Provision of Non-assurance Services to Assurance Clients Other Than Audit and Review Engagement Clients

Introduction

950.1 Firms are required to comply with the fundamental principles, be independent, and apply the conceptual framework set out in Section 120Section 120 to identify, evaluate and address threats to independence. 950.2 Firms might provide a range of non-assurance services to their assurance clients, consistent with their skills and expertise. Providing certain non-assurance services to assurance clients might create threats to compliance with the fundamental principles and threats to independence. 950.3 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 assurance clients. 950.4 New business practices, the evolution of financial markets and changes in technology are some developments that make it impossible to draw up an all-inclusive list of non-assurance services that firms might provide to an 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. 950.5 The requirements and application material in this section apply where a firm uses technology to provide a non-assurance service to an assurance client.

Requirements and Application Material

General

Risk of Assuming Management Responsibilities When Providing a Non-

Assurance Service

950.6 A1 When a firm provides a non-assurance service to an assurance client, there is a risk that a firm will assume a management responsibility in relation to the underlying subject matter and, in an attestation engagement, the subject matter information of the assurance engagement unless the firm is satisfied that the requirements in paragraphs R900.13 and R900.14 have been complied with.

Accepting an Engagement to Provide a Non-Assurance Service

R950.7

Before a firm accepts an engagement to provide a non-

assurance service to an 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

950.8 A1 A description of the categories of threats that might arise when a firm provides a non-assurance service to an assurance client is set out in paragraph 120.6 A3. 950.8 A2 Factors that are relevant in identifying and evaluating the different threats that might be created by providing a non-assurance service to an assurance client 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. • Whether the outcome of the service will affect matters reflected in the subject matter or subject matter information of the assurance engagement, and, if so: o The extent to which the outcome of the service will have a material or significant effect on the subject matter of the assurance engagement. o The extent of the assurance client’s involvement in determining significant matters of judgment. • The degree of reliance that will be placed on the outcome of the service as part of the assurance engagement. • The fee relating to the provision of the non-assurance service.

Materiality in Relation to an Assurance Client’s Information

950.9 A1 Materiality is a factor that is relevant in evaluating threats created by providing a non-assurance service to an assurance client. The concept of materiality in relation to an assurance client’s subject matter information is addressed in the Guidance Note on Reports or Certificates for Special Purposes (Revised 2016). 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 financial or other information needs of users.

Multiple Non-assurance Services Provided to the Same Assurance Client

950.10 A1 A firm might provide multiple non-assurance services to an assurance client. In these circumstances the combined effect of threats created by providing those services is relevant to the firm’s evaluation of threats.

Self-Review Threats

950.11 A1 A self-review threat might be created if the firm is involved in the preparation of subject matter information which is subsequently the subject matter information of an assurance engagement. Examples of non-assurance services that might create such self-review threats when providing services related to the subject matter information of an assurance engagement include: • Developing and preparing prospective information and subsequently providing assurance on this information. • Performing a valuation that forms part of the subject matter information of an assurance engagement. • Designing, developing, implementing, operating, maintaining, monitoring, updating or upgrading IT systems or IT controls and subsequently undertaking an assurance engagement on a statement or report prepared about the IT systems or IT controls. • Designing, developing, implementing, operating, maintaining, monitoring, updating or upgrading IT systems and subsequently issuing an assurance report on subject matter information, such as elements of non-financial information, that is prepared from information generated by such IT systems.

Assurance clients that are public interest entities

950.12 A1 Expectations about a firm’s independence are heightened when an assurance engagement is undertaken by a firm for a public interest entity and the results of that engagement will be: