Fees

Introduction

5410.1 Firms are required to comply with the fundamental principles, be independent and apply the conceptual framework set out in Section 5120Section 5120 to identify, evaluate and address threats to independence. 5410.2 Section 5330Section 5330 sets out application material relevant to applying the conceptual framework where 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 requirements and application material relevant to applying the conceptual framework to identify, evaluate and address threats to independence arising from fees charged to sustainability assurance clients.

Requirements and Application Material

General

5410.3 A1 Fees for professional services are usually negotiated with and paid by a sustainability assurance client and might create threats to independence. This practice is generally recognized and accepted by intended users of sustainability information. 5410.3 A4 If the firm also performs the audit engagement for the same client, the audit fees and fees for the sustainability assurance engagement are a matter for the firm and the client to agree.

If the sustainability assurance engagement is a separate engagement, the provisions in this Part apply, in addition to the relevant provisions in Part 4A that apply to the separate audit engagement.

Fees Paid by a Sustainability Assurance Client

5410.4 A1 When fees are negotiated with and paid by a sustainability assurance client, this creates a self-interest threat and might create an intimidation threat to independence. 5410.4 A2 The application of the conceptual framework requires that before a firm or network firm accepts a sustainability assurance engagement, or any other engagement for a sustainability assurance client, the firm determines whether the threats to independence created by the fees proposed to the client are at an acceptable level. The application of the conceptual framework also requires the firm to re-evaluate such threats when facts and circumstances change during the engagement period for the sustainability assurance engagement. 5410.4 A3 Factors that are relevant in evaluating the level of threats created when fees for a sustainability assurance engagement, or any other engagement, are paid by the sustainability assurance client include: • The level of the fees and the extent to which they have regard to the resources required, taking into account the firm’s commercial and market priorities. • Any linkage between fees for the sustainability assurance engagement and those for services other than the sustainability assurance engagement and the relative size of both elements. • The extent of any dependency between the level of the fee for, and the outcome of, the service. • Whether the fee is for services to be provided by the firm or a network firm. • The level of the fee in the context of the service to be provided by the firm or a network firm. • The operating structure and the compensation arrangements of the firm and network firms. • The significance of the client, or a third party referring the client, to the firm, network firm, engagement leader or office. • The nature of the client, for example whether the client is a public interest entity. • The relationship of the client to the related entities to which the services other than the sustainability assurance engagement are provided, for example when the related entity is a sister entity. • The involvement of those charged with governance in appointing the firm providing the sustainability assurance service and agreeing fees, and the apparent emphasis they and client management place on the quality of the sustainability assurance engagement and the overall level of the fees. • Whether the level of the fee is set by an independent third party, such as a regulatory body. • Whether the quality of the firm’s sustainability assurance work is subject to the review of the Institute . 5410.4 A5 The requirements and application material that follow identify circumstances which might need to be further evaluated when determining whether the threats are at an acceptable level.

For those circumstances, application material includes examples of additional factors that might be relevant in evaluating the threats.

Level of Sustainability Assurance Fees

5410.5 A1 Determining the fees to be charged to a sustainability assurance client, whether for the sustainability assurance engagement or other services, is a business decision of the firm taking into account the facts and circumstances relevant to that specific engagement, including the requirements of technical and professional standards. 5410.5 A2 Factors that are relevant in evaluating the level of self-interest and intimidation threats created by the level of the sustainability assurance fee paid by the sustainability assurance client include: • The firm’s commercial rationale for the sustainability assurance fee. • Whether undue pressure has been, or is being, applied by the client to reduce the sustainability assurance fee. 5410.5 A3 Examples of actions that might be safeguards to address such threats include: • Having an appropriate reviewer who does not take part in the sustainability assurance engagement assess the reasonableness of the fee proposed, having regard to the scope and complexity of the engagement. • Having an appropriate reviewer who did not take part in the sustainability assurance engagement review the work performed.

Impact of Other Services Provided to a Sustainability Assurance Client

R5410.6

Subject to paragraph R5410.7, a firm shall not allow the sustainability assurance fee to be influenced by the provision of services other than the sustainability assurance engagement to a sustainability assurance client by the firm or a network firm. 5410.6 A1 The sustainability assurance fee ordinarily reflects a combination of matters. However, the provision of other services to a sustainability assurance client is not an appropriate consideration in determining the sustainability assurance fee.

R5410.7

As an exception to paragraph R5410.6, when determining the sustainability assurance fee, the firm may take into consideration the cost savings achieved as a result of experience derived from the provision of services other than the sustainability assurance engagement to a sustainability assurance client.

Contingent Fees

5410.8 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.

R5410.9

A firm shall not charge directly or indirectly a contingent fee for a sustainability assurance engagement.

Total Fees – Proportion of Fees for Services Other than

Sustainability Assurance to Sustainability Assurance Fee

5410.11 A0 Where a firm performs both an audit engagement and a sustainability assurance engagement for a sustainability assurance client, paragraphs 410.11 A1 to 410.11 A3 in Part 4A apply in the context of the fees charged by the firm and network firms to the sustainability assurance client. Where the firm is not engaged to perform an audit engagement for the client, paragraphs 5410.11 A1 to A3 apply. 5410.11 A1 The level of the self-interest threat might be impacted when a large proportion of fees charged by the firm or network firms to a sustainability assurance client is generated by providing services other than the sustainability assurance engagement to the client, due to concerns about the potential loss of either the sustainability assurance engagement or other services. Such circumstances might also create an intimidation threat. A further consideration is a perception that the firm or network firm focuses on the non-sustainability assurance relationship, which might create a threat to the sustainability assurance provider’s independence. 5410.11 A2 Factors that are relevant in evaluating the level of such threats include: • The ratio of fees for services other than the sustainability assurance engagement to the sustainability assurance fee. • The length of time during which a large proportion of fees for services other than the sustainability assurance engagement to the sustainability assurance fee has existed. • The nature, scope and purposes of the services other than the sustainability assurance engagement, including: o Whether they are recurring services. o Whether law or regulation mandates the services to be performed by the firm. 5410.11 A3 Examples of actions that might be safeguards to address such self-interest or intimidation threats include: • Having an appropriate reviewer who was not involved in the sustainability assurance engagement or the service other than the sustainability assurance engagement review the relevant sustainability assurance work. • Reducing the extent of services other than the sustainability assurance engagement provided to the sustainability assurance client.

Total Fees – Overdue Fees

5410.12 A1 The level of the self-interest threat might be impacted if fees payable by a sustainability assurance client for the sustainability assurance engagement or services other than the sustainability assurance engagement are overdue during the period of the sustainability assurance engagement. 5410.12 A2 It is generally expected that the firm will obtain payment of such fees before the sustainability assurance report is issued. 5410.12 A3 Factors that are relevant in evaluating the level of such a self-interest threat include: • The significance of the overdue fees to the firm. • The length of time the fees have been overdue. • The firm’s assessment of the ability and willingness of the sustainability assurance client to pay the overdue fees. 5410.12 A4 Examples of actions that might be safeguards to address such a threat include: • Obtaining partial payment of overdue fees. • Having an appropriate reviewer who did not take part in the sustainability assurance engagement review the sustainability assurance work.

R5410.13

When a significant part of the fees due from a sustainability assurance client remains unpaid for a long time, the firm shall determine: