Section 300: Applying the Conceptual Framework – Chartered Accountants in Practice

Section 300: Applying the Conceptual Framework – Chartered Accountants in Practice · Complied AI

(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 chartered accountant’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.

The Firm and its Operating Environment

300.7 A5 A chartered accountant’s evaluation of the level of a threat might be impacted by the work environment within the accountant’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 any 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. 300.7 A6 The chartered accountant’s evaluation of the level of a threat associated with the use of technology might also be impacted by the work environment within the accountant’s firm and its operating environment. For example: • Level of corporate oversight and internal controls over the technology. • Assessments of the quality and functionality of technology that are undertaken by a third-party. • Training that is provided regularly to all relevant employees so they obtain and maintain the professional competence to sufficiently understand, use and explain the technology and its appropriateness for the purpose intended.

Consideration of New Information or Changes in Facts and Circumstances

300.7 A7 New information or changes in facts and circumstances might:

(b)

Affect the chartered accountant’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 chartered accountant re-evaluate and address the threats accordingly. (Ref: Paras. R120.9 and R120.10). 300.7 A8 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 chartered accountant is jointly engaged by two clients and a dispute emerges between the two clients. • When there is a change in the chartered accountant’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.

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 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 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 chartered accountant.

Communicating with Those Charged with Governance

R300.9

When communicating with those charged with governance in

accordance with the Code, a chartered accountant shall determine the appropriate individual(s) within the entity’s governance structure with whom to communicate. If the accountant communicates with a subgroup of those charged with governance, the accountant 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 chartered accountant might consider: