Section 5600: Provision of Non-assurance Services to a Sustainability Assurance Client · Complied AI

Section 5600Part 5

Provision of Non-assurance Services to a Sustainability Assurance Client

Introduction

5600.1 Firms are required to comply with the fundamental principles, be independent, and apply the conceptual framework set out in Section 5120 to identify, evaluate and address threats to independence. 5600.2 Firms and network firms might provide a range of non- assurance services to their sustainability assurance clients, consistent with their expertise. Providing non-assurance services to sustainability assurance clients might create threats to compliance with the fundamental principles and threats to independence. 5600.3 This section sets out requirements and application material relevant to applying the conceptual framework to identify, evaluate and address threats to independence when providing non-assurance services to sustainability assurance clients.

The subsections that follow set out specific requirements and

application material that are relevant when a firm or a network firm provides certain types of non- assurance services to sustainability assurance clients and indicate the types of threats that might be created as a result. 5600.4 Some subsections include requirements that expressly prohibit a firm or a network firm from providing certain services to a sustainability assurance client because the threats created cannot be eliminated and safeguards are not capable of being applied to reduce the threats to an acceptable level. 5600.5 New business practices, the developing sustainability landscape, the evolution of financial markets and sustainability reporting, and changes in technology are some developments that make it impossible to draw up an all- inclusive list of non-assurance services that firms and network firms might provide to a sustainability assurance client. The conceptual framework and the general provisions in this section apply when a firm proposes to a client to provide a non-assurance service for which there are no specific requirements and application material. 5600.5a The requirements and application material in this section apply where a firm or a network firm provides non-assurance services to a sustainability assurance client and:

(b)

The services might create an advocacy, self-interest, familiarity or intimidation threat. 5600.6 Circumstances involving non-assurance services that might affect the sustainability information on which the firm will express an assurance opinion or the records underlying that information, include where a firm or network firm uses technology to provide a non-assurance service to a sustainability assurance client. 5600.6a Where the firm is also the entity’s auditor, the requirements and application material in Section 600 apply with respect to identifying, evaluating and addressing threats to the firm’s independence, in relation to the audit engagement, that might be created by the provision of non-assurance services to the audit client. A non-assurance service related to sustainability information that does not affect the accounting records, the internal controls over financial reporting, or the financial statements on which the firm will express an opinion does not create a self-review or advocacy threat to independence for the audit. However, such a service might create threats to independence in relation to performing a sustainability assurance engagement for the same client where the provision of that service affects the sustainability information on which the firm will express an opinion, the records underlying that information, or the internal controls over sustainability reporting.

Requirements and Application Material

General

Non-Assurance Services Provisions in Laws or Regulations

5600.7 A1 Paragraphs R5100.6 to 5100.7 A1 set out requirements and application material relating to compliance with the Code. If there are laws and regulations relating to the provision of non- assurance services to sustainability assurance clients that differ from or go beyond those set out in this section, firms providing non-assurance services to which such provisions apply need to be aware of those differences and comply with the more stringent provisions.

Risk of Assuming Management Responsibilities when Providing a Non-

Assurance Service

5600.8 A1 When a firm or a network firm provides a non-assurance service to a sustainability assurance client, there is a risk that the firm or network firm will assume a management responsibility unless the firm or network firm is satisfied that the requirements in paragraph R5400.21 have been complied with.

Accepting an Engagement to Provide a Non-Assurance Service

R5600.9

Before a firm or a network firm accepts an engagement to provide a non-assurance service to a sustainability assurance client, the firm shall apply the conceptual framework to identify, evaluate and address any threat to independence that might be created by providing that service.

Identifying and Evaluating Threats

All Sustainability Assurance Clients

5600.10 A1 A description of the categories of threats that might arise when a firm or a network firm provides a non- assurance service to a sustainability assurance client is set out in paragraph 5120.6 A3. 5600.10 A2 Factors that are relevant in identifying the different threats that might be created by providing a non- assurance service to a sustainability assurance client, and evaluating the level of such threats include: • The nature, scope, intended use and purpose of the service. • The manner in which the service will be provided, such as the personnel to be involved and their location. • The client’s dependency on the service, including the frequency with which the service will be provided. • The legal and regulatory environment in which the service is provided. • Whether the client is a public interest entity. • The level of expertise of the client’s management and employees with respect to the type of service provided. • The extent to which the client determines significant matters of judgment. (Ref: Para. R5400.20 to R5400.21). • Whether the outcome of the service will affect the matters reflected in the sustainability information on which the firm will express an opinion or the records underlying that information, and, if so: o The extent to which the outcome of the service will have a material effect on the sustainability information. o The degree of subjectivity involved in determining the appropriate amounts, disclosures or treatment for those matters reflected in the sustainability information. • 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 Sustainability information on which the firm will express an opinion or the records underlying that information. o Internal controls over sustainability reporting. • The degree of reliance that will be placed on the outcome of the service as part of the sustainability assurance engagement. • The fee relating to the provision of the non-assurance service. 5600.10 A3 Subsections 5601 to 5610 include examples of additional factors that are relevant in identifying threats to independence created by providing certain non-assurance services and evaluating the level of such threats.

Materiality in relation to sustainability information

5600.11 A1 Materiality is a factor that is relevant in evaluating threats created by providing a non-assurance service to a sustainability assurance client. Subsections 5601 to 5610 refer to materiality in relation to a sustainability assurance client’s sustainability information on which the firm will express an opinion. The concept of materiality in relation to sustainability assurance engagement is addressed in the relevant reporting and assurance frameworks.

The

determination of materiality involves the exercise of professional judgment and is impacted by both quantitative and qualitative factors. It is also affected by perceptions of the sustainability information needs of users. The applicable reporting and assurance frameworks might include principles or guidance to assist the sustainability assurance client in identifying information that might be material to users. 5600.11 A2 Where the Code expressly prohibits the provision of a non- assurance service to a sustainability assurance client, a firm or a network firm is not permitted to provide that service, regardless of the materiality of the outcome or results of the non-assurance service on the sustainability information on which the firm will express an opinion.

Providing advice and recommendations

5600.12 A1 Providing advice and recommendations might create a self- review threat.

Whether

providing advice and recommendations creates a self-review threat involves making the determination set out in paragraph R5600.15.

Where the sustainability assurance client is not a public

interest entity and a self-review threat is identified, the firm is required to apply the conceptual framework to evaluate and address the threat. If the sustainability assurance client is a public interest entity, paragraphs R5600.17 and R5600.18 apply.

Multiple non-assurance services provided to the same sustainability

assurance client R5600.13 When a firm or a network firm provides multiple non- assurance services to a sustainability assurance client, the firm shall consider whether, in addition to the threats created by each service individually, the combined effect of such services creates or impacts threats to independence. 5600.13 A1 In addition to paragraph 5600.10 A2, factors that are relevant in a firm’s evaluation of the level of threats to independence created where multiple non-assurance services are provided to a sustainability assurance client might include whether: • The combined effect of providing multiple services increases the level of threat created by each service assessed individually. • The combined effect of providing multiple services increases the level of any threat arising from the overall relationship with the sustainability assurance client. 5600.13 A2 When the sustainability assurance provider is also the auditor, paragraphs R600.13 and 600.13 A1 in Part 4A apply in relation to multiple non-assurance services provided to the same client.

Self-review threats

5600.14 A1 When a firm or a network firm provides a non-assurance service to a sustainability assurance client, there might be a risk of the firm carrying out assurance procedures on its own or the network firm’s work, thereby giving rise to a self-review threat. A self-review threat is the threat that a firm or a network firm will not appropriately evaluate the results of a previous judgment made or an activity performed by an individual within the firm or network firm as part of a non- assurance service on which the sustainability assurance team will rely when forming a judgment as part of a sustainability assurance engagement.

R5600.15

Before providing a non-assurance service to a sustainability

assurance client, a firm or a network firm shall determine whether the provision of that service might create a self- review threat by evaluating whether there is a risk that:

(b)

Applies the conceptual framework to identify, evaluate and address threats, other than self- review threats, to independence that might be created by the provision of that advice. 5600.18 A1 Examples of advice and recommendations that might be provided in relation to information or matters arising in the course of a sustainability assurance engagement include: • Advising on sustainability reporting standards or policies and sustainability information disclosure requirements. • Advising on the appropriateness of controls related to sustainability information and the methods used in determining or establishing the sustainability information to be reported. • Proposing an adjustment to sustainability information arising from the sustainability assurance engagement findings. • Discussing findings on internal controls over sustainability reporting and processes and recommending improvements.

Addressing Threats

All Sustainability Assurance Clients

5600.19 A1 Paragraphs R5120.10 to 5120.10 A2 include a requirement and application material that are relevant when addressing threats to independence, including a description of safeguards. 5600.19 A2 Threats to independence created by providing a non- assurance service or multiple services to a sustainability assurance client vary depending on the facts and circumstances of the sustainability assurance engagement and the nature of the service. Such threats might be addressed by applying safeguards or by adjusting the scope of the proposed service. 5600.19 A3 Examples of actions that might be safeguards to address such threats include: • Using professionals who are not sustainability assurance team members to perform the service. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or service performed. 5600.19 A4 Safeguards might not be available to reduce the threats created by providing a non-assurance service to a sustainability assurance client to an acceptable level. In such a situation, the application of the conceptual framework requires the firm or network firm to:

(c)

End the sustainability assurance engagement.

Communication with Those Charged With Governance Regarding Non-

Assurance Services

All Sustainability Assurance Clients

5600.20 A1 Paragraphs 5400.40 A1 and 5400.40 A2 are relevant to a firm’s communication with those charged with governance in relation to the provision of non-assurance services.

Sustainability Assurance Clients that are Public Interest Entities

5600.21 A1 Paragraphs R5600.22 to R5600.24 require a firm to communicate with those charged with governance of a public interest entity before the firm or network firm provides non- assurance services to entities within the corporate structure of which the public interest entity forms part that might create threats to the firm’s independence from the public interest entity. The purpose of the communication is to enable those charged with governance of the public interest entity to have effective oversight of the independence of the firm that assures the sustainability information of that public interest entity. 5600.21 A2 To facilitate compliance with such requirements, a firm might agree with those charged with governance of the public interest entity a process that addresses when and with whom the firm is to communicate. Such a process might: • Establish the procedure for the provision of information about a proposed non-assurance service which might be on an individual engagement basis, under a general policy, or on any other agreed basis. • Identify the entities to which the process would apply, which might include other public interest entities within the corporate structure. • Identify any services that can be provided to the entities identified in paragraph R5600.22 without specific approval of those charged with governance if they agree as a general policy that these services are not prohibited under this section and would not create threats to the firm’s independence or, if any such threats are created, they would be at an acceptable level. • Establish how those charged with governance of multiple public interest entities within the same corporate structure have determined that authority for approving services is to be allocated. • Establish a procedure to be followed where the provision of information necessary for those charged with governance to evaluate whether a proposed service might create a threat to the firm’s independence is prohibited or limited by professional standards, laws or regulations, or might result in the disclosure of sensitive or confidential information. • Specify how any issues not covered by the process might be resolved.

Sustainability Assurance Clients that are Public Interest Entities

R5600.22

Before a firm that undertakes assurance work on the

sustainability information of a public interest entity or a network firm accepts an engagement to provide a non- assurance service to:

(A)

That public interest entity;

(B)

Any entity that controls, directly or indirectly, that public interest entity; or

(C)

Any entity that is controlled directly or indirectly by that public interest entity, the firm shall, unless already addressed when establishing a process agreed with those charged with governance:

(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 sustainability information 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 sustainability information the firm will express an opinion;

(iii)

The services do not create a self-review threat; and

(iv)

The firm addresses other threats created by providing such services that are not at an acceptable level.

Documentation

5600.28 A1 Documentation of the firm’s conclusions regarding compliance with this section in accordance with paragraphs R5400.60 and 5400.60 A1 might include: • Key elements of the firm’s understanding of the nature of the non-assurance service to be provided and whether and how the service might impact the sustainability information on which the firm will express an opinion. • The nature of any threat to independence that is created by providing the service to the sustainability assurance client, including whether the results of the service will be subject to sustainability assurance procedures. • The extent of management’s involvement in the provision and oversight of the proposed non- assurance service. • Any safeguards that are applied, or other actions taken to address a threat to independence. • The firm’s rationale for determining that the service is not prohibited and that any identified threat to independence is at an acceptable level. • In relation to the provision of a proposed non- assurance service to the entities referred to in paragraph R5600.22, the steps taken to comply with paragraphs R5600.22 to R5600.24.

SUBSECTION 5601 – SUSTAINABILITY DATA AND INFORMATION

SERVICES

Introduction

5601.1 In addition to the specific requirements and application material in this subsection, the requirements and application material in paragraphs 5600.6a to R5600.27 are relevant to applying the conceptual framework when providing sustainability data and information services for the preparation or maintenance of sustainability data, records or information to a sustainability assurance client.

Requirements and Application Material

General

5601.2 A1 Management is responsible for the preparation and presentation of the sustainability information in accordance with the applicable sustainability reporting framework. These responsibilities include: • Determining sustainability reporting policies and the reporting 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, event or other matter included in the sustainability information. • Originating or changing sustainability data entries or records. • Determining or approving sustainability information classifications.

Paragraph R5400.20 prohibits a firm or a network firm from

assuming a management responsibility.

Description of Service

5601.3 A1 Sustainability data and information services comprise a broad range of services including: • Preparing sustainability data records or sustainability information that is reported. • Recording data, events or other matters included in the sustainability information. • Resolving sustainability information inaccuracies. • Converting existing sustainability information from one sustainability reporting framework to another. • Accounting and bookkeeping services that might affect the sustainability information on which the firm expresses an opinion. Potential Threats Arising from the Provision of Sustainability Data and Information Services All Sustainability Assurance Clients 5601.4 A1 Providing sustainability data and information services to a sustainability assurance client creates a self-review threat when there is a risk that the results of the services will affect the sustainability information on which the firm will express an opinion, or the sustainability data or information records underlying that information.

Sustainability Assurance Clients that are Not Public Interest Entities

R5601.5

A firm or a network firm shall not provide to a sustainability assurance client that is not a public interest entity sustainability data and information services that might affect the sustainability information on which the firm expresses an opinion, unless:

(b)

Require little or no professional judgment. 5601.5 A2 Sustainability data and information services can either be manual or automated. In determining whether an automated service is routine or mechanical, factors to be considered include the activities performed by, and the output of, the technology, and whether the technology provides an automated service that is based on or requires the expertise or judgment of the firm or network firm. 5601.5 A3 Examples of services, whether manual or automated, that might be regarded as routine or mechanical include: • Preparing calculations or reports based on client or third party-originated data for approval by the client. • Recording recurring data which are easily determinable from source documents, where the client has determined or approved the appropriate classification. • Posting data coded by the client or received from third parties to the sustainability information records. • Preparing sustainability information to be reported based on information in the client-approved records and preparing related notes based on client-approved records. • Compiling and presenting factual sustainability data from client or third-party identified sources for comparative purposes. The firm or a network firm may provide such services to sustainability assurance clients that are not public interest entities provided that the firm or network firm complies with the requirements of paragraph R5400.21 to ensure that it does not assume a management responsibility in connection with the service and with the requirement in paragraph R5601.5(b). 5601.5 A4 Examples of actions that might be safeguards to address a self-review threat created when providing sustainability data and information services of a routine or mechanical nature to a sustainability assurance client that is not a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or service performed.

Sustainability Assurance Clients that are Public Interest Entities

R5601.6

A firm or a network firm shall not provide sustainability data and information services that might affect the sustainability information on which the firm expresses an opinion to a sustainability assurance client that is a public interest entity.

SUBSECTION 5602 – ADMINISTRATIVE SERVICES

Introduction

5602.1 In addition to the specific application material in this subsection, the requirements and application material in paragraphs 5600.1 to 5600.28 A1 are relevant to applying the conceptual framework when providing administrative services.

Application Material

Description of Service

5602.2 A1 Administrative services involve assisting clients with their routine or mechanical tasks within the normal course of operations. 5602.2 A2 Examples of administrative services include: • Word processing or document formatting. • Preparing administrative or statutory forms for client approval. • Submitting such forms as instructed by the client. • Monitoring statutory filing dates and advising a sustainability assurance client of those dates. Potential Threats Arising from the Provision of Administrative Services All Sustainability Assurance Clients 5602.3 A1 Providing administrative services to a sustainability assurance client does not usually create a threat when such services are clerical in nature and require little to no professional judgment.

SUBSECTION 5603 – VALUATIONS AND ADVISORY SERVICES ON

FORWARD-LOOKING INFORMATION

Introduction

5603.1 In addition to the specific requirements and application material in this subsection, the requirements and application material in paragraphs 5600.1 to 5600.28 A1 are relevant to applying the conceptual framework when providing valuations or advisory services on forward-looking information to a sustainability assurance client.

Requirements and Application Material

Description of Service

5603.2 A1 Valuations and advisory services on forward-looking information, including forecasting, include 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 the whole or part of an entity. For such services, the values might be non-monetary, for example, forecasting estimates of materials reserves or the amounts of hazardous substances produced by a manufacturing process. 5603.2 A2 If a firm or a network firm is requested to perform a valuation or an advisory service on forward-looking information to assist a sustainability assurance client with its tax reporting obligations or for tax planning purposes and the results of the service have no effect on the sustainability information on which the firm will express an opinion, or the records underlying that information, other than through entries related to tax, the requirements and application material set out in paragraphs 5604.17 A1 to 5604.19 A1, relating to such services, apply. Potential Threats Arising from the Provision of Valuations and Advisory Services on Forward-looking Information All Sustainability Assurance Clients 5603.3 A1 Providing a valuation or an advisory service on forward- looking information to a sustainability assurance client might create a self-review threat when there is a risk that the results of the service will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such a service might also create an advocacy threat. 5603.3 A2 Factors that are relevant in identifying self-review or advocacy threats created by providing a valuation or an advisory service on forward-looking information to a sustainability assurance client, and evaluating the level of such threats include: • The use and purpose of the results of the service or its inclusion in a report. • Whether the results of the service will be made public. • The extent to which the service methodology is supported by law or regulation, other precedent or established practice. • The extent of the client’s involvement in determining and approving the service methodology and other significant matters of judgment. • The degree of subjectivity inherent in the item for the service involving standard or established methodologies. • Whether the service will have a material effect on the sustainability information. • The extent of the disclosures related to the item covered by the service in the sustainability information. • The volatility of the values involved as a result of dependence on future events.

When a self-review threat for a sustainability assurance client

that is a public interest entity has been identified, paragraph R5603.5 applies.

Sustainability Assurance Clients that are Not Public Interest Entities

5603.3 A3 Examples of actions that might be safeguards to address self- review or advocacy threats created by providing a valuation or an advisory service on forward-looking information to a sustainability assurance client that is not a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service might address self-review or advocacy threats. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or service performed might address a self-review threat.

R5603.4

A firm or a network firm shall not provide a valuation or an advisory service on forward-looking information to a sustainability assurance client that is not a public interest entity if:

(b)

The service will have a material effect on the sustainability information on which the firm will express an opinion. 5603.4 A1 Certain valuations and advisory services on forward-looking information do not involve a significant degree of subjectivity. This is likely to be the case when the underlying assumptions are established by law or regulation or 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 or an advisory service on forward-looking information performed by two or more parties are not likely to be materially different.

Sustainability Assurance Clients that are Public Interest Entities

Self-review Threats

R5603.5

A firm or a network firm shall not provide a valuation or an advisory service on forward-looking information to a sustainability assurance client that is a public interest entity if the provision of the service might create a self-review threat. (Ref: Para. R5600.15 and R5600.17).

Advocacy Threats

5603.5 A1 An example of an action that might be a safeguard to address an advocacy threat created by providing a valuation or an advisory service on forward-looking information to a sustainability assurance client that is a public interest entity is using professionals who are not sustainability assurance team members to perform the service.

SUBSECTION 5604 – TAX SERVICES

Introduction

5604.1 In addition to the specific requirements and application material in this subsection, the requirements and application material in paragraphs 5600.1 to 5600.28 A1 are relevant to applying the conceptual framework when providing a tax service to a sustainability assurance client.

Requirements and Application Material

Description of Service

5604.2 A1 Tax services comprise a broad range of services. This subsection deals specifically with: • Tax return preparation. • Tax calculations for the purpose of preparing accounting entries or sustainability information. • Tax advisory services. • Tax planning services. • Tax services involving valuations. • Assistance in the resolution of tax disputes. 5604.2 A2 It is possible to consider tax services under broad headings, such as tax planning or compliance. However, such services are often interrelated in practice and might be combined with other types of non-assurance services provided by the firm such as corporate finance services. It is, therefore, impracticable to categorize generically the threats to which specific tax services give rise. 5604.2 A3 While tax services are generally relevant to financial information and accounting entries, such services can also be relevant to sustainability and, where they are, might affect the sustainability information on which the firm will express an opinion or the records underlying that information.

Potential Threats Arising from the Provision of Tax Services

5604.3 A1 Providing tax services to a sustainability assurance client might create a self-review threat when there is a risk that the results of the services will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such services might also create an advocacy threat. 5604.3 A2 Factors that are relevant in identifying self-review or advocacy threats created by providing any tax service to a sustainability assurance client, and evaluating the level of such threats 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 judgment necessary in applying it.

All Sustainability Assurance Clients

R5604.4

A firm or a network firm shall not provide a tax service or recommend a transaction to a sustainability assurance client if the service or transaction relates to marketing, planning, or opining in favor of a tax treatment that was initially recommended, directly or indirectly, by the firm or network firm, and a significant purpose of the tax treatment or transaction is tax evasion. 5604.4 A1 Unless the tax treatment has a basis in applicable tax law or regulation that the firm is confident is likely to prevail, providing the non-assurance service described in paragraph R5604.4 creates self- interest, self-review and advocacy threats that cannot be eliminated and safeguards are not capable of being applied to reduce such threats to an acceptable level.

A. Tax Return Preparation

Description of Service

5604.5 A1 Tax return preparation services include: • Assisting clients with their tax reporting obligations by drafting and compiling information, including the amount of tax due (usually on standardized forms) required to be submitted to the applicable tax authorities. • Advising on the tax return treatment of past transactions. • Responding on behalf of the sustainability assurance client to the tax authorities’ requests for additional information and analysis (for example, providing explanations of and technical support for the approach being taken).

Potential Threats Arising from the Provision of Tax Return Preparation

Services

All Sustainability Assurance Clients

5604.6 A1 Providing tax return preparation services does not usually create a threat because:

(b)

Tax returns are subject to whatever review or approval process the tax authority considers appropriate.

B. Tax Calculations That Affect Sustainability Information

Description of Service

5604.7 A1 Tax calculation services involve the preparation of calculations of current and deferred tax liabilities or assets for the purpose of preparing accounting entries supporting tax assets or liabilities in the financial statements of the sustainability assurance client. In some cases, those services might also affect the sustainability information of the client. Potential Threats Arising from the Provision of Tax Calculation Services All Sustainability Assurance Clients 5604.8 A1 Preparing tax calculations of current and deferred tax liabilities (or assets) for a sustainability assurance client for the purpose of preparing accounting entries that support such balances creates a self-review threat where the results of those calculations affect the sustainability information on which the firm expresses an opinion.

Sustainability Assurance Clients that are Not Public Interest Entities

5604.9 A1 In addition to the factors in paragraph 5604.3 A2, a factor that is relevant in evaluating the level of self-review threat created when preparing such calculations for a sustainability assurance client is whether the calculation might have a material effect on the sustainability information on which the firm will express an opinion. 5604.9 A2 Examples of actions that might be safeguards to address such a self-review threat when the sustainability assurance client is not a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or service performed.

Sustainability Assurance Clients that are Public Interest Entities

R5604.10

A firm or a network firm shall not prepare tax calculations of current and deferred tax liabilities (or assets) for a sustainability assurance client that is a public interest entity if the results of the services will affect the sustainability information on which the firm will express an opinion. (Ref: Para. R5600.15 and R5600.17).

C. Tax Advisory and Tax Planning Services

Description of Service

5604.11 A1 Tax advisory and tax planning services comprise a broad range of services, such as advising the sustainability assurance client how to structure its affairs in a tax efficient manner or advising on the application of a tax law or regulation. Potential Threats Arising from the Provision of Tax Advisory and Tax Planning Services All Sustainability Assurance Clients 5604.12 A1 Providing tax advisory and tax planning services to a sustainability assurance client might create a self-review threat when there is a risk that the results of the services will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such services might also create an advocacy threat. 5604.12 A2 Providing tax advisory and tax planning services will not create a self-review threat if such services:

(b)

The sustainability assurance team has doubt as to the appropriateness of the related treatment or presentation under the relevant sustainability reporting framework.

Sustainability Assurance Clients that are Not Public Interest Entities

5604.14 A1 Examples of actions that might be safeguards to address self- review or advocacy threats created by providing tax advisory and tax planning services to a sustainability assurance client that is not a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service might address self-review or advocacy threats. • Having an appropriate reviewer, who was not involved in providing the service, review the sustainability assurance work or service performed might address a self-review threat. • Obtaining pre-clearance from the tax authorities might address self-review or advocacy threats.

Sustainability Assurance Clients that are Public Interest Entities

Self-review Threats

R5604.15

A firm or a network firm shall not provide tax advisory and tax planning services to a sustainability assurance client that is a public interest entity if the provision of such services might create a self- review threat. (Ref: Para. R5600.15, R5600.17).

Advocacy Threats

5604.15 A1 Examples of actions that might be safeguards to address an advocacy threat created by providing tax advisory and tax planning services to a sustainability assurance client that is a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service. • Obtaining pre-clearance from the tax authorities.

D. Tax Services Involving Valuations

Potential Threats Arising from the Provision of Tax Services involving

Valuations

Description of Service

5604.16 A1 The provision of tax services involving valuations might arise in a range of circumstances including: • Merger and acquisition transactions. • Group restructurings and corporate reorganizations. • Transfer pricing studies. • Stock-based compensation arrangements.

Potential Threats Arising from the Provision of Tax Services involving

Valuations

All Sustainability Assurance Clients

5604.17 A1 Providing a valuation for tax purposes to a sustainability assurance client might create a self-review threat when there is a risk that the results of the service will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such a service might also create an advocacy threat. 5604.17 A2 When a firm or a network firm performs a valuation for tax purposes to assist a sustainability assurance client with its tax reporting obligations or for tax planning purposes, the result of the valuation might:

(b)

The techniques and methodologies to be used are based on generally accepted standards or prescribed by law or regulation, and the valuation is subject to external review by a tax authority or similar regulatory authority.

Sustainability Assurance Clients that are Not Public Interest Entities

5604.18 A1 A firm or a network firm might perform a valuation for tax purposes for a sustainability assurance client that is not a public interest entity where the result of the valuation only affects the sustainability information on which the firm will express an opinion, or the records underlying that information, through adjustments related to tax. This would not usually create threats if the effect on the sustainability information is immaterial or the valuation, as incorporated in a tax return or other filing, is subject to external review by a tax authority or similar regulatory authority. 5604.18 A2 If the valuation that is performed for tax purposes is not subject to an external review and the effect is material to the sustainability information on which the firm expresses an opinion, in addition to paragraph 5604.3 A2, the following factors are relevant in identifying self-review or advocacy threats created by providing those services to a sustainability assurance client that is not a public interest entity, and evaluating the level of such threats: • 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. 5604.18 A3 Examples of actions that might be safeguards to address such threats for a sustainability assurance client that is not a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service might address self-review or advocacy threats. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or service performed might address a self-review threat. • Obtaining pre-clearance from the tax authorities might address self-review or advocacy threats.

Sustainability Assurance Clients that are Public Interest Entities

Self-review Threats

R5604.19

A firm or a network firm shall not perform a valuation for tax purposes for a sustainability assurance client that is a public interest entity if the provision of that service might create a self-review threat. (Ref: Para. R5600.15, R5600.17, 5604.17 A3).

Advocacy Threats

5604.19 A1 Examples of actions that might be safeguards to address an advocacy threat created by providing a valuation for tax purposes for a sustainability assurance client that is a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service.

E. Assistance in the Resolution of Tax Disputes

Description of Service

5604.20 A1 A non-assurance service to provide assistance to a sustainability assurance client in the resolution of tax disputes might arise from a tax authority’s consideration of tax calculations and treatments. Such a service might include, for example, providing assistance when the tax authorities have notified the 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 before a tribunal or court.

Potential Threats Arising from the Provision of Assistance in the

Resolution of Tax Disputes

All Sustainability Assurance Clients

5604.21 A1 Providing assistance in the resolution of a tax dispute to a sustainability assurance client might create a self-review threat when there is a risk that the results of the service will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such a service might also create an advocacy threat. 5604.22 A1 In addition to those identified in paragraph 5604.3 A2, factors that are relevant in identifying self- review or advocacy threats created by assisting a sustainability assurance client in the resolution of tax disputes, and evaluating the level of such threats 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 sustainability information on which the firm will express an opinion. • Whether the firm or network firm provided the advice that 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. • Whether the proceedings are conducted in public.

When a self-review threat for a sustainability assurance client

that is a public interest entity has been identified, paragraph R5604.24 applies.

Sustainability Assurance Clients that are Not Public Interest Entities

5604.23 A1 Examples of actions that might be safeguards to address self- review or advocacy threats created by assisting a sustainability assurance client that is not a public interest entity in the resolution of tax disputes include: • Using professionals who are not sustainability assurance team members to perform the service might address self-review or advocacy threats. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or the service performed might address a self-review threat.

Sustainability Assurance Clients that are Public Interest Entities

Self-review Threats

R5604.24

A firm or a network firm shall not provide assistance in the resolution of tax disputes to a sustainability assurance client that is a public interest entity if the provision of that assistance might create a self- review threat. (Ref: Para. R5600.15 and R5600.17).

Advocacy Threats

5604.24 A1 An example of an action that might be a safeguard to address an advocacy threat for a sustainability assurance client that is a public interest entity is using professionals who are not sustainability assurance team members to perform the service.

Resolution of Tax Matters Including Acting as an Advocate

R5604.25

A firm or a network firm shall not provide tax services that involve assisting in the resolution of tax disputes to a sustainability assurance client if:

(b)

The amounts involved are material to the sustainability information on which the firm will express an opinion. 5604.27 A1 Paragraphs R5604.25a does not preclude a firm or a network firm from having a continuing advisory role in relation to the matter that is being heard before a court, for example: • Responding to specific requests for information. • Providing factual accounts or testimony about the work performed. • Assisting the client in analyzing the tax issues related to the matter. 5604.27 A2 For the purpose of this subsection “court” does not include a Tribunal.

SUBSECTION 5605 – INTERNAL AUDIT SERVICES

Risk of Assuming Management Responsibility When Providing an

Internal Audit Service

Introduction

5605.1 In addition to the specific requirements and application material in this subsection, the requirements and application material in paragraphs 5600.1 to 5600.28 A1 are relevant to applying the conceptual framework when providing an internal audit service to a sustainability assurance client.

Requirements and Application Material

Description of Service

5605.2 A1 Internal audit services comprise a broad range of activities and might involve assisting the sustainability assurance client in the performance of one or more aspects 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 relevant to sustainability by: o Reviewing the means used to identify, measure, classify and report that 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 relevant to sustainability 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. 5605.2 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 those charged with governance as well as the needs and expectations of management. They might involve matters that are operational in nature that will be subject to consideration in relation to the assurance of sustainability information.

R5605.3

Paragraph R5400.20 precludes a firm or a network firm from

assuming a management responsibility. When providing an internal audit service to a sustainability assurance client, the firm shall be satisfied that:

(d)

The client is responsible for operating the IT system and for the data it generates and uses. 5606.3 A1 Examples of IT systems services that result in the assumption of a management responsibility include where a firm or a network firm: • Stores data or manages (directly or indirectly) the hosting of data on behalf of the sustainability assurance client. Such services include: o Acting as the only access to a financial or non- financial information system of the sustainability assurance client. o Taking custody of or storing the sustainability assurance client’s data or records such that the sustainability assurance client’s data or records are otherwise incomplete. o Providing electronic security or back-up services, such as business continuity or a disaster recovery function, for the sustainability assurance client’s data or records. • Operates, maintains, or monitors the sustainability assurance client’s IT systems, network or website. 5606.3 A2 The collection, receipt, transmission and retention of data provided by a sustainability assurance client in the course of a sustainability assurance engagement or to enable the provision of a permissible service to that client does not result in an assumption of management responsibility.

Potential Threats Arising from the Provision of IT Systems Services

Sustainability Assurance Clients

5606.4 A1 Providing IT systems services to a sustainability assurance client might create a self-review threat when there is a risk that the results of the services will affect the assurance of the sustainability information on which the firm will express an opinion. 5606.4 A2 Factors that are relevant in identifying a self-review threat created by providing an IT systems service to a sustainability assurance client, and evaluating the level of such a threat include: • The nature of the service. • The nature of the client’s IT systems and the extent to which the IT systems service impacts or interacts with the client’s sustainability information on which the firm will express an opinion, the records underlying that information, or internal controls over sustainability reporting. • The degree of reliance that will be placed on the particular IT systems as part of the sustainability assurance engagement.

When a self-review threat for a sustainability assurance client

that is a public interest entity has been identified, paragraph R5606.6 applies. 5606.4 A3 Examples of IT systems services that create a self-review threat when they form part of or affect a sustainability assurance client’s sustainability information records or system of internal control over sustainability reporting include: • Designing, developing, implementing, operating, maintaining, monitoring, updating or upgrading IT systems, including those related to cybersecurity. • Supporting a sustainability assurance client’s IT systems, including network and software applications. • Implementing sustainability information management systems or sustainability information reporting software, whether or not it was developed by the firm or a network firm.

Sustainability Assurance Clients that are Not Public Interest Entities

5606.5 A1 An example of an action that might be a safeguard to address a self-review threat created by the provision of an IT systems service to a sustainability assurance client that is not a public interest entity is using professionals who are not sustainability assurance team members to perform the service.

Sustainability Assurance Clients that are Public Interest Entities

R5606.6

A firm or a network firm shall not provide IT systems services to a sustainability assurance client that is a public interest entity if the provision of such services might create a self- review threat (Ref: Para. R5600.15 and R5600.17).

SUBSECTION 5607 – LITIGATION SUPPORT SERVICES

Introduction

5607.1 In addition to the specific requirements and application material in this subsection, the requirements and application material in paragraphs 5600.1 to 5600.28 A1 are relevant to applying the conceptual framework when providing a litigation support service to a sustainability assurance client.

Requirements and Application Material

Description of Service

5607.2 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. • Forensic or investigative services.

Potential Threats Arising from the Provision of Litigation Support

Services

All Sustainability Assurance Clients

5607.3 A1 Providing litigation support services to a sustainability assurance client might create a self-review threat when there is a risk that the results of the services will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such services might also create an advocacy threat. 5607.4 A1 Factors that are relevant in identifying self-review or advocacy threats created by providing litigation support services to a sustainability assurance client, and evaluating the level of such threats include: • The legal and regulatory environment in which the service is provided. • The nature and characteristics of the service. • The extent to which the outcome of the litigation support service might involve estimating, or might affect the estimation of, damages or other amounts that might have a material effect on the sustainability information on which the firm will express an opinion.

When a self-review threat for a sustainability assurance client

that is a public interest entity has been identified, paragraph R5607.6 applies. 5607.4 A2 If a firm or a network firm provides a litigation support service to a sustainability assurance client and the service might involve estimating, or might affect the estimation of, damages or other amounts that affect the sustainability information on which the firm will express an opinion, the requirements and application material set out in Subsection 5603 related to valuation services apply.

Sustainability Assurance Clients that are Not Public Interest Entities

5607.5 A1 An example of an action that might be a safeguard to address a self-review or advocacy threat created by providing a litigation support service to a sustainability assurance client that is not a public interest entity is using a professional who was not a sustainability assurance team member to perform the service.

Sustainability Assurance Clients that are Public Interest Entities

Self-review Threats

R5607.6

A firm or a network firm shall not provide litigation support services to a sustainability assurance client that is a public interest entity if the provision of such services might create a self-review threat. (Ref: Para. R5600.15 and R5600.17).

Acting as a Witness

Sustainability Assurance Clients that are Public Interest Entities

5607.6 A1 An example of a service that is prohibited because it might create a self-review threat is providing advice in connection with a legal proceeding where there is a risk that the outcome of the service affects the quantification of any provision or other amount in the sustainability information on which the firm will express an opinion.

Advocacy Threats

5607.6 A2 An example of an action that might be a safeguard to address an advocacy threat created by providing a litigation support service to a sustainability assurance client that is a public interest entity is using a professional who was not a sustainability assurance team member to perform the service.

Acting as a Witness

Sustainability Assurance Clients

5607.7 A1 A professional within the firm or the network firm might give evidence to a tribunal or court as a witness of fact or as an expert witness.

(b)

Engaged to advise or act as an expert witness in relation to a class action (or an equivalent group representative action) provided that:

(i)

The firm’s sustainability assurance clients constitute less than 20% of the members of the class or group (in number and in value);

(ii)

No sustainability assurance client is designated to lead the class or group; and

(iii)

No sustainability assurance client is authorized by the class or group to determine the nature and scope of the services to be provided by the firm or the terms on which such services are to be provided.

Sustainability Assurance Clients that are Not Public Interest Entities

5607.8 A1 An example of an action that might be a safeguard to address an advocacy threat for a sustainability assurance client that is not a public interest entity is using a professional to perform the service who is not, and has not been, a sustainability assurance team member.

R5607.9

A firm or a network firm, or an individual within a firm or a network firm, shall not act for a sustainability assurance client that is a public interest entity as an expert witness in a matter unless the circumstances set out in paragraph 5607.7 A3 apply.

SUBSECTION 5608 – LEGAL SERVICES

All Sustainability Assurance Clients

5608.3 A1 Providing legal services to a sustainability assurance client might create a self-review threat when there is a risk that the results of the services will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such services might also create an advocacy threat.

A. Providing Legal Advice

Description of Service

5608.4 A1 Providing legal advice might include a wide and diversified range of service areas including both corporate and commercial services to sustainability assurance clients, such as: • Contract support. • Supporting a sustainability assurance client in executing a transaction. • Mergers and acquisitions. • Supporting and assisting a sustainability assurance client’s internal legal department. • Legal due diligence and restructuring.

Potential Threats Arising from Providing Legal Advice

All Sustainability Assurance Clients

5608.5 A1 Factors that are relevant in identifying self-review or advocacy threats created by providing legal advice to a sustainability assurance client, and evaluating the level of such threats include: • The materiality of the specific matter in relation to the client’s sustainability information reported. • The complexity of the legal matter and the degree of judgment necessary to provide the service.

When a self-review threat for a sustainability assurance client

that is a public interest entity has been identified, paragraph R5608.7 applies. 5608.5 A2 Examples of legal advice that might create a self-review threat include: • Estimating a potential loss arising from a lawsuit that will be disclosed in the sustainability information on which the firm will express an opinion. • Interpreting provisions in contracts that might affect information disclosed in the sustainability information on which the firm will express an opinion. 5608.5 A3 Negotiating on behalf of a sustainability assurance client might create an advocacy threat or might result in the firm or network firm assuming a management responsibility.

