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. 524.4 A3 Factors that are relevant in evaluating the level of such threats include: • 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
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. 524.5 A2 An example of an action that might eliminate such a self- interest threat is removing the individual from the audit team. 524.5 A3 An example of an action that might be a safeguard to address such a self-interest threat is having an appropriate reviewer review any significant judgments made by that individual while on the team.
Audit Clients that are Public Interest Entities
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:
