Section 5524Part 5

Employment with a Sustainability Assurance Client

Introduction

5524.1 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. 5524.2 Employment relationships with a sustainability assurance client might create a self-interest, familiarity or intimidation threat. This section sets out specific requirements and application material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material All Sustainability Assurance

Clients

5524.3 A1 A familiarity or intimidation threat might be created if any of the following individuals have been a sustainability assurance team member or leader of the firm or a network firm: • A director or officer of the sustainability assurance client. • An employee in a position to exert significant influence over the preparation of the client’s sustainability information on which the firm will express an opinion, or the records underlying that information.

Former Leader or Sustainability Assurance Team Member Restrictions

R5524.4

The firm shall ensure that no significant connection remains between the firm or a network firm and:

(a)

A former leader who has joined a sustainability assurance client of the firm; or

(b)

A former sustainability assurance team member who has joined the sustainability assurance client, If either has joined the sustainability assurance client as:

(i)

A director or officer; or

(ii)

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

(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. 5524.4 A1 Even if the requirements of paragraph R5524.4 are met, a familiarity or intimidation threat might still be created. 5524.4 A2 A familiarity or intimidation threat might also be created if a former leader of the firm or network firm has joined an entity in one of the positions described in paragraph 5524.3 A1 and the entity subsequently becomes a sustainability assurance client of the firm. 5524.4 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 sustainability assurance team. • The length of time since the individual was a sustainability assurance team member or leader of the firm or network firm. • The former position of the individual within the sustainability assurance 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. 5524.4 A4 Examples of actions that might be safeguards to address such familiarity or intimidation threats include: • Modifying the plan for the sustainability assurance engagement. • Assigning to the sustainability 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 sustainability assurance team member.

Sustainability Assurance Team Members Entering Employment with a Client

R5524.5 A firm or network firm shall have policies and procedures that require sustainability assurance team members to notify the firm or network firm when entering employment negotiations with a sustainability assurance client. 5524.5 A1 A self-interest threat is created when a sustainability assurance team member participates in the sustainability assurance engagement while knowing that the sustainability assurance team member will, or might, join the client at some time in the future. 5524.5 A2 An example of an action that might eliminate such a self-interest threat is removing the individual from the sustainability assurance team. 5524.5 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.

Sustainability Assurance Clients that are Public Interest Entities

Key Sustainability Assurance Leaders

R5524.6

Subject to paragraph R5524.8, if an individual who was a key sustainability assurance leader with respect to a sustainability assurance client that is a public interest entity joins the client as:

(a)

A director or officer; or

(b)

An employee in a position to exert significant influence over the preparation of the client’s sustainability information on which the firm will express an opinion, or the records underlying that information, independence is compromised unless, subsequent to the individual ceasing to be a key sustainability assurance leader:

(i)

The sustainability assurance client has issued assured sustainability information covering a period of not less than twelve months; and

(ii)

The individual was not a sustainability assurance team member with respect to the assurance of that sustainability information.

Chief Executive or Equivalent of the Firm

R5524.7

Subject to paragraph R5524.8, if an individual who was the

Chief Executive or equivalent of the firm joins a sustainability assurance client that is a public interest entity as:

(a)

A director or officer; or

(b)

An employee in a position to exert significant influence over the preparation of the client’s sustainability information on which the firm will express an opinion, or the records underlying that information, independence is compromised, unless twelve months have passed since the individual was the Chief Executive or equivalent of the firm.

Business Combinations

R5524.8

As an exception to paragraphs R5524.6 and R5524.7, 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 key sustainability assurance leader or Chief Executive 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 key sustainability assurance leader or Chief Executive is not material to the firm or network firm as applicable;

(c)

The former key sustainability assurance leader or Chief Executive 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 key sustainability assurance leader’s or Chief Executive’s position held with the sustainability assurance client with those charged with governance.