is the nature
or closeness of the relationship, between:
(a) The Member and the Immediate or Close Family member;
(b) The Immediate or Close Family member and the existing or prospective client; and
(c) The Member and the existing or prospective client.
For example, the offer of employment, outside of the normal recruitment process, to the
spouse of the Member by a client for whom the Member is providing a business valuation
for a prospective sale might indicate such intent.
340.13 A2 The application material in paragraph 340.10 A2 is also relevant in addressing threats that
might be created when there is actual or perceived intent to improperly influence the
behaviour of the Member in Public Practice, or of the existing or prospective client even if
the Immediate or Close Family member has followed the advice given pursuant to
paragraph R340.13.
Application of the Conceptual Framework
340.14 A1 Where the Member in Public Practice becomes aware of an Inducement offered in the
circumstances addressed in paragraph R340.12, threats to compliance with the
fundamental principles might be created where:
(a) The Immediate or Close Family member offers or accepts the Inducement contrary
to the advice of the Member pursuant to paragraph R340.13; or
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(b) The Member does not have reason to believe an actual or perceived intent to
improperly influence the behaviour of the Member or of the existing or prospective
client exists.
340.14 A2 The application material in paragraphs 340.11 A1 to 340.11 A6 is relevant for the purposes
of identifying, evaluating and addressing such threats. Factors that are relevant in
evaluating the level of threats in these circumstances also include the nature or closeness
of the relationships set out in paragraph 340.13 A1.
340.15 A1 If a Member in Public Practice encounters or is made aware of Inducements that might
result in NOCLAR or suspected NOCLAR by a client or individuals working for or under the
direction of the client, the requirements and application material in Section 360 apply.
340.15 A2 If a Firm, Network Firm or an Audit Team member is being offered gifts or hospitality from
an Audit Client, the requirement and application material set out in Section 420 apply.
340.15 A3 If a Firm or an Assurance Team member is being offered gifts or hospitality from an
Assurance Client, the requirement and application material set out in Section 906 apply.
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SECTION 350
CUSTODY OF CLIENT ASSETS
Introduction
threats.
350.2 Holding client assets creates a self-interest or other threat to compliance with the principles
of professional behaviour and objectivity. This section sets out specific requirements and
application material relevant to applying the conceptual framework in such circumstances.5
Before Taking Custody
R350.3 A Member in Public Practice 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 Member in Public Practice shall:
(a) Make inquiries about the source of the assets; and
(b) Consider related legal and regulatory obligations.
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 A Member in Public Practice entrusted with money or other assets belonging to
others shall:
(a) Comply with the laws and regulations relevant to holding and accounting for
the assets;
(b) Keep the assets separately from personal or Firm assets;

(c) Use the assets only for the purpose for which they are intended; and
(d) Be ready at all times to account for the assets and any income, dividends, or
gains generated, to any individuals entitled to that accounting.
5 APESB has issued APES 310 Client Monies which mandates requirements and provides guidance for
Members in Public Practice when they deal with client monies.
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SECTION 360
RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS
Introduction
threats.
360.2 A self-interest or intimidation threat to compliance with the principles of integrity and
professional behaviour is created when a Member in Public Practice becomes aware of
non-compliance or suspected non-compliance with laws and regulations (“NOCLAR”).
360.3 A Member in Public Practice might encounter or be made aware of NOCLAR or suspected
NOCLAR in the course of providing a Professional Service to a client. This section guides
the Member in assessing the implications of the matter and the possible courses of action
when responding to NOCLAR or suspected NOCLAR with:
(a) Laws and regulations generally recognised to have a direct effect on the
determination of material amounts and disclosures in the client’s Financial
Statements; and
(b) Other laws and regulations that do not have a direct effect on the determination of the
amounts and disclosures in the client’s Financial Statements, but compliance with
which might be fundamental to the operating aspects of the client’s business, to its
ability to continue its business, or to avoid material penalties.
Objectives of the Member in Public Practice in Relation to NOCLAR
360.4 A distinguishing mark of the accountancy profession is its acceptance of the responsibility
to act in the public interest. When responding to NOCLAR or suspected NOCLAR, the
objectives of the Member in Public Practice are:
(a) To comply with the principles of integrity and professional behaviour;
(b) By alerting management or, where appropriate, Those Charged with Governance of
the client, to seek to:
(i) Enable them to rectify, remediate or mitigate the consequences of the

identified or suspected NOCLAR; or
(ii) Deter the commission of the NOCLAR where it has not yet occurred; and
(c) To take such further action as appropriate in the public interest.
General
360.5 A1 NOCLAR comprises acts of omission or commission, intentional or unintentional, which are
contrary to the prevailing laws or regulations committed by the following parties:
(a) A client;
(b) Those Charged with Governance of a client;
(c) Management of a client; or
(d) Other individuals working for or under the direction of a client.
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360.5 A2 Examples of laws and regulations which this section addresses include those that deal
with:
• Fraud, corruption and bribery.
• Money laundering, terrorist financing and proceeds of crime.
• Securities markets and trading.
• Banking and other financial products and services.
• Data protection.
• Tax and pension liabilities and payments.
• Environmental protection.
• Public health and safety.
360.5 A3 NOCLAR might result in fines, litigation or other consequences for the client, potentially
materially affecting its Financial Statements. Importantly, such NOCLAR might have wider
public interest implications in terms of potentially substantial harm to investors, creditors,
employees or the general public. For the purposes of this section, an act that causes
substantial harm is one that results in serious adverse consequences to any of these
parties in financial or non-financial terms. Examples include the perpetration of a fraud
resulting in significant financial losses to investors, and breaches of environmental laws
and regulations endangering the health or safety of employees or the public.
R360.6 In some jurisdictions, there are legal or regulatory provisions governing how
Members in Public Practice should address NOCLAR or suspected NOCLAR.6 These
legal or regulatory provisions might differ from or go beyond the provisions in this
section. When encountering such NOCLAR or suspected NOCLAR, the Member shall
obtain an understanding of those legal or regulatory provisions and comply with
them, including:
(a) Any requirement to report the matter to an appropriate authority; and
(b) Any prohibition on alerting the client.
360.6 A1 A prohibition on alerting the client might arise, for example, pursuant to anti-money
laundering legislation.
360.7 A1 This section applies regardless of the nature of the client, including whether or not it is a
Public Interest Entity.
360.7 A2 A Member in Public Practice who encounters or is made aware of matters that are clearly
inconsequential is not required to comply with this section. Whether a matter is clearly
inconsequential is to be judged with respect to its nature and its impact, financial or
otherwise, on the client, its stakeholders and the general public.
6 For example, there are auditor reporting obligations in the Corporations Act 2001 which a Member in Public
Practice must comply with. Further information on these requirements is set out in ASIC Regulatory Guide
34 Auditor’s obligations: Reporting to ASIC.
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360.7 A3 This section does not address:
(a) Personal misconduct unrelated to the business activities of the client; and
(b) NOCLAR by parties other than those specified in paragraph 360.5 A1. This includes,
for example, circumstances where a Member in Public Practice has been engaged
by a client to perform a due diligence assignment on a third party entity and the
identified or suspected NOCLAR has been committed by that third party.
The Member in Public Practice might nevertheless find the guidance in this section helpful
in considering how to respond in these situations.
Responsibilities of Management and Those Charged with Governance
360.8 A1 Management, with the oversight of Those Charged with Governance, is responsible for
ensuring that the client’s business activities are conducted in accordance with laws and
regulations. Management and Those Charged with Governance are also responsible for
identifying and addressing any NOCLAR by:
(a) The client;

(b) An individual charged with governance of the entity;
(c) A member of management; or
(d) Other individuals working for or under the direction of the client.
Responsibilities of All Members in Public Practice
R360.9 Where a Member in Public Practice becomes aware of a matter to which this section
applies, the steps that the Member takes to comply with this section shall be taken
on a timely basis. In taking timely steps, the Member shall have regard to the nature
of the matter and the potential harm to the interests of the entity, investors, creditors,
employees or the general public.
Audits of Financial Statements
Obtaining an Understanding of the Matter
R360.10 If a Member in Public Practice engaged to perform an audit of Financial Statements

becomes aware of information concerning NOCLAR or suspected NOCLAR, the
Member shall obtain an understanding of the matter. This understanding shall include
the nature of the NOCLAR or suspected NOCLAR and the circumstances in which it
has occurred or might occur.
360.10 A1 The Member in Public Practice might become aware of the NOCLAR or suspected
NOCLAR in the course of performing the engagement or through information provided by
other parties.
360.10 A2 The Member in Public Practice is expected to apply knowledge and expertise, and exercise
knowledge of laws and regulations greater than that which is required to undertake the
engagement. Whether an act constitutes NOCLAR is ultimately a matter to be determined
by a court or other appropriate adjudicative body.
360.10 A3 Depending on the nature and significance of the matter, the Member in Public Practice
might consult on a confidential basis with others within the Firm, a Network Firm or a
Professional Body, or with legal counsel.
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R360.11 If the Member in Public Practice identifies or suspects that NOCLAR has occurred
or might occur, the Member shall discuss the matter with the appropriate level of
management and, where appropriate, Those Charged with Governance.
360.11 A1 The purpose of the discussion is to clarify the Member in Public Practice’s understanding
of the facts and circumstances relevant to the matter and its potential consequences. The
discussion also might prompt management or Those Charged with Governance to
investigate the matter.
360.11 A2 The appropriate level of management with whom to discuss the matter is a question of
professional judgement. Relevant factors to consider include:
• The nature and circumstances of the matter.
• The individuals actually or potentially involved.
• The likelihood of collusion.

• The potential consequences of the matter.
• Whether that level of management is able to investigate the matter and take
appropriate action.
360.11 A3 The appropriate level of management is usually at least one level above the individual or
individuals involved or potentially involved in the matter. In the context of a group, the
appropriate level might be management at an entity that controls the client.
360.11 A4 The Member in Public Practice might also consider discussing the matter with internal
auditors, where applicable.
R360.12 If the Member in Public Practice believes that management is involved in the
NOCLAR or suspected NOCLAR, the Member shall discuss the matter with Those
Charged with Governance.
Addressing the Matter
R360.13 In discussing the NOCLAR or suspected NOCLAR with management and, where
appropriate, Those Charged with Governance, the Member in Public Practice shall
advise them to take appropriate and timely actions, if they have not already done so,
to:
(a) Rectify, remediate or mitigate the consequences of the NOCLAR;
(b) Deter the commission of the NOCLAR where it has not yet occurred; or
(c) Disclose the matter to an appropriate authority where required by law or
regulation or where considered necessary in the public interest.
R360.14 The Member in Public Practice shall consider whether management and Those
Charged with Governance understand their legal or regulatory responsibilities with
respect to the NOCLAR or suspected NOCLAR.
360.14 A1 If management and Those Charged with Governance do not understand their legal or
regulatory responsibilities with respect to the matter, the Member in Public Practice might
suggest appropriate sources of information or recommend that they obtain legal advice.
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R360.15 The Member in Public Practice shall comply with applicable:
(a) Laws and regulations, including legal or regulatory provisions governing the
reporting of NOCLAR or suspected NOCLAR to an appropriate authority; and
(b) Requirements under Auditing and Assurance Standards, including those

relating to:
• Identifying and responding to NOCLAR, including fraud.
• Communicating with Those Charged with Governance.
• Considering the implications of the NOCLAR or suspected NOCLAR for

the auditor’s report.
360.15 A1 Some laws and regulations might stipulate a period within which reports of NOCLAR or
suspected NOCLAR are to be made to an appropriate authority.
Communication with Respect to Groups
R360.16 Where a Member in Public Practice becomes aware of NOCLAR or suspected

NOCLAR in relation to a component of a group in either of the following two
situations, the Member shall communicate the matter to the group Engagement
Partner unless prohibited from doing so by law or regulation:
(a) The Member in Public Practice is, for purposes of an audit of the group
Financial Statements, requested by the group Engagement Team to perform
work on financial information related to the component; or
(b) The Member in Public Practice is engaged to perform an audit of the

component’s Financial Statements for purposes other than the group audit, for
example, a statutory audit.
The communication to the group Engagement Partner shall be in addition to

responding to the matter in accordance with the provisions of this section.
360.16 A1 The purpose of the communication is to enable the group Engagement Partner to be
informed about the matter and to determine, in the context of the group audit, whether and,
if so, how to address it in accordance with the provisions in this section. The communication
requirement in paragraph R360.16 applies regardless of whether the group Engagement
Partner’s Firm or Network is the same as or different from the Member in Public Practice’s
Firm or Network.
R360.17 Where the group Engagement Partner becomes aware of NOCLAR or suspected
NOCLAR in the course of an audit of group Financial Statements, the group
Engagement Partner shall consider whether the matter might be relevant to one or
more components:
(a) Whose financial information is subject to work for purposes of the audit of the
group Financial Statements; or
(b) Whose Financial Statements are subject to audit for purposes other than the
group audit, for example, a statutory audit.
This consideration shall be in addition to responding to the matter in the context of

the group audit in accordance with the provisions of this section.
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R360.18 If the NOCLAR or suspected NOCLAR might be relevant to one or more of the
components specified in paragraph R360.17(a) and (b), the group Engagement
Partner shall take steps to have the matter communicated to those performing work
at the components, unless prohibited from doing so by law or regulation. If
necessary, the group Engagement Partner shall arrange for appropriate inquiries to
be made (either of management or from publicly available information) as to whether
the relevant component(s) specified in paragraph R360.17(b) is subject to audit and,
if so, to ascertain to the extent practicable the identity of the auditor.
360.18 A1 The purpose of the communication is to enable those responsible for work at the
components to be informed about the matter and to determine whether and, if so, how to
address it in accordance with the provisions in this section. The communication
requirement applies regardless of whether the group Engagement Partner’s Firm or
Network is the same as or different from the Firms or Networks of those performing work
at the components.
Determining Whether Further Action Is Needed
R360.19 The Member in Public Practice shall assess the appropriateness of the response of
management and, where applicable, Those Charged with Governance.
360.19 A1 Relevant factors to consider in assessing the appropriateness of the response of

management and, where applicable, Those Charged with Governance include whether:
• The response is timely.
• The NOCLAR or suspected NOCLAR has been adequately investigated.
• Action has been, or is being, taken to rectify, remediate or mitigate the consequences
of any NOCLAR.
• Action has been, or is being, taken to deter the commission of any NOCLAR where
it has not yet occurred.
• Appropriate steps have been, or are being, taken to reduce the risk of reccurrence,
for example, additional controls or training.
• The NOCLAR or suspected NOCLAR has been disclosed to an appropriate authority

where appropriate and, if so, whether the disclosure appears adequate.
R360.20 In light of the response of management and, where applicable, Those Charged with
Governance, the Member in Public Practice shall determine if further action is
needed in the public interest.
360.20 A1 The determination of whether further action is needed, and the nature and extent of it, will
depend on various factors, including:

• The pervasiveness of the matter throughout the client.
• Whether the Member in Public Practice continues to have confidence in the integrity
of management and, where applicable, Those Charged with Governance.
• Whether the NOCLAR or suspected NOCLAR is likely to recur.
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• Whether there is credible evidence of actual or potential substantial harm to the
interests of the entity, investors, creditors, employees or the general public.
360.20 A2 Examples of circumstances that might cause the Member in Public Practice no longer to
have confidence in the integrity of management and, where applicable, Those Charged
with Governance include situations where:
• The Member suspects or has evidence of their involvement or intended involvement

in any NOCLAR.
• The Member is aware that they have knowledge of such NOCLAR and, contrary to
legal or regulatory requirements, have not reported, or authorised the reporting of,
the matter to an appropriate authority within a reasonable period.
R360.21 The Member in Public Practice shall exercise professional judgement in determining
the need for, and nature and extent of, further action. In making this determination,
the Member shall take into account whether a reasonable and informed third party
would be likely to conclude that the Member has acted appropriately in the public
interest.
360.21 A1 Further action that the Member in Public Practice might take includes:

regulatory requirement to do so.7
• Withdrawing from the engagement and the professional relationship where permitted
by law or regulation.
360.21 A2 Withdrawing from the engagement and the professional relationship is not a substitute for
taking other actions that might be needed to achieve the Member in Public Practice’s
objectives under this section. In some jurisdictions, however, there might be limitations as
to the further actions available to the Member. In such circumstances, withdrawal might be
the only available course of action.
R360.22 Where the Member in Public Practice has withdrawn from the professional
relationship pursuant to paragraphs R360.20 and 360.21 A1, the Member shall, on
request by the Proposed Accountant pursuant to paragraph R320.8, provide all
relevant facts and other information concerning the identified or suspected NOCLAR
to the Proposed Accountant. The Member shall do so, even in the circumstances
addressed in paragraph R320.8(b) where the client fails or refuses to grant the
Member permission to discuss the client’s affairs with the Proposed Accountant,
unless prohibited by law or regulation.
360.22 A1 The facts and other information to be provided are those that, in the Member in Public
Practice’s opinion, the Proposed Accountant needs to be aware of before deciding
whether to accept the audit appointment. Section 320 addresses communications from
Proposed Accountants.
R360.23 If the Proposed Accountant is unable to communicate with the Predecessor

Accountant, the Proposed Accountant shall take reasonable steps to obtain
information about the circumstances of the change of appointment by other means.
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360.23 A1 Other means to obtain information about the circumstances of the change of appointment
include inquiries of third parties or background investigations of management or Those
360.24 A1 As assessment of the matter might involve complex analysis and judgements, the Member
in Public Practice might consider:
• Obtaining legal advice to understand the Member’s options and the professional or
legal implications of taking any particular course of action.
• Consulting on a confidential basis with a regulatory or Professional Body.
Determining Whether to Disclose the Matter to an Appropriate Authority
360.25 A1 Disclosure of the matter to an appropriate authority would be precluded if doing so would
be contrary to law or regulation. Otherwise, the purpose of making disclosure is to enable
an appropriate authority to cause the matter to be investigated and action to be taken in
the public interest.
360.25 A2 The determination of whether to make such a disclosure depends in particular on the nature
and extent of the actual or potential harm that is or might be caused by the matter to
investors, creditors, employees or the general public. For example, the Member in Public
Practice might determine that disclosure of the matter to an appropriate authority is an
appropriate course of action if:
• The entity is engaged in bribery (for example, of local or foreign government officials
for purposes of securing large contracts).
• The entity is regulated and the matter is of such significance as to threaten its license
to operate.
• The entity is listed on a securities exchange and the matter might result in adverse
consequences to the fair and orderly market in the entity’s securities or pose a
systemic risk to the financial markets.
• It is likely that the entity would sell products that are harmful to public health or safety.
• The entity is promoting a scheme to its clients to assist them in evading taxes.
360.25 A3 The determination of whether to make such a disclosure will also depend on external
factors such as:
• Whether there is an appropriate authority that is able to receive the information, and
cause the matter to be investigated and action to be taken. The appropriate authority
will depend on the nature of the matter. For example, the appropriate authority would
be a securities regulator in the case of fraudulent financial reporting or an
environmental protection agency in the case of a breach of environmental laws and
regulations.
• Whether there exists robust and credible protection from civil, criminal or professional
liability or retaliation afforded by legislation or regulation, such as under whistle-
blowing legislation or regulation.8
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• Whether there are actual or potential threats to the physical safety of the Member in
Public Practice or other individuals.
R360.26 If the Member in Public Practice determines that disclosure of the NOCLAR or
suspected NOCLAR to an appropriate authority is an appropriate course of action in
the circumstances, that disclosure is permitted pursuant to paragraph R114.1(d) of
the Code. When making such disclosure, the Member shall act in good faith and
exercise caution when making statements and assertions. The Member shall also
consider whether it is appropriate to inform the client of the Member’s intentions
before disclosing the matter.
Imminent Breach
R360.27 In exceptional circumstances, the Member in Public Practice might become aware
or Those Charged with Governance of the entity, the Member shall exercise
professional judgement and determine whether to disclose the matter immediately
to an appropriate authority in order to prevent or mitigate the consequences of such
imminent breach. If disclosure is made, that disclosure is permitted pursuant to
paragraph R114.1(d) of the Code.
Documentation
R360.28 In relation to NOCLAR or suspected NOCLAR that falls within the scope of this
section, the Member in Public Practice shall document:
• How management and, where applicable, Those Charged with Governance

have responded to the matter.
decisions that were taken, having regard to the reasonable and informed third
party test.
• How the Member is satisfied that the Member has fulfilled the responsibility
set out in paragraph R360.20.
360.28 A1 This documentation is in addition to complying with the documentation requirements under
applicable auditing standards. Auditing and Assurance Standards, for example, require a
Member in Public Practice performing an audit of Financial Statements to:
• Prepare documentation sufficient to enable an understanding of significant matters
arising during the audit, the conclusions reached, and significant professional
judgements made in reaching those conclusions;
• Document discussions of significant matters with management, Those Charged with
Governance, and others, including the nature of the significant matters discussed
and when and with whom the discussions took place; and
• Document identified or suspected NOCLAR, and the results of discussion with

management and, where applicable, Those Charged with Governance and other
parties outside the entity.
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Professional Services Other than Audits of Financial Statements
Obtaining an Understanding of the Matter and Addressing It with Management and Those Charged with
Governance
R360.29 If a Member in Public Practice engaged to provide a Professional Service other than
an audit of Financial Statements becomes aware of information concerning NOCLAR
or suspected NOCLAR, the Member shall seek to obtain an understanding of the
matter. This understanding shall include the nature of the NOCLAR or suspected
NOCLAR and the circumstances in which it has occurred or might be about to occur.
360.29 A1 The Member in Public Practice is expected to apply knowledge and expertise, and exercise
understanding of laws and regulations beyond that which is required for the Professional
Service for which the Member was engaged. Whether an act constitutes actual NOCLAR
is ultimately a matter to be determined by a court or other appropriate adjudicative body.
360.29 A2 Depending on the nature and significance of the matter, the Member in Public Practice
might consult on a confidential basis with others within the Firm, a Network Firm or a
professional body, or with legal counsel.
R360.30 If the Member in Public Practice identifies or suspects that NOCLAR has occurred
or might occur, the Member shall discuss the matter with the appropriate level of
management. If the Member has access to Those Charged with Governance, the
Member shall also discuss the matter with them where appropriate.
360.30 A1 The purpose of the discussion is to clarify the Member in Public Practice’s understanding
of the facts and circumstances relevant to the matter and its potential consequences. The
discussion also might prompt management or Those Charged with Governance to
investigate the matter.
360.30 A2 The appropriate level of management with whom to discuss the matter is a question of
professional judgement. Relevant factors to consider include:
• The nature and circumstances of the matter.
• The individuals actually or potentially involved.
• The likelihood of collusion.
• The potential consequences of the matter.

• Whether that level of management is able to investigate the matter and take
appropriate action.
Communicating the Matter to the Entity’s External Auditor
R360.31 If the Member in Public Practice is performing a non-audit service for:
(a) An Audit Client of the Firm; or
(b) A component of an Audit Client of the Firm,
the Member shall communicate the NOCLAR or suspected NOCLAR within the Firm,
unless prohibited from doing so by law or regulation. The communication shall be
made in accordance with the Firm’s protocols or procedures. In the absence of
such protocols and procedures, it shall be made directly to the Audit Engagement
Partner.
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R360.32 If the Member in Public Practice is performing a non-audit service for:
(a) An Audit Client of a Network Firm; or
(b) A component of an Audit Client of a Network Firm,
the Member shall consider whether to communicate the NOCLAR or suspected

NOCLAR to the Network Firm. Where the communication is made, it shall be made
in accordance with the Network's protocols or procedures. In the absence of such
protocols and procedures, it shall be made directly to the Audit Engagement Partner.
R360.33 If the Member in Public Practice is performing a non-audit service for a client that is
not:
(a) An Audit Client of the Firm or a Network Firm; or
(b) A component of an Audit Client of the Firm or a Network Firm,
the Member shall consider whether to communicate the NOCLAR or suspected

NOCLAR to the Firm that is the client’s external auditor, if any.
Relevant Factors to Consider
360.34 A1 Factors relevant to considering the communication in accordance with paragraphs R360.31
to R360.33 include:
• Whether doing so would be contrary to law or regulation.
• Whether there are restrictions about disclosure imposed by a regulatory agency or

prosecutor in an ongoing investigation into the NOCLAR or suspected NOCLAR.
• Whether the purpose of the engagement is to investigate potential NOCLAR within

the entity to enable it to take appropriate action.
• Whether management or Those Charged with Governance have already informed

the entity’s external auditor about the matter.
• The likely materiality of the matter to the audit of the client’s Financial Statements or,
where the matter relates to a component of a group, its likely materiality to the audit
of the group Financial Statements.
Purpose of Communication
360.35 A1 In the circumstances addressed in paragraphs R360.31 to R360.33, the purpose of the
communication is to enable the Audit Engagement Partner to be informed about the
NOCLAR or suspected NOCLAR and to determine whether and, if so, how to address it in
accordance with the provisions of this section.
Considering Whether Further Action Is Needed
R360.36 The Member in Public Practice shall also consider whether further action is needed
in the public interest.
360.36 A1 Whether further action is needed, and the nature and extent of it, will depend on factors
such as:
• The appropriateness and timeliness of the response of management and, where

applicable, Those Charged with Governance.
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• The involvement of management or Those Charged with Governance in the matter.
• The likelihood of substantial harm to the interests of the client, investors, creditors,
employees or the general public.
360.36 A2 Further action by the Member in Public Practice might include:

regulatory requirement to do so.
• Withdrawing from the engagement and the professional relationship where permitted
by law or regulation.
360.36 A3 In considering whether to disclose to an appropriate authority, relevant factors to take into
account include:
• Whether doing so would be contrary to law or regulation.
• Whether there are restrictions about disclosure imposed by a regulatory agency or

prosecutor in an ongoing investigation into the NOCLAR or suspected NOCLAR.
• Whether the purpose of the engagement is to investigate potential NOCLAR within

the entity to enable it to take appropriate action.
R360.37 If the Member in Public Practice determines that disclosure of the NOCLAR or
suspected NOCLAR to an appropriate authority is an appropriate course of action in
the circumstances, that disclosure is permitted pursuant to paragraph R114.1(d) of
the Code. When making such disclosure, the Member shall act in good faith and
exercise caution when making statements and assertions. The Member shall also
consider whether it is appropriate to inform the client of the Member’s intentions
before disclosing the matter.
Imminent Breach
R360.38 In exceptional circumstances, the Member in Public Practice might become aware
or Those Charged with Governance of the entity, the Member shall exercise
professional judgement and determine whether to disclose the matter immediately
to an appropriate authority in order to prevent or mitigate the consequences of such
imminent breach of law or regulation. If disclosure is made, that disclosure is
permitted pursuant to paragraph R114.1(d) of the Code.
Seeking Advice
360.39 A1 The Member in Public Practice might consider:
• Obtaining legal advice to understand the professional or legal implications of taking
any particular course of action.
• Consulting on a confidential basis with a regulatory or professional body.
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Documentation
Member in Public Practice is encouraged to document:
• The matter.
• The results of discussion with management and, where applicable, Those Charged
with Governance and other parties.
• How management and, where applicable, Those Charged with Governance have
responded to the matter.
• How the Member is satisfied that the Member has fulfilled the responsibility set out
in paragraph R360.36.
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[AUST] PREFACE: PART 4A AND PART 4B
PART 4A - INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS

AND
PART 4B - INDEPENDENCE FOR ASSURANCE ENGAGEMENTS
OTHER THAN AUDIT AND REVIEW ENGAGEMENTS
Part 4A of this Code addresses Independence requirements for Audit and Review Engagements, which
are Assurance Engagements where a Member in Public Practice expresses a conclusion on Historical
Financial Information.
Part 4B of this Code addresses Independence requirements for Assurance Engagements that are not
Audit or Review Engagements of Historical Financial Information.
The concept of Independence is fundamental to compliance with the principles of integrity and
objectivity. This Code adopts a conceptual framework that requires the identification and evaluation of
threats to Independence so that any threats created are eliminated or reduced to an Acceptable Level
by the application of safeguards. However, there are some situations in which threats can only be
addressed by declining or ending the specific Professional Activity. This is because the circumstances
that created the threats cannot be eliminated and safeguards are not capable of being applied to reduce
the threat to an Acceptable Level.
This approach contrasts with the rules adopted in legislation, which are often prescriptive in nature.
Accordingly, Members and other readers of this Code should be aware that adherence to this Code
does not ensure adherence to legislation and they must refer to such legislation to determine their legal
obligations.
While this difference in approach makes precise comparisons to specific legislation difficult, such as the
Corporations Act 2001, the underlying principles of integrity and objectivity are consistent with objective
and impartial judgement, when both approaches are tested in the context of all relevant facts by a
reasonable person. Where APESB is aware that there is a more stringent requirement in the
Corporations Act 2001 an appropriate footnote reference has been included for Members’ and other
readers’ information. However, please note that not all applicable Corporations Act 2001 requirements
have been addressed and thus Members are referred to the Corporations Act 2001 to determine their
independence obligations when performing Audit and Review Engagements in accordance with the Act.
The statutory independence of Auditors-General is provided for in legislation by the Parliament of each
Australian jurisdiction in a number of ways. This includes defining the scope of an Auditor-General's
mandate, the appointment and removal of an Auditor-General and the performance of his or her
responsibilities. The requirements within this Code apply to Auditors-General and their senior officers
who are delegated or authorised to sign assurance reports and are Members, to the extent that they do
not conflict with applicable legislation.
With regard to the use of the words “material” and “materiality” in Parts 4A and 4B, it is not possible to
provide a definition that covers all circumstances where either word is used. In assessing materiality, a
Member in Public Practice or a Firm shall consider both the qualitative and quantitative aspects of the
matter under consideration which might have, or be seen to have, an adverse effect on the objectivity of
the Member or Firm.
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PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW
ENGAGEMENTS
Section Page
400 Applying the Conceptual Framework to Independence for Audit and
Review Engagements .......................................................................................................... 109
410 Fees...................................................................................................................................... 121
411 Compensation and Evaluation Policies ................................................................................ 125
420 Gifts and Hospitality ............................................................................................................. 126
430 Actual or Threatened Litigation ............................................................................................ 127
510 Financial Interests ................................................................................................................ 128
511 Loans and Guarantees ......................................................................................................... 132
520 Business Relationships ........................................................................................................ 134
521 Family and Personal Relationships ...................................................................................... 136
522 Recent Service with an Audit Client ..................................................................................... 139
523 Serving as a Director or Officer of an Audit Client ............................................................... 140
524 Employment with an Audit Client ......................................................................................... 142
525 Temporary Personnel Assignments ..................................................................................... 145
540 Long Association of Personnel (Including Partner Rotation) with an Audit Client ............... 146
600 Provision of Non-Assurance Services to an Audit Client ..................................................... 152
Subsection 601 - Accounting and Bookkeeping Services.................................................... 156
Subsection 602 - Administrative Services ............................................................................ 158
Subsection 603 - Valuation Services ................................................................................... 158
Subsection 604 - Tax Services ............................................................................................ 160
Subsection 605 - Internal Audit Services ............................................................................. 164
Subsection 606 - Information Technology Systems Services .............................................. 167
Subsection 607 - Litigation Support Services ...................................................................... 168
Subsection 608 - Legal Services .......................................................................................... 169
Subsection 609 - Recruiting Services .................................................................................. 170
Subsection 610 - Corporate Finance Services..................................................................... 172
800 Reports on Special Purpose Financial Statements That Include a Restriction
on Use and Distribution (Audit and Review Engagements) ................................................. 174
108
SECTION 400
APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR AUDIT

AND REVIEW ENGAGEMENTS
Introduction
General
400.1 It is in the public interest and required by the Code that Members in Public Practice be
independent when performing Audit or Review Engagements.
400.2 This Part 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.
Firms.
400.4 APES 320 Quality Control for Firms (APES 320) requires a Firm to establish policies and
procedures designed to provide it with reasonable assurance that the Firm, its personnel
and, where applicable, others subject to Independence requirements (including Network
Firm personnel), maintain Independence where required by relevant ethics requirements.
Auditing and Assurance Standards establish responsibilities for Engagement Partners and
Engagement Teams at the level of the engagement for audits and reviews, respectively.
The allocation of responsibilities within a Firm will depend on its size, structure and
organisation. Many of the provisions of this Part do not prescribe the specific responsibility
of individuals within the Firm for actions related to Independence, instead referring to “Firm”
for ease of reference. Firms assign responsibility for a particular action to an individual or
a group of individuals (such as an Audit Team), in accordance with APES 320. In addition,
an individual Member in Public Practice remains responsible for compliance with any
provisions that apply to that Member’s activities, interests or relationships.
400.5 Independence is linked to the principles of objectivity and integrity. It comprises:
(b) Independence in appearance – the avoidance of facts and circumstances that are
so significant that a reasonable and informed third party would be likely to conclude
that a Firm’s, or an Audit Team member’s, integrity, objectivity or professional
In this Part, references to an individual or Firm being “independent” mean that the individual
or Firm has complied with the provisions of this Part.
400.6 When performing Audit Engagements, the Code requires Firms to comply with the
fundamental principles and be independent. This Part sets out specific requirements and
application material on how to apply the conceptual framework to maintain Independence
when performing such engagements. The conceptual framework set out in Section 120
applies to Independence as it does to the fundamental principles set out in Section 110.
109
400.7 This Part describes:
(a) Facts and circumstances, including Professional Activities, interests and

relationships, that create or might create threats to Independence;
(b) Potential actions, including safeguards, that might be appropriate to address any
such threats; and
(c) Some situations where the threats cannot be eliminated or there can be no
safeguards to reduce them to an Acceptable Level.
Public Interest Entities
400.8 Some of the requirements and application material set out in this Part reflect the extent of
public interest in certain entities which are defined to be Public Interest Entities.
AUST R400.8.1 Firms shall determine whether to treat additional entities, or certain categories of
entities, as Public Interest Entities because they have a large number and wide range
of stakeholders. Factors to be considered include:
• The nature of the business, such as the holding of assets in a fiduciary

capacity for a large number of stakeholders. Examples might include financial
institutions, such as banks and insurance companies, and pension funds.
• Size.
• Number of employees.
AUST 400.8.1 A1 The following entities in Australia will generally satisfy the conditions in paragraph AUST
R400.8.1 as having a large number and wide range of stakeholders and thus are likely to be
classified as Public Interest Entities. In each instance Firms shall consider the nature of the
business, its size and the number of its employees:
• Authorised deposit-taking institutions (ADIs) and authorised non-operating holding

companies (NOHCs) regulated by the Australian Prudential Regulatory Authority
(APRA)9 under the Banking Act 1959;
• Authorised insurers and authorised NOHCs regulated by APRA 10 under Section 122
of the Insurance Act 1973;
• Life insurance companies and registered NOHCs regulated by APRA 11 under the Life
Insurance Act 1995;
• Private health insurers regulated by APRA12 under the Private Health Insurance
(Prudential Supervision) Act 2015;
• Disclosing entities as defined in Section 111AC of the Corporations Act 2001;
• Registrable superannuation entity (RSE) licensees, and RSEs under their trusteeship
that have five or more members, regulated by APRA 13 under the Superannuation
Industry (Supervision) Act 1993; and
• Other issuers of debt and equity instruments to the public.
9 Refer to the APRA Prudential Standard CPS 510 Governance for applicable regulatory requirements for
audits of APRA-regulated entities.
10 Refer to the APRA Prudential Standard CPS 510 Governance for applicable regulatory requirements for
11
Refer to the APRA Prudential Standard CPS 510 Governance for applicable regulatory requirements for audits
of APRA-regulated entities.
12 Refer to the APRA Prudential Standard HPS 510 Governance (until 30 June 2019) or Prudential Standard
CPS 510 Governance (from 1 July 2019) for applicable regulatory requirements for audits of APRA-regulated
entities.
13 Refer to the APRA Prudential Standard SPS 510 Governance for applicable regulatory requirements for
110
Reports that Include a Restriction on Use and Distribution
400.9 An audit report might include a restriction on use and distribution. If it does and the
conditions set out in Section 800 are met, then the Independence requirements in this Part
may be modified as provided in Section 800.
Assurance Engagements Other than Audit and Review Engagements
400.10 Independence standards for Assurance Engagements that are not Audit or Review
Engagements are set out in Part 4B – Independence for Assurance Engagements Other
than Audit and Review Engagements.
General
R400.11 A Firm performing an Audit Engagement shall be independent.
R400.12 A Firm shall apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to Independence in relation to an Audit Engagement.
AUST R400.12.1 Where a Member in Public Practice identified multiple threats to Independence,
which individually might not be significant, the Member shall evaluate the
significance of those threats in aggregate and the safeguards applied or in place to
eliminate some or all of the threats or reduce them to an Acceptable Level in
aggregate.
[Paragraphs 400.13 to 400.19 are intentionally left blank]
Related Entities
R400.20 As defined, an Audit Client that is a Listed Entity includes all of its Related Entities.
For all other entities, references to an Audit Client in this Part include Related
Entities over which the client has direct or indirect control. When the Audit Team
knows, or has reason to believe, that a relationship or circumstance involving any
other Related Entity of the client is relevant to the evaluation of the Firm’s
Independence from the client, the Audit Team shall include that Related Entity when
identifying, evaluating and addressing threats to Independence.
Period During which Independence is Required
R400.30 Independence, as required by this Part, shall be maintained during both:

(a) The Engagement Period; and
(b) The period covered by the Financial Statements.
400.30 A1 The Engagement Period starts when the Audit Team begins to perform the audit. The
Engagement Period ends when the audit report is issued. When the engagement is of a
recurring nature, it ends at the later of the notification by either party that the professional
relationship has ended or the issuance of the final audit report.
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R400.31 If an entity becomes an Audit Client during or after the period covered by the
Financial Statements on which the Firm will express an Opinion, the Firm shall
determine whether any threats to Independence are created by:
(a) Financial or business relationships with the Audit Client during or after the
period covered by the Financial Statements but before accepting the Audit
Engagement; or
(b) Previous services provided to the Audit Client by the Firm or a Network Firm.
400.31 A1 Threats to Independence are created if a non-assurance service was provided to an Audit
Client during, or after the period covered by the Financial Statements, but before the Audit
Team begins to perform the audit, and the service would not be permitted during the
Engagement Period.
• Using professionals who are not Audit Team members to perform the service.
• Having an appropriate reviewer review the audit and non-assurance work as

appropriate.
• Engaging another Firm outside of the Network to evaluate the results of the non-
assurance service or having another Firm outside of the Network re-perform the non-
assurance service to the extent necessary to enable the other Firm to take
responsibility for the service.
Communication with Those Charged with Governance
400.40 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to communicating with
Those Charged with Governance.
400.40 A2 Even when not required by the Code, applicable professional standards, laws or
regulations, regular communication is encouraged between a Firm and Those Charged
with Governance of the client regarding relationships and other matters that might, in the
Firm’s opinion, reasonably bear on Independence. Such communication enables Those
Charged with Governance to:
(a) Consider the Firm’s judgements in identifying and evaluating threats;

(b) Consider how threats have been addressed including the appropriateness of
safeguards when they are available and capable of being applied; and
(c) Take appropriate action.

Such an approach can be particularly helpful with respect to intimidation and familiarity
threats.
Network Firms
400.50 A1 Firms frequently form larger structures with other Firms and entities to enhance their ability
to provide Professional Services. Whether these larger structures create a Network
depends on the particular facts and circumstances. It does not depend on whether the
Firms and entities are legally separate and distinct.
112
R400.51 A Network Firm shall be independent of the Audit Clients of the other Firms within
the Network as required by this Part.
400.51 A1 The Independence requirements in this Part that apply to a Network Firm apply to any entity
that meets the definition of a Network Firm. It is not necessary for the entity also to meet
the definition of a Firm. For example, a consulting practice or professional law practice
might be a Network Firm but not a Firm.
R400.52 When associated with a larger structure of other Firms and entities, a Firm shall:
(a) Exercise professional judgement to determine whether a Network is created

by such a larger structure;
(b) Consider whether a reasonable and informed third party would be likely to
conclude that the other Firms and entities in the larger structure are associated
in such a way that a Network exists; and
(c) Apply such judgement consistently throughout such a larger structure.
R400.53 When determining whether a Network is created by a larger structure of Firms and
other entities, a Firm shall conclude that a Network exists when such a larger
structure is aimed at cooperation and:
(a) It is clearly aimed at profit or cost sharing among the entities within the
structure. (Ref: Para. 400.53 A2);
(b) The entities within the structure share common ownership, control or
management. (Ref: Para. 400.53 A3);
(c) The entities within the structure share common quality control policies and
procedures. (Ref: Para. 400.53 A4);
(d) The entities within the structure share a common business strategy. (Ref: Para.
400.53 A5);
(e) The entities within the structure share the use of a common brand name. (Ref:
Paras. 400.53 A6, 400.53 A7); or
(f) The entities within the structure share a significant part of professional
resources. (Ref: Paras. 400.53 A8, 400.53 A9).
400.53 A1 There might be other arrangements between Firms and entities within a larger structure
that constitute a Network, in addition to those arrangements described in paragraph
R400.53. However, a larger structure might be aimed only at facilitating the referral of work,
which in itself does not meet the criteria necessary to constitute a Network.
400.53 A2 The sharing of immaterial costs does not in itself create a Network. In addition, if the sharing
of costs is limited only to those costs related to the development of audit methodologies,
manuals or training courses, this would not in itself create a Network. Further, an
association between a Firm and an otherwise unrelated entity jointly to provide a service
or develop a product does not in itself create a Network. (Ref: Para. R400.53(a)).
400.53 A3 Common ownership, control or management might be achieved by contract or other

means. (Ref: Para. R400.53(b)).
400.53 A4 Common quality control policies and procedures are those designed, implemented and
monitored across the larger structure. (Ref: Para. R400.53(c)).
113
400.53 A5 Sharing a common business strategy involves an agreement by the entities to achieve
common strategic objectives. An entity is not a Network Firm merely because it
cooperates with another entity solely to respond jointly to a request for a proposal for the
provision of a Professional Service. (Ref: Para. R400.53(d)).
400.53 A6 A common brand name includes common initials or a common name. A Firm is using a
common brand name if it includes, for example, the common brand name as part of, or
along with, its Firm name when a partner of the Firm signs an audit report. (Ref: Para.
R400.53(e)).
400.53 A7 Even if a Firm does not belong to a Network and does not use a common brand name as
part of its Firm name, it might appear to belong to a Network if its stationery or promotional
materials refer to the Firm being a member of an association of Firms. Accordingly, if care
is not taken in how a Firm describes such membership, a perception might be created that
the Firm belongs to a Network. (Ref: Para. R400.53(e)).
400.53 A8 Professional resources include:
• Common systems that enable Firms to exchange information such as client data,
billing and time records.
• Partners and other personnel.
• Technical departments that consult on technical or industry specific issues,

transactions or events for Assurance Engagements.
• Audit methodology or audit manuals.
• Training courses and facilities. (Ref: Para. R400.53(f)).
400.53 A9 Whether the shared professional resources are significant depends on the circumstances.
For example:
• The shared resources might be limited to common audit methodology or audit

manuals, with no exchange of personnel or client or market information. In such
circumstances, it is unlikely that the shared resources would be significant. The same
applies to a common training endeavour.
• The shared resources might involve the exchange of personnel or information, such
as where personnel are drawn from a shared pool, or where a common technical
department is created within the larger structure to provide participating Firms with
technical advice that the Firms are required to follow. In such circumstances, a
reasonable and informed third party is more likely to conclude that the shared
resources are significant. (Ref: Para. R400.53(f)).
R400.54 If a Firm or a Network sells a component of its practice, and the component
continues to use all or part of the Firm’s or Network’s name for a limited time, the
relevant entities shall determine how to disclose that they are not Network Firms
when presenting themselves to outside parties.
400.54 A1 The agreement for the sale of a component of a practice might provide that, for a limited
period of time, the sold component can continue to use all or part of the name of the Firm
or the Network, even though it is no longer connected to the Firm or the Network. In such
circumstances, while the two entities might be practicing under a common name, the facts
are such that they do not belong to a larger structure aimed at cooperation. The two entities
are therefore not Network Firms.
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General Documentation of Independence for Audit and Review Engagements
R400.60 A Firm shall document conclusions regarding compliance with this Part, and the
substance of any relevant discussions that support those conclusions. In particular:
(a) When safeguards are applied to address a threat, the Firm shall document the
nature of the threat and the safeguards in place or applied; and
(b) When a threat required significant analysis and the Firm concluded that the
threat was already at an Acceptable Level, the Firm shall document the nature
of the threat and the rationale for the conclusion.
400.60 A1 Documentation provides evidence of the Firm’s judgements in forming conclusions

regarding compliance with this Part. However, a lack of documentation does not determine
whether a Firm considered a particular matter or whether the Firm is independent.
Mergers and Acquisitions
When a Client Merger Creates a Threat
400.70 A1 An entity might become a Related Entity of an Audit Client because of a merger or
acquisition. A threat to Independence and, therefore, to the ability of a Firm to continue an
Audit Engagement might be created by previous or current interests or relationships
between a Firm or Network Firm and such a Related Entity.
R400.71 In the circumstances set out in paragraph 400.70 A1,
(a) The Firm shall identify and evaluate previous and current interests and
relationships with the Related Entity that, taking into account any actions
taken to address the threat, might affect its Independence and therefore its
ability to continue the Audit Engagement after the effective date of the merger
or acquisition; and
(b) Subject to paragraph R400.72, the Firm shall take steps to end any interests or
relationships that are not permitted by the Code by the effective date of the
merger or acquisition.
R400.72 As an exception to paragraph R400.71(b), if the interest or relationship cannot

reasonably be ended by the effective date of the merger or acquisition, the Firm
shall:
(a) Evaluate the threat that is created by the interest or relationship; and
(b) Discuss with Those Charged with Governance the reasons why the interest or
relationship cannot reasonably be ended by the effective date and the
evaluation of the level of the threat.
400.72 A1 In some circumstances, it might not be reasonably possible to end an interest or

relationship creating a threat by the effective date of the merger or acquisition. This might
be because the Firm provides a non-assurance service to the Related Entity, which the
entity is not able to transition in an orderly manner to another provider by that date.
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400.72 A2 Factors that are relevant in evaluating the level of a threat created by mergers and
acquisitions when there are interests and relationships that cannot reasonably be ended
include:
• The nature and significance of the interest or relationship.
• The nature and significance of the Related Entity relationship (for example, whether
the Related Entity is a subsidiary or parent).
• The length of time until the interest or relationship can reasonably be ended.
R400.73 If, following the discussion set out in paragraph R400.72(b), Those Charged with
Governance request the Firm to continue as the auditor, the Firm shall do so only if:
(a) The interest or relationship will be ended as soon as reasonably possible but
no later than six months after the effective date of the merger or acquisition;
(b) Any individual who has such an interest or relationship, including one that has
arisen through performing a non-assurance service that would not be
permitted by Section 600 and its subsections, will not be a member of the
Engagement Team for the audit or the individual responsible for the
Engagement Quality Control Review; and
(c) Transitional measures will be applied, as necessary, and discussed with Those
400.73 A1 Examples of such transitional measures include:
• Having a Member in Public Practice review the audit or non-assurance work as

appropriate.
• Having a Member in Public Practice, who is not a member of the Firm expressing the
opinion on the Financial Statements, perform a review that is equivalent to an
Engagement Quality Control Review.
• Engaging another Firm to evaluate the results of the non-assurance service or having
another Firm re-perform the non-assurance service to the extent necessary to enable
the other Firm to take responsibility for the service.
R400.74 The Firm might have completed a significant amount of work on the audit prior to
the effective date of the merger or acquisition and might be able to complete the
remaining audit procedures within a short period of time. In such circumstances, if
Those Charged with Governance request the Firm to complete the audit while
continuing with an interest or relationship identified in paragraph 400.70 A1, the Firm
shall only do so if it:
(a) Has evaluated the level of the threat and discussed the results with Those
Charged with Governance;
(b) Complies with the requirements of paragraph R400.73(a) to (c); and

(c) Ceases to be the auditor no later than the date that the audit report is issued.
If Objectivity Remains Compromised
R400.75 Even if all the requirements of paragraphs R400.71 to R400.74 could be met, the Firm
shall determine whether the circumstances identified in paragraph 400.70 A1 create
a threat that cannot be addressed such that objectivity would be compromised. If
so, the Firm shall cease to be the auditor.
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Documentation
R400.76 The Firm shall document:
(a) Any interests or relationships identified in paragraph 400.70 A1 that will not be
ended by the effective date of the merger or acquisition and the reasons why
they will not be ended;
(b) The transitional measures applied;
(c) The results of the discussion with Those Charged with Governance; and
(d) The reasons why the previous and current interests and relationships do not
create a threat such that objectivity would be compromised.
[Paragraphs 400.77 to 400.79 are intentionally left blank.]
Breach of an Independence Provision for Audit and Review Engagements
When a Firm Identifies a Breach
R400.80 If a Firm concludes that a breach of a requirement in this Part has occurred, the Firm
shall:
(a) End, suspend or eliminate the interest or relationship that created the breach
and address the consequences of the breach;
(b) Consider whether any legal or regulatory requirements apply to the breach
and, if so:
(i) Comply with those requirements; and
(ii) Consider reporting the breach to a professional or regulatory body or

oversight authority if such reporting is common practice or expected in
the relevant jurisdiction;14
(c) Promptly communicate the breach in accordance with its policies and
procedures to:
(i) The Engagement Partner;
(ii) Those with responsibility for the policies and procedures relating to
Independence;
(iii) Other relevant personnel in the Firm and, where appropriate, the
Network; and
(iv) Those subject to the Independence requirements in Part 4A who need to
take appropriate action;
(d) Evaluate the significance of the breach and its impact on the Firm’s objectivity
and ability to issue an audit report; and
(e) Depending on the significance of the breach, determine:
(i) Whether to end the Audit Engagement; or
14 For example, there are auditor reporting obligations in the Corporations Act 2001 which a Member in Public
Practice must comply with. Further information on these requirements is set out in ASIC Regulatory Guide
34 Auditor’s obligations: Reporting to ASIC.
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(ii) Whether it is possible to take action that satisfactorily addresses the
consequences of the breach and whether such action can be taken and
is appropriate in the circumstances.
In making this determination, the Firm shall exercise professional judgement

and take into account whether a reasonable and informed third party would
be likely to conclude that the Firm's objectivity would be compromised,
and therefore, the Firm would be unable to issue an audit report.
400.80 A1 A breach of a provision of this Part might occur despite the Firm having policies and
procedures designed to provide it with reasonable assurance that Independence is
maintained. It might be necessary to end the Audit Engagement because of the breach.
400.80 A2 The significance and impact of a breach on the Firm’s objectivity and ability to issue an
audit report will depend on factors such as:
• The nature and duration of the breach.
• The number and nature of any previous breaches with respect to the current Audit
Engagement.
• Whether an Audit Team member had knowledge of the interest or relationship that
created the breach.
• Whether the individual who created the breach is an Audit Team member or another
individual for whom there are Independence requirements.
• If the breach relates to an Audit Team member, the role of that individual.
• If the breach was created by providing a Professional Service, the impact of that
service, if any, on the accounting records or the amounts recorded in the Financial
Statements on which the Firm will express an Opinion.
• The extent of the self-interest, advocacy, intimidation or other threats created by the
breach.
400.80 A3 Depending upon the significance of the breach, examples of actions that the Firm might
consider to address the breach satisfactorily include:
• Removing the relevant individual from the Audit Team.
• Using different individuals to conduct an additional review of the affected audit work
or to re-perform that work to the extent necessary.
• Recommending that the Audit Client engage another Firm to review or re-perform
the affected audit work to the extent necessary.
• If the breach relates to a non-assurance service that affects the accounting records
or an amount recorded in the Financial Statements, engaging another Firm to
evaluate the results of the non-assurance service or having another Firm re-perform
the non-assurance service to the extent necessary to enable the other Firm to take
responsibility for the service.
R400.81 If the Firm determines that action cannot be taken to address the consequences of
the breach satisfactorily, the Firm shall inform Those Charged with Governance as
soon as possible and take the steps necessary to end the Audit Engagement in
compliance with any applicable legal or regulatory requirements. Where ending the
engagement is not permitted by laws or regulations, the Firm shall comply with any
reporting or disclosure requirements.
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R400.82 If the Firm determines that action can be taken to address the consequences of the
breach satisfactorily, the Firm shall discuss with Those Charged with Governance:
(a) The significance of the breach, including its nature and duration;
(b) How the breach occurred and how it was identified;
(c) The action proposed or taken and why the action will satisfactorily address the
consequences of the breach and enable the Firm to issue an audit report;
(d) The conclusion that, in the Firm’s professional judgement, objectivity has not
been compromised and the rationale for that conclusion; and
(e) Any steps proposed or taken by the Firm to reduce or avoid the risk of further
breaches occurring.
Such discussion shall take place as soon as possible unless an alternative timing is
specified by Those Charged with Governance for reporting less significant
breaches.
Communication of Breaches to Those Charged with Governance
400.83 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to communicating with
Those Charged with Governance.
R400.84 With respect to breaches, the Firm shall communicate in writing to Those Charged
with Governance:
(a) All matters discussed in accordance with paragraph R400.82 and obtain the
concurrence of Those Charged with Governance that action can be, or has
been, taken to satisfactorily address the consequences of the breach; and
(b) A description of:
(i) The Firm’s policies and procedures relevant to the breach designed to
provide it with reasonable assurance that Independence is maintained;
and
(ii) Any steps that the Firm has taken, or proposes to take, to reduce or avoid
the risk of further breaches occurring.
R400.85 If Those Charged with Governance do not concur that the action proposed by the
Firm in accordance with paragraph R400.80(e)(ii) satisfactorily addresses the
consequences of the breach, the Firm shall take the steps necessary to end the Audit
Engagement in accordance with paragraph R400.81.
Breaches Before the Previous Audit Report Was Issued
R400.86 If the breach occurred prior to the issuance of the previous audit report, the Firm
shall comply with the provisions of Part 4A in evaluating the significance of the
breach and its impact on the Firm’s objectivity and its ability to issue an audit
report in the current period.
R400.87 The Firm shall also:
(a) Consider the impact of the breach, if any, on the Firm’s objectivity in relation
to any previously issued audit reports, and the possibility of withdrawing such
audit reports; and
(b) Discuss the matter with Those Charged with Governance.
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Documentation
R400.88 In complying with the requirements in paragraphs R400.80 to R400.87, the Firm shall
document:
(a) The breach;
(b) The actions taken;
(c) The key decisions made;
(d) All the matters discussed with Those Charged with Governance; and
(e) Any discussions with a professional or regulatory body or oversight authority.
R400.89 If the Firm continues with the Audit Engagement, it shall document:
(a) The conclusion that, in the Firm’s professional judgement, objectivity has not
been compromised; and
(b) The rationale for why the action taken satisfactorily addressed the
consequences of the breach so that the Firm could issue an audit report.
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SECTION 410
FEES
Introduction
410.1 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.
410.2 The nature and level of fees or other types of remuneration 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.
Fees – Relative Size
All Audit Clients
410.3 A1 When the total fees generated from an Audit Client by the Firm expressing the audit opinion
represent a large proportion of the total fees of that Firm, the dependence on that client
and concern about losing the client create a self-interest or intimidation threat.
• The operating structure of the Firm.
• Whether the Firm is well established or new.
• The significance of the client qualitatively and/or quantitatively to the Firm.
410.3 A3 An example of an action that might be a safeguard to address such a self-interest or

intimidation threat is increasing the client base in the Firm to reduce dependence on the
Audit Client.
410.3 A4 A self-interest or intimidation threat is also created when the fees generated by a Firm from
an Audit Client represent a large proportion of the revenue of one partner or one Office of
the Firm.
• The significance of the client qualitatively and/or quantitatively to the partner or

Office.
• The extent to which the compensation of the partner, or the partners in the Office, is
dependent upon the fees generated from the client.
410.3 A6 Examples of actions that might be safeguards to address such self-interest or intimidation
threats include:
• Increasing the client base of the partner or the Office to reduce dependence on the
Audit Client.
• Having an appropriate reviewer who did not take part in the Audit Engagement review
the work.
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AUST R410.3.1 When the total fees in respect of multiple Audit Clients referred from one source
represent a large proportion of the total fees of the Firm expressing the audit
opinions, the Firm shall evaluate the significance of the threat and apply safeguards
when necessary to eliminate the threat or reduce it to an Acceptable Level.
AUST 410.3.1 A1 Another party or Firm may refer multiple Audit Clients to a Firm. The dependence on that
source and concern about losing those clients creates a self-interest or intimidation threat.
Paragraph 410.3 A2 provides examples of factors that may affect the significance of the
threat and paragraph 410.3 A6 lists potential safeguards that may be applied.
Audit Clients that are Public Interest Entities
R410.4 Where an Audit Client is a Public Interest Entity and, for two consecutive years, the
total fees from the client and its Related Entities represent more than 15% of the total
fees received by the Firm expressing the opinion on the Financial Statements of the
client, the Firm shall:
(a) Disclose to Those Charged with Governance of the Audit Client the fact that
the total of such fees represents more than 15% of the total fees received by
the Firm; and
(b) Discuss whether either of the following actions might be a safeguard to

address the threat created by the total fees received by the Firm from the client,
and if so, apply it:
(i) Prior to the audit opinion being issued on the second year’s Financial
Statements, a Member in Public Practice, who is not a member of the
Firm expressing the opinion on the Financial Statements, performs an
Engagement Quality Control Review of that engagement; or a
Professional Body performs a review of that engagement that is
equivalent to an Engagement Quality Control Review (“a pre-issuance
review”); or
(ii) After the audit opinion on the second year’s Financial Statements has
been issued, and before the audit opinion being issued on the third
year’s Financial Statements, a Member in Public Practice, who is not a
member of the Firm expressing the opinion on the Financial Statements,
or a Professional Body performs a review of the second year’s audit that
is equivalent to an Engagement Quality Control Review (“a post-
issuance review”).
R410.5 When the total fees described in paragraph R410.4 significantly exceed 15%, the
Firm shall determine whether the level of the threat is such that a post-issuance
review would not reduce the threat to an Acceptable Level. If so, the Firm shall have
a pre-issuance review performed.
R410.6 If the fees described in paragraph R410.4 continue to exceed 15%, the Firm shall
each year:
(a) Disclose to and discuss with Those Charged with Governance the matters set
out in paragraph R410.4; and
(b) Comply with paragraphs R410.4(b) and R410.5.
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Fees – Overdue
410.7 A1 A self-interest threat might be created if a significant part of fees is not paid before the audit
report for the following year is issued. It is generally expected that the Firm will require
payment of such fees before such audit report is issued. The requirements and application
material set out in Section 511 with respect to loans and guarantees might also apply to
situations where such unpaid fees exist.
• Obtaining partial payment of overdue fees.
• Having an appropriate reviewer who did not take part in the Audit Engagement review
the work performed.
R410.8 When a significant part of fees due from an Audit Client remains unpaid for a long
time, the Firm shall determine:
(a) Whether the overdue fees might be equivalent to a loan to the client; and
(b) Whether it is appropriate for the Firm to be re-appointed or continue the Audit
Engagement.
Contingent Fees
410.9 A1 Contingent Fees are fees calculated on a predetermined basis relating to the outcome of
a transaction or the result of the services performed. A Contingent Fee charged through an
intermediary is an example of an indirect Contingent Fee. In this section, a fee is not
regarded as being contingent if established by a court or other public authority.
R410.10 A Firm shall not charge directly or indirectly a Contingent Fee for an Audit
Engagement.
R410.11 A Firm or Network Firm shall not charge directly or indirectly a Contingent Fee for a
non-assurance service provided to an Audit Client, if:
(a) The fee is charged by the Firm expressing the opinion on the Financial
Statements and the fee is material or expected to be material to that Firm;
(b) The fee is charged by a Network Firm that participates in a significant part of
the audit and the fee is material or expected to be material to that Firm; or
(c) The outcome of the non-assurance service, and therefore the amount of the
fee, is dependent on a future or contemporary judgement related to the audit
of a material amount in the Financial Statements.
410.12 A1 Paragraphs R410.10 and R410.11 preclude a Firm or a Network Firm from entering into
certain Contingent Fee arrangements with an Audit Client. Even if a Contingent Fee
arrangement is not precluded when providing a non-assurance service to an Audit Client,
a self-interest threat might still be created.
• Whether an appropriate authority determines the outcome on which the Contingent

Fee depends.
• Disclosure to intended users of the work performed by the Firm and the basis of
remuneration.
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• The nature of the service.
• The effect of the event or transaction on the Financial Statements.
assurance service review the work performed by the Firm.
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SECTION 411
COMPENSATION AND EVALUATION POLICIES
Introduction
to Independence.
411.2 A Firm’s evaluation or compensation policies might create a self-interest threat. This
General
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:
(a) What proportion of the compensation or evaluation is based on the sale of such
services;
(b) The role of the individual on the Audit Team; and
(c) Whether the sale of such non-assurance services influences promotion decisions.
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.
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.
R411.4 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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SECTION 420
GIFTS AND HOSPITALITY
Introduction
to Independence.
420.2 Accepting gifts and hospitality from an Audit Client might create a self-interest, familiarity
or intimidation threat. This section sets out a specific requirement and application material
Requirement and Application Material
R420.3 A Firm, Network Firm or an Audit Team member shall not accept gifts and hospitality
from an Audit Client, unless the value is trivial and inconsequential.
420.3 A1 Where a Firm, Network Firm or Audit Team member is offering or accepting an Inducement
to or from an Audit Client, the requirements and application material set out in Section 340
apply and non-compliance with these requirements might create threats to Independence.
420.3 A2 The requirements set out in Section 340 relating to offering or accepting Inducements do
not allow a Firm, Network Firm or Audit Team member to accept gifts and hospitality where
the intent is to improperly influence behaviour even if the value is trivial and
inconsequential.
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SECTION 430
ACTUAL OR THREATENED LITIGATION
Introduction
to Independence.
430.2 When litigation with an Audit Client occurs, or appears likely, self-interest and intimidation
threats are created. This section sets out specific application material relevant to applying
the conceptual framework in such circumstances.
General
430.3 A1 The relationship between client management and Audit Team members must be
characterised by complete candour and full disclosure regarding all aspects of a client’s
operations. Adversarial positions might result from actual or threatened litigation between
an Audit Client and the Firm, a Network Firm or an Audit Team member. Such adversarial
positions might affect management’s willingness to make complete disclosures and create
self-interest and intimidation threats.
• The materiality of the litigation.
• Whether the litigation relates to a prior Audit Engagement.
430.3 A3 If the litigation involves an Audit Team member, an example of an action that might eliminate
such self-interest and intimidation threats is removing that individual from the Audit Team.
430.3 A4 An example of an action that might be a safeguard to address such self-interest and
intimidation threats is to have an appropriate reviewer review the work performed.
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SECTION 510
FINANCIAL INTERESTS
Introduction
to Independence.
510.2 Holding a Financial Interest in an Audit Client might create a self-interest threat. This
General
510.3 A1 A Financial Interest might be held directly or indirectly through an intermediary such as a
collective investment vehicle, an estate or a trust. When a beneficial owner has control over
the intermediary or ability to influence its investment decisions, the Code defines that
Financial Interest to be direct. Conversely, when a beneficial owner has no control over the
intermediary or ability to influence its investment decisions, the Code defines that Financial
Interest to be indirect.
510.3 A2 This section contains references to the “materiality” of a Financial Interest. In determining
whether such an 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.
510.3 A3 Factors that are relevant in evaluating the level of a self-interest threat created by holding
a Financial Interest in an Audit Client include:
• The role of the individual holding the Financial Interest.
• Whether the Financial Interest is direct or indirect.
• The materiality of the Financial Interest.
Financial Interests Held by the Firm, a Network Firm, Audit Team Members and Others
R510.4 Subject to paragraph R510.5, a Direct Financial Interest or a material Indirect

Financial Interest in the Audit Client shall not be held by:
(a) The Firm or a Network Firm;
(b) An Audit Team member, or any of that individual’s Immediate Family;

(c) Any other partner in the Office in which an Engagement Partner practices in
connection with the Audit Engagement, or any of that other partner’s
Immediate Family; or
(d) Any other partner or managerial employee who provides non-audit services to
the Audit Client, except for any whose involvement is minimal, or any of that
individual’s Immediate Family.
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510.4 A1 The Office in which the Engagement Partner practices in connection with an Audit
Engagement is not necessarily the Office to which that partner is assigned. When the
Engagement Partner is located in a different Office from that of the other Audit Team
members, professional judgement is needed to determine the Office in which the partner
practices in connection with the engagement.
R510.5 As an exception to paragraph R510.4, an Immediate Family member identified in

subparagraphs R510.4(c) or (d) may hold a Direct or material Indirect Financial
Interest in an Audit Client, provided that:
(a) The family member received the Financial Interest because of employment
rights, for example through pension or share option plans, and, when
necessary, the Firm addresses the threat created by the Financial Interest; and
(b) The family member disposes of or forfeits the Financial Interest as soon as
practicable when the family member has or obtains the right to do so, or in the
case of a stock option, when the family member obtains the right to exercise
the option.
Financial Interests in an Entity Controlling an Audit Client
R510.6 When an entity has a controlling interest in an Audit Client and the client is material
to the entity, neither the Firm, nor a Network Firm, nor an Audit Team member, nor
any of that individual’s Immediate Family shall hold a Direct or material Indirect
Financial Interest in that entity.
Financial Interests Held as Trustee
R510.7 Paragraph R510.4 shall also apply to a Financial Interest in an Audit Client held in a
trust for which the Firm, Network Firm or individual acts as trustee, unless:
(a) None of the following is a beneficiary of the trust: the trustee, the Audit Team
member or any of that individual’s Immediate Family, the Firm or a Network
Firm;
(b) The interest in the Audit Client held by the trust is not material to the trust;
(c) The trust is not able to exercise significant influence over the Audit Client; and
(d) None of the following can significantly influence any investment decision
involving a Financial Interest in the Audit Client: the trustee, the Audit Team
member or any of that individual’s Immediate Family, the Firm or a Network
Firm.
Financial Interests in Common with the Audit Client
R510.8 (a) A Firm, or a Network Firm, or an Audit Team member, or any of that individual’s
Immediate Family shall not hold a Financial Interest in an entity when an Audit
Client also has a Financial Interest in that entity, unless:
(i) The Financial Interests are immaterial to the Firm, the Network Firm, the
Audit Team member and that individual’s Immediate Family member and
the Audit Client, as applicable; or
(ii) The Audit Client cannot exercise significant influence over the entity.
(b) Before an individual who has a Financial Interest described in paragraph

R510.8(a) can become an Audit Team member, the individual or that
individual’s Immediate Family member shall either:
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(i) Dispose of the interest; or
(ii) Dispose of enough of the interest so that the remaining interest is no

longer material.
Financial Interests Received Unintentionally
R510.9 If a Firm, a Network Firm or a partner or employee of the Firm or a Network Firm, or
any of that individual’s Immediate Family, receives a Direct Financial Interest or a
material Indirect Financial Interest in an Audit Client by way of an inheritance, gift,
as a result of a merger or in similar circumstances and the interest would not
otherwise be permitted to be held under this section, then:
(a) If the interest is received by the Firm or a Network Firm, or an Audit Team
member or any of that individual’s Immediate Family, the Financial Interest
shall be disposed of immediately, or enough of an Indirect Financial Interest
shall be disposed of so that the remaining interest is no longer material; or
(b) (i) If the interest is received by an individual who is not an Audit Team
member, or by any of that individual’s Immediate Family, the Financial
Interest shall be disposed of as soon as possible, or enough of an
Indirect Financial Interest shall be disposed of so that the remaining
interest is no longer material; and
(ii) Pending the disposal of the Financial Interest, when necessary the Firm
shall address the threat created.
Financial Interests – Other Circumstances
Immediate Family
510.10 A1 A self-interest, familiarity, or intimidation threat might be created if an Audit Team member,
or any of that individual’s Immediate Family, or the Firm or a Network Firm has a Financial
Interest in an entity when a Director or Officer or controlling owner of the Audit Client is also
known to have a Financial Interest in that entity.
• The role of the individual on the Audit Team.
• Whether ownership of the entity is closely or widely held.
• Whether the interest allows the investor to control or significantly influence the entity.
510.10 A3 An example of an action that might eliminate such a self-interest, familiarity, or intimidation
threat is removing the Audit Team member with the Financial Interest from the Audit Team.
Close Family
510.10 A5 A self-interest threat might be created if an Audit Team member knows that a Close Family
member has a Direct Financial Interest or a material Indirect Financial Interest in the Audit
Client.
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• The nature of the relationship between the Audit Team member and the Close Family
member.
• The materiality of the Financial Interest to the Close Family member.
• Having the Close Family member dispose, as soon as practicable, of all of the
Financial Interest or dispose of enough of an Indirect Financial Interest so that the
remaining interest is no longer material.
• Removing the individual from the Audit Team.
Other Individuals
510.10 A9 A self-interest threat might be created if an Audit Team member knows that a Financial
Interest in the Audit Client is held by individuals such as:
• Partners and professional employees of the Firm or Network Firm, apart from those
who are specifically not permitted to hold such Financial Interests by paragraph
R510.4, or their Immediate Family members.
• Individuals with a close personal relationship with an Audit Team member.
• The Firm’s organisational, operating and reporting structure.
• The nature of the relationship between the individual and the Audit Team member.
510.10 A11 An example of an action that might eliminate such a self-interest threat is removing the
Audit Team member with the personal relationship from the Audit Team.
• Excluding the Audit Team member from any significant decision making concerning
the Audit Engagement.
• Having an appropriate reviewer review the work of the Audit Team member.
Retirement Benefit Plan of a Firm or Network Firm
510.10 A13 A self-interest threat might be created if a retirement benefit plan of a Firm or a Network
Firm holds a Direct or material Indirect Financial Interest in an Audit Client.15
15 Refer to s324CH(1) Items 10-12 of the Corporations Act 2001 which prohibits this arrangement in respects of
audits performed in accordance with the Act.
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SECTION 511
LOANS AND GUARANTEES
Introduction
to Independence.
511.2 A loan or a guarantee of a loan with an Audit Client might create a self-interest threat. This
General
511.3 A1 This section contains references to the “materiality” of a loan or guarantee. In determining
whether such a loan or guarantee is material to an individual, the combined net worth of
the individual and the individual’s Immediate Family members may be taken into account.
Loans and Guarantees with an Audit Client
R511.4 A Firm, a Network Firm, an Audit Team member, or any of that individual’s Immediate
Family shall not make or guarantee a loan to an Audit Client unless the loan or
guarantee is immaterial to:
(a) The Firm, the Network Firm or the individual making the loan or guarantee, as
applicable; and
(b) The client.16
Loans and Guarantees with an Audit Client that is a Bank or Similar Institution
Family shall not accept a loan, or a guarantee of a loan, from an Audit Client that is
a bank or a similar institution unless the loan or guarantee is made under normal
lending procedures, terms and conditions.
511.5 A1 Examples of loans include mortgages, bank overdrafts, car loans, and credit card balances.
511.5 A2 Even if a Firm or Network Firm receives a loan from an Audit Client that is a bank or similar
institution under normal lending procedures, terms and conditions, the loan might create a
self-interest threat if it is material to the Audit Client or Firm receiving the loan.
having the work reviewed by an appropriate reviewer, who is not an Audit Team member,
from a Network Firm that is not a beneficiary of the loan.
16 Refer to s324CH(1) Items 15,16, 17 & 19 of the Corporations Act 2001 which prohibits making or guaranteeing
loans irrespective of materiality for audits performed in accordance with the Act.
132
Deposits or Brokerage Accounts
Family shall not have deposits or a brokerage account with an Audit Client that is a
bank, broker or similar institution, unless the deposit or account is held under
normal commercial terms.
Loans and Guarantees with an Audit Client that is Not a Bank or Similar Institution
Family shall not accept a loan from, or have a borrowing guaranteed by, an Audit
Client that is not a bank or similar institution, unless the loan or guarantee is
immaterial to:
(a) The Firm, the Network Firm, or the individual receiving the loan or guarantee,
as applicable; and
(b) The client.
133
SECTION 520
BUSINESS RELATIONSHIPS
Introduction
to Independence.
520.2 A close business relationship with an Audit Client or its management might create a self-
interest or intimidation threat. This section sets out specific requirements and application
General
520.3 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.
520.3 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 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 or a Network

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 or a Network Firm

distributes or markets the client’s products or services, or the client distributes or
markets the Firm or a Network Firm's products or services.
Firm, Network Firm, Audit Team Member or Immediate Family Business Relationships
R520.4 A Firm, a Network Firm or an Audit Team member shall not have a close business
relationship17 with an Audit 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, the Network Firm or the Audit Team member, as
applicable.
520.4 A1 A self-interest or intimidation threat might be created if there is a close business relationship
between the Audit Client or its management and the Immediate Family of an Audit Team
member.
17 Refer to s324CH(1) of the Corporations Act 2001 which prohibits certain relationships between a person or the
Firm and the corporate Audit Client irrespective of materiality or the significance of the relationship or Financial
Interest.
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Common Interests in Closely-Held Entities
Family shall not have a business relationship 18 involving the holding of an interest
in a closely-held entity when an Audit Client or a Director or Officer of the client, or
any group thereof, also holds an interest in that entity, unless:
(a) The business relationship is insignificant to the Firm, the Network Firm, or the
individual as applicable, and the client;
(b) The Financial Interest is immaterial to the investor or group of investors; and
(c) The Financial Interest does not give the investor, or group of investors, the
ability to control the closely-held entity.
Buying Goods or Services
520.6 A1 The purchase of goods and services from an Audit Client by a Firm, a Network Firm, an
Audit 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.
• Eliminating or reducing the magnitude of the transaction.
• Removing the individual from the Audit Team.
18 Refer to s 324CH(1) of the Corporations Act 2001 which prohibits certain relationships between a person or
the Firm and the corporate Audit Client irrespective of materiality or the significance of the relationships or
Financial Interest.
135
SECTION 521
FAMILY AND PERSONAL RELATIONSHIPS
Introduction
to Independence.
521.2 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
General
521.3 A1 A self-interest, familiarity or intimidation threat might be created by family and personal
relationships between an Audit Team member and a Director or Officer or, depending on
their role, certain employees of the Audit Client.
• The individual’s responsibilities on the Audit Team.
• The role of the family member or other individual within the client, and the closeness
of the relationship.
Immediate Family of an Audit Team Member
521.4 A1 A self-interest, familiarity or intimidation threat is created when an Immediate Family

member of an Audit Team member is an employee in a position to exert significant influence
over the client’s financial position, financial performance or cash flows.
• The position held by the Immediate Family member.
• The role of the Audit Team member.
521.4 A3 An example of an action that might eliminate such a self-interest, familiarity or intimidation
threat is removing the individual from the Audit Team.
521.4 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 Audit Team so that
the Audit Team member does not deal with matters that are within the responsibility of the
Immediate Family member.
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R521.5 An individual shall not participate as an Audit Team member when any of that
individual’s Immediate Family:
(a) Is a Director or Officer of the Audit Client;
(b) Is an employee in a position to exert significant influence over the preparation

of the client’s accounting records or the Financial Statements on which the
Firm will express an Opinion; or
(c) Was in such position during any period covered by the engagement or the
Financial Statements.
Close Family of an Audit Team Member
521.6 A1 A self-interest, familiarity or intimidation threat is created when a Close Family member of
an Audit Team member is:
(a) A Director or Officer of the Audit Client; or

(b) An employee in a position to exert significant influence over the preparation of the
client’s accounting records or the Financial Statements on which the Firm will
express an Opinion.
• The nature of the relationship between the Audit Team member and the Close
Family member.
• The position held by the Close Family member.

Close Family member.
Other Close Relationships of an Audit Team Member
R521.7 An Audit Team member shall consult in accordance with Firm policies and
procedures if the Audit Team member has a close relationship with an individual who
is not an Immediate or Close Family member, but who is:
(a) A Director or Officer of the Audit Client; or
(b) An employee in a position to exert significant influence over the preparation

Firm will express an Opinion.
521.7 A1 Factors that are relevant in evaluating the level of a self-interest, familiarity or intimidation
threat created by such a relationship include:
• The nature of the relationship between the individual and the Audit Team member.
• The position the individual holds with the client.
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individual with whom the Audit Team member has a close relationship.
Relationships of Partners and Employees of the Firm
R521.8 Partners and employees of the Firm shall consult in accordance with Firm policies
and procedures if they are aware of a personal or family relationship between:
(a) A partner or employee of the Firm or Network Firm who is not an Audit Team
member; and
(b) A Director or Officer of the Audit Client or an employee of the Audit Client in a
position to exert significant influence over the preparation of the client’s
accounting records or the Financial Statements on which the Firm will express
an Opinion.
threat created by such a relationship 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 Audit Team.
• The position of the partner or employee within the Firm.
521.8 A2 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 Audit Engagement.
• Having an appropriate reviewer review the relevant audit work performed.
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SECTION 522
RECENT SERVICE WITH AN AUDIT CLIENT
Introduction
to Independence.
522.2 If an Audit Team member has recently served as a Director or Officer, or employee of the
Audit Client, a self-interest, self-review or familiarity threat might be created. This section
sets out specific requirements and application material relevant to applying the conceptual
framework in such circumstances.
Service During Period Covered by the Audit Report
R522.3 The Audit Team shall not include an individual who, during the period covered by
the audit report:
(a) Had served as a Director or Officer of the Audit Client; or
(b) Was an employee in a position to exert significant influence 19 over the

preparation of the client’s accounting records or the Financial Statements on
which the Firm will express an Opinion.
Service Prior to Period Covered by the Audit Report
522.4 A1 A self-interest, self-review or familiarity threat might be created if, before the period covered
by the audit report, an Audit Team member:
(a) Had served as a Director or Officer of the Audit Client; or
(b) Was an employee in a position to exert significant influence over the preparation of
the client’s accounting records or Financial Statements on which the Firm will
express an Opinion.20
For example, a threat would be created if a decision made or work performed by the
individual in the prior period, while employed by the client, is to be evaluated in the current
period as part of the current Audit Engagement.
• The position the individual held with the client.

• The length of time since the individual left the client.
522.4 A3 An example of an action that might be a safeguard to address such a self-interest, self-
review or familiarity threat is having an appropriate reviewer review the work performed by
the Audit Team member.
19 Refer to s9 of the Corporations Act 2001 for the definition of 'audit-critical employee'.
20 Refer to s324CH(1) Items 8 & 9 and s324CF(5) Items 3,4,5 & 9 of the Corporations Act 2001 regarding a
cooling-off period of 12 months immediately preceding the beginning of the audited period for a corporate
Audit Client.
139
SECTION 523
SERVING AS A DIRECTOR OR OFFICER OF AN AUDIT CLIENT
Introduction
to Independence.
523.2 Serving as a Director or Officer of an Audit Client creates self-review and self-interest
threats. This section sets out specific requirements and application material relevant to
applying the conceptual framework in such circumstances.
Service as Director or Officer
R523.3 A partner or employee of the Firm or a Network Firm shall not serve as a Director or
Officer of an Audit Client of the Firm.21
AUST R523.3.1 A Firm shall refuse to perform, or shall withdraw from, the Audit Engagement if a
partner or employee of the Firm were to serve as an Officer (including management
of an Administration) or as a Director of an Audit Client, or as an employee in a
position to exert direct and significant influence over the subject matter of the Audit
Engagement.22
Service as Company Secretary
R523.4 A partner or employee of the Firm or a Network Firm shall not serve as company
secretary for an Audit Client of the Firm, unless:
(a) This practice is specifically permitted under local law, professional rules or
practice;
(b) Management makes all relevant decisions; and
(c) The duties and activities performed are limited to those of a routine and
administrative nature, such as preparing minutes and maintaining statutory
returns.
523.4 A1 The position of company secretary has different implications in different jurisdictions. Duties
might range from: administrative duties (such as personnel management and the
maintenance of company records and registers) to duties as diverse as ensuring that the
company complies with regulations or providing advice on corporate governance matters.
Usually this position is seen to imply a close association with the entity. Therefore, a threat
is created if a partner or employee of the Firm or a Network Firm serves as company
secretary for an Audit Client. (More information on providing non-assurance services to an
Audit Client is set out in Section 600, Provision of Non-Assurance Services to an Audit
Client.)
21 Refer to s324CI of the Corporations Act 2001 regarding prohibitions on partners or employees serving as a
Director or Officer of a corporate Audit Client.
22 The Corporations Act 2001 sets out specific independence requirements for audit companies (refer to
s324CF) and audit Firms (refer to s324CG) in relation to relevant relationships set out in s324CH(1), such as
partners or employees acting as a Director or Officer of an Audit Client.
140
AUST R523.5 As the company secretary of a company incorporated in Australia is an Officer
under the Corporations Act 2001, no partner or employee of a Firm shall act in the
position of company secretary of an Audit Client. If an individual were to accept
such a position the Firm shall comply with the requirements of AUST R523.3.1.
141
SECTION 524
EMPLOYMENT WITH AN AUDIT CLIENT
Introduction
to Independence.
524.2 Employment relationships with an Audit Client might create a self-interest, familiarity or
All Audit Clients
524.3 A1 A familiarity or intimidation threat might be created if any of the following individuals have
been an Audit Team member or partner of the Firm or a Network Firm:
• A Director or Officer of the Audit Client.23
• An employee in a position to exert significant influence over the preparation of the

client’s accounting records or the Financial Statements on which the Firm will
express an Opinion.
Former Partner or Audit Team Member Restrictions
R524.4 The Firm shall ensure that no significant connection remains between the Firm or a
Network Firm and:
(a) A former partner24 who has joined an Audit Client of the Firm; or
(b) A former Audit Team member who has joined the Audit Client,
if either has joined the Audit Client as:
(i) A Director or Officer; or
(ii) An employee in a position to exert significant influence over the preparation

A significant connection remains between the Firm or a Network Firm and the
individual, unless:
(a) The individual is not entitled to any benefits or payments from the Firm or
Network Firm that are not made in accordance with fixed pre-determined
arrangements;
(b) Any amount owed to the individual is not material to the Firm or the Network
Firm; and
23 Refer to s324CI of the Corporations Act 2001 regarding prohibitions on partners or employees serving as a
Director or Officer of a corporate Audit Client.
24 Refer to s324CK of the Corporations Act 2001 regarding the 5 year cooling-off period before a former audit
Engagement Partner can be appointed as a Director or Officer of a corporate Audit Client in circumstances
where another former partner of the Firm is already a Director or Officer of the corporate Audit Client.
142
(c) The individual does not continue to participate or appear to participate in the
Firm’s or the Network Firm’s business or Professional Activities.
524.4 A1 Even if the requirements of paragraph R524.4 are met, a familiarity or intimidation threat
might still be created.
524.4 A2 A familiarity or intimidation threat might also be created if a former partner of the Firm or
Network Firm has joined an entity in one of the positions described in paragraph 524.3 A1
and the entity subsequently becomes an Audit Client of the Firm.
• The position the individual has taken at the client.
• Any involvement the individual will have with the Audit Team.
• The length of time since the individual was an Audit Team member or partner of the
Firm or Network Firm.
• The former position of the individual within the Audit Team, Firm or Network Firm. An
example is whether the individual was responsible for maintaining regular contact
with the client’s management or Those Charged with Governance.
524.4 A4 Examples of actions that might be safeguards to address such familiarity or intimidation
threats include:
• Modifying the audit plan.
• Assigning to the Audit Team individuals who have sufficient experience relative to the
individual who has joined the client.
• Having an appropriate reviewer review the work of the former Audit Team member.
Audit Team Members Entering Employment with a Client
R524.5 A Firm or Network Firm shall have policies and procedures that require Audit Team
members to notify the Firm or Network Firm when entering employment negotiations
with an Audit Client.
524.5 A1 A self-interest threat is created when an Audit Team member participates in the Audit
Engagement while knowing that the Audit Team member will, or might, join the client at
some time in the future.
individual from the Audit Team.
having an appropriate reviewer review any significant judgements made by that individual
while on the team.
143
Key Audit Partners
R524.6 Subject to paragraph R524.8, if an individual who was a Key Audit Partner with
respect to an Audit Client that is a Public Interest Entity joins the client as:
(a) A Director or Officer; or

Firm will express an Opinion,
Independence is compromised unless, subsequent to the individual ceasing to be

a Key Audit Partner:
(i) The Audit Client has issued audited Financial Statements covering a period of
not less than twelve months; and
(ii) The individual was not an Audit Team member with respect to the audit of those
Financial Statements.25
Senior or Managing Partner (Chief Executive or Equivalent) of the Firm
R524.7 Subject to paragraph R524.8, if an individual who was the senior or managing partner
(chief executive or equivalent) of the Firm joins an Audit Client that is a Public
Interest Entity as:

Firm will express an Opinion,
Independence is compromised, unless twelve months have passed since the

individual was the senior or managing partner (chief executive or equivalent) of the
Firm.26
Business Combinations
R524.8 As an exception to paragraphs R524.6 and R524.7, Independence is not

compromised if the circumstances set out in those paragraphs arise as a result of a
business combination and:
(a) The position was not taken in contemplation of the business combination;
(b) Any benefits or payments due to the former partner from the Firm or a Network
Firm have been settled in full, unless made in accordance with fixed pre-
determined arrangements and any amount owed to the partner is not material
to the Firm or Network Firm as applicable;
(c) The former partner does not continue to participate or appear to participate in
the Firm’s or Network Firm’s business or Professional Activities; and
(d) The Firm discusses the former partner’s position held with the Audit Client
with Those Charged with Governance.
25 Refer to s324CI of the Corporations Act 2001 for additional prohibitions on former audit partners joining
corporate Audit Clients.
26 Refer to s324CI of the Corporations Act 2001 for additional prohibitions on former audit partners joining
corporate Audit Clients.
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SECTION 525
TEMPORARY PERSONNEL ASSIGNMENTS
Introduction
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
General
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:
(a) Such assistance is provided only for a short period of time;
(b) The personnel are not involved in providing non-assurance services that
would not be permitted under Section 600 and its subsections; and
(c) The personnel do not assume management responsibilities and the Audit
Client is responsible for directing and supervising the activities of the
personnel.
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SECTION 540
LONG ASSOCIATION OF PERSONNEL (INCLUDING PARTNER ROTATION) WITH

AN AUDIT CLIENT
Introduction
to Independence.
540.2 When an individual is involved in an Audit Engagement over a long period of time, familiarity
and self-interest threats might be created. This section sets out requirements and application
All Audit Clients
540.3 A1 Although an understanding of an Audit Client and its environment is fundamental to audit
quality, a familiarity threat might be created as a result of an individual’s long association
as an Audit Team member with:
(a) The Audit Client and its operations;
(b) The Audit Client’s senior management; or
(c) The Financial Statements on which the Firm will express an Opinion or the financial
information which forms the basis of the Financial Statements.
540.3 A2 A self-interest threat might be created as a result of an individual’s concern about losing a long
standing client or an interest in maintaining a close personal relationship with a member of
senior management or Those Charged with Governance. Such a threat might influence the
individual’s judgement inappropriately.
540.3 A3 Factors that are relevant to evaluating the level of such familiarity or self-interest threats
include:
(a) In relation to the individual:
• The overall length of the individual’s relationship with the client, including if
such relationship existed while the individual was at a prior Firm.
• How long the individual has been an Engagement Team member, and the
nature of the roles performed.
• The extent to which the work of the individual is directed, reviewed and
supervised by more senior personnel.
• The extent to which the individual, due to the individual’s seniority, has the
ability to influence the outcome of the audit, for example, by making key
decisions or directing the work of other Engagement Team members.
• The closeness of the individual’s personal relationship with senior

management or Those Charged with Governance.
• The nature, frequency and extent of the interaction between the individual and
senior management or Those Charged with Governance.
146
(b) In relation to the Audit Client:
• The nature or complexity of the client’s accounting and financial reporting

issues and whether they have changed.
• Whether there have been any recent changes in senior management or Those
• Whether there have been any structural changes in the client’s organisation
which impact the nature, frequency and extent of interactions the individual
might have with senior management or Those Charged with Governance.
540.3 A4 The combination of two or more factors might increase or reduce the level of the threats. For
example, familiarity threats created over time by the increasingly close relationship between an
individual and a member of the client’s senior management would be reduced by the departure
of that member of the client’s senior management.
540.3 A5 An example of an action that might eliminate the familiarity and self-interest threats created
by an individual being involved in an Audit Engagement over a long period of time would
be rotating the individual off the Audit Team.
540.3 A6 Examples of actions that might be safeguards to address such familiarity or self-interest
threats include:
• Changing the role of the individual on the Audit Team or the nature and extent of the
tasks the individual performs.
• Having an appropriate reviewer who was not an Audit Team member review the work
of the individual.
• Performing regular independent internal or external quality reviews of the

engagement.
R540.4 If a Firm decides that the level of the threats created can only be addressed by rotating
the individual off the Audit Team, the Firm shall determine an appropriate period during
which the individual shall not:
(a) Be a member of the Engagement Team for the Audit Engagement;
(b) Provide quality control for the Audit Engagement; or
(c) Exert direct influence on the outcome of the Audit Engagement.
The period shall be of sufficient duration to allow the familiarity and self-interest
threats to be addressed. In the case of a Public Interest Entity, paragraphs R540.5 to
R540.20 also apply.
R540.5 Subject to paragraphs R540.7 to R540.9, in respect of an audit of a Public Interest

Entity, an individual shall not act in any of the following roles, or a combination of
such roles, for a period of more than seven cumulative years27 (the “time-on”
period):
(a) The Engagement Partner;
(b) The individual appointed as responsible for the Engagement Quality Control
Review; or
27 Refer to s324DA of the Corporations Act 2001 which has more restrictive time-on requirements for audit
partners of Listed Entities in Australia.
147
(c) Any other Key Audit Partner role.
After the time-on period, the individual shall serve a “cooling-off” period in
accordance with the provisions in paragraphs R540.11 to AUST R540.19.1.
R540.6 In calculating the time-on period, the count of years shall not be restarted unless the
individual ceases to act in any one of the roles in paragraph R540.5(a) to (c) for a
minimum period. This minimum period is a consecutive period equal to at least the
cooling-off period determined in accordance with paragraphs R540.11 to R540.13 as
applicable to the role in which the individual served in the year immediately before
ceasing such involvement.
540.6 A1 For example, an individual who served as Engagement Partner for four years followed by
three years off can only act thereafter as a Key Audit Partner on the same Audit
Engagement for three further years (making a total of seven cumulative years 28).
Thereafter, that individual is required to cool off in accordance with paragraph R540.14.
R540.7 As an exception to paragraph R540.5, Key Audit Partners whose continuity is

especially important to audit quality may, in rare cases due to unforeseen
circumstances outside the Firm’s control, and with the concurrence of Those Charged
with Governance, be permitted to serve an additional year as a Key Audit Partner as
long as the threat to Independence can be eliminated or reduced to an Acceptable Level.
540.7 A1 For example, a Key Audit Partner may remain in that role on the Audit Team for up to
one additional year in circumstances where, due to unforeseen events, a required rotation
was not possible, as might be the case due to serious illness of the intended Engagement
Partner. In such circumstances, this will involve the Firm discussing with Those Charged
with Governance the reasons why the planned rotation cannot take place and the need
for any safeguards to reduce any threat created.
R540.8 If an Audit Client becomes a Public Interest Entity, a Firm shall take into account the
length of time29 an individual has served the Audit Client as a Key Audit Partner
before the client becomes a Public Interest Entity in determining the timing of the
rotation. If the individual has served the Audit Client as a Key Audit Partner for a
period of five cumulative years or less when the client becomes a Public Interest
Entity, the number of years the individual may continue to serve the client in that
capacity before rotating off the engagement is seven years less the number of years
already served. As an exception to paragraph R540.5, if the individual has served
the Audit Client as a Key Audit Partner for a period of six or more cumulative years
when the client becomes a Public Interest Entity, the individual may continue to
serve in that capacity with the concurrence of Those Charged with Governance for a
maximum of two additional years before rotating off the engagement.
R540.9 When a Firm has only a few people with the necessary knowledge and experience to
serve as a Key Audit Partner on the audit of a Public Interest Entity, rotation of Key
Audit Partners might not be possible. As an exception to paragraph R540.5, if an
independent regulatory body30 in the relevant jurisdiction has provided an
partners of Listed Entities in Australia. The Corporations Act 2001 restricts the number of years that an
Engagement Partner can serve a listed Audit Client (which includes all the years served by the Engagement
Partner on that entity).
30 Refer to s342A of the Corporations Act 2001 which specifies that the Australian Securities and Investment
Commission may grant extensions.
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exemption from partner rotation in such circumstances, an individual may remain a
Key Audit Partner for more than seven years, in accordance with such exemption.
This is provided that the independent regulatory body has specified other
requirements which are to be applied, such as the length of time that the Key Audit
Partner may be exempted from rotation or a regular independent external review.
Other Considerations Relating to the Time-on Period
R540.10 In evaluating the threats created by an individual’s long association with an Audit
Engagement, a Firm shall give particular consideration to the roles undertaken and
the length of an individual’s association with the Audit Engagement prior to the
individual becoming a Key Audit Partner.
540.10 A1 There might be situations where the Firm, in applying the conceptual framework, concludes
that it is not appropriate for an individual who is a Key Audit Partner to continue in that role
even though the length of time served as a Key Audit Partner is less than seven years.
Cooling-off Period
R540.11 If the individual acted as the Engagement Partner for seven cumulative years,31 the
cooling-off period shall be five consecutive years.
R540.12 Where the individual has been appointed as responsible for the Engagement
Quality Control Review and has acted in that capacity for seven cumulative years,32
the cooling-off period shall be three consecutive years.
R540.13 If the individual has acted as a Key Audit Partner other than in the capacities set out in
paragraphs R540.11 and R540.12 for seven cumulative years, the cooling-off period
shall be two consecutive years.
Service in a combination of Key Audit Partner roles
R540.14 If the individual acted in a combination of Key Audit Partner roles and served as the
Engagement Partner for four or more cumulative years, the cooling-off period shall
be five consecutive years.
R540.15 Subject to paragraph R540.16(a), if the individual acted in a combination of Key Audit
Partner roles and served as the Key Audit Partner responsible for the Engagement
Quality Control Review for four or more cumulative years, the cooling-off period shall
be three consecutive years.
R540.16 If an individual has acted in a combination of Engagement Partner and Engagement

Quality Control Review roles for four or more cumulative years during the time-on
period, the cooling-off period shall:
(a) As an exception to paragraph R540.15, be five consecutive years where the
individual has been the Engagement Partner for three or more years; or
(b) Be three consecutive years in the case of any other combination.
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R540.17 If the individual acted in any combination of Key Audit Partner roles other than those
addressed in paragraphs R540.14 to R540.16, the cooling-off period shall be two
consecutive years.
Service at a Prior Firm
R540.18 In determining the number of years that an individual has been a Key Audit Partner
as set out in paragraph R540.5, the length of the relationship shall, where relevant,
include time while the individual was a Key Audit Partner on that engagement at a
prior Firm.
Shorter Cooling-off Period Established by Law or Regulation
R540.19 Where a legislative or regulatory body (or organisation authorised or recognised by

such legislative or regulatory body) has established a cooling-off period for an
Engagement Partner of less than five consecutive years, the higher of that period or
three years may be substituted for the cooling-off period of five consecutive years
specified in paragraphs R540.11, R540.14 and R540.16(a) provided that the
applicable time-on period does not exceed seven years.33
AUST R540.19.1 In Australia, where laws or regulations require a two year cooling-off period for
Engagement Partners for audits of Public Interest Entities,34 the cooling-off period
shall be three years for periods beginning prior to 31 December 2023 provided that
the applicable time-on period does not exceed seven years.35
Restrictions on Activities During the Cooling-off Period
R540.20 For the duration of the relevant cooling-off period, the individual shall not:
(a) Be an Engagement Team member or provide quality control for the Audit
Engagement;
(b) Consult with the Engagement Team or the client regarding technical or
industry-specific issues, transactions or events affecting the Audit Engagement
(other than discussions with the Engagement Team limited to work undertaken or
conclusions reached in the last year of the individual’s time-on period where
this remains relevant to the audit);
(c) Be responsible for leading or coordinating the Professional Services provided

by the Firm or a Network Firm to the Audit Client, or overseeing the relationship
of the Firm or a Network Firm with the Audit Client; or
(d) Undertake any other role or activity not referred to above with respect to the
Audit Client, including the provision of non-assurance services that would
result in the individual:
(i) Having significant or frequent interaction with senior management or

Those Charged with Governance; or
(ii) Exerting direct influence on the outcome of the Audit Engagement.
34 For example, s324DA of the Corporations Act 2001 requires a minimum two year cooling-off period for the
rotation of audit partners of Listed Entities in Australia.
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540.20 A1 The provisions of paragraph R540.20 are not intended to prevent the individual from
assuming a leadership role in the Firm or a Network Firm, such as that of the senior or
managing partner (chief executive or equivalent).
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SECTION 600
PROVISION OF NON-ASSURANCE SERVICES TO AN AUDIT CLIENT
Introduction
600.1 Firms are required to comply with the fundamental principles, be independent, and apply
to Independence.
600.2 Firms and Network Firms might provide a range of non-assurance services to their Audit
Clients, consistent with their skills and expertise. Providing non-assurance services to Audit
Clients might create threats to compliance with the fundamental principles and threats to
Independence.
conceptual framework to identify, evaluate and address threats to Independence when
providing non-assurance services to Audit Clients. The subsections that follow set out
specific requirements and application material relevant when a Firm or Network Firm
provides certain non-assurance services to Audit Clients and indicate the types of threats
that might be created as a result. Some of the subsections include requirements that
expressly prohibit a Firm or Network Firm from providing certain services to an Audit Client
in certain circumstances because the threats created cannot be addressed by applying
safeguards.
General
R600.4 Before a Firm or a Network Firm accepts an engagement to provide a non-assurance

service to an Audit Client, the Firm shall determine whether providing such a service
might create a threat to Independence.
600.4 A1 The requirements and application material in this section assist the Firm in analysing
certain types of non-assurance services and the related threats that might be created if a
Firm or Network Firm provides non-assurance services to an Audit Client.
600.4 A2 New business practices, the evolution of financial markets and changes in information
technology, are among the developments that make it impossible to draw up an all-inclusive
list of non-assurance services that might be provided to an Audit Client. As a result, the
Code does not include an exhaustive list of all non-assurance services that might be
provided to an Audit Client.
Evaluating Threats
600.5 A1 Factors that are relevant in evaluating the level of threats created by providing a non-
assurance service to an Audit Client include:
• The nature, scope and purpose of the service.
• The degree of reliance that will be placed on the outcome of the service as part of
the audit.
• The legal and regulatory environment in which the service is provided.
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• Whether the outcome of the service will affect matters reflected in the Financial
Statements on which the Firm will express an Opinion, and, if so:
o The extent to which the outcome of the service will have a material effect on
the Financial Statements.
o The degree of subjectivity involved in determining the appropriate amounts or
treatment for those matters reflected in the Financial Statements.
• The level of expertise of the client’s management and employees with respect to the
type of service provided.
• The extent of the client’s involvement in determining significant matters of judgement.
• The nature and extent of the impact of the service, if any, on the systems that
generate information that forms a significant part of the client’s:
o Accounting records or Financial Statements on which the Firm will express an
Opinion.
o Internal controls over financial reporting.
• Whether the client is a Public Interest Entity. For example, providing a non-assurance
service to an Audit Client that is a Public Interest Entity might be perceived to result
in a higher level of a threat.
600.5 A2 Subsections 601 to 610 include examples of additional factors that are relevant in
evaluating the level of threats created by providing the non-assurance services set out in
those subsections.
Materiality in Relation to Financial Statements
600.5 A3 Subsections 601 to 610 refer to materiality in relation to an Audit Client’s Financial
Statements. The concept of materiality in relation to an audit is addressed in Auditing and
Assurance Standard ASA 320, Materiality in Planning and Performing an Audit (Compiled),
and in relation to a review in ASRE 2400, Review of a Financial Report Performed by an
Assurance Practitioner Who is Not the Auditor of the Entity. The determination of materiality
involves the exercise of professional judgement and is impacted by both quantitative and
qualitative factors. It is also affected by perceptions of the financial information needs of
users.
Multiple Non-Assurance Services Provided to the Same Audit Client
600.5 A4 A Firm or Network Firm might provide multiple non-assurance services to an Audit Client.
In these circumstances the consideration of the combined effect of threats created by
providing those services is relevant to the Firm’s evaluation of threats.
Addressing Threats
600.6 A1 Subsections 601 to 610 include examples of actions, including safeguards, that might
address threats to Independence created by providing those non-assurance services when
threats are not at an Acceptable Level. Those examples are not exhaustive.
600.6 A2 Some of the subsections include requirements that expressly prohibit a Firm or Network
Firm from providing certain services to an Audit Client in certain circumstances because
the threats created cannot be addressed by applying safeguards.
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600.6 A3 Paragraph 120.10 A2 includes a description of safeguards. In relation to providing non-
assurance services to Audit Clients, safeguards are actions, individually or in combination,
that the Firm takes that effectively reduce threats to Independence to an Acceptable Level.
In some situations, when a threat is created by providing a non-assurance service to an
Audit Client, safeguards might not be available. In such situations, the application of the
conceptual framework set out in Section 120 requires the Firm to decline or end the non-
assurance service or the Audit Engagement.
Prohibition on Assuming Management Responsibilities
R600.7 A Firm or a Network Firm shall not assume a management responsibility for an Audit
Client.
600.7 A1 Management responsibilities involve controlling, leading and directing an entity, including
making decisions regarding the acquisition, deployment and control of human, financial,
technological, physical and intangible resources.
600.7 A2 Providing a non-assurance service to an Audit Client creates self-review and self-interest
threats if the Firm or Network Firm assumes a management responsibility when performing
the service. Assuming a management responsibility also creates a familiarity threat and
might create an advocacy threat because the Firm or Network Firm becomes too closely
aligned with the views and interests of management.
600.7 A3 Determining whether an activity is a management responsibility depends on the

circumstances and requires the exercise of professional judgement. Examples of activities
that would be considered a management responsibility include:
• Setting policies and strategic direction.
• Hiring or dismissing employees.
• Directing and taking responsibility for the actions of employees in relation to the
employees’ work for the entity.
• Authorising transactions.
• Controlling or managing bank accounts or investments.
• Deciding which recommendations of the Firm or Network Firm or other third parties
to implement.
• Reporting to Those Charged with Governance on behalf of management.

• Taking responsibility for:
o The preparation and fair presentation of the Financial Statements in
accordance with the applicable financial reporting framework.
o Designing, implementing, monitoring or maintaining internal control.
600.7 A4 Providing advice and recommendations to assist the management of an Audit Client in
discharging its responsibilities is not assuming a management responsibility. (Ref: Paras.
R600.7 to 600.7 A3).
R600.8 To avoid assuming a management responsibility when providing any non-assurance

service to an Audit Client, the Firm shall be satisfied that client management makes
all judgements and decisions that are the proper responsibility of management. This
includes ensuring that the client’s management:
(a) Designates an individual who possesses suitable skill, knowledge and

experience to be responsible at all times for the client’s decisions and to
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oversee the services. Such an individual, preferably within senior
management, would understand:
(i) The objectives, nature and results of the services; and
(ii) The respective client and Firm or Network Firm responsibilities.
However, the individual is not required to possess the expertise to perform or

re-perform the services.
(b) Provides oversight of the services and evaluates the adequacy of the results
of the service performed for the client’s purpose.
(c) Accepts responsibility for the actions, if any, to be taken arising from the
results of the services.
Providing Non-Assurance Services to an Audit Client that Later Becomes a Public Interest Entity
R600.9 A non-assurance service provided, either currently or previously, by a Firm or a

Network Firm to an Audit Client compromises the Firm’s Independence when the
client becomes a Public Interest Entity unless:
(a) The previous non-assurance service complies with the provisions of this
section that relate to Audit Clients that are not Public Interest Entities;
(b) Non-assurance services currently in progress that are not permitted under this
section for Audit Clients that are Public Interest Entities are ended before, or
as soon as practicable after, the client becomes a Public Interest Entity; and
(c) The Firm addresses threats that are created that are not at an Acceptable Level.
Considerations for Certain Related Entities
R600.10 This section includes requirements that prohibit Firms and Network Firms from
assuming management responsibilities or providing certain non-assurance services
to Audit Clients. As an exception to those requirements, a Firm or Network Firm may
assume management responsibilities or provide certain non-assurance services
that would otherwise be prohibited to the following Related Entities of the client on
whose Financial Statements the Firm will express an opinion:
(a) An entity that has direct or indirect control over the client;
(b) An entity with a Direct Financial Interest in the client if that entity has
significant influence over the client and the interest in the client is material to
such entity; or
(c) An entity which is under common control with the client,
provided that all of the following conditions are met:

(i) The Firm or a Network Firm does not express an opinion on the Financial
Statements of the Related Entity;
(ii) The Firm or a Network Firm does not assume a management responsibility,
directly or indirectly, for the entity on whose Financial Statements the Firm will
express an opinion;
(iii) The services do not create a self-review threat because the results of the
services will not be subject to audit procedures; and
(iv) The Firm addresses other threats created by providing such services that are
not at an Acceptable Level.
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SUBSECTION 601 – ACCOUNTING AND BOOKKEEPING SERVICES
Introduction
601.1 Providing accounting and bookkeeping services to an Audit Client might create a self-
review threat.
601.2 In addition to the specific requirements and application material in this subsection, the
requirements and application material in paragraphs 600.1 to R600.10 are relevant to
applying the conceptual framework when providing an Audit Client with accounting and
bookkeeping services. This subsection includes requirements that prohibit Firms and
Network Firms from providing certain accounting and bookkeeping services to Audit Clients
in some circumstances because the threats created cannot be addressed by applying
safeguards.
All Audit Clients
601.3 A1 Accounting and bookkeeping services comprise a broad range of services including:
• Preparing accounting records and Financial Statements.

• Recording transactions.
• Payroll services.
601.3 A2 Management is responsible for the preparation and fair presentation of the Financial
Statements in accordance with the applicable financial reporting framework. These
responsibilities include:
• Determining accounting policies and the accounting treatment in accordance with

those policies.
• Preparing or changing source documents or originating data, in electronic or other

form, evidencing the occurrence of a transaction. Examples include:
o Purchase orders.
o Payroll time records.
o Customer orders.
• Originating or changing journal entries.
• Determining or approving the account classifications of transactions.
601.3 A3 The audit process necessitates dialogue between the Firm and the management of the
Audit Client, which might involve:
• Applying accounting standards or policies and Financial Statement disclosure

requirements.
• Assessing the appropriateness of financial and accounting control and the methods
used in determining the stated amounts of assets and liabilities.
• Proposing adjusting journal entries.
These activities are considered to be a normal part of the audit process and do not usually
create threats as long as the client is responsible for making decisions in the preparation
of accounting records and Financial Statements.
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601.3 A4 Similarly, the client might request technical assistance on matters such as resolving
account reconciliation problems or analysing and accumulating information for regulatory
reporting. In addition, the client might request technical advice on accounting issues such
as the conversion of existing Financial Statements from one financial reporting framework
to another. Examples include:
• Complying with group accounting policies.
• Transitioning to a different financial reporting framework such as International

Financial Reporting Standards.
Such services do not usually create threats provided neither the Firm nor Network Firm
assumes a management responsibility for the client.
Accounting and Bookkeeping Services that are Routine or Mechanical
601.4 A1 Accounting and bookkeeping services that are routine or mechanical in nature require little
or no professional judgement. Some examples of these services are:
• Preparing payroll calculations or reports based on client-originated data for approval

and payment by the client.
• Recording recurring transactions for which amounts are easily determinable from
source documents or originating data, such as a utility bill where the client has
determined or approved the appropriate account classification.
• Calculating depreciation on fixed assets when the client determines the accounting
policy and estimates of useful life and residual values.
• Posting transactions coded by the client to the general ledger.
• Posting client-approved entries to the trial balance.
• Preparing Financial Statements based on information in the client-approved trial

balance and preparing related notes based on client-approved records.
Audit Clients that are Not Public Interest Entities
R601.5 A Firm or a Network Firm shall not provide to an Audit Client that is not a Public
Interest Entity accounting and bookkeeping services including preparing Financial
Statements on which the Firm will express an Opinion or financial information which
forms the basis of such Financial Statements, unless:
(a) The services are of a routine or mechanical nature; and

(b) The Firm addresses any threats that are created by providing such services
that are not at an Acceptable Level.
601.5 A1 Examples of actions that might be safeguards to address a self-review threat created when
providing accounting and bookkeeping services of a routine and mechanical nature to an
Audit Client include:
• Having an appropriate reviewer who was not involved in providing the service review
the audit work or service performed.
R601.6 Subject to paragraph R601.7, a Firm or a Network Firm shall not provide to an Audit
Client that is a Public Interest Entity accounting and bookkeeping services including
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preparing Financial Statements on which the Firm will express an Opinion or
financial information which forms the basis of such Financial Statements.
R601.7 As an exception to paragraph R601.6, a Firm or Network Firm may provide

accounting and bookkeeping services of a routine or mechanical nature for divisions
or Related Entities of an Audit Client that is a Public Interest Entity if the personnel
providing the services are not Audit Team members and:
(a) The divisions or Related Entities for which the service is provided are
collectively immaterial to the Financial Statements on which the Firm will
express an Opinion; or
(b) The service relates to matters that are collectively immaterial to the Financial
Statements of the division or Related Entity.
SUBSECTION 602 – ADMINISTRATIVE SERVICES
Introduction
602.1 Providing administrative services to an Audit Client does not usually create a threat.
602.2 In addition to the specific application material in this subsection, the requirements and
application material in paragraphs 600.1 to R600.10 are relevant to applying the conceptual
framework when providing administrative services.
All Audit Clients
602.3 A1 Administrative services involve assisting clients with their routine or mechanical tasks
within the normal course of operations. Such services require little to no professional
judgement and are clerical in nature.
602.3 A2 Examples of administrative services include:
• Word processing services.
• Preparing administrative or statutory forms for client approval.
• Submitting such forms as instructed by the client.
• Monitoring statutory filing dates, and advising an Audit Client of those dates.
SUBSECTION 603 – VALUATION SERVICES
Introduction
603.1 Providing valuation services to an Audit Client might create a self-review or advocacy
threat.
applying the conceptual framework when providing valuation services to an Audit Client.
This subsection includes requirements that prohibit Firms and Network Firms from
providing certain valuation services to Audit Clients in some circumstances because the
threats created cannot be addressed by applying safeguards.
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All Audit Clients
603.3 A1 A valuation comprises the making of assumptions with regard to future developments, the
application of appropriate methodologies and techniques, and the combination of both to
compute a certain value, or range of values, for an asset, a liability or for a business as a
whole.
603.3 A2 If a Firm or Network Firm is requested to perform a valuation to assist an Audit Client with
its tax reporting obligations or for tax planning purposes and the results of the valuation will
not have a direct effect on the Financial Statements, the application material set out in
paragraphs 604.9 A1 to 604.9 A5, relating to such services, applies.
603.3 A3 Factors that are relevant in evaluating the level of self-review or advocacy threats created
by providing valuation services to an Audit Client include:
• The use and purpose of the valuation report.
• Whether the valuation report will be made public.
• The extent of the client’s involvement in determining and approving the valuation
methodology and other significant matters of judgement.
• The degree of subjectivity inherent in the item for valuations involving standard or
established methodologies.
• Whether the valuation will have a material effect on the Financial Statements.
• The extent and clarity of the disclosures related to the valuation in the Financial
Statements.
• The degree of dependence on future events of a nature that might create significant
volatility inherent in the amounts involved.
603.3 A4 Examples of actions that might be safeguards to address threats include:
• Using professionals who are not Audit Team members to perform the service might
address self-review or advocacy threats.
the audit work or service performed might address a self-review threat.
R603.4 A Firm or a Network Firm shall not provide a valuation service to an Audit Client that
is not a Public Interest Entity if:
(a) The valuation involves a significant degree of subjectivity; and
(b) The valuation will have a material effect on the Financial Statements on which
the Firm will express an Opinion.
603.4 A1 Certain valuations do not involve a significant degree of subjectivity. This is likely to be the
case when the underlying assumptions are either established by law or regulation, or are
widely accepted and when the techniques and methodologies to be used are based on
generally accepted standards or prescribed by law or regulation. In such circumstances,
the results of a valuation performed by two or more parties are not likely to be materially
different.
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R603.5 A Firm or a Network Firm shall not provide a valuation service to an Audit Client that
is a Public Interest Entity if the valuation service would have a material effect,
individually or in the aggregate, on the Financial Statements on which the Firm will
express an Opinion.
SUBSECTION 604 – TAX SERVICES
Introduction
604.1 Providing tax services to an Audit Client might create a self-review or advocacy threat.
applying the conceptual framework when providing a tax service to an Audit Client. This
subsection includes requirements that prohibit Firms and Network Firms from providing
certain tax services to Audit Clients in some circumstances because the threats created
cannot be addressed by applying safeguards.
All Audit Clients
604.3 A1 Tax services comprise a broad range of services, including activities such as:
• Tax return preparation.
• Tax calculations for the purpose of preparing the accounting entries.
• Tax planning and other tax advisory services.
• Tax services involving valuations.
• Assistance in the resolution of tax disputes.
While this subsection deals with each type of tax service listed above under separate
headings, in practice, the activities involved in providing tax services are often inter-related.
604.3 A2 Factors that are relevant in evaluating the level of threats created by providing any tax
service to an Audit Client include:
• The particular characteristics of the engagement.

• The level of tax expertise of the client’s employees.
• The system by which the tax authorities assess and administer the tax in question
and the role of the Firm or Network Firm in that process.
• The complexity of the relevant tax regime and the degree of judgement necessary in
applying it.
Tax Return Preparation
All Audit Clients
604.4 A1 Providing tax return preparation services does not usually create a threat.
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604.4 A2 Tax return preparation services involve:
• Assisting clients with their tax reporting obligations by drafting and compiling
information, including the amount of tax due (usually on standardised forms) required
to be submitted to the applicable tax authorities.
• Advising on the tax return treatment of past transactions and responding on behalf
of the Audit Client to the tax authorities’ requests for additional information and
analysis (for example, providing explanations of and technical support for the
approach being taken).
604.4 A3 Tax return preparation services are usually based on historical information and principally
involve analysis and presentation of such historical information under existing tax law,
including precedents and established practice. Further, the tax returns are subject to
whatever review or approval process the tax authority considers appropriate.
Tax Calculations for the Purpose of Preparing Accounting Entries
All Audit Clients
604.5 A1 Preparing calculations of current and deferred tax liabilities (or assets) for an Audit Client
for the purpose of preparing accounting entries that will be subsequently audited by the
Firm creates a self-review threat.
604.5 A2 In addition to the factors in paragraph 604.3 A2, a factor that is relevant in evaluating the
level of the threat created when preparing such calculations for an Audit Client is whether
the calculation might have a material effect on the Financial Statements on which the Firm
will express an Opinion.
604.5 A3 Examples of actions that might be safeguards to address such a self-review threat when
the Audit Client is not a Public Interest Entity include:
the audit work or service performed.
R604.6 A Firm or a Network Firm shall not prepare tax calculations of current and deferred
tax liabilities (or assets) for an Audit Client that is a Public Interest Entity for the
purpose of preparing accounting entries that are material to the Financial
604.6 A1 The examples of actions that might be safeguards in paragraph 604.5 A3 to address self-
review threats are also applicable when preparing tax calculations of current and deferred
tax liabilities (or assets) to an Audit Client that is a Public Interest Entity that are immaterial
to the Financial Statements on which the Firm will express an Opinion.
Tax Planning and Other Tax Advisory Services
All Audit Clients
604.7 A1 Providing tax planning and other tax advisory services might create a self-review or
advocacy threat.
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604.7 A2 Tax planning or other tax advisory services comprise a broad range of services, such as
advising the client how to structure its affairs in a tax efficient manner or advising on the
application of a new tax law or regulation.
604.7 A3 In addition to paragraph 604.3 A2, factors that are relevant in evaluating the level of self-
review or advocacy threats created by providing tax planning and other tax advisory
services to Audit Clients include:
• The degree of subjectivity involved in determining the appropriate treatment for the
tax advice in the Financial Statements.
• Whether the tax treatment is supported by a private ruling or has otherwise been
cleared by the tax authority before the preparation of the Financial Statements.
For example, whether the advice provided as a result of the tax planning and other
tax advisory services:
o Is clearly supported by a tax authority or other precedent.
o Is an established practice.
o Has a basis in tax law that is likely to prevail.
• The extent to which the outcome of the tax advice will have a material effect on the
Financial Statements.
• Whether the effectiveness of the tax advice depends on the accounting treatment or
presentation in the Financial Statements and there is doubt as to the appropriateness
of the accounting treatment or presentation under the relevant financial reporting
framework.
• Having an appropriate reviewer, who was not involved in providing the service review
• Obtaining pre-clearance from the tax authorities might address self-review or

advocacy threats.
When Effectiveness of Tax Advice Is Dependent on a Particular Accounting Treatment or Presentation
R604.8 A Firm or a Network Firm shall not provide tax planning and other tax advisory
services to an Audit Client when the effectiveness of the tax advice depends on a
particular accounting treatment or presentation in the Financial Statements and:
(a) The Audit Team has reasonable doubt as to the appropriateness of the related
accounting treatment or presentation under the relevant financial reporting
framework; and
(b) The outcome or consequences of the tax advice will have a material effect on
the Financial Statements on which the Firm will express an Opinion.
Tax Services Involving Valuations
All Audit Clients
604.9 A1 Providing tax valuation services to an Audit Client might create a self-review or advocacy
threat.
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604.9 A2 A Firm or a Network Firm might perform a valuation for tax purposes only, where the result
of the valuation will not have a direct effect on the Financial Statements (that is, the
Financial Statements are only affected through accounting entries related to tax). This
would not usually create threats if the effect on the Financial Statements is immaterial or
the valuation is subject to external review by a tax authority or similar regulatory authority.
604.9 A3 If the valuation that is performed for tax purposes is not subject to an external review and
the effect is material to the Financial Statements, in addition to paragraph 604.3 A2, the
following factors are relevant in evaluating the level of self-review or advocacy threats
created by providing those services to an Audit Client:
• The extent to which the valuation methodology is supported by tax law or regulation,
other precedent or established practice.
• The degree of subjectivity inherent in the valuation.

• The reliability and extent of the underlying data.
• Obtaining pre-clearance from the tax authorities might address self-review or

advocacy threats.
604.9 A5 A Firm or Network Firm might also perform a tax valuation to assist an Audit Client with its
tax reporting obligations or for tax planning purposes where the result of the valuation will
have a direct effect on the Financial Statements. In such situations, the requirements and
application material set out in Subsection 603 relating to valuation services apply.
Assistance in the Resolution of Tax Disputes
All Audit Clients
604.10 A1 Providing assistance in the resolution of tax disputes to an Audit Client might create a self-
review or advocacy threat.
604.10 A2 A tax dispute might reach a point when the tax authorities have notified an Audit Client that
arguments on a particular issue have been rejected and either the tax authority or the client
refers the matter for determination in a formal proceeding, for example, before a public
tribunal or court.
604.10 A3 In addition to paragraph 604.3 A2, factors that are relevant in evaluating the level of self-
review or advocacy threats created by assisting an Audit Client in the resolution of tax
disputes include:
• The role management plays in the resolution of the dispute.
• The extent to which the outcome of the dispute will have a material effect on the
Financial Statements on which the Firm will express an Opinion.
• Whether the advice that was provided is the subject of the tax dispute.
• The extent to which the matter is supported by tax law or regulation, other precedent,
or established practice.
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• Whether the proceedings are conducted in public.
the audit work or the service performed might address a self-review threat.
Resolution of Tax Matters Involving Acting as An Advocate
R604.11 A Firm or a Network Firm shall not provide tax services that involve assisting in the
resolution of tax disputes to an Audit Client if:
(a) The services involve acting as an advocate for the Audit Client before a public
tribunal or court in the resolution of a tax matter; and
(b) The amounts involved are material to the Financial Statements on which the
604.11 A1 Paragraph R604.11 does not preclude a Firm or Network Firm from having a continuing
advisory role in relation to the matter that is being heard before a public tribunal or court,
for example:
• Responding to specific requests for information.
• Providing factual accounts or testimony about the work performed.
• Assisting the client in analysing the tax issues related to the matter.
604.11 A2 What constitutes a “public tribunal or court” depends on how tax proceedings are heard in
the particular jurisdiction.
SUBSECTION 605 – INTERNAL AUDIT SERVICES
Introduction
605.1 Providing internal audit services to an Audit Client might create a self-review threat.
applying the conceptual framework when providing an internal audit service to an Audit
Client. This subsection includes requirements that prohibit Firms and Network Firms from
providing certain internal audit services to Audit Clients in some circumstances because
the threats created cannot be addressed by applying safeguards.36
36 The AUASB has prohibited the use of direct assistance from individuals within the client’s internal audit
function in Auditing and Assurance Standard ASA 610 Using the Work of Internal Auditors (November
2013).
164
All Audit Clients
605.3 A1 Internal audit services involve assisting the Audit Client in the performance of its internal
audit activities. Internal audit activities might include:
• Monitoring of internal control – reviewing controls, monitoring their operation and

recommending improvements to them.
• Examining financial and operating information by:

o Reviewing the means used to identify, measure, classify and report financial
and operating information.
o Inquiring specifically into individual items including detailed testing of
transactions, balances and procedures.
• Reviewing the economy, efficiency and effectiveness of operating activities including

non-financial activities of an entity.
• Reviewing compliance with:

o Laws, regulations and other external requirements.
o Management policies, directives and other internal requirements.
605.3 A2 The scope and objectives of internal audit activities vary widely and depend on the size
and structure of the entity and the requirements of management and Those Charged with
Governance.
R605.4 When providing an internal audit service to an Audit Client, the Firm shall be
satisfied that:
(a) The client designates an appropriate and competent resource, preferably

within senior management, to:
(i) Be responsible at all times for internal audit activities; and
(ii) Acknowledge responsibility for designing, implementing, monitoring

and maintaining internal control.
(b) The client’s management or Those Charged with Governance reviews,

assesses and approves the scope, risk and frequency of the internal audit
services;
(c) The client’s management evaluates the adequacy of the internal audit services
and the findings resulting from their performance;
(d) The client’s management evaluates and determines which recommendations

resulting from internal audit services to implement and manages the
implementation process; and
(e) The client’s management reports to Those Charged with Governance the
significant findings and recommendations resulting from the internal audit
services.
605.4 A1 Paragraph R600.7 precludes a Firm or a Network Firm from assuming a management
responsibility. Performing a significant part of the client’s internal audit activities increases
the possibility that Firm or Network Firm personnel providing internal audit services will
assume a management responsibility.
165
605.4 A2 Examples of internal audit services that involve assuming management responsibilities
include:
• Setting internal audit policies or the strategic direction of internal audit activities.
• Directing and taking responsibility for the actions of the entity’s internal audit
employees.
• Deciding which recommendations resulting from internal audit activities to

implement.
• Reporting the results of the internal audit activities to Those Charged with
Governance on behalf of management.
• Performing procedures that form part of the internal control, such as reviewing and
approving changes to employee data access privileges.
• Taking responsibility for designing, implementing, monitoring and maintaining

internal control.
• Performing outsourced internal audit services, comprising all or a substantial portion

of the internal audit function, where the Firm or Network Firm is responsible for
determining the scope of the internal audit work, and might have responsibility for
one or more of the matters noted above.
605.4 A3 When a Firm uses the work of an internal audit function in an Audit Engagement, Auditing
and Assurance Standards require the performance of procedures to evaluate the adequacy
of that work. Similarly, when a Firm or Network Firm accepts an engagement to provide
internal audit services to an Audit Client, the results of those services might be used in
conducting the external audit. This creates a self-review threat because it is possible that
the Audit Team will use the results of the internal audit service for purposes of the Audit
Engagement without:
(a) Appropriately evaluating those results; or
(b) Exercising the same level of professional scepticism as would be exercised when
the internal audit work is performed by individuals who are not members of the Firm.
605.4 A4 Factors that are relevant in evaluating the level of such a self-review threat include:
• The materiality of the related Financial Statement amounts.
• The risk of misstatement of the assertions related to those Financial Statement

amounts.
• The degree of reliance that the Audit Team will place on the work of the internal audit
service, including in the course of an external audit.
605.4 A5 An example of an action that might be a safeguard to address such a self-review threat is
using professionals who are not Audit Team members to perform the service.
R605.5 A Firm or a Network Firm shall not provide internal audit services to an Audit Client
that is a Public Interest Entity, if the services relate to:
(a) A significant part of the internal controls over financial reporting;

(b) Financial accounting systems that generate information that is, individually or
in the aggregate, material to the client’s accounting records or Financial
Statements on which the Firm will express an Opinion; or
166
(c) Amounts or disclosures that are, individually or in the aggregate, material to
the Financial Statements on which the Firm will express an Opinion.
SUBSECTION 606 – INFORMATION TECHNOLOGY SYSTEMS SERVICES
Introduction
606.1 Providing information technology (IT) systems services to an Audit Client might create a
self-review threat.
applying the conceptual framework when providing an IT systems service to an Audit Client.
providing certain IT systems services to Audit Clients in some circumstances because the
threats created cannot be addressed by applying safeguards.
All Audit Clients
606.3 A1 Services related to IT systems include the design or implementation of hardware or

software systems. The IT systems might:
(a) Aggregate source data;
(b) Form part of the internal control over financial reporting; or
(c) Generate information that affects the accounting records or Financial Statements,
including related disclosures.
However, the IT systems might also involve matters that are unrelated to the Audit Client’s
accounting records or the internal control over financial reporting or Financial Statements.
responsibility. Providing the following IT systems services to an Audit Client does not
usually create a threat as long as personnel of the Firm or Network Firm do not assume a
management responsibility:
(a) Designing or implementing IT systems that are unrelated to internal control over
financial reporting;
(b) Designing or implementing IT systems that do not generate information forming a

significant part of the accounting records or Financial Statements;
(c) Implementing “off-the-shelf” accounting or financial information reporting software
that was not developed by the Firm or Network Firm, if the customisation required to
meet the client’s needs is not significant; and
(d) Evaluating and making recommendations with respect to an IT system designed,
implemented or operated by another service provider or the client.
167
R606.4 When providing IT systems services to an Audit Client, the Firm or Network Firm
shall be satisfied that:
(a) The client acknowledges its responsibility for establishing and monitoring a
system of internal controls;
(b) The client assigns the responsibility to make all management decisions with
respect to the design and implementation of the hardware or software system
to a competent employee, preferably within senior management;
(c) The client makes all management decisions with respect to the design and
implementation process;
(d) The client evaluates the adequacy and results of the design and implementation
of the system; and
(e) The client is responsible for operating the system (hardware or software) and
for the data it uses or generates.
606.4 A1 Factors that are relevant in evaluating the level of a self-review threat created by providing
IT systems services to an Audit Client include:
• The nature of IT systems and the extent to which they impact or interact with the
client’s accounting records or Financial Statements.
• The degree of reliance that will be placed on the particular IT systems as part of the
audit.
606.4 A2 An example of an action that might be a safeguard to address such a self-review threat is
using professionals who are not Audit Team members to perform the service.
R606.5 A Firm or a Network Firm shall not provide IT systems services to an Audit Client
that is a Public Interest Entity if the services involve designing or implementing IT
systems that:
(a) Form a significant part of the internal control over financial reporting; or
(b) Generate information that is significant to the client’s accounting records or
SUBSECTION 607 – LITIGATION SUPPORT SERVICES
Introduction
607.1 Providing certain litigation support services to an Audit Client might create a self-review or
advocacy threat.
607.2 In addition to the specific application material in this subsection, the requirements and
application material in paragraphs 600.1 to R600.10 are relevant to applying the conceptual
framework when providing a litigation support service to an Audit Client.
168
All Audit Clients
607.3 A1 Litigation support services might include activities such as:

• Assisting with document management and retrieval.
• Acting as a witness, including an expert witness.
• Calculating estimated damages or other amounts that might become receivable or

payable as the result of litigation or other legal dispute.
by providing litigation support services to an Audit Client include:
• The legal and regulatory environment in which the service is provided, for example,
whether an expert witness is chosen and appointed by a court.
• The nature and characteristics of the service.

• The extent to which the outcome of the litigation support service will have a material
effect on the Financial Statements on which the Firm will express an Opinion.
607.3 A3 An example of an action that might be a safeguard to address such a self-review or

advocacy threat is using a professional who was not an Audit Team member to perform the
service.
607.3 A4 If a Firm or a Network Firm provides a litigation support service to an Audit Client and the
service involves estimating damages or other amounts that affect the Financial Statements
on which the Firm will express an Opinion, the requirements and application material set
out in Subsection 603 related to valuation services apply.
SUBSECTION 608 – LEGAL SERVICES
Introduction
608.1 Providing legal services to an Audit Client might create a self-review or advocacy threat.
applying the conceptual framework when providing a legal service to an Audit Client. This
subsection includes requirements that prohibit Firms and Network Firms from providing
certain legal services to Audit Clients in some circumstances because the threats cannot
be addressed by applying safeguards.
All Audit Clients
608.3 A1 Legal services are defined as any services for which the individual providing the services
must either:
(a) Have the required legal training to practice law; or
(b) Be admitted to practice law before the courts of the jurisdiction in which such services
are to be provided.
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Acting in an Advisory Role
608.4 A1 Depending on the jurisdiction, legal advisory services might include a wide and diversified
range of service areas including both corporate and commercial services to Audit Clients,
such as:
• Contract support.
• Supporting an Audit Client in executing a transaction.

• Mergers and acquisitions.
• Supporting and assisting an Audit Client’s internal legal department.
• Legal due diligence and restructuring.
by providing legal advisory services to an Audit Client include:
• The materiality of the specific matter in relation to the client’s Financial Statements.
• The complexity of the legal matter and the degree of judgement necessary to provide
the service.

address a self-review or advocacy threat.
the audit work or the service performed might address a self-review threat.
Acting as General Counsel
R608.5 A partner or employee of the Firm or the Network Firm shall not serve as general
counsel for legal affairs of an Audit Client.
608.5 A1 The position of general counsel is usually a senior management position with broad
responsibility for the legal affairs of a company.
Acting in an Advocacy Role
R608.6 A Firm or a Network Firm shall not act in an advocacy role for an Audit Client in
resolving a dispute or litigation when the amounts involved are material to the
608.6 A1 Examples of actions that might be safeguards to address a self-review threat created when
acting in an advocacy role for an Audit Client when the amounts involved are not material
to the Financial Statements on which the Firm will express an Opinion include:
the audit work or the service performed.
SUBSECTION 609 – RECRUITING SERVICES
Introduction
609.1 Providing recruiting services to an Audit Client might create a self-interest, familiarity or
intimidation threat.
170
applying the conceptual framework when providing a recruiting service to an Audit Client.
providing certain types of recruiting services to Audit Clients in some circumstances
because the threats created cannot be addressed by applying safeguards.
All Audit Clients
609.3 A1 Recruiting services might include activities such as:

• Developing a job description.
• Developing a process for identifying and selecting potential candidates.
• Searching for or seeking out candidates.
• Screening potential candidates for the role by:

o Reviewing the professional qualifications or competence of applicants and
determining their suitability for the position.
o Undertaking reference checks of prospective candidates.
o Interviewing and selecting suitable candidates and advising on candidates’
competence.
• Determining employment terms and negotiating details, such as salary, hours and
other compensation.
responsibility. Providing the following services does not usually create a threat as long as
personnel of the Firm or Network Firm does not assume a management responsibility:
• Reviewing the professional qualifications of a number of applicants and providing

advice on their suitability for the position.
• Interviewing candidates and advising on a candidate’s competence for financial

accounting, administrative or control positions.
R609.4 When a Firm or Network Firm provides recruiting services to an Audit Client, the Firm
shall be satisfied that:
(a) The client assigns the responsibility to make all management decisions with
respect to hiring the candidate for the position to a competent employee,
preferably within senior management; and
(b) The client makes all management decisions with respect to the hiring process,
including:
• Determining the suitability of prospective candidates and selecting

suitable candidates for the position.
• Determining employment terms and negotiating details, such as salary,

hours and other compensation.
171
609.5 A1 Factors that are relevant in evaluating the level of self-interest, familiarity or intimidation
threats created by providing recruiting services to an Audit Client include:
• The nature of the requested assistance.
• The role of the individual to be recruited.
• Any conflicts of interest or relationships that might exist between the candidates and
the Firm providing the advice or service.

familiarity or intimidation threat is using professionals who are not Audit Team members to
perform the service.
Recruiting Services that are Prohibited
R609.6 When providing recruiting services to an Audit Client, the Firm or the Network Firm
shall not act as a negotiator on the client’s behalf.
R609.7 A Firm or a Network Firm shall not provide a recruiting service to an Audit Client if
the service relates to:
(a) Searching for or seeking out candidates; or

(b) Undertaking reference checks of prospective candidates,
with respect to the following positions:
(i) A Director or Officer of the entity; or
(ii) A member of senior management in a position to exert significant influence

over the preparation of the client’s accounting records or the Financial
SUBSECTION 610 – CORPORATE FINANCE SERVICES
Introduction
610.1 Providing corporate finance services to an Audit Client might create a self-review or
advocacy threat.
applying the conceptual framework when providing a corporate finance service to an Audit
Client. This subsection includes requirements that prohibit Firms and Network Firms from
providing certain corporate finance services in some circumstances to Audit Clients
because the threats created cannot be addressed by applying safeguards.
All Audit Clients
610.3 A1 Examples of corporate finance services that might create a self-review or advocacy threat
include:
• Assisting an Audit Client in developing corporate strategies.

• Identifying possible targets for the Audit Client to acquire.
• Advising on disposal transactions.
172
• Assisting in finance raising transactions.
• Providing structuring advice.
• Providing advice on the structuring of a corporate finance transaction or on financing

arrangements that will directly affect amounts that will be reported in the Financial
610.3 A2 Factors that are relevant in evaluating the level of such threats created by providing
corporate finance services to an Audit Client include:
• The degree of subjectivity involved in determining the appropriate treatment for the
outcome or consequences of the corporate finance advice in the Financial
Statements.
• The extent to which:
o The outcome of the corporate finance advice will directly affect amounts
recorded in the Financial Statements.
o The amounts are material to the Financial Statements.
• Whether the effectiveness of the corporate finance advice depends on a particular

accounting treatment or presentation in the Financial Statements and there is doubt
as to the appropriateness of the related accounting treatment or presentation under
the relevant financial reporting framework.
Corporate Finance Services that are Prohibited
R610.4 A Firm or a Network Firm shall not provide corporate finance services to an Audit
Client that involve promoting, dealing in, or underwriting the Audit Client’s shares.
R610.5 A Firm or a Network Firm shall not provide corporate finance advice to an Audit
Client where the effectiveness of such advice depends on a particular accounting
treatment or presentation in the Financial Statements on which the Firm will express
an Opinion and:
(a) The Audit Team has reasonable doubt as to the appropriateness of the related
accounting treatment or presentation under the relevant financial reporting
framework; and
(b) The outcome or consequences of the corporate finance advice will have a
material effect on the Financial Statements on which the Firm will express an
Opinion.
173
SECTION 800
REPORTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS THAT INCLUDE

A RESTRICTION ON USE AND DISTRIBUTION (AUDIT AND REVIEW
ENGAGEMENTS)
Introduction
to Independence.
800.2 This section sets out certain modifications to Part 4A which are permitted in certain
circumstances involving audits of Special Purpose Financial Statements where the report
includes a restriction on use and distribution. In this section, an engagement to issue a
restricted use and distribution report in the circumstances set out in paragraph R800.3 is
referred to as an “eligible Audit Engagement.”
General
R800.3 When a Firm intends to issue a report on an audit of Special Purpose Financial
Statements which includes a restriction on use and distribution, the Independence
requirements set out in Part 4A shall be eligible for the modifications that are
permitted by this section, but only if:
(a) The Firm communicates with the intended users of the report regarding the
modified Independence requirements that are to be applied in providing the
service; and
(b) The intended users of the report understand the purpose and limitations of the
report and explicitly agree to the application of the modifications.
800.3 A1 The intended users of the report might obtain an understanding of the purpose and
limitations of the report by participating, either directly, or indirectly through a representative
who has authority to act for the intended users, in establishing the nature and scope of the
engagement. In either case, this participation helps the Firm to communicate with intended
users about Independence matters, including the circumstances that are relevant to
applying the conceptual framework. It also allows the Firm to obtain the agreement of the
intended users to the modified Independence requirements.
R800.4 Where the intended users are a class of users who are not specifically identifiable
by name at the time the engagement terms are established, the Firm shall
subsequently make such users aware of the modified Independence requirements
agreed to by their representative.
800.4 A1 For example, where the intended users are a class of users such as lenders in a syndicated
loan arrangement, the Firm might describe the modified Independence requirements in an
engagement letter to the representative of the lenders. The representative might then
make the Firm’s engagement letter available to the members of the group of lenders to
meet the requirement for the Firm to make such users aware of the modified
Independence requirements agreed to by the representative.
174
R800.5 When the Firm performs an eligible Audit Engagement, any modifications to Part 4A
shall be limited to those set out in paragraphs R800.7 to R800.14. The Firm shall not
apply these modifications when an audit of Financial Statements is required by law
or regulation.
R800.6 If the Firm also issues an audit report that does not include a restriction on use and
distribution for the same client, the Firm shall apply Part 4A to that Audit
Engagement.
Public Interest Entities
R800.7 When the Firm performs an eligible Audit Engagement, the Firm does not need to
apply the Independence requirements set out in Part 4A that apply only to Public
Interest Entity Audit Engagements.
Related Entities
R800.8 When the Firm performs an eligible Audit Engagement, references to “Audit Client”
in Part 4A do not need to include its Related Entities. However, when the Audit Team
knows or has reason to believe that a relationship or circumstance involving a
Related Entity of the client is relevant to the evaluation of the Firm’s Independence
of the client, the Audit Team shall include that Related Entity when identifying,
evaluating and addressing threats to Independence.
Networks and Network Firms
R800.9 When the Firm performs an eligible Audit Engagement, the specific requirements
regarding Network Firms set out in Part 4A do not need to be applied. However, when
the Firm knows or has reason to believe that threats to Independence are created by
any interests and relationships of a Network Firm, the Firm shall evaluate and
address any such threat.
Financial Interests, Loans and Guarantees, Close Business Relationships, and Family and
Personal Relationships
R800.10 When the Firm performs an eligible Audit Engagement:
(a) The relevant provisions set out in Sections 510, 511, 520, 521, 522, 524 and 525
need apply only to the members of the Engagement Team, their Immediate
Family members and, where applicable, Close Family members;
(b) The Firm shall identify, evaluate and address any threats to Independence
created by interests and relationships, as set out in Sections 510, 511, 520,
521, 522, 524 and 525, between the Audit Client and the following Audit Team
members:
(i) Those who provide consultation regarding technical or industry specific

issues, transactions or events; and
(ii) Those who provide quality control for the engagement, including those
who perform the Engagement Quality Control Review; and
(c) The Firm shall evaluate and address any threats that the Engagement Team
has reason to believe are created by interests and relationships between the
Audit Client and others within the Firm who can directly influence the outcome
of the Audit Engagement.
175
800.10 A1 Others within a Firm who can directly influence the outcome of the Audit Engagement
include those who recommend the compensation, or who provide direct supervisory,
management or other oversight, of the Audit Engagement Partner in connection with the
performance of the Audit Engagement including those at all successively senior levels
above the Engagement Partner through to the individual who is the Firm’s senior or
managing partner (chief executive or equivalent).
R800.11 When the Firm performs an eligible Audit Engagement, the Firm shall evaluate and
address any threats that the Engagement Team has reason to believe are created by
Financial Interests in the Audit Client held by individuals, as set out in paragraphs
R510.4(c) and (d), R510.5, R510.7, 510.10 A5 and 510.10 A9.
R800.12 When the Firm performs an eligible Audit Engagement, the Firm, in applying the
provisions set out in paragraphs R510.4(a), R510.6 and R510.7 to interests of the
Firm, shall not hold a material Direct or a material Indirect Financial Interest in the
Audit Client.
Employment with an Audit Client
R800.13 When the Firm performs an eligible Audit Engagement, the Firm shall evaluate and
address any threats created by any employment relationships as set out in
paragraphs 524.3 A1 to 524.5 A3.
Providing Non-Assurance Services
R800.14 If the Firm performs an eligible Audit Engagement and provides a non-assurance
service to the Audit Client, the Firm shall comply with Sections 410 to 430 and
Section 600, including its subsections, subject to paragraphs R800.7 to R800.9.
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PART 4B – INDEPENDENCE FOR ASSURANCE ENGAGEMENTS
OTHER THAN AUDIT AND REVIEW ENGAGEMENTS
Section Page
900 Applying the Conceptual Framework to Independence for Assurance
Engagements Other than Audit and Review Engagements ................................................. 178
905 Fees...................................................................................................................................... 185
906 Gifts and Hospitality ............................................................................................................. 187
907 Actual or Threatened Litigation ............................................................................................ 188
910 Financial Interests ................................................................................................................ 189
911 Loans and Guarantees ......................................................................................................... 192
920 Business Relationships ........................................................................................................ 194
921 Family and Personal Relationships ...................................................................................... 196
922 Recent Service with an Assurance Client ............................................................................ 199
923 Serving as a Director or Officer of an Assurance Client ...................................................... 200
924 Employment with an Assurance Client................................................................................. 201
940 Long Association of Personnel with an Assurance Client .................................................... 203
950 Provision of Non-Assurance Services to Assurance Clients Other than
Audit and Review Engagement Clients ................................................................................ 205
990 Reports that Include a Restriction on Use and Distribution (Assurance
Engagements Other than Audit and Review Engagements) ............................................... 208
177
SECTION 900
APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR

ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
ENGAGEMENTS
Introduction
General
900.1 This Part applies to Assurance Engagements other than Audit and Review Engagements
(referred to as “Assurance Engagements” in this Part). Examples of such engagements
include:
• An audit of specific elements, accounts or items of a Financial Statement.
• Performance assurance on a company's key performance indicators.
Firms.
900.3 APES 320 Quality Control for Firms (APES 320) requires a Firm to establish policies and
procedures designed to provide it with reasonable assurance that the Firm, its personnel
and, where applicable, others subject to Independence requirements maintain
Independence where required by relevant ethics standards. Auditing and Assurance
Standards establish responsibilities for Engagement Partners and Engagement Teams at
the level of the engagement. The allocation of responsibilities within a Firm will depend on
its size, structure and organisation. Many of the provisions of Part 4B do not prescribe the
specific responsibility of individuals within the Firm for actions related to Independence,
instead referring to “Firm” for ease of reference. Firms assign responsibility for a particular
action to an individual or a group of individuals (such as an Assurance Team) in accordance
with APES 320. In addition, an individual Member in Public Practice remains responsible
for compliance with any provisions that apply to that Member’s activities, interests or
relationships.
900.4 Independence is linked to the principles of objectivity and integrity. It comprises:
(b) Independence in appearance – the avoidance of facts and circumstances that are
so significant that a reasonable and informed third party would be likely to conclude
that a Firm’s or an Assurance Team member’s integrity, objectivity or professional
In this Part, references to an individual or Firm being “independent” mean that the individual
or Firm has complied with the provisions of this Part.
900.5 When performing Assurance Engagements, the Code requires Firms to comply with the
fundamental principles and be independent. This Part sets out specific requirements and
application material on how to apply the conceptual framework to maintain Independence
when performing such engagements. The conceptual framework set out in Section 120
applies to Independence as it does to the fundamental principles set out in Section 110.
178
900.6 This Part describes:
(a) Facts and circumstances, including Professional Activities, interests and

relationships, that create or might create threats to Independence;
(b) Potential actions, including safeguards, that might be appropriate to address any
such threats; and
(c) Some situations where the threats cannot be eliminated or there can be no
safeguards to reduce the threats to an Acceptable Level.
Description of Other Assurance Engagements
900.7 Assurance Engagements are designed to enhance intended users’ degree of confidence
about the outcome of the evaluation or measurement of a subject matter against criteria.
In an Assurance Engagement, the Firm expresses a conclusion designed to enhance the
degree of confidence of the intended users (other than the responsible party) about the
outcome of the evaluation or measurement of a subject matter against criteria. The
Framework for Assurance Engagements issued by the AUASB describes the elements and
objectives of an Assurance Engagement and identifies engagements to which Auditing and
Assurance Standards apply. For a description of the elements and objectives of an
Assurance Engagement, refer to the Framework for Assurance Engagements.
900.8 The outcome of the evaluation or measurement of a subject matter is the information that
results from applying the criteria to the subject matter. The term “subject matter information”
is used to mean the outcome of the evaluation or measurement of a subject matter. For
example, the Framework for Assurance Engagements states that an assertion about the
effectiveness of internal control (subject matter information) results from applying a
framework for evaluating the effectiveness of internal control, such as COSO37 or CoCo38
(criteria), to internal control, a process (subject matter).
900.9 Assurance Engagements might be assertion-based or direct reporting. In either case, they
involve three separate parties: a Firm, a responsible party and intended users.
900.10 In an assertion-based Assurance Engagement, the evaluation or measurement of the

subject matter is performed by the responsible party. The subject matter information is in
the form of an assertion by the responsible party that is made available to the intended
users.
900.11 In a direct reporting Assurance Engagement, the Firm:
(a) Directly performs the evaluation or measurement of the subject matter; or
(b) Obtains a representation from the responsible party that has performed the
evaluation or measurement that is not available to the intended users. The subject
matter information is provided to the intended users in the assurance report.
AUST 900.11.1 The AUASB has issued Framework for Assurance Engagements which describes the
nature of an Assurance Engagement. To obtain a full understanding of the objectives and
elements of an Assurance Engagement it is necessary to refer to the full text of that
document.
37 “Internal Control – Integrated Framework” The Committee of Sponsoring Organizations of the Treadway
Commission.
38 “Guidance on Assessing Control – The CoCo Principles” Criteria of Control Board, The Canadian Institute of
Chartered Accountants.
179
Reports that Include a Restriction on Use and Distribution
900.12 An assurance report might include a restriction on use and distribution. If it does and the
conditions set out in Section 990 are met, then the Independence requirements in this Part
may be modified as provided in Section 990.
Audit and Review Engagements
900.13 Independence standards for Audit and Review Engagements are set out in Part 4A –
Independence for Audit and Review Engagements. If a Firm performs both an Assurance
Engagement and an Audit or Review Engagement for the same client, the requirements in
Part 4A continue to apply to the Firm, a Network Firm and the Audit or Review Team
members.
General
R900.14 A Firm performing an Assurance Engagement shall be independent.
R900.15 A Firm shall apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to Independence in relation to an Assurance
Engagement.
AUST R900.15.1 Where a Member in Public Practice identifies multiple threats to Independence,
which individually might not be significant, the Member shall evaluate the
significance of those threats in aggregate and the safeguards applied or in place to
eliminate some or all of the threats or reduce them to an Acceptable Level in
aggregate.
Network Firms
R900.16 When a Firm has reason to believe that interests and relationships of a Network
Firm create a threat to the Firm’s Independence, the Firm shall evaluate and
address any such threat.
900.16 A1 Network Firms are discussed in paragraphs 400.50 A1 to 400.54 A1.
Related Entities
R900.17 When the Assurance Team knows or has reason to believe that a relationship or
circumstance involving a Related Entity of the Assurance Client is relevant to the
evaluation of the Firm’s Independence from the client, the Assurance Team shall
include that Related Entity when identifying, evaluating and addressing threats to
Independence.
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Types of Assurance Engagements
Assertion-based Assurance Engagements
R900.18 When performing an assertion-based Assurance Engagement:
(a) The Assurance Team members and the Firm shall be independent of the
Assurance Client (the party responsible for the subject matter information, and
which might be responsible for the subject matter) as set out in this Part. The
Independence requirements set out in this Part prohibit certain relationships
between Assurance Team members and (i) Directors or Officers, and (ii)
individuals at the client in a position to exert significant influence over the
subject matter information;
(b) The Firm shall apply the conceptual framework set out in Section 120 to
relationships with individuals at the client in a position to exert significant
influence over the subject matter of the engagement; and
(c) The Firm shall evaluate and address any threats that the Firm has reason to
believe are created by Network Firm39 interests and relationships.
R900.19 When performing an assertion-based Assurance Engagement where the responsible

party is responsible for the subject matter information but not the subject matter:
(a) The Assurance Team members and the Firm shall be independent of the party
responsible for the subject matter information (the Assurance Client); and
(b) The Firm shall evaluate and address any threats the Firm has reason to
believe are created by interests and relationships between an Assurance
Team member, the Firm, a Network Firm and the party responsible for the
subject matter.
900.19 A1 In the majority of assertion-based Assurance Engagements, the responsible party is

responsible for both the subject matter information and the subject matter. However, in
some engagements, the responsible party might not be responsible for the subject matter.
An example might be when a Firm is engaged to perform an Assurance Engagement
regarding a report that an environmental consultant has prepared about a company’s
sustainability practices for distribution to intended users. In this case, the environmental
consultant is the responsible party for the subject matter information but the company is
responsible for the subject matter (the sustainability practices).
Direct Reporting Assurance Engagements
R900.20 When performing a direct reporting Assurance Engagement:
(a) The Assurance Team members and the Firm shall be independent of the
Assurance Client (the party responsible for the subject matter); and
(b) The Firm shall evaluate and address any threats to Independence the Firm has
reason to believe are created by Network Firm interests and relationships.
39 See paragraphs 400.50 A1 to 400.54 A1 for guidance on what constitutes a Network Firm.
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Multiple Responsible Parties
900.21 A1 In some Assurance Engagements, whether assertion-based or direct reporting, there might
be several responsible parties. In determining whether it is necessary to apply the
provisions in this Part to each responsible party in such engagements, the Firm may take
into account certain matters. These matters include whether an interest or relationship
between the Firm, or an Assurance Team member, and a particular responsible party
would create a threat to Independence that is not trivial and inconsequential in the context
of the subject matter information. This determination will take into account factors such as:
(a) The materiality of the subject matter information (or of the subject matter) for which
the particular responsible party is responsible.
(b) The degree of public interest associated with the engagement.
If the Firm determines that the threat created by any such interest or relationship with a
particular responsible party would be trivial and inconsequential, it might not be necessary
to apply all of the provisions of this section to that responsible party.
Period During which Independence is Required
R900.30 Independence, as required by this Part, shall be maintained during both:
(a) The Engagement Period; and
(b) The period covered by the subject matter information.
900.30 A1 The Engagement Period starts when the Assurance Team begins to perform assurance
services with respect to the particular engagement. The Engagement Period ends when
the assurance report is issued. When the engagement is of a recurring nature, it ends at
the later of the notification by either party that the professional relationship has ended or
the issuance of the final assurance report.
R900.31 If an entity becomes an Assurance Client during or after the period covered by the
subject matter information on which the Firm will express a conclusion, the Firm
shall determine whether any threats to Independence are created by:
(a) Financial or business relationships with the Assurance Client during or after
the period covered by the subject matter information but before accepting the
Assurance Engagement; or
(b) Previous services provided to the Assurance Client.
R900.32 Threats to Independence are created if a non-assurance service was provided to the
Assurance Client during, or after the period covered by the subject matter
information, but before the Assurance Team begins to perform assurance services,
and the service would not be permitted during the Engagement Period. In such
circumstances, the Firm shall evaluate and address any threat to Independence
created by the service. If the threats are not at an Acceptable Level, the Firm shall
only accept the Assurance Engagement if the threats are reduced to an Acceptable
Level.
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• Using professionals who are not Assurance Team members to perform the service.
• Having an appropriate reviewer review the assurance and non-assurance work as

appropriate.
R900.33 If a non-assurance service that would not be permitted during the Engagement
Period has not been completed and it is not practical to complete or end the service
before the commencement of Professional Services in connection with the
Assurance Engagement, the Firm shall only accept the Assurance Engagement if:
(a) The Firm is satisfied that:
(i) The non-assurance service will be completed within a short period of

time; or
(ii) The client has arrangements in place to transition the service to another
provider within a short period of time;
(b) The Firm applies safeguards when necessary during the service period; and
(c) The Firm discusses the matter with Those Charged with Governance.
General Documentation of Independence for Assurance Engagements Other than Audit and
Review Engagements
R900.40 A Firm shall document conclusions regarding compliance with this Part, and the
substance of any relevant discussions that support those conclusions. In particular:
(a) When safeguards are applied to address a threat, the Firm shall document the
nature of the threat and the safeguards in place or applied; and
(b) When a threat required significant analysis and the Firm concluded that the
threat was already at an Acceptable Level, the Firm shall document the nature
of the threat and the rationale for the conclusion.
900.40 A1 Documentation provides evidence of the Firm’s judgements in forming conclusions

regarding compliance with this Part. However, a lack of documentation does not determine
whether a Firm considered a particular matter or whether the Firm is independent.
Breach of an Independence Provision for Assurance Engagements Other than Audit and Review
Engagements
When a Firm Identifies a Breach
R900.50 If a Firm concludes that a breach of a requirement in this Part has occurred, the Firm
shall:
(a) End, suspend or eliminate the interest or relationship that created the breach;
(b) Evaluate the significance of the breach and its impact on the Firm’s objectivity
and ability to issue an assurance report; and
(c) Determine whether action can be taken that satisfactorily addresses the
consequences of the breach.
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In making this determination, the Firm shall exercise professional judgement and
take into account whether a reasonable and informed third party would be likely to
conclude that the Firm’s objectivity would be compromised, and therefore, the Firm
would be unable to issue an assurance report.
R900.51 If the Firm determines that action cannot be taken to address the consequences of
the breach satisfactorily, the Firm shall, as soon as possible, inform the party that
engaged the Firm or Those Charged with Governance, as appropriate. The Firm shall
also take the steps necessary to end the Assurance Engagement in compliance with
any applicable legal or regulatory requirements relevant to ending the Assurance
Engagement.
R900.52 If the Firm determines that action can be taken to address the consequences of the
breach satisfactorily, the Firm shall discuss the breach and the action it has taken
or proposes to take with the party that engaged the Firm or Those Charged with
Governance, as appropriate. The Firm shall discuss the breach and the proposed
action on a timely basis, taking into account the circumstances of the engagement
and the breach.
R900.53 If the party that engaged the Firm does not, or Those Charged with Governance do
not concur that the action proposed by the Firm in accordance with paragraph
R900.50(c) satisfactorily addresses the consequences of the breach, the Firm shall
take the steps necessary to end the Assurance Engagement in compliance with any
applicable legal or regulatory requirements relevant to ending the Assurance
Engagement.
Documentation
R900.54 In complying with the requirements in paragraphs R900.50 to R900.53, the Firm shall
document:
(a) The breach;
(b) The actions taken;
(c) The key decisions made; and
(d) All the matters discussed with the party that engaged the Firm or Those
R900.55 If the Firm continues with the Assurance Engagement, it shall document:
(a) The conclusion that, in the Firm’s professional judgement, objectivity has not
been compromised; and
(b) The rationale for why the action taken satisfactorily addressed the
consequences of the breach so that the Firm could issue an assurance report.
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SECTION 905
FEES
Introduction
to Independence.
905.2 The nature and level of fees or other types of remuneration might create a self-interest or
Fees ― Relative Size
905.3 A1 When the total fees generated from an Assurance Client by the Firm expressing the
conclusion in an Assurance Engagement represent a large proportion of the total fees of
that Firm, the dependence on that client and concern about losing the client create a self-
interest or intimidation threat.
• The operating structure of the Firm.
• Whether the Firm is well established or new.
• The significance of the client qualitatively and/or quantitatively to the Firm.
905.3 A3 An example of an action that might be a safeguard to address such a self-interest or

intimidation threat is increasing the client base in the Firm to reduce dependence on the
Assurance Client.
905.3 A4 A self-interest or intimidation threat is also created when the fees generated by the Firm
from an Assurance Client represent a large proportion of the revenue from an individual
partner’s clients.
905.3 A5 Examples of actions that might be safeguards to address such a self-interest or intimidation
threat include:
• Increasing the client base of the partner to reduce dependence on the Assurance
Client.
• Having an appropriate reviewer who was not an Assurance Team member review
the work.
Fees ― Overdue
905.4 A1 A self-interest threat might be created if a significant part of fees is not paid before the
assurance report, if any, for the following period is issued. It is generally expected that the
Firm will require payment of such fees before any such report is issued. The requirements
and application material set out in Section 911 with respect to loans and guarantees might
also apply to situations where such unpaid fees exist.
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• Obtaining partial payment of overdue fees.
• Having an appropriate reviewer who did not take part in the Assurance Engagement
review the work performed.
R905.5 When a significant part of fees due from an Assurance Client remains unpaid for a
long time, the Firm shall determine:
(a) Whether the overdue fees might be equivalent to a loan to the client; and
(b) Whether it is appropriate for the Firm to be re-appointed or continue the

Assurance Engagement.
Contingent Fees
905.6 A1 Contingent Fees are fees calculated on a predetermined basis relating to the outcome of
a transaction or the result of the services performed. A Contingent Fee charged through an
intermediary is an example of an indirect Contingent Fee. In this section, a fee is not
regarded as being contingent if established by a court or other public authority.
R905.7 A Firm shall not charge directly or indirectly a Contingent Fee for an Assurance
Engagement.
R905.8 A Firm shall not charge directly or indirectly a Contingent Fee for a non-assurance
service provided to an Assurance Client if the outcome of the non-assurance
service, and therefore, the amount of the fee, is dependent on a future or
contemporary judgement related to a matter that is material to the subject matter
information of the Assurance Engagement.
905.9 A1 Paragraphs R905.7 and R905.8 preclude a Firm from entering into certain Contingent Fee
arrangements with an Assurance Client. Even if a Contingent Fee arrangement is not
precluded when providing a non-assurance service to an Assurance Client, a self-interest
threat might still be created.
• Whether an appropriate authority determines the outcome on which the Contingent
Fee depends.
• Disclosure to intended users of the work performed by the Firm and the basis of
remuneration.
• The effect of the event or transaction on the subject matter information.
assurance service review the relevant assurance work.
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SECTION 906
GIFTS AND HOSPITALITY
Introduction
to Independence.
906.2 Accepting gifts and hospitality from an Assurance Client might create a self-interest,
familiarity or intimidation threat. This section sets out a specific requirement and application
Requirement and Application Material
R906.3 A Firm or an Assurance Team member shall not accept gifts and hospitality from an
Assurance Client, unless the value is trivial and inconsequential.
906.3 A1 Where a Firm or Assurance Team member is offering or accepting an Inducement to or

from an Assurance Client, the requirements and application material set out in Section 340
apply and non-compliance with these requirements might create threats to Independence.
906.3 A2 The requirements set out in Section 340 relating to offering or accepting Inducements do
not allow a Firm or Assurance Team member to accept gifts and hospitality where the intent
is to improperly influence behaviour even if the value is trivial and inconsequential.
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SECTION 907
ACTUAL OR THREATENED LITIGATION
Introduction
to Independence.
907.2 When litigation with an Assurance Client occurs, or appears likely, self-interest and
intimidation threats are created. This section sets out specific application material relevant
to applying the conceptual framework in such circumstances.
General
907.3 A1 The relationship between client management and Assurance Team members must be
characterised by complete candour and full disclosure regarding all aspects of a client’s
operations. Adversarial positions might result from actual or threatened litigation between
an Assurance Client and the Firm or an Assurance Team member. Such adversarial
positions might affect management’s willingness to make complete disclosures and create
self-interest and intimidation threats.
• The materiality of the litigation.
• Whether the litigation relates to a prior Assurance Engagement.
907.3 A3 If the litigation involves an Assurance Team member, an example of an action that might
eliminate such self-interest and intimidation threats is removing that individual from the
Assurance Team.
907.3 A4 An example of an action that might be a safeguard to address such self-interest and
intimidation threats is having an appropriate reviewer review the work performed.
188
SECTION 910
FINANCIAL INTERESTS
Introduction
to Independence.
910.2 Holding a Financial Interest in an Assurance Client might create a self-interest threat. This
General
910.3 A1 A Financial Interest might be held directly or indirectly through an intermediary such as a
collective investment vehicle, an estate or a trust. When a beneficial owner has control over
the intermediary or ability to influence its investment decisions, the Code defines that
Financial Interest to be direct. Conversely, when a beneficial owner has no control over the
intermediary or ability to influence its investment decisions, the Code defines that Financial
Interest to be indirect.
910.3 A2 This section contains references to the “materiality” of a Financial Interest. In determining
whether such an 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.
910.3 A3 Factors that are relevant in evaluating the level of a self-interest threat created by holding
a Financial Interest in an Assurance Client include:
• The role of the individual holding the Financial Interest.
Financial Interests Held by the Firm, Assurance Team Members and Immediate Family
R910.4 A Direct Financial Interest or a material Indirect Financial Interest in the Assurance
Client shall not be held by:
(a) The Firm; or
(b) An Assurance Team member or any of that individual’s Immediate Family.
Financial Interests in an Entity Controlling an Assurance Client
R910.5 When an entity has a controlling interest in the Assurance Client and the client is
material to the entity, neither the Firm, nor an Assurance Team member, nor any of
that individual’s Immediate Family shall hold a Direct or material Indirect Financial
Interest in that entity.
189
Financial Interests Held as Trustee
R910.6 Paragraph R910.4 shall also apply to a Financial Interest in an Assurance Client held
in a trust for which the Firm or individual acts as trustee unless:
(a) None of the following is a beneficiary of the trust: the trustee, the Assurance
Team member or any of that individual’s Immediate Family, or the Firm;
(b) The interest in the Assurance Client held by the trust is not material to the
trust;
(c) The trust is not able to exercise significant influence over the Assurance
Client; and
(d) None of the following can significantly influence any investment decision
involving a Financial Interest in the Assurance Client: the trustee, the
Assurance Team member or any of that individual’s Immediate Family, or the
Firm.
Financial Interests Received Unintentionally
R910.7 If a Firm, an Assurance Team member, or any of that individual’s Immediate Family,
receives a Direct Financial Interest or a material Indirect Financial Interest in an
Assurance Client by way of an inheritance, gift, as a result of a merger, or in similar
circumstances and the interest would not otherwise be permitted to be held under
this section, then:
(a) If the interest is received by the Firm, the Financial Interest shall be disposed
of immediately, or enough of an Indirect Financial Interest shall be disposed
of so that the remaining interest is no longer material; or
(b) If the interest is received by an Assurance Team member, or by any of that

individual’s Immediate Family, the individual who received the Financial
Interest shall immediately dispose of the Financial Interest, or dispose of
enough of an Indirect Financial Interest so that the remaining interest is no
longer material.
Financial Interests – Other Circumstances
Close Family
910.8 A1 A self-interest threat might be created if an Assurance Team member knows that a Close
Family member has a Direct Financial Interest or a material Indirect Financial Interest in
the Assurance Client.
• The nature of the relationship between the Assurance Team member and the Close
Family member.
• The materiality of the Financial Interest to the Close Family member.
190
• Having the Close Family member dispose, as soon as practicable, of all of the
Financial Interest or dispose of enough of an Indirect Financial Interest so that the
remaining interest is no longer material.
• Removing the individual from the Assurance Team.
having an appropriate reviewer review the work of the Assurance Team member.
Other Individuals
910.8 A5 A self-interest threat might be created if an Assurance Team member knows that a
Financial Interest is held in the Assurance Client by individuals such as:
• Partners and professional employees of the Firm, apart from those who are
specifically not permitted to hold such Financial Interests by paragraph R910.4, or
their Immediate Family members.
• Individuals with a close personal relationship with an Assurance Team member.
Assurance Team member with the personal relationship from the Assurance Team.
• Excluding the Assurance Team member from any significant decision making
concerning the Assurance Engagement.
• Having an appropriate reviewer review the work of the Assurance Team member.
191
SECTION 911
LOANS AND GUARANTEES
Introduction
to Independence.
911.2 A loan or a guarantee of a loan with an Assurance Client might create a self-interest threat.
This section sets out specific requirements and application material relevant to applying
the conceptual framework in such circumstances.
General
911.3 A1 This section contains references to the “materiality” of a loan or guarantee. In determining
whether such a loan or guarantee is material to an individual, the combined net worth of
the individual and the individual’s Immediate Family members may be taken into account.
Loans and Guarantees with an Assurance Client
R911.4 A Firm, an Assurance Team member, or any of that individual’s Immediate Family
shall not make or guarantee a loan to an Assurance Client unless the loan or
guarantee is immaterial to both:
(a) The Firm or the individual making the loan or guarantee, as applicable; and
(b) The client.
Loans and Guarantees with an Assurance Client that is a Bank or Similar Institution
shall not accept a loan, or a guarantee of a loan, from an Assurance Client that is a
bank or a similar institution unless the loan or guarantee is made under normal
lending procedures, terms and conditions.
911.5 A1 Examples of loans include mortgages, bank overdrafts, car loans and credit card balances.
911.5 A2 Even if a Firm receives a loan from an Assurance Client that is a bank or similar institution
under normal lending procedures, terms and conditions, the loan might create a self-
interest threat if it is material to the Assurance Client or Firm receiving the loan.
having the work reviewed by an appropriate reviewer, who is not an Assurance Team
member, from a Network Firm that is not a beneficiary of the loan.
Deposit or Brokerage Accounts
shall not have deposits or a brokerage account with an Assurance Client that is a
bank, broker, or similar institution, unless the deposit or account is held under
normal commercial terms.
192
Loans and Guarantees with an Assurance Client that is not a Bank or Similar Institution
R911.7 A Firm or an Assurance Team member, or any of that individual’s Immediate Family,
shall not accept a loan from, or have a borrowing guaranteed by, an Assurance Client
that is not a bank or similar institution, unless the loan or guarantee is immaterial to
both:
(a) The Firm, or the individual receiving the loan or guarantee, as applicable; and
(b) The client.
193
SECTION 920
BUSINESS RELATIONSHIPS
Introduction
to Independence.
920.2 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.
General
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.
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 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 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.
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 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.
194
However, such transactions might be of such a nature and magnitude that they create a
self-interest threat.
• Eliminating or reducing the magnitude of the transaction.
• Removing the individual from the Assurance Team.
195
SECTION 921
FAMILY AND PERSONAL RELATIONSHIPS
Introduction
to Independence.
921.2 Family or personal relationships with client personnel might create a self-interest, familiarity
General
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.
• The individual’s responsibilities on the Assurance Team.
• The role of the family member or other individual within the client, and the closeness
of the relationship.
Immediate Family of an Assurance Team Member
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 subject matter of the engagement.
• The position held by the Immediate Family member.
• The role of the Assurance Team member.
threat is removing the individual from the Assurance Team.

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.
R921.5 An individual shall not participate as an Assurance Team member when any of that
individual’s Immediate Family:
(a) Is a Director or Officer of the Assurance Client;
(b) Is an employee in a position to exert significant influence over the subject

matter information of the Assurance Engagement; or
(c) Was in such a position during any period covered by the engagement or the
subject matter information.
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Close Family of an Assurance Team Member
921.6 A1 A self-interest, familiarity or intimidation threat is created when a Close Family member of
an Assurance Team member is:
(a) A Director or Officer of the Assurance Client; or
(b) An employee in a position to exert significant influence over the subject matter
• The nature of the relationship between the Assurance Team member and the
Close Family member.
• The position held by the Close Family member.

responsibility of the Close Family member.
Other Close Relationships of an Assurance Team Member
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) A Director or Officer of the Assurance Client; or
threat created by such relationships include:
• The nature of the relationship between the individual and the Assurance Team
member.

responsibility of the individual with whom the Assurance Team member has a close
relationship.
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Relationships of Partners and Employees of the Firm
921.8 A1 A self-interest, familiarity or intimidation threat might be created by a personal or family

relationship between:
(a) A partner or employee of the Firm who is not an Assurance Team member; and
(b) A Director or Officer of the Assurance Client or an employee in a position to exert

significant influence over the subject matter information of the Assurance
Engagement.
• 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.
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.
198
SECTION 922
RECENT SERVICE WITH AN ASSURANCE CLIENT
Introduction
to Independence.
922.2 If an Assurance Team member has recently served as a Director or Officer or employee of
the Assurance Client, a self-interest, self-review or familiarity threat might be created. This
Service During the Period Covered by the Assurance Report
R922.3 The Assurance Team shall not include an individual who, during the period covered
by the assurance report:
(a) Had served as a Director or Officer of the Assurance Client; or
(b) Was an employee in a position to exert significant influence over the subject
matter information of the Assurance Engagement.
Service Prior to the Period Covered by the Assurance Report
922.4 A1 A self-interest, self-review or familiarity threat might be created if, before the period covered
by the assurance report, an Assurance Team member:
(a) Had served as a Director or Officer of the Assurance Client; or
(b) Was an employee in a position to exert significant influence over the subject matter
For example, a threat would be created if a decision made or work performed by the
individual in the prior period, while employed by the client, is to be evaluated in the current
period as part of the current Assurance Engagement.
• The position the individual held with the client.
• The length of time since the individual left the client.
922.4 A3 An example of an action that might be a safeguard to address such a self-interest, self-
review or familiarity threat is having an appropriate reviewer review the work performed by
the Assurance Team member.
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SECTION 923
SERVING AS A DIRECTOR OR OFFICER OF AN ASSURANCE CLIENT
Introduction
to Independence.
923.2 Serving as a Director or Officer of an Assurance Client creates self-review and self-interest
threats. This section sets out specific requirements and application material relevant to
Service as Director or Officer
R923.3 A partner or employee of the Firm shall not serve as a Director or Officer of an
Assurance Client of the Firm.
Service as Company Secretary
R923.4 A partner or employee of the Firm shall not serve as company secretary for an
Assurance Client of the Firm unless:
(a) This practice is specifically permitted under local law, professional rules or
practice;
(b) Management makes all decisions; and
(c) The duties and activities performed are limited to those of a routine and
administrative nature, such as preparing minutes and maintaining statutory
returns.
923.4 A1 The position of company secretary has different implications in different jurisdictions. Duties
might range from: administrative duties (such as personnel management and the
maintenance of company records and registers), to duties as diverse as ensuring that the
company complies with regulations or providing advice on corporate governance matters.
Usually this position is seen to imply a close association with the entity. Therefore, a threat
is created if a partner or employee of the Firm serves as company secretary for an
Assurance Client. (More information on providing non-assurance services to an
Assurance Client is set out in Section 950, Provision of Non-Assurance Services to
an Assurance Client.)
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SECTION 924
EMPLOYMENT WITH AN ASSURANCE CLIENT
Introduction
924.1 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.
924.2 Employment relationships with an Assurance Client might create a self-interest, familiarity
General
924.3 A1 A familiarity or intimidation threat might be created if any of the following individuals have
been an Assurance Team member or partner of the Firm:
• A Director or Officer of the Assurance Client.
• An employee who is in a position to exert significant influence over the subject matter
Former Partner or Assurance Team Member Restrictions
R924.4 If a former partner has joined an Assurance Client of the Firm or a former Assurance
Team member has joined the Assurance Client as:
information of the Assurance Engagement,
the individual shall not continue to participate in the Firm’s business or Professional
Activities.
924.4 A1 Even if one of the individuals described in paragraph R924.4 has joined the Assurance
Client in such a position and does not continue to participate in the Firm’s business or
Professional Activities, a familiarity or intimidation threat might still be created.
924.4 A2 A familiarity or intimidation threat might also be created if a former partner of the Firm has
joined an entity in one of the positions described in paragraph 924.3 A1 and the entity
subsequently becomes an Assurance Client of the Firm.
• The position the individual has taken at the client.
• Any involvement the individual will have with the Assurance Team.
• The length of time since the individual was an Assurance Team member or partner
of the Firm.
• The former position of the individual within the Assurance Team or Firm. An example
is whether the individual was responsible for maintaining regular contact with the
client’s management or Those Charged with Governance.
201
924.4 A4 Examples of actions that might be safeguards to address such a familiarity or intimidation
threat include:
• Making arrangements such that the individual is not entitled to any benefits or
payments from the Firm, unless made in accordance with fixed pre-determined
arrangements.
• Making arrangements such that any amount owed to the individual is not material to
the Firm.
• Modifying the plan for the Assurance Engagement.
• Assigning to the Assurance Team individuals who have sufficient experience relative
to the individual who has joined the client.
• Having an appropriate reviewer review the work of the former Assurance Team
member.
Assurance Team Members Entering Employment Negotiations with a Client
R924.5 A Firm shall have policies and procedures that require Assurance Team members to
notify the Firm when entering employment negotiations with an Assurance Client.
924.5 A1 A self-interest threat is created when an Assurance Team member participates in the
Assurance Engagement while knowing that the Assurance Team member will, or might,
join the client sometime in the future.
individual from the Assurance Engagement.
having an appropriate reviewer review any significant judgements made by that Assurance
Team member while on the team.
202
SECTION 940
LONG ASSOCIATION OF PERSONNEL WITH AN ASSURANCE CLIENT
Introduction
to Independence.
940.2 When an individual is involved in an Assurance Engagement of a recurring nature over a

long period of time, familiarity and self-interest threats might be created. This section sets
out requirements and application material relevant to applying the conceptual framework in
such circumstances.
General
940.3 A1 A familiarity threat might be created as a result of an individual’s long association with:
(a) The Assurance Client;
(b) The Assurance Client’s senior management; or
(c) The subject matter and subject matter information of the Assurance Engagement.
940.3 A2 A self-interest threat might be created as a result of an individual’s concern about losing a
long-standing Assurance Client or an interest in maintaining a close personal relationship
with a member of senior management or Those Charged with Governance. Such a threat
might influence the individual’s judgement inappropriately.
940.3 A3 Factors that are relevant to evaluating the level of such familiarity or self-interest threats
include:
• The nature of the Assurance Engagement.
• How long the individual has been an Assurance Team member, the individual’s
seniority on the team, and the nature of the roles performed, including if such a
relationship existed while the individual was at a prior Firm.
• The extent to which the work of the individual is directed, reviewed and supervised
by more senior personnel.
• The extent to which the individual, due to the individual’s seniority, has the ability to
influence the outcome of the Assurance Engagement, for example, by making key
decisions or directing the work of other Engagement Team members.
• The closeness of the individual’s personal relationship with the Assurance Client or,
if relevant, senior management.
• The nature, frequency and extent of interaction between the individual and the
Assurance Client.
• Whether the nature or complexity of the subject matter or subject matter information
has changed.
• Whether there have been any recent changes in the individual or individuals who are
the responsible party or, if relevant, senior management.
203
940.3 A4 The combination of two or more factors might increase or reduce the level of the threats.
For example, familiarity threats created over time by the increasingly close relationship
between an individual and the Assurance Client would be reduced by the departure of the
individual who is the responsible party.
940.3 A5 An example of an action that might eliminate the familiarity and self-interest threats in
relation to a specific engagement would be rotating the individual off the Assurance Team.
940.3 A6 Examples of actions that might be safeguards to address such familiarity or self-interest
threats include:
• Changing the role of the individual on the Assurance Team or the nature and extent
of the tasks the individual performs.
• Having an appropriate reviewer who was not an Assurance Team member review
the work of the individual.
• Performing regular independent internal or external quality reviews of the
engagement.
R940.4 If a Firm decides that the level of the threats created can only be addressed by
rotating the individual off the Assurance Team, the Firm shall determine an
appropriate period during which the individual shall not:
(a) Be a member of the Engagement Team for the Assurance Engagement;
(b) Provide quality control for the Assurance Engagement; or
(c) Exert direct influence on the outcome of the Assurance Engagement.

The period shall be of sufficient duration to allow the familiarity and self-interest
threats to be addressed.
204
SECTION 950
PROVISION OF NON-ASSURANCE SERVICES TO ASSURANCE CLIENTS OTHER

THAN AUDIT AND REVIEW ENGAGEMENT CLIENTS
Introduction
to Independence.
950.2 Firms might provide a range of non-assurance services to their Assurance Clients,
consistent with their skills and expertise. Providing certain non-assurance services to
Assurance Clients might create threats to compliance with the fundamental principles and
threats to Independence. This section sets out specific requirements and application
General
R950.3 Before a Firm accepts an engagement to provide a non-assurance service to an

Assurance Client, the Firm shall determine whether providing such a service might
create a threat to Independence.
950.3 A1 The requirements and application material in this section assist Firms in analysing certain
types of non-assurance services and the related threats that might be created when a Firm
accepts or provides non-assurance services to an Assurance Client.
950.3 A2 New business practices, the evolution of financial markets and changes in information
technology are among the developments that make it impossible to draw up an all-inclusive
list of non-assurance services that might be provided to an Assurance Client. As a result,
the Code does not include an exhaustive listing of all non-assurance services that might
be provided to an Assurance Client.
Evaluating Threats
950.4 A1 Factors that are relevant in evaluating the level of threats created by providing a non-
assurance service to an Assurance Client include:
• The nature, scope and purpose of the service.

• The degree of reliance that will be placed on the outcome of the service as part of the
• The legal and regulatory environment in which the service is provided.

• Whether the outcome of the service will affect matters reflected in the subject matter
or subject matter information of the Assurance Engagement, and, if so:
o The extent to which the outcome of the service will have a material or
significant effect on the subject matter of the Assurance Engagement.
o The extent of the Assurance Client’s involvement in determining significant

matters of judgement.
• The level of expertise of the client’s management and employees with respect to the
type of service provided.
205
Materiality in Relation to an Assurance Client’s Information
950.4 A2 The concept of materiality in relation to an Assurance Client’s information is addressed in

Standard on Assurance Engagements (ASAE) 3000, Assurance Engagements Other than
Audits or Reviews of Historical Financial Information. The determination of materiality
involves the exercise of professional judgement and is impacted by both quantitative and
qualitative factors. It is also affected by perceptions of the financial or other information
needs of users.
Multiple Non-Assurance Services Provided to the Same Assurance Client
950.4 A3 A Firm might provide multiple non-assurance services to an Assurance Client. In these
circumstances the combined effect of threats created by providing those services is
relevant to the Firm’s evaluation of threats.
Addressing Threats
950.5 A1 Paragraph 120.10 A2 includes a description of safeguards. In relation to providing non-

assurance services to Assurance Clients, safeguards are actions, individually or in
combination, that the Firm takes that effectively reduce threats to Independence to an
Acceptable Level. In some situations, when a threat is created by providing a service to an
Assurance Client, safeguards might not be available. In such situations, the application of
the conceptual framework set out in Section 120 requires the Firm to decline or end the
non-assurance service or the Assurance Engagement.
Prohibition on Assuming Management Responsibilities
R950.6 A Firm shall not assume a management responsibility related to the subject matter
or subject matter information of an Assurance Engagement provided by the Firm. If
the Firm assumes a management responsibility as part of any other service provided
to the Assurance Client, the Firm shall ensure that the responsibility is not related
to the subject matter or subject matter information of the Assurance Engagement
provided by the Firm.
950.6 A1 Management responsibilities involve controlling, leading and directing an entity, including
making decisions regarding the acquisition, deployment and control of human, financial,
technological, physical and intangible resources.
950.6 A2 Providing a non-assurance service to an Assurance Client creates self-review and self-
interest threats if the Firm assumes a management responsibility when performing the
service. In relation to providing a service related to the subject matter or subject matter
information of an Assurance Engagement provided by the Firm, assuming a management
responsibility also creates a familiarity threat and might create an advocacy threat because
the Firm becomes too closely aligned with the views and interests of management.
950.6 A3 Determining whether an activity is a management responsibility depends on the

circumstances and requires the exercise of professional judgement. Examples of activities
that would be considered a management responsibility include:
• Setting policies and strategic direction.

• Hiring or dismissing employees.
• Directing and taking responsibility for the actions of employees in relation to the
employees’ work for the entity.
• Authorising transactions.
206
• Controlling or managing bank accounts or investments.
• Deciding which recommendations of the Firm or other third parties to implement.
• Reporting to Those Charged with Governance on behalf of management.
• Taking responsibility for designing, implementing, monitoring and maintaining

internal control.
950.6 A4 Providing advice and recommendations to assist the management of an Assurance Client
in discharging its responsibilities is not assuming a management responsibility. (Ref: Paras.
R950.6 to 950.6 A3).
R950.7 To avoid assuming a management responsibility when providing non-assurance

services to an Assurance Client that are related to the subject matter or subject
matter information of the Assurance Engagement, the Firm shall be satisfied that
client management makes all related judgements and decisions that are the proper
responsibility of management. This includes ensuring that the client’s management:
(a) Designates an individual who possesses suitable skill, knowledge and

experience to be responsible at all times for the client’s decisions and to
oversee the services. Such an individual, preferably within senior
management, would understand:
(i) The objectives, nature and results of the services; and
(ii) The respective client and Firm responsibilities.
However, the individual is not required to possess the expertise to perform or

re-perform the services.
(b) Provides oversight of the services and evaluates the adequacy of the results
of the service performed for the client’s purpose; and
(c) Accepts responsibility for the actions, if any, to be taken arising from the
results of the services.
Other Considerations Related to Providing Specific Non-Assurance Services
950.8 A1 A self-review threat might be created if the Firm is involved in the preparation of subject
matter information which is subsequently the subject matter information of an Assurance
Engagement. Examples of non-assurance services that might create such self-review
threats when providing services related to the subject matter information of an Assurance
Engagement include:
(a) Developing and preparing prospective information and subsequently providing

assurance on this information.
(b) Performing a valuation that forms part of the subject matter information of an
207
SECTION 990
REPORTS THAT INCLUDE A RESTRICTION ON USE AND DISTRIBUTION

(ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
ENGAGEMENTS)
Introduction
to Independence.
990.2 This section sets out certain modifications to Part 4B which are permitted in certain
circumstances involving Assurance Engagements where the report includes a restriction
on use and distribution. In this section, an engagement to issue a restricted use and
distribution assurance report in the circumstances set out in paragraph R990.3 is referred
to as an “eligible Assurance Engagement”.
General
R990.3 When a Firm intends to issue a report on an Assurance Engagement which includes
a restriction on use and distribution, the Independence requirements set out in Part
4B shall be eligible for the modifications that are permitted by this section, but only
if:
(a) The Firm communicates with the intended users of the report regarding the
modified Independence requirements that are to be applied in providing the
service; and
(b) The intended users of the report understand the purpose, subject matter
information and limitations of the report and explicitly agree to the application
of the modifications.
990.3 A1 The intended users of the report might obtain an understanding of the purpose, subject
matter information, and limitations of the report by participating, either directly, or indirectly
through a representative who has authority to act for the intended users, in establishing the
nature and scope of the engagement. In either case, this participation helps the Firm to
communicate with intended users about Independence matters, including the
circumstances that are relevant to applying the conceptual framework. It also allows the
Firm to obtain the agreement of the intended users to the modified Independence
requirements.
R990.4 Where the intended users are a class of users who are not specifically identifiable
by name at the time the engagement terms are established, the Firm shall
subsequently make such users aware of the modified Independence requirements
agreed to by their representative.
208
990.4 A1 For example, where the intended users are a class of users such as lenders in a syndicated
loan arrangement, the Firm might describe the modified Independence requirements in an
engagement letter to the representative of the lenders. The representative might then
make the Firm’s engagement letter available to the members of the group of lenders to
meet the requirement for the Firm to make such users aware of the modified
Independence requirements agreed to by the representative.
R990.5 When the Firm performs an eligible Assurance Engagement, any modifications to
Part 4B shall be limited to those modifications set out in paragraphs R990.7 and
R990.8.
R990.6 If the Firm also issues an assurance report that does not include a restriction on use
and distribution for the same client, the Firm shall apply Part 4B to that Assurance
Engagement.
Financial Interests, Loans and Guarantees, Close Business, Family and Personal Relationships
R990.7 When the Firm performs an eligible Assurance Engagement:

(a) The relevant provisions set out in Sections 910, 911, 920, 921, 922 and 924 need
apply only to the members of the Engagement Team, and their Immediate and
Close Family members;
(b) The Firm shall identify, evaluate and address any threats to Independence
created by interests and relationships, as set out in Sections 910, 911, 920, 921,
922 and 924, between the Assurance Client and the following Assurance Team
members;
(i) Those who provide consultation regarding technical or industry specific

issues, transactions or events; and
(ii) Those who provide quality control for the engagement, including those
who perform the Engagement Quality Control Review; and
(c) The Firm shall evaluate and address any threats that the Engagement Team
has reason to believe are created by interests and relationships between the
Assurance Client and others within the Firm who can directly influence the
outcome of the Assurance Engagement, as set out in Sections 910, 911, 920,
921, 922 and 924.
990.7 A1 Others within the Firm who can directly influence the outcome of the Assurance
Engagement include those who recommend the compensation, or who provide direct
supervisory, management or other oversight, of the Assurance Engagement Partner in
connection with the performance of the Assurance Engagement.
R990.8 When the Firm performs an eligible Assurance Engagement, the Firm shall not hold
a material Direct or a material Indirect Financial Interest in the Assurance Client.
209
TRANSITIONAL PROVISIONS
The Code is subject to the following transitional provisions:
Long Association of Personnel with an Audit or Assurance Client
1. Paragraph R540.19 shall have effect only for audits of Financial Statements for periods beginning
prior to 31 December 2023. This will facilitate the transition to the required cooling-off period of
five consecutive years for Engagement Partners where legislation or regulation has specified a
cooling-off period of less than five consecutive years.
210
CONFORMITY WITH INTERNATIONAL PRONOUNCEMENTS
APES 110 and the IESBA Code
APES 110 incorporates the International Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code) issued by the International Ethics Standards
Board for Accountants (IESBA) in April 2018 and incorporating amendments up to July 2018.
Compliance with the IESBA Code
The principles and requirements of APES 110 and the IESBA Code are consistent except for the
following:
• The title of APES 110 does not include the term ‘International’;
• The addition of a Scope and Application section in APES 110;
• Requirement paragraphs in APES 110 are in bold-type font;

• APES 110 generally refers to Members whereas the IESBA Code refers to professional
accountants;
• Defined terms are in title case in APES 110;
• The addition of definitions prefixed as AUST in APES 110. The additional definitions are of
AASB, Administration, AUASB, Auditing and Assurance Standards, Australian Accounting
Standards, Member, Professional Bodies and Professional Standards;
• The addition of paragraphs prefixed as AUST are to deal with applicable Australian laws and
regulations, Australian Accounting Standards, Auditing and Assurance Standards,
Accounting Professional & Ethical Standards, or to address specific matters in the Australian
environment;
• APES 110 tailors the following IESBA defined terms to the Australian environment: Assurance
Engagement, Audit Engagement, Director or Officer, Engagement Team, Financial Statements,
Firm, Member in Public Practice, Public Interest Entity, and Review Engagement;
• The definition of Engagement Team in APES 110 does not exclude individuals within the client’s
internal audit function who provide direct assistance on an Audit Engagement as the AUASB has
prohibited the use of direct assistance in Auditing and Assurance Standard ASA 610 Using the
Work of Internal Auditors (November 2013);
• APES 110 uses the term ‘NOCLAR’ whereas the IESBA Code refers to ‘non-compliance’;
• APES 110 includes additional text in the section heading of Part 2 to indicate that the section
includes employment relationships of Members in Public Practice;
• Enhancing the clarity of provisions in Sections 320 and 360 by replacing some of the references
to the Proposed Accountant, Existing Accountant or Predecessor Accountant with the term
Member in Public Practice in APES 110; and
• Paragraph AUST R400.8.1 in APES 110 mandates Firms to determine whether additional entities
are Public Interest Entities.
211

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APES 110 Code of Ethics for Professional

Accountants (including Independence

ISSUED: November 2018

CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS (INCLUDING

SCOPE AND APPLICATION ................................................................................................................. 12

PART 1 – COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND

PART 2 – MEMBERS IN BUSINESS (INCLUDING EMPLOYMENT RELATIONSHIPS OF

PART 3 – MEMBERS IN PUBLIC PRACTICE ...................................................................................... 68

INDEPENDENCE STANDARDS (PARTS 4A AND 4B)

[AUST] PREFACE: PART 4A AND PART 4B........................................................................................107

PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS .................................... 108

PART 4B – INDEPENDENCE FOR ASSURANCE ENGAGEMENTS OTHER

TRANSITIONAL PROVISIONS ........................................................................................................... 210

CONFORMITY WITH INTERNATIONAL PRONOUNCEMENTS ........................................................ 211

Purpose of the Code

How the Code is Structured

• Part 2 – Members in Business (including employment relationships of Members in Public

o Commerce, industry or service.

o The public sector.

o The not-for-profit sector.

• Application material – provides context, explanations, suggestions for actions or matters to

How to Use the Code

9. Complying with the Code requires knowing, understanding and applying:

Appendix to Guide to the Code

17. Appendix 1 to this Guide provides an overview of the Code.

The Code and other Professional Standards

• APES 110 Code of Ethics for Professional Accountants (including Independence

• professional standards; and

OVERVIEW OF THE CODE

PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS

PART 4B – INDEPENDENCE FOR ASSURANCE ENGAGEMENTS OTHER

Structure of APESB pronouncements

Due process and working procedures

Conceptual Framework APES 110: Code of Ethics for

Standards APESB Standards

Guidance notes Guidance notes

APESB issued pronouncements as at November 2018

Professional Standards APES Name of Standard or

Standards & Guidance Notes for all Members

APES 200-299 APES 205 Conformity with Accounting Standards

Standards & Guidance Notes for Members in Public Practice

APES 300-399 APES 305 Terms of Engagement

APES GN 30-39 APES GN 30 Outsourced Services

Standards & Guidance Notes for Members in Business

APES GN 40-49 APES GN 40 Ethical Conflicts in the Workplace – Considerations

SCOPE AND APPLICATION ............................................................................................................. 12

PART 1 - COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND

PART 2 - MEMBERS IN BUSINESS (INCLUDING EMPLOYMENT RELATIONSHIPS

PART 3 - MEMBERS IN PUBLIC PRACTICE ................................................................................... 68

[AUST] PREFACE: PART 4A AND PART 4B ................................................................................. 107

PART 4A - INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS ................................. 108

PART 4B - INDEPENDENCE FOR ASSURANCE ENGAGEMENTS OTHER THAN

TRANSITIONAL PROVISIONS ........................................................................................................ 210

CONFORMITY WITH INTERNATIONAL PRONOUNCEMENTS .................................................... 211

[AUST] Administration An insolvency arrangement arising from an appointment, other than a

Advertising The communication to the public of information as to the services or skills

Appropriate reviewer An appropriate reviewer is a professional with the necessary knowledge,

This term is described in paragraph 300.8 A4.

(a) In a direct reporting engagement, is responsible for the subject