Sustainability Assurance Clients that are Not Public Interest Entities

5608.6 A1 Examples of actions that might be safeguards to address self- review or advocacy threats created by providing legal advice to a sustainability assurance client that is not a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service might address a self-review or advocacy threat. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or the service performed might address a self-review threat.

Sustainability Assurance Clients that are Public Interest Entities

Self-review Threats

R5608.7

A firm or a network firm shall not provide legal advice to a sustainability assurance client that is a public interest entity if the provision of such a service might create a self-review threat. (Ref: Para. R5600.15 and R5600.17).

Advocacy Threats

5608.8 A1 The considerations in paragraphs 5608.5 A1 and 5608.5 A3 to 5608.6 A1 are also relevant to evaluating and addressing advocacy threats that might be created by providing legal advice to a sustainability assurance client that is a public interest entity.

B. Acting as General Counsel

All Sustainability Assurance Clients

R5608.9

An engagement leader or employee of the firm or the network firm shall not serve as General Counsel of a sustainability assurance client. 5608.9 A1 The position of General Counsel is usually a senior management position with broad responsibility for the legal affairs of a company.

C. Acting in an Advocacy Role

R5608.10

A firm or a network firm shall not act in an advocacy role for a sustainability assurance client in resolving a dispute or litigation when the amounts or the information involved are material to the sustainability information on which the firm will express an opinion. 5608.10 A1 Examples of actions that might be safeguards to address a self-review or advocacy threat created when acting in an advocacy role for a sustainability assurance client that is not a public interest entity include: • Using professionals who are not sustainability assurance team members to perform the service. • Having an appropriate reviewer who was not involved in providing the service review the sustainability assurance work or the service performed.

SUBSECTION 5609 – RECRUITING SERVICES

Introduction

5609.1 In addition to the specific requirements and application material in this subsection, the requirements and application material in paragraphs 5600.1 to 5600.28 A1 are relevant to applying the conceptual framework when providing a recruiting service to a sustainability assurance client.

Requirements and Application Material

Description of Service

5609.2 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.

Risk of Assuming Management Responsibility When Providing a

Recruiting Service

R5609.3

Paragraph R5400.20 precludes a firm or a network firm from

assuming a management responsibility. When providing a recruiting service to a sustainability assurance client, the firm shall be satisfied that:

(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.

Potential Threats Arising from Providing Recruiting Services

All Sustainability Assurance Clients

5609.4 A1 Providing recruiting services to a sustainability assurance client might create a self-interest, familiarity or intimidation threat. 5609.4 A2 Providing the following services does not usually create a threat as long as individuals within the firm or the network firm do 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 sustainability reporting, administrative or control positions. 5609.4 A3 Factors that are relevant in identifying self-interest, familiarity or intimidation threats created by providing recruiting services to a sustainability assurance client, and evaluating the level of such threats 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. 5609.4 A4 An example of an action that might be a safeguard to address such a self-interest, familiarity or intimidation threat is using professionals who are not sustainability assurance team members to perform the service.

Recruiting Services that are Prohibited

R5609.5

When providing recruiting services to a sustainability

assurance client, the firm or the network firm shall not act as a negotiator on the client’s behalf.

R5609.6

A firm or a network firm shall not provide a recruiting service to a sustainability assurance client if the service relates to:

(d)

Advising on the terms of employment, remuneration or related benefits of a particular candidate, with respect to the following positions:

(i)

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 sustainability information on which the firm will express an opinion or the records underlying that information.

SUBSECTION 5610 – CORPORATE FINANCE SERVICES

Introduction

5610.1 In addition to the specific requirements and application material in this subsection, the requirements and application material in paragraphs 5600.1 to 5600.28 A1 are relevant to applying the conceptual framework when providing a corporate finance service to a sustainability assurance client.

Requirements and Application Material

Description of Service

5610.2 A1 Examples of corporate finance services include: • Assisting a sustainability assurance client in developing corporate strategies. • Identifying possible targets for the sustainability assurance client to acquire. • Advising on the potential purchase or disposal price of an asset. • Assisting in finance raising transactions. • Providing structuring advice. • Providing advice on the structuring of a corporate finance transaction or on financing arrangements.

Potential Threats Arising from the Provision of Corporate Finance

Services

All Sustainability Assurance Clients

5610.3 A1 Providing corporate finance services to a sustainability assurance client might create a self-review threat when there is a risk that the results of the services will affect the sustainability information on which the firm will express an opinion or the records underlying that information. Such services might also create an advocacy threat. 5610.4 A1 Factors that are relevant in identifying self-review or advocacy threats created by providing corporate finance services to a sustainability assurance client, and evaluating the level of such threats include: • The degree of subjectivity involved in determining the appropriate treatment for the outcome or consequences of the corporate finance advice in the sustainability information on which the firm will express an opinion. • The extent to which: o The outcome of the corporate finance advice will directly affect amounts recorded in the sustainability information on which the firm will express an opinion. o The outcome of the corporate finance service might have a material effect on the sustainability information on which the firm will express an opinion.

When a self-review threat for a sustainability

assurance client that is a public interest entity has been identified, paragraph R5610.8 applies.

Corporate Finance Services that are Prohibited

R5610.5

A firm or a network firm shall not provide corporate finance services that involve promoting, dealing in, or underwriting the shares, debt or other financial instruments issued by the sustainability assurance client or providing advice on investment in such shares, debt or other financial instruments.

R5610.6

A firm or a network firm shall not provide advice in relation to corporate finance services to a sustainability assurance client where: