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Exposure Draft - ICAI Code of Ethics, 2018
October, 09th 2018
                                                  1




            EXPOSURE DRAFT:

      ICAI Code of Ethics, 2018




(Last date for comments: November, 7, 2018)




The Institute of Chartered Accountants of India
            (Set up by an Act of Parliament)
                    New Delhi
                                                                                                                                               2




                                                                      CONTENTS

                                                                                                                                        Page
GUIDE TO THE CODE .........................................................................................................

CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS (including INDEPENDENCE
      STANDARDS)...............................................
PREFACE..............................................................................................................................

PART 1  COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND
       CONCEPTUAL FRAMEWORK................................................................................
PART 2  PROFESSIONAL ACCOUNTANTS IN SERVICE ..............................................

PART 3  PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE ................................

INDEPENDENCE STANDARDS (PARTS 4A and 4B)
            PART 4A INDEPENDENCE FOR AUDIT AND REVIEW
                  ENGAGEMENTS ........................................................................................

            PART 4B  INDEPENDENCE FOR ASSURANCE ENGAGEMENTS
                  OTHER THAN AUDIT AND REVIEW ENGAGEMENTS ............................
GLOSSARY, INCLUDING LISTS OF ABBREVIATIONS ......................................................

EFFECTIVE DATE ................................................................................................................
                                                                                                                3
                                                GUIDE TO THE CODE
GUIDE TO THE CODE
(This Guide is a non-authoritative aid to using the Code.)

Purpose of the Code


This ICAI Code of Ethics is applicable from 1 April, 2019. Where guidance contained in this Code relates to
engagements commencing prior to that date, previous guidance may be applied up to completion of the
said engagements. Transitional arrangements are available in respect of specific sections of this Code.

This Code has been derived from the International Ethics Standards Board for Accountants (IESBA) Code
of Ethics, 2018 issued by the International Federation of Accountants (IFAC).


1.    The Code of Ethics for Professional Accountants (including Independence Standards) ("the Code")
      sets out fundamental principles of ethics for professional accountants, reflecting the
      profession's recognition of its public interest responsibility. These principles establish the standard
      of behaviour expected of a professional accountant. The fundamental principles are: integrity,
      objectivity, professional competence and due care, confidentiality, and professional behaviour.
2.    The Code provides a conceptual framework that professional accountants are to apply in order to
      identify, evaluate and address threats to compliance with the fundamental principles. The Code sets
      out requirements and application material on various topics to help accountants apply the conceptual
      framework to those topics.

3.    In the case of audits, reviews and other assurance engagements, the Code sets out
      Independence Standards, established by the application of the conceptual framework to threats to
      independence in relation to these engagements.

How the Code is structured
4.    The Code contains the following material:
            Part 1  Complying with the Code, Fundamental Principles and Conceptual Framework, which
            includes the fundamental principles and the conceptual framework and is applicable to all
            professional accountants.
            Part 2  Professional Accountants in Service, which sets out additional material that applies
            to professional accountants in service when performing professional activities. Professional
            accountants in service include professional accountants employed, engaged or contracted in
            an executive or non-executive capacity in, for example:
            o      Commerce, industry or service.
            o      The public sector.
            o      Education.
            o      The not-for-profit sector.
            o      Regulatory or professional bodies.
            Part 2 is also applicable to individuals who are professional accountants in public practice when
            performing professional activities pursuant to their relationship with the firm, whether as a
            contractor or employee.
                                                                                                                4
                                            GUIDE TO THE CODE
           Part 3  Professional Accountants in Public Practice, which sets out additional material that
           applies to professional accountants in public practice when providing professional services.
           Independence Standards, which sets out additional material that applies to professional
           accountants in public practice when providing assurance services, as follows:
           o     Part 4A  Independence for Audit and Review Engagements, which applies when
                 performing audit or review engagements.
           o     Part 4B  Independence for Assurance Engagements Other than Audit and Review
                 Engagements, which applies when performing assurance engagements that are not
                 audit or review engagements.
           Glossary, which contains defined terms (together with additional explanations where
           appropriate) and described terms which have a specific meaning in certain parts of the Code.
           For example, as noted in the Glossary, in Part 4A, the term "audit engagement" applies equally
           to both audit and review engagements. The Glossary also includes lists of abbreviations that
           are used in the Code and other standards to which the Code refers.

5.   The Code contains sections which address specific topics. Some sections contain subsections
     dealing with specific aspects of those topics. Each section of the Code is structured, where
     appropriate, as follows:

           Introduction  sets out the subject matter addressed within the section, and introduces the
           requirements and application material in the context of the conceptual framework. Introductory
           material contains information, including an explanation of terms used, which is important to the
           understanding and application of each Part and its sections.
           Requirements  establish general and specific obligations with respect to the subject matter
           addressed.
           Application material  provides context, explanations, suggestions for actions or matters to
           consider, illustrations and other guidance to assist in complying with the requirements.

How to Use the Code
The Fundamental Principles, Independence and Conceptual Framework
6.   The Code requires professional accountants to comply with the fundamental principles of ethics. The
     Code also requires them to apply the conceptual framework to identify, evaluate and address threats
     to compliance with the fundamental principles. Applying the conceptual framework requires
     exercising professional judgment, remaining alert for new information and to changes in facts and
     circumstances, and using the reasonable and informed third party test.
7.   The conceptualframework recognizes that the existence of conditions, policies and procedures
     established by the profession, legislation, regulation, the firm, or the employing organization might
     impact the identification of threats. Those conditions, policies and procedures might also be a relevant
     factor in the professional accountant's evaluation of whether a threat is at an acceptable level. When
     threats are not at an acceptable level, the conceptual framework requires the accountant to address
     those threats. Applying safeguards is one way that threats might be addressed. Safeguards are
     actions individually or in combination that the accountant takes that effectively reduce threats to an
     acceptable level.

8.   In addition, the Code requires professional accountants to be independent when performing audit,
     review and other assurance engagements. The conceptual framework applies in the same way to
     identifying, evaluating and addressing threats to independence as to threats to compliance with the
                                                                                                                   5
                                             GUIDE TO THE CODE
      fundamental principles.

9.    Complying with the Code requires knowing, understanding and applying:

            All of the relevant provisions of a particular section in the context of Part 1, together with the
            additional material set out in Sections 200, 300, 400 and 900, as applicable.
            All of the relevant provisions of a particular section, for example, applying the provisions that
            are set out under the subheadings titled "General" and "All Audit Clients" together with
            additional specific provisions, including those set out under the subheadings titled "Audit
            Clients that are not Public Interest Entities" or "Audit Clients that are Public Interest Entities."

            All of the relevant provisions set out in a particular section together with any additional
            provisions set out in any relevant subsection.

Requirements and Application Material
10.   Requirements and application material are to be read and applied with the objective of complying
      with the fundamental principles, applying the conceptual framework and, when performing audit,
      review and other assurance engagements, being independent.

Requirements
11.   Requirements are designated with the letter "R" and, in most cases, include the word "shall." The
      word "shall" in the Code imposes an obligation on a professional accountant or firm to comply with
      the specific provision in which "shall" has been used.

12.   In some situations, the Code provides a specific exception to a requirement. In such a situation, the
      provision is designated with the letter "R" but uses "may" or conditional wording.

13.   When the word "may" is used in the Code, it denotes permission to take a particular action in certain
      circumstances, including as an exception to a requirement. It is not used to denote possibility.
14.   When the word "might" is used in the Code, it denotes the possibility of a matter arising, an event
      occurring or a course of action being taken. The term does not ascribe any particular level of
      possibility or likelihood when used in conjunction with a threat, as the evaluation of the level of a
      threat depends on the facts and circumstances of any particular matter, event or course of action.

Application Material
15.   In addition to requirements, the Code contains application material that provides context relevant to
      a proper understanding of the Code. In particular, the application material is intended to help a
      professional accountant to understand how to apply the conceptual framework to a particular set of
      circumstances and to understand and comply with a specific requirement. While such application
      material does not of itself impose a requirement, consideration of the material is necessary to the
      proper application of the requirements of the Code, including application of the conceptual
      framework. Application material is designated with the letter "A."
16.   Where application material includes lists of examples, these lists are not intended to be exhaustive.

Appendix to Guide to the Code
17.   The Appendix to this Guide provides an overview of the Code.
                                                                                                                                              6
                                                                GUIDE TO THE CODE



                                                                                                              Appendix to Guide to the Code

                                                          OVERVIEW OF THE CODE

                                                          PART 1
                         COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND CONCEPTUAL FRAMEWORK
                                          (ALL PROFESSIONAL ACCOUNTANTS - SECTIONS 100 TO 199)




                          PART 2                                                                       PART 3
            PROFESSIONAL ACCOUNTANTS IN Service                                 PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE
                        (SECTIONS 200 TO 299)                                                    (SECTIONS 300 TO 399)
(PART 2 IS ALSO APPLICABLE TO INDIVIDUAL PROFESSIONAL ACCOUNTANTS
   IN PUBLIC PRACTICE WHEN PERFORMING PROFESSIONAL ACTIVITIES
          PURSUANT TO THEIR RELATIONSHIP WITH THE FIRM)
                                                                                              INDEPENDENCE STANDARDS
                                                                                                      (PARTS 4A AND 4B)
                                                                                       PART 4A  INDEPENDENCE FOR AUDIT AND REVIEW
                                                                                                    ENGAGEMENTS
                                                                                                    (SECTIONS 400 TO 899)
                                                                                    PART 4B  INDEPENDENCE FOR ASSURANCE ENGAGEMENTS
                                                                                      OTHER THAN AUDIT AND REVIEW ENGAGEMENTS
                                                                                                    (SECTIONS 900 TO 999)



                                                                    GLOSSARY
                                                          (ALL PROFESSIONAL ACCOUNTANTS)
                                                                                                                               7


           CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS
                 (including INDEPENDENCE STANDARDS)
                                                       TABLE OF CONTENTS

PART 1  COMPLYING WITH THE CODE, FUNDAMENTAL
       PRINCIPLES AND CONCEPTUAL FRAMEWORK ...............................................

100     COMPLYING WITH THE CODE ..............................................................................
110     THE      FUNDAMENTAL PRINCIPLES........................................................................
        111  INTEGRITY.....................................................................................................

        112  OBJECTIVITY ................................................................................................
        113  PROFESSIONAL COMPETENCE AND DUE CARE.....................................
        114  CONFIDENTIALITY .......................................................................................

        115  PROFESSIONAL BEHAVIOUR .......................................................................
120     THE      CONCEPTUAL FRAMEWORK........................................................................

PART 2  PROFESSIONAL ACCOUNTANTS IN.SERVICE
200     APPLYING THE CONCEPTUAL FRAMEWORK 
        PROFESSIONAL ACCOUNTANTS IN SERVICE

210     CONFLICTS OF INTEREST ....................................................................................

220     PREPARATION AND PRESENTATION OF INFORMATION...................................
230     ACTING WITH SUFFICIENT EXPERTISE ..............................................................
240     FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES
        LINKED TO FINANCIAL REPORTING AND DECISION MAKING ..........................
250     INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY .....
260     RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS ........
270     PRESSURE TO BREACH THE FUNDAMENTAL PRINCIPLES .............................

PART 3  PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE ..............................
300     APPLYING THE CONCEPTUAL FRAMEWORK  PROFESSIONAL
        ACCOUNTANTS IN PUBLIC PRACTICE ................................................................
310     CONFLICTS OF INTEREST ....................................................................................
320     PROFESSIONAL APPOINTMENTS ........................................................................

321     SECOND OPINIONS ...............................................................................................
330     FEES AND OTHER TYPES OF REMUNERATION.................................................
340     INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY .......................................
                                                                                                                                          8
                                                                        THE CODE


350       CUSTODY OF CLIENT ASSETS .............................................................................
360        RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS DURINGTHECOURSEOF
           FINANCIAL STATEMENT AUDIT ENGAGEMENTS OF LISTED COMPANIES
           ...............................................................................................
INDEPENDENCE STANDARDS (PARTS 4A AND 4B)

PART 4A  INDEPENDENCE FOR AUDIT AND REVIEW
          ENGAGEMENTS .....................................................................................................
400       APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR
          AUDIT AND REVIEW ENGAGEMENTS .................................................................
410       FEES ........................................................................................................................
411       COMPENSATION AND EVALUATION POLICIES...................................................

420       GIFTS AND HOSPITALITY ......................................................

430       ACTUAL OR THREATENED LITIGATION...............................................................
510       FINANCIAL INTERESTS .........................................................................................

511       LOANS AND GUARANTEES...................................................................................
520       BUSINESS RELATIONSHIPS .................................................................................
521       FAMILY AND PERSONAL RELATIONSHIPS ..........................................................

522       RECENT SERVICE WITH AN AUDIT CLIENT ........................................................
523       SERVING AS A DIRECTOR OR OFFICER OF AN AUDIT CLIENT ........................
524       EMPLOYMENT WITH AN AUDIT CLIENT ..............................................................

525       TEMPORARY PERSONNEL ASSIGNMENTS ........................................................
540       LONG ASSOCIATION OF PERSONNEL (INCLUDING
          PARTNER ROTATION) WITH AN AUDIT CLIENT ..................................................
550       AUDITOR ROTATION.............................................................................
600       PROVISION OF NON-ASSURANCE SERVICES TO AN AUDIT CLIENT ..............

          601  ACCOUNTING AND BOOKKEEPING SERVICES ........................................
          602  ADMINISTRATIVE SERVICES ......................................................................
          603  VALUATION SERVICES ................................................................................

          604  TAX SERVICES .............................................................................................
          605  INTERNAL AUDIT SERVICES.......................................................................
          606  INFORMATION TECHNOLOGY SYSTEMS SERVICES ..............................

          607  LITIGATION SUPPORT SERVICES ..............................................................
          608  LEGAL SERVICES.........................................................................................
          609  RECRUITING SERVICES..............................................................................

          610  CORPORATE FINANCE SERVICES ............................................................
                                                                                                                                        9
                                                                      THE CODE


800     REPORTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS
        THAT INCLUDE A RESTRICTION ON USE AND DISTRIBUTION
        (AUDIT AND REVIEW ENGAGEMENTS) ...............................................................
PART 4B  INDEPENDENCE FOR ASSURANCE ENGAGEMENTS
      OTHER THAN AUDIT AND REVIEW ENGAGEMENTS ........................................

900     APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR
        ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
        ENGAGEMENTS .....................................................................................................

905     FEES ........................................................................................................................
906      GIFTS AND HOSPITALITY ......................................................

907     ACTUAL OR THREATENED LITIGATION...............................................................

910     FINANCIAL INTERESTS .........................................................................................
911     LOANS AND GUARANTEES...................................................................................

920     BUSINESS RELATIONSHIPS .................................................................................
921     FAMILY AND PERSONAL RELATIONSHIPS ..........................................................
922     RECENT SERVICE WITH AN ASSURANCE CLIENT ............................................

923     SERVING AS A DIRECTOR OR OFFICER OF AN
        ASSURANCE CLIENT ............................................................................................
924     EMPLOYMENT WITH AN ASSURANCE CLIENT...................................................

940     LONG ASSOCIATION OF PERSONNEL WITH AN
        ASSURANCE CLIENT .............................................................................................
950     PROVISION OF NON-ASSURANCE SERVICES TO
        ASSURANCE CLIENTS OTHER THAN AUDIT AND
        REVIEW ENGAGEMENT CLIENTS ........................................................................
990     REPORTS THAT INCLUDE A RESTRICTION ON USE AND DISTRIBUTION
        (ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
        ENGAGEMENTS) ....................................................................................................
GLOSSARY, INCLUDING LISTS OF ABBREVIATIONS .....................................................
                                                                                                                                10
                                                                   THE CODE


PART 1  COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND
       CONCEPTUAL FRAMEWORK ...............................................................................

Section 100 Complying with the Code ..................................................................................
Section 110 The Fundamental Principles..............................................................................

          Subsection 111  Integrity ........................................................................................

          Subsection 112  Objectivity ....................................................................................
          Subsection 113  Professional Competence and Due Care....................................
          Subsection 114  Confidentiality ..............................................................................

          Subsection 115  Professional Behaviour .................................................................
Section 120 The Conceptual Framework..............................................................................
                                                                                                                  11
                                                 THE CODE


PART 1  COMPLYING WITH THE CODE, FUNDAMENTAL
PRINCIPLES AND CONCEPTUAL FRAMEWORK
SECTION 100
COMPLYING WITH THE CODE
General
100.1 A1   A distinguishing mark of the accountancy profession is its acceptance of the responsibility to
           act in the public interest. A professional accountant's responsibility is not exclusively to satisfy
           the needs of an individual client or employing organization. Therefore, the Code contains
           requirements and application material to enable professional accountants to meet their
           responsibility to act in the public interest.
100.2 A1   The requirements in the Code, designated with the letter "R," impose obligations.
100.2 A2   Application material, designated with the letter "A," provides context, explanations, suggestions
           for actions or matters to consider, illustrations and other guidance relevant to a proper
           understanding of the Code. In particular, the application material is intended to help a
           professional accountant to understand how to apply the conceptual framework to a particular
           set of circumstances and to understand and comply with a specific requirement. While such
           application material does not of itself impose a requirement, consideration of the material is
           necessary to the proper application of the requirements of the Code, including application of
           the conceptual framework.
R100.3     A professional accountant shall comply with the Code. There might be circumstances where
           laws or regulations preclude an accountant from complying with certain parts of the Code. In
           such circumstances, those laws and regulations prevail, and the accountant shall comply with
           all other parts of the Code.

100.3 A1   The principle of professional behaviour requires a professional accountant to comply
           with relevant laws and regulations. Accountants need to be aware of differences in local
           regulations from the provisions as set out in the Code, and comply with the more stringent
           provisions unless prohibited by law or regulation.

Breaches of the Code
R100.4     Paragraphs R400.80 to R400.89 and R900.50 to R900.55 address a breach of
           Independence Standards. A professional accountant who identifies a breach of any other
           provision of the Code shall evaluate the significance of the breach and its impact on the
           accountant's ability to comply with the fundamental principles. The accountant shall also:
           (a)   Take whatever actions might be available, as soon as possible, to address the
                 consequences of the breach satisfactorily; and

           (b)   Determine whether to report the breach to the relevant parties.

100.4 A1   Relevant parties to whom such a breach might be reported include those who might have been
           affected by it.
                                                                                                                12
                                                THE CODE


SECTION 110
THE FUNDAMENTAL PRINCIPLES
General
110.1 A1   There are five fundamental principles of ethics for professional accountants:

           (a)   Integrity  to be straightforward and honest in all professional and business relationships.

           (b)   Objectivity  not to compromise professional or business judgments because of bias,
                 conflict of interest or undue influence of others.

           (c)   Professional Competence and Due Care  to:
                 (i)    Attain and maintain professional knowledge and skill at the level required to ensure
                        that a client or employing organization receives competent professional service,
                        based on current technical and professional standards and relevant legislation;
                        and
                 (ii)   Act diligently and in accordance with applicable technical and professional
                        standards.

           (d)   Confidentiality  to respect the confidentiality of information acquired as a result of
                 professional and business relationships.
           (e)   Professional Behaviour  to comply with relevant laws and regulations and avoid
                 any conduct that the professional accountant knows or should know might discredit
                 the profession.

R110.2     A professional accountant shall comply with each of the fundamental principles.

110.2 A1   The fundamental principles of ethics establish the standard of behaviour expected of a
           professional accountant. The conceptual framework establishes the approach which an
           accountant is required to apply to assist in complying with those fundamental principles.
           Subsections 111 to 115 set out requirements and application material related to each of the
           fundamental principles.
110.2 A2   A professional accountant might face a situation in which complying with one fundamental
           principle conflicts with complying with one or more other fundamental principles. In such a
           situation, the accountant might consider consulting, with:
                 Others within the firm or employing organization.
                 Those charged with governance.
                 Institute
                 Legal counsel.
           However, such consultation does not relieve the accountant from the responsibility to exercise
           professional judgment to resolve the conflict or, if necessary, and unless prohibited by law or
           regulation, disassociate from the matter creating the conflict.
110.2 A3   The professional accountant is encouraged to document the substance of the issue, the details
           of any discussions, the decisions made and the rationale for those decisions.
                                                                                                                  13
                                                    THE CODE


SUBSECTION 111  INTEGRITY
R111.1     A professional accountant shall comply with the principle of integrity, which requires an accountant
           to be straightforward and honest in all professional and business relationships.
111.1 A1   Integrity implies fair dealing and truthfulness.

R111.2     A professional accountant shall not knowingly be associated with reports, returns,
           comunications or other information where the accountant believes that the information:
           (a)    Contains a materially false or misleading statement;

           (b)    Contains statements or information provided negligently; or
           (c)   Omits or obscures required information where such omission or obscurity would be
                 misleading.

111.2 A1   If a professional accountant provides a modified report in respect of such a report, return,
           communication or other information, the accountant is not in breach of paragraph R111.2.
R111.3     When a professional accountant becomes aware of having been associated with information
           described in paragraph R111.2, the accountant shall take steps to be disassociated from that
           information.

SUBSECTION 112  OBJECTIVITY
R112.1     A professional accountant shall comply with the principle of objectivity, which requires an
           accountant not to compromise professional or business judgment because of bias, conflict of
           interest or undue influence of others.
R112.2     A professional accountant shall not undertake a professional activity if a circumstance or
           relationship unduly influences the accountant's professional judgment regarding that activity.

SUBSECTION 113  PROFESSIONAL COMPETENCE AND DUE CARE
R113.1     A professional accountant shall comply with the principle of professional competence and due
           care, which requires an accountant to:

           (a)    Attain and maintain professional knowledge and skill at the level required to ensure that
                  a client or employing organization receives competent professional service, based on
                  current technical and professional standards and relevant legislation; and
           (b)    Act diligently and in accordance with applicable technical and professional standards.
113.1 A1   Serving clients and employing organizations with professional competence requires the
           exercise of sound judgment in applying professional knowledge and skill when undertaking
           professional activities.

113.1 A2   Maintaining professional competence requires a continuing awareness and an understanding
           of relevant technical, professional and business developments. Continuing professional
           development enables a professional accountant to develop and maintain the capabilities to
           perform competently within the professional environment.

113.1 A3   Diligence encompasses the responsibility to act in accordance with the requirements of an
           assignment, carefully, thoroughly and on a timely basis.
                                                                                                                 14
                                                THE CODE


R113.2     In complying with the principle of professional competence and due care, a professional
           accountant shall take reasonable steps to ensure that those working in a professional capacity
           under the accountant's authority have appropriate training and supervision.
R113.3     Where appropriate, a professional accountant shall make clients, the employing organization,
           or other users of the accountant's professional services or activities, aware of the limitations
           inherent in the services or activities.

SUBSECTION 114  CONFIDENTIALITY
R114.1     A professional accountant shall comply with the principle of confidentiality, which requires an
           accountant to respect the confidentiality of information acquired as a result of professional and
           employment relationships. An accountant shall:
           (a)   Be alert to the possibility of inadvertent disclosure, including in a social environment, and
                 particularly to a close business associate or an immediate or a close family member;
           (b)   Maintain confidentiality of information within the firm or employing organization;

           (c)   Maintain confidentiality of information disclosed by a prospective client or employing
                 organization;
           (d)   Not disclose confidential information acquired as a result of professional and
                 employment relationships outside the firm or employing organization without proper
                 and specific authority, unless there is a legal or professional duty or right to disclose;

           (e)   Not use confidential information acquired as a result of professional and
                 employment relationships for the personal advantage of the accountant or for the
                 advantage of a third party;

           (f)   Not use or disclose any confidential information, either acquired or received as a result
                 of a professional or employment relationship, after that relationship has ended; and

           (g)   Take reasonable steps to ensure that personnel under the accountant's control, and
                 individuals from whom advice and assistance are obtained, respect the accountant's
                 duty of confidentiality.
114.1 A1   Confidentiality serves the public interest because it facilitates the free flow of information from
           the professional accountant's client or employing organization to the accountant in the
           knowledge that the information will not be disclosed to a third party. Nevertheless, the following
           are circumstances where professional accountants are or might be required to disclose
           confidential information or when such disclosure might be appropriate:
           (a)   Disclosure is required by law, for example:

                 (i)    Production of documents or other provision of evidence in the course of legal
                        proceedings; or

                 (ii)   Disclosure to the appropriate public authorities of infringements of the law that
                        come to light;

           (b)   Disclosure is permitted by law and is authorized by the client or the employing
                 organization; and

           (c)   There is a professional duty or right to disclose, when not prohibited by law:
                                                                                                                      15
                                                   THE CODE


                 (i)     To comply with the requirements of peer review or quality review of the Institute
                 (ii)    To respond to an inquiry or investigation by a professional or regulatory body;

                 (iii)   To protect the professional interests of a professional accountant in legal
                         proceedings; or

                 (iv)    To comply with technical and professional standards, including ethics
                         requirements.
114.1 A2   In deciding whether to disclose confidential information, factors to consider, depending on the
           circumstances, include:

                  Whether the interests of any parties, including third parties whose interests might be
                  affected, could be harmed if the client or employing organization consents to the
                  disclosure of information by the professional accountant.

                  Whether all the relevant information is known and substantiated, to the extent
                  practicable. Factors affecting the decision to disclose include:

                  o      Unsubstantiated facts.
                  o      Incomplete information.
                  o      Unsubstantiated conclusions.
                  The proposed type of communication, and to whom it is addressed.
                  Whether the parties to whom the communication is addressed are appropriate recipients.
R114.2     A professional accountant shall continue to comply with the principle of confidentiality even after
           the end of the relationship between the accountant and a client r employing organization. When
           changing employment or acquiring a new client, the accountant is entitled to use prior
           experience but shall not use or disclose any confidential information acquired or received as a
           result of a professional or employment relationship.

SUBSECTION 115  PROFESSIONAL BEHAVIOUR
R115.1     A professional accountant shall comply with the principle of professional behaviour,
           which requires an accountant to comply with relevant laws and regulations and avoid any
           conduct that the accountant knows or should know might discredit the profession. A
           professional accountant shall not knowingly engage in any employment, occupation or
           activity that impairs or might impair the integrity, objectivity or good reputation of the
           profession, and as a result would be incompatible with the fundamental principles.
115.1 A1   Conduct that might discredit the profession includes conduct that a reasonable and informed
           third party would be likely to conclude adversely affects the good reputation of the profession.

R115.2     When promoting himself and his work, a professional accountant shall not bring the
           profession into disrepute. A professional Accountant is required to conduct his affairs in a manner that
           he remains outside the boundaries of professional and other misconduct. A professional accountant
           shall be honest and truthful and shall not make:
           (a)   Exaggerated claims for the services offered by, or the qualifications or experience of, the
                 accountant; or

           (b)   Disparaging references or unsubstantiated comparisons to the work of others.
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           (c)    Any direct or indirect measures to advertise any professional/other facts which are in
                  violation of advertisement guidelines issued by the Council of the Institute from time to
                  time.

115.2 A1   If a professional accountant is in doubt about whether a form of advertising is appropriate,
           the accountant is encouraged to consult with the Ethical Standards Board of ICAI.



SECTION 120
THE CONCEPTUAL FRAMEWORK
Introduction
120.1      The circumstances in which professional accountants operate might create threats to
           compliance with the fundamental principles. Section 120 sets out requirements and application
           material, including a conceptual framework, to assist accountants in complying with the
           fundamental principles and meeting their responsibility to act in the public interest. Such
           requirements and application material accommodate the wide range of facts and
           circumstances, including the various professional activities, interests and relationships that
           create threats to compliance with the fundamental principles. In addition, they deter
           accountants from concluding that a situation is permitted solely because that situation is not
           specifically prohibited by the Code.
120.2      The conceptual framework specifies an approach for a professional accountant to:

           (a)     Identify threats to compliance with the fundamental principles;

           (b)     Evaluate the threats identified; and
           (c)     Address the threats by eliminating or reducing them to an acceptable level.

Requirements and Application Material
General
R120.3     The professional accountant shall apply the conceptual framework to identify, evaluate and
           address threats to compliance with the fundamental principles set out in Section 110.

120.3 A1   Additional requirements and application material that are relevant to the application of the
           conceptual framework are set out in:

           (a) Part 2  Professional Accountants in Service;

           (b) Part 3  Professional Accountants in Public Practice; and
           (c)   Independence Standards, as follows:

                 (i)      Part 4A  Independence for Audit and Review Engagements; and

                 (ii)     Part 4B  Independence for Assurance Engagements Other than Audit and
                          Review Engagements.
R120.4     When dealing with an ethics issue, the professional accountant shall consider the context in
           which the issue has arisen or might arise. Where an individual who is a professional accountant
           in public practice is performing professional activities pursuant to the accountant's relationship
           with the firm, whether as a contractor, employee or owner, the individual shall comply with the
           provisions in Part 2 that apply to these circumstances.
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R120.5      When applying the conceptual framework, the professional accountant shall:

            (a)    Exercise professional judgment;
            (b)    Remain alert for new information and to changes in facts and circumstances; and
            (c)    Use the reasonable and informed third party test described in paragraph 120.5 A4.

Exercise of Professional Judgment
120.5 A1   Professional judgment involves the application of relevant training, professional knowledge,
           skill and experience commensurate with the facts and circumstances, including the nature and
           scope of the particular professional activities, and the interests and relationships involved. In
           relation to undertaking professional activities, the exercise of professional judgment is required
           when the professional accountant applies the conceptual framework in order to make informed
           decisions about the courses of actions available, and to determine whether such decisions are
           appropriate in the circumstances.

120.5 A2   An understanding of known facts and circumstances is a prerequisite to the proper application
           of the conceptual framework. Determining the actions necessary to obtain this understanding
           and coming to a conclusion about whether the fundamental principles have been complied with
           also require the exercise of professional judgment.
120.5 A3 In exercising professional judgment to obtain this understanding, the professional accountant
           might consider, among other matters, whether:

                  There is reason to be concerned that potentially relevant information might be missing
                  from the facts and circumstances known to the accountant.

                  There is an inconsistency between the known facts and circumstances and the
                  accountant's expectations.
                  The accountant's expertise and experience are sufficient to reach a conclusion.
                  There is a need to consult with others with relevant expertise or experience.
                  The information provides a reasonable basis on which to reach a conclusion.
                  The accountant's own preconception or bias might be affecting the accountant's exercise
                  of professional judgment.

                  There might be other reasonable conclusions that could be reached from the available
                  information.

Reasonable and Informed Third Party
120.5 A4   The reasonable and informed third party test is a consideration by the professional accountant
           about whether the same conclusions would likely be reached by another party. Such
           consideration is made from the perspective of a reasonable and informed third party, who
           weighs all the relevant facts and circumstances that the accountant knows, or could reasonably
           be expected to know, at the tie the conclusions are made. The reasonable and informed third
           party does not need to be an accountant, but would possess the relevant knowledge and
           experience to understand and evaluate the appropriateness of the accountant's conclusions in
           an impartial manner.

Identifying Threats
R120.6        The professional accountant shall identify threats to compliance with the fundamental
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            principles.
120.6 A1    An understanding of the facts and circumstances, including any professional activities,
            interests and relationships that might compromise compliance with the fundamental principles,
            is a prerequisite to the professional accountant's identification of threats to such compliance.
            The existence of certain conditions, policies and procedures established by the profession,
            legislation, regulation, the firm, or the employing organization that can enhance the accountant
            acting ethically might also help identify threats to compliance with the fundamental principles.
            Paragraph 120.8 A2 includes general examples of such conditions, policies and procedures
            which are also factors that are relevant in evaluating the level of threats.

120.6 A2   Threats to compliance with the fundamental principles might be created by a broad range of
           facts and circumstances. It is not possible to define every situation that creates threats. In
           addition, the nature of engagements and work assignments might differ and, consequently,
           different types of threats might be created.
120.6 A3   Threats to compliance with the fundamental principles fall into one or more of the following
           categories:

           (a)     Self-interest threat  the threat that a financial or other interest will inappropriately
                   influence a professional accountant's judgment or behaviour;
           (b)     Self-review threat  the threat that a professional accountant will not appropriately
                   evaluate the results of a previous judgment made; or an activity performed by the
                   accountant, or by another individual within the accountant's firm or employing
                   organization, on which the accountant will rely when forming a judgment as part of
                   performing a current activity;
           (c)     Advocacy threat  the threat that a professional accountant will promote a client's or
                   employing organization's position to the point that the accountant's objectivity is
                   compromised;

           (d)     Familiarity threat  the threat that due to a long or close relationship with a client, or
                   employing organization, a professional accountant will be too sympathetic to their
                   interests or too accepting of their work; and

           (e)     Intimidation threat  the threat that a professional accountant will be deterred from acting
                   objectively because of actual or perceived pressures, including attempts to exercise
                   undue influence over the accountant.
120.6 A4   A circumstance might create more than one threat, and a threat might affect compliance with
           more than one fundamental principle.

Evaluating Threats
R120.7     When the professional accountant identifies a threat to compliance with the fundamental
           principles, the accountant shall evaluate whether such a threat is at an acceptable level.

Acceptable Level

120.7 A1   An acceptable level is a level at which a professional accountant using the reasonable and
           informed third party test would likely conclude that the accountant complies with the
           fundamental principles.
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Factors Relevant in Evaluating the Level of Threats

120.8 A1    The consideration of qualitative as well as quantitative factors is relevant in the professional
            accountant's evaluation of threats, as is the combined effect of multiple threats, if applicable.

120.8 A2    The existence of conditions, policies and procedures described in paragraph 120.6 A1 might
            also be factors that are relevant in evaluating the level of threats to compliance with
            fundamental principles. Examples of such conditions, policies and procedures include:
                  Corporate governance requirements.
                  Educational, training and experience requirements for the profession.
                  Effective complaint systems which enable the professional accountant and the general
                  public to draw attention to unethical behaviour.
                  An explicitly stated duty to report breaches of ethics requirements.
                  Professional or regulatory monitoring and disciplinary procedures.
Consideration of New Information or Changes in Facts and Circumstances
R120.9      If the professional accountant becomes aware of new information or changes in facts and
            circumstances that might impact whether a threat has been eliminated or reduced to an
            acceptable level, the accountant shall re-evaluate and address that threat accordingly.

120.9 A1    Remaining alert throughout the professional activity assists the professional accountant in
            determining whether new information has emerged or changes in facts and circumstances
            have occurred that:

            (a)   Impact the level of a threat; or

            (b)   Affect the accountant's conclusions about whether safeguards applied continue to be
                  appropriate to address identified threats.
120.9 A2    If new information results in the identification of a new threat, the professional accountant is
            required to evaluate and, as appropriate, address this threat. (Ref: Paras. R120.7 and
            R120.10).

Addressing Threats
R120.10 If the professional accountant determines that the identified threats to compliance with the
           fundamental principles are not at an acceptable level, the accountant shall address the threats
           by eliminating them or reducing them to an acceptable level. The accountant shall do so by:

            (a)   Eliminating the circumstances, including interests or relationships, that are creating the
                  threats;

            (b)   Applying safeguards, where available and capable of being applied, to reduce the threats
                  to an acceptable level; or
            (c)   Declining or ending the specific professional activity.

Actions to Eliminate Threats
120.10 A1 Depending on the facts and circumstances, a threat might be addressed by eliminating the
          circumstance creating the threat. However, there are some situations in which threats can only
          be addressed by declining or ending the specific professional activity. This is because the
          circumstances that created the threats cannot be eliminated and safeguards are not capable
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             of being applied to reduce the threat to an acceptable level.

Safeguards
120.10 A2 Safeguards are actions, individually or in combination, that the professional accountant takes
          that effectively reduce threats to compliance with the fundamental principles to an acceptable
          level.

Consideration of Significant Judgments Made and Overall Conclusions Reached
R120.11    The professional accountant shall form an overall coclusion about whether the actions that
            the accountant takes, or intends to take, to address the threats created will eliminate those
            threats or reduce them to an acceptable level. In forming the overall conclusion, the accountant
            shall:
             (a)   Review any significant judgments made or conclusions reached; and

             (b)   Use the reasonable and informed third party test.

Considerations for Audits, Reviews and Other Assurance Engagements
Independence
120.12 A1 Professional accountants in public practice are required by Independence Standards to be
          independent when performing audits, reviews, or other assurance engagements.
          Independence is linked to the fundamental principles of objectivity and integrity. It comprises:
             (a)   Independence of mind  the state of mind that permits the expression of a conclusion
                   without being affected by influences that compromise professional judgment, thereby
                   allowing an individual to act with integrity, and exercise objectivity and professional
                   skepticism.
             (b)   Independence in appearance  the avoidance of facts and circumstances that are so
                   significant that a reasonable and informed third party would be likely to conclude that a
                   firm's or an audit or assurance team member's integrity, objectivity or professional
                   skepticism has been compromised.

120.12 A2 Independence Standards set out requirements and application material on how to apply the
          conceptual framework to maintain independence when performing audits, reviews or other
          assurance engagements. Professional accountants and firms are required to comply with
          these standards in order to be independent when conducting such engagements. The
          conceptual framework to identify, evaluate and address threats to compliance with the
          fundamental principles applies in the same way to compliance with independence
          requirements. The categories of threats to compliance with the fundamental principles
          described in paragraph 120.6 A3 are also the categories of threats to compliance with
          independence requirements.

Professional Skepticism
120.13 A1 Under auditing, review and other assurance standards, including those issued by the AASB,
           professional accountants in public practice are required to exercise professional skepticism
           when planning and performing audits, reviews and other assurance engagements.
           Professional skepticism and the fundamental principles that are described in Section 110 are
           inter-related concepts.
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120.13 A2 In an audit of financial statements, compliance with the fundamental principles, individually and
          collectively, supports the exercise of professional skepticism, as shown in the following
          examples:
                  Integrity requires the professional accountant to be straightforward and honest. For
                  example, the accountant complies with the principle of integrity by:

                  (a)   Being straightforward and honest when raising concerns about a position taken
                        by a client; and
                  (b)   Pursuing inquiries about inconsistent information and seeking further audit
                        evidence to address concerns about statements that might be materially false or
                        misleading in order to make informed decisions about the appropriate course of
                        action in the circumstances.

                  In doing so, the accountant demonstrates the critical assessment of audit evidence that
                  contributes to the exercise of professional skepticism.

                  Objectivity requires the professional accountant not to compromise professional or
                  business judgment because of bias, conflict of interest or the undue influence of others.
                  For example, the accountant complies with the principle of objectivity by:

                  (a)   Recognizing circumstances or relationships such as familiarity with the client, that
                        might compromise the accountant's professional or business judgment; and

                  (b)   Considering the impact of such circumstances and relationships on the
                        accountant's judgment when evaluating the sufficiency and appropriateness of
                        audit evidence related to a matter material to the client's financial statements.

                  In doing so, the accountant behaves in a manner that contributes to the exercise of
                  professional skepticism.

                  Professional competence and due care requires the professional accountant to have
                  professional knowledge and skill at the level required to ensure the provision of
                  competent professional service, and to act diligently in accordance with applicable
                  standards, laws and regulations. For example, the accountant complies with the principle
                  of professional competence and due care by:

                  (a)   Applying knowledge that is relevant to a particular client's industry and business
                        activities in order to properly identify risks of material misstatement;
                  (b)   Designing and performing appropriate audit procedures; and

                  (c)   Applying relevant knowledge when critically assessing whether audit evidence is
                        sufficient and appropriate in the circumstances.
                  In doing so, the accountant behaves in a manner that contributes to the exercise of
                  professional skepticism.
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PART 2  PROFESSIONAL ACCOUNTANTS IN SERVICE.............................................
Section 200 Applying the Conceptual Framework  Professional Accountants in Service ..
Section 210 Conflicts of Interest ...........................................................................................

Section 220 Preparation and Presentation of Information ....................................................

Section 230 Acting with Sufficient Expertise .........................................................................
Section 240 Financial Interests, Compensation and Incentives Linked to Financial
           Reporting and Decision Making ...............................................................................
Section 250 Inducements, Including Gifts And Hospitality............................
Section 260 Responding to Non-Compliance with Laws and Regulations ...........................

Section 270 Pressure to Breach the Fundamental Principles ..............................................
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PART 2  PROFESSIONAL ACCOUNTANTS IN SERVICE
SECTION 200
APPLYING THE CONCEPTUAL FRAMEWORK  PROFESSIONAL ACCOUNTANTS IN
SERVICE
Introduction
200.1      This Part of the Code sets out requirements and application material for professional
           accountants in service when applying the conceptual framework set out in Section 120. It
           does not describe all of the facts and circumstances, including professional activities, interests
           and relationships that could be encountered by professional accountants in service, which
           create or might create threats to compliance with the fundamental principles. Therefore, the
           conceptual framework requires professional accountants in service to be alert for such facts
           and circumstances.

200.2      Investors, creditors, employing organizations and other sectors of the business community, as
           well as governments and the general public, might rely on the work of professional accountants
           in service. Professional accountants in service might be solely or jointly responsible for the
           preparation and reporting of financial and other information, on which both their employing
           organizations and third parties might rely. They might also be responsible for providing effective
           financial management and competent advice on a variety of business-related matters.
200.3      A professional accountant in service might be an employee, contractor, partner, director
           (executive or non-executive), owner-manager, or volunteer of an employing organization. The
           legal form of the relationship of the accountant with the employing organization has no bearing
           on the ethical responsibilities placed on the accountant.

200.4      In this Part, the term "professional accountant" refers to:
           (a)   A professional accountant in service; and

           (b)   An individual who is a professional accountant in public practice when performing
                 professional activities pursuant to the accountant's relationship with the accountant's
                 firm, whether as a contractor or employee. More information on when Part 2 is
                 applicable to professional accountants in public practice is set out in paragraphs R120.4,
                 R300.5 and 300.5 A1.

Requirements and Application Material
General
R200.5     A professional accountant shall comply with the fundamental principles set out in Section 110
           and apply the conceptual framework set out in Section 120 to identify, evaluate and address
           threats to compliance with the fundamental principles.
200.5 A1   A professional accountant has a responsibility to further the legitimate objectives of the
           accountant's employing organization. The Code does not seek to hinder accountants from
           fulfilling that responsibility, but addresses circumstances in which compliance with the
           fundamental principles might be compromised.
200.5 A2   Professional accountants may promote the position of the employing organization when
           furthering the legitimate goals and objectives of their employing organization, provided that any
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           statements made are neither false nor misleading. Such actions usually would not create an
           advocacy threat.

200.5 A3   The more senior the position of a professional accountant, the greater will be the ability and
           opportunity to access information, and to influence policies, decisions made and actions taken
           by others involved with the employing organization. To the extent that they are able to do so,
           taking into account their position and seniority in the organization, accountants are expected
           to encourage and promote an ethics-based culture in the organization. Examples of actions
           that might be taken include the introduction, implementation and oversight of:

                 Ethics education and training programs.
                 Ethics and whistle-blowing policies.
                 Policies and procedures designed to prevent non-compliance with laws and regulations.

Identifying Threats
200.6 A1   Threats to compliance with the fundamental principles might be created by a broad range of
           facts and circumstances. The categories of threats are described in paragraph 120.6 A3. The
           following are examples of facts and circumstances within each of those categories that might
           create threats for a professional accountant when undertaking a professional activity:

           (a)   Self-interest Threats
                        A professional accountant holding a financial interest in, or receiving a loan or
                        guarantee from, the employing organization.

                        A professional accountant participating in incentive compensation arrangements
                        offered by the employing organization.
                        A professional accountant having access to corporate assets for personal use.
                        A professional accountant being offered a gift or special treatment from a supplier
                        of the employing organization.
           (b)   Self-review Threats
                        A professional accountant determining the appropriate accounting treatment for
                        a business combination after performing the feasibility study supporting the
                        purchase decision.
           (c)   Advocacy Threats
                        A professional accountant having the opportunity to manipulate information in a
                        prospectus in order to obtain favorable financing.

           (d)   Familiarity Threats
                        A professional accountant being responsible for the financial reporting of the
                        employing organization when an immediate or close family member employed by
                        the organization makes decisions that affect the financial reporting of the
                        organization.
                        A professional accountant having a long association with individuals influencing
                        business decisions.
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            (e)   Intimidation Threats
                         A professional accountant or immediate or close family member facing the threat
                         of dismissal or replacement over a disagreement about:
                         o   The application of an accounting principle.
                         o   The way in which financial information is to be reported.
                         An individual attempting to influence the decision-making process of the
                         professional accountant, for example with regard to the awarding of contracts or
                         the application of an accounting principle.

Evaluating Threats
200.7 A1    The conditions, policies and procedures described in paragraphs 120.6 A1 and 120.8 A2 might
            impact the evaluation of whether a threat to compliance with the fundamental principles is at
            an acceptable level.

200.7 A2    The professional accountant's evaluation of the level of a threat is also impacted by the nature
            and scope of the professional activity.

200.7 A3    The professional accountant's evaluation of the level of a threat might be impacted by the work
            environment within the employing organization and its operating environment. For example:

                  Leadership that stresses the importance of ethical behaviour and the expectation
                  that employees will act in an ethical manner.
                  Policies and procedures to empower and encourage employees to communicate ethics
                  issues that concern them to senior levels of management without fear of retribution.

                  Policies and procedures to implement and monitor the quality of employee performance.
                  Systems of corporate oversight or other oversight structures and strong internal controls.
                  Recruitment procedures emphasizing the importance of employing high caliber
                  competent personnel.
                  Timely communication of policies and procedures, including any changes to them, to all
                  employees, and appropriate training and education on such policies and procedures.

                  Ethics and code of conduct policies.
200.7 A4    Professional accountants might consider obtaining legal advice where they believe that
            unethical behaviour or actions by others have occurred, or will continue to occur, within
            the employing organization.

Addressing Threats

200.8 A1 Sections 210 to 270 describe certain threats that might arise during the course of performing
          professional activities and include examples of actions that might address such threats.

200.8 A2 In extreme situations, if the circumstances that created the threats cannot be eliminated and
           safeguards are not available or capable of being applied to reduce the threat to an acceptable
           level, it might be appropriate for a professional accountant to resign from the employing
           organization.
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Communicating with Those Charged with Governance
R200.9      When communicating with those charged with governance in accordance with the Code, a
            professional accountant shall determine the appropriate individual(s) within the employing
            organization's governance structure with whom to communicate. If the accountant
            communicates with a subgroup of those charged with governance, the accountant shall
            determine whether communication with all of those charged with governance is also necessary
            so that they are adequately informed.

200.9 A1    In determining with whom to communicate, a professional accountant might consider:
            (a)   The nature and importance of the circumstances; and
            (b)   The matter to be communicated.

200.9 A2    Examples of a subgroup of those charged with governance include an audit committee or an
            individual member of those charged with governance.
R200.10     If a professional accountant communicates with individuals who have management
            responsibilities as well as governance responsibilities, the accountant shall be satisfied that
            communication with those individuals adequately informs all of those in a governance role with
            whom the accountant would otherwise communicate.

200.10 A1 In some circumstances, all of those charged with governance are involved in managing the
          employing organization, for example, a small business where a single owner manages the
          organization and no one else has a governance role. In these cases, if matters are
          communicated with individual(s) with management responsibilities, and those individual(s) also
          have governance responsibilities, the professional accountant has satisfied the requirement to
          communicate with those charged with governance.
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SECTION 210
CONFLICTS OF INTEREST
Introduction
210.1       Professional accountants are required to comply with the fundamental principles and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats.

210.2       A conflict of interest creates threats to compliance with the principle of objectivity and might
            create threats to compliance with the other fundamental principles. Such threats might be
            created when:

            (a)   A professional accountant undertakes a professional activity related to a particular matter
                  for two or more parties whose interests with respect to that matter are in conflict; or
            (b)   The interest of a professional accountant with respect to a particular matter and the
                  interests of a party for whom the accountant undertakes a professional activity related to
                  that matter are in conflict.

            A party might include an employing organization, a vendor, a customer, a lender, a
            shareholder, or another party.

210.3       This section sets out specific requirements and application material relevant to applying the
            conceptual framework to conflicts of interest.

Requirements and Application Material
General
R210.4      A professional accountant shall not allow a conflict of interest to compromise professional or
            business judgment.
210.4 A1    Examples of circumstances that might create a conflict of interest include:

                  Serving in a management or governance position for two employing organizations and
                  acquiring confidential information from one organization that might be used by the
                  professional accountant to the advantage or disadvantage of the other organization.

                  Undertaking a professional activity for each of two parties in a partnership, where both
                  parties are employing the accountant to assist them to dissolve their partnership.
                  Preparing financial information for certain members of management of the accountant's
                  employing organization who are seeking to undertake a management buy-out.

                  Being responsible for selecting a vendor for the employing organization when an
                  immediate family member of the accountant might benefit financially from the
                  transaction.

                  Serving in a governance capacity in an employing organization that is approving certain
                  investments for the company where one of those investments will increase the value of
                  the investment portfolio of the accountant or an immediate family member.
Conflict Identification
R210.5      A professional accountant shall take reasonable steps to identify circumstances that might
            create a conflict of interest, and therefore a threat to compliance with one or more of the
            fundamental principles. Such steps shall include identifying:
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           (a)   The nature of the relevant interests and relationships between the parties involved; and
           (b)   The activity and its implication for relevant parties.
R210.6     A professional accountant shall remain alert to changes over time in the nature of the activities,
           interests and relationships that might create a conflict of interest while performing a
           professional activity.

Threats Created by Conflicts of Interest
210.7 A1   In general, the more direct the connection between the professional activity and the matter on
           which the parties' interests conflict, the more likely the level of the threat is not at an acceptable
           level.
210.7 A2   An example of an action that might eliminate threats created by conflicts of interest is
           withdrawing from the decision-making process related to the matter giving rise to the conflict
           of interest.

210.7 A3   Examples of actions that might be safeguards to address threats created by conflicts of interest
           include:

                 Restructuring or segregating certain responsibilities and duties.
                 Obtaining appropriate oversight, for example, acting under the supervision of an
                 executive or non-executive director.

Disclosure and Consent
General
210.8 A1   It is generally necessary to:

           (a)   Disclose the nature of the conflict of interest and how any threats created were
                 addressed to the relevant parties, including to the appropriate levels within the employing
                 organization affected by a conflict; and
           (b)   Obtain consent from the relevant parties for the professional accountant to undertake
                 the professional activity when safeguards are applied to address the threat.

210.8 A2   Consent might be implied by a party's conduct in circumstances where the professional
           accountant has sufficient evidence to conclude that the parties know the circumstances at the
           outset and have accepted the conflict of interest if they do not raise an objection to the
           existence of the conflict.

210.8 A3   If such disclosure or consent is not in writing, the professional accountant is encouraged to
           document:

           (a)   The nature of the circumstances giving rise to the conflict of interest;

           (b)   The safeguards applied to address the threats when applicable; and
           (c)   The consent obtained.

Other Considerations
210.9 A1    When addressing a conflict of interest, the professional accountant is encouraged to seek
            guidance from within the employing organization or from the Institute, legal counsel or
            another accountant. When making such disclosures or sharing information within the
            employing organization and seeking guidance of third parties, the principle of
            confidentiality applies.
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SECTION 220
PREPARATION AND PRESENTATION OF INFORMATION
Introduction
220.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.

220.2      Preparing or presenting information might create a self-interest, intimidation or other threats 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 in such
           circumstances.

Requirements and Application Material
General
220.3 A1   Professional accountants at all levels in an employing organization are involved in the
           preparation or presentation of information both within and outside the organization.

220.3 A2   Stakeholders to whom, or for whom, such information is prepared or presented, include:
                 Management and those charged with governance.
                 Investors and lenders or other creditors.
                 Regulatory bodies.
           This information might assist stakeholders in understanding and evaluating aspects of the
           employing organization's state of affairs and in making decisions concerning the organization.
           Information can include financial and non-financial information that might be made public or
           used for internal purposes.
           Examples include:
                 Operating and performance reports.
                 Decision support analyses.
                 Budgets and forecasts.
                 Information provided to the internal and external auditors.
                 Risk analyses.
                 General and special purpose financial statements.
                 Tax returns.
                 Reports filed with regulatory bodies for legal and compliance purposes.
220.3 A3   For the purposes of this section, preparing or presenting information includes recording,
           maintaining and approving information.

R220.4     When preparing or presenting information, a professional accountant shall:
           (a)   Prepare or present the information in accordance with a relevant reporting framework,
                 where applicable;
           (b)   Prepare or present the information in a manner that is intended neither to mislead nor to
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                 influence contractual or regulatory outcomes inappropriately;

           (c)   Exercise professional judgment to:
                 (i)     Represent the facts accurately and completely in all material respects;

                 (ii)    Describe clearly the true nature of business transactions or activities; and

                 (iii)   Classify and record information in a timely and proper manner; and
           (d)   Not omit anything with the intention of rendering the information misleading or of
                 influencing contractual or regulatory outcomes inappropriately.

220.4 A1   An example of influencing a contractual or regulatory outcome inappropriately is using an
           unrealistic estimate with the intention of avoiding violation of a contractual requirement such as
           a debt covenant or of a regulatory requirement such as a capital requirement for a financial
           institution.

Use of Discretion in Preparing or Presenting Information
R220.5     Preparing or presenting information might require the exercise of discretion in making
           professional judgments. The professional accountant shall not exercise such discretion with
           the intention of misleading others or influencing contractual or regulatory outcomes
           inappropriately.

220.5 A1 Examples of ways in which discretion might be misused to achieve inappropriate outcomes
          include:

                 Determining estimates, for example, determining fair value estimates in order to
                 misrepresent profit or loss.
                 Selecting or changing an accounting policy or method among two or more alternatives
                 permitted under the applicable financial reporting framework, for example, selecting a
                 policy for accounting for long-term contracts in order to misrepresent profit or loss.
                 Determining the timing of transactions, for example, timing the sale of an asset near the
                 end of the fiscal year in order to mislead.

                 Determining the structuring of transactions, for example, structuring financing
                 transactions in order to misrepresent assets and liabilities or classification of cash flows.

                 Selecting disclosures, for example, omitting or obscuring information relating to financial
                 or operating risk in order to mislead.
R220.6     When performing professional activities, especially those that do not require compliance with
           a relevant reporting framework, the professional accountant shall exercise professional
           judgment to identify and consider:
           (a)   The purpose for which the information is to be used;

           (b)   The context within which it is given; and
           (c)   The audience to whom it is addressed.
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220.6 A1   For example, when preparing or presenting pro forma reports, budgets or forecasts, the
           inclusion of relevant estimates, approximations and assumptions, where appropriate, would
           enable those who might rely on such information to form their own judgments.
220.6 A2   The professional accountant might also consider clarifying the intended audience, context and
           purpose of the information to be presented.

Relying on the Work of Others
R220.7     A professional accountant who intends to rely on the work of others, either internal or external
           to the employing organization, shall exercise professional judgment to determine what steps
           to take, if any, in order to fulfill the responsibilities set out in paragraph R220.4.
220.7 A1   Factors to consider in determining whether reliance on others is reasonable include:

                 The reputation and expertise of, and resources available to, the other individual or
                 organization.
                 Whether the other individual is subject to applicable professional and ethics standards.
           Such information might be gained from prior association with, or from consulting others about,
           the other individual or organization.

Addressing Information that Is or Might be Misleading
R220.8     When the professional accountant knows or has reason to believe that the information with
           which the accountant is associated is misleading, the accountant shall take appropriate actions
           to seek to resolve the matter.

220.8 A1   Actions that might be appropriate include:
                 Discussing concerns that the information is misleading with the professional
                 accountant's superior and/or the appropriate level(s) of management within the
                 accountant's employing organization or those charged with governance, and requesting
                 such individuals to take appropriate action to resolve the matter. Such action might
                 include:

                 o     Having the information corrected.
                 o     If the information has already been disclosed to the intended users, informing them
                       of the correct information.
                 Consulting the policies and procedures of the employing organization (for example, an
                 ethics or whistle-blowing policy) regarding how to address such matters internally.
220.8 A2   The professional accountant might determine that the employing organization has not taken
           appropriate action. If the accountant continues to have reason to believe that the information
           is misleading, the following further actions might be appropriate provided that the accountant
           remains alert to the principle of confidentiality:

                 Consulting with:
                 o     The Institute
                 o     The internal or external auditor of the employing organization.
                 o     Legal counsel.
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                  Determining whether any requirements exist to communicate to:
                  o     Third parties, including users of the information.
                  o     Regulatory and oversight authorities.
R220.9      If after exhausting all feasible options, the professional accountant determines that appropriate
            action has not been taken and there is reason to believe that the information is still misleading,
            the accountant shall refuse to be or to remain associated with the information.
220.9 A1    In such circumstances, it might be appropriate for a professional accountant to resign from the
            employing organization.

Documentation
220.10 A1 The professional accountant is encouraged to document:

                  The facts.
                  The accounting principles or other relevant professional standards involved.
                  The communications and parties with whom matters were discussed.
                  The courses of action considered.
                  How the accountant attempted to address the matter(s).
Other Considerations
220.11 A1 Where threats to compliance with the fundamental principles relating to the preparation or
          presentation of information arise from a financial interest, including compensation and
          incentives linked to financial reporting and decision making, the requirements and application
          material set out in Section 240 apply.

220.11 A2 Where the misleading information might involve non-compliance with laws and regulations, the
          requirements and application material set out in Section 260 apply.
220.11 A3 Where threats to compliance with the fundamental principles relating to the preparation or
           presentation of information arise from pressure, the requirements and application material set
           out in Section 270 apply.
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SECTION 230
ACTING WITH SUFFICIENT EXPERTISE
Introduction
230.1       Professional accountants are required to comply with the fundamental principles and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats.

230.2       Acting without sufficient expertise creates a self-interest threat to compliance with the principle
            of professional competence and due care. This section sets out specific requirements and
            application material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material
General

R230.3      A professional accountant shall not intentionally mislead an employing organization as to the
            level of expertise or experience possessed.

230.3 A1    The principle of professional competence and due care requires that a professional accountant
            only undertake significant tasks for which the accountant has, or can obtain, sufficient training
            or experience.

230.3 A2 A self-interest threat to compliance with the principle of professional competence and due care
           might be created if a professional accountant has:
                  Insufficient time for performing or completing the relevant duties.
                  Incomplete, restricted or otherwise inadequate information for performing the duties.
                  Insufficient experience, training and/or education.
                  Inadequate resources for the performance of the duties.
230.3 A3    Factors that are relevant in evaluating the level of such a threat include:
                  The extent to which the professional accountant is working with others.
                  The relative seniority of the accountant in the business.
                  The level of supervision and review applied to the work.
230.3 A4    Examples of actions that might be safeguards to address such a self-interest threat include:
                  Obtaining assistance or training from someone with the necessary expertise.
                  Ensuring that there is adequate time available for performing the relevant duties.
R230.4      If a threat to compliance with the principle of professional competence and due care cannot be
            addressed, a professional accountant shall determine whether to decline to perform the duties
            in question. If the accountant determines that declining is appropriate, the accountant shall
            communicate the reasons.

Other Considerations
230.5 A1    The requirements and application material in Section 270 apply when a professional
            accountant is pressured to act in a manner that might lead to a breach of the principle of
            professional competence and due care.
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SECTION 240
FINANCIAL INTERESTS, COMPENSATION AND INCENTIVES LINKED TO FINANCIAL
REPORTING AND DECISION MAKING
Introduction
240.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.
240.2      Having a financial interest, or knowing of a financial interest held by an immediate or close
           family member might create a self-interest threat to compliance with the principles of objectivity
           or confidentiality. This section sets out specific requirements and application material relevant
           to applying the conceptual framework in such circumstances.

Requirements and Application Material
General
R240.3     A professional accountant shall not manipulate information or use confidential information for
           personal gain or for the financial gain of others.

240.3 A1   Professional accountants might have financial interests or might know of financial interests of
           immediate or close family members that, in certain circumstances, might create threats to
           compliance with the fundamental principles. Financial interests include those arising from
           compensation or incentive arrangements linked to financial reporting and decision making.
240.3 A2   Examples of circumstances that might create a self-interest threat include situations in which
           the professional accountant or an immediate or close family member:

                 Has a motive and opportunity to manipulate price-sensitive information in order to gain
                 financially.

                 Holds a direct or indirect financial interest in the employing organization and the value of
                 that financial interest might be directly affected by decisions made by the accountant.
                 Is eligible for a profit-related bonus and the value of that bonus might be directly affected
                 by decisions made by the accountant.
                 Holds, directly or indirectly, deferred bonus share rights or share options in the employing
                 organization, the value of which might be affected by decisions made by the accountant.
                 Participates in compensation arrangements which provide incentives to achieve targets
                 or to support efforts to maximize the value of the employing organization's shares. An
                 example of such an arrangement might be through participation in incentive plans which
                 are linked to certain performance conditions being met.

240.3 A3   Factors that are relevant in evaluating the level of such a threat include:
                 The significance of the financial interest. What constitutes a significant financial interest
                 will depend on personal circumstances and the materiality of the financial interest to the
                 individual.
                 Policies and procedures for a committee independent of management to determine the
                 level or form of senior management remuneration.

                 In accordance with any internal policies, disclosure to those charged with governance
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                of:
                o     All relevant interests.
                o     Any plans to exercise entitlements or trade in relevant shares.
                Internal and external audit procedures that are specific to address issues that give rise
                to the financial interest.

240.3 A4   Threats created by compensation or incentive arrangements might be compounded by explicit
           or implicit pressure from superiors or colleagues. See Section 270, Pressure to Breach the
           Fundamental Principles.
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SECTION 250
INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY
Introduction
250.1      Professional accountants are required to comply with the fundamental
           principles and apply the conceptual framework set out in Section 120 to
           identify, evaluate and address threats.
250.2      Offering or accepting inducements might create a self-interest,
           familiarity or intimidation threat to compliance with the fundamental
           principles, particularly the principles of integrity, objectivity and
           professional behaviour.
250.3      This section sets out requirements and application material relevant to
           applying the conceptual framework in relation to the offering and
           accepting of inducements when undertaking professional activities that
           does not constitute non-compliance with laws and regulations. This
           section also requires a professional accountant to comply with relevant
           laws and regulations when offering or accepting inducements.

Requirements and Application Material
General
250.4 A1   An inducement is an object, situation, or action that is used as a means
           to influence another individual's behaviour, but not necessarily with the
           intent to improperly influence that individual's behaviour. Inducements
           can range from minor acts of hospitality between business colleagues
           to acts that result in non-compliance with laws and regulations. An
           inducement can take many different forms, for example:
                 Gifts.
                 Hospitality.
                 Entertainment.
                 Political or charitable donations.
                 Appeals to friendship and loyalty.
                 Employment or other commercial opportunities.
                 Preferential treatment, rights or privileges.

Inducements Prohibited by Laws and Regulations
R250.5     The professional accountant shall obtain an understanding of relevant
           laws and regulations and comply with them when the accountant
           encounters such circumstances.


Inducements Not Prohibited by Laws and Regulations
250.6 A1   The offering or accepting of inducements that is not prohibited by laws
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            and regulations might still create threats to compliance with the
            fundamental principles.

Inducements with Intent to Improperly Influence Behaviour
R250.7      A professional accountant shall not offer, or encourage others to offer,
            any inducement that is made, or which the accountant considers a
            reasonable and informed third party would be likely to conclude is
            made, with the intent to improperly influence the behaviour of the
            recipient or of another individual.
R250.8      A professional accountant shall not accept, or encourage others to
            accept, any inducement        that the accountant concludes is made, or
            considers a reasonable and informed third party would be likely to
            conclude is made, with the intent to improperly influence the behaviour
            of the recipient or of another individual.
250.9 A1    An inducement is considered as improperly influencing an individual's
            behaviour if it causes the individual to act in an unethical manner. Such
            improper influence can be directed either towards the recipient or
            towards another individual who has some relationship with the
            recipient. The fundamental principles are an appropriate frame of
            reference for a professional accountant in considering what constitutes
            unethical behaviour on the part of the accountant and, if necessary by
            analogy, other individuals.
250.9 A2    A breach of the fundamental principle of integrity arises when a
            professional accountant offers or accepts, or encourages others to offer
            or accept, an inducement where the intent is to improperly influence the
            behaviour of the recipient or of another individual.
250.9 A3    The determination of whether there is actual or perceived intent to
            improperly influence behaviour requires the exercise of professional
            judgment. Relevant factors to consider might include:
                  The nature, frequency, value and cumulative effect of the
                  inducement.
                  Timing of when the inducement is offered relative to any action or
                  decision that it might influence.
                  Whether the inducement is a customary or cultural practice in the
                  circumstances, for example, offering a gift on the occasion of a
                  religious holiday or wedding.
                  Whether the inducement is an ancillary part of a professional
                  activity, for example, offering or accepting lunch in connection
                  with a business meeting.
                  Whether the offer of the inducement is limited to an individual
                  recipient or available to a broader group. The broader group
                  might be internal or external to the employing organization, such
                  as other customers or vendors.
                  The roles and positions of the individuals offering or being offered
                  the inducement.
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                  Whether the professional accountant knows, or has reason to
                  believe, that accepting the inducement would breach the policies
                  and procedures of the counterparty's employing organization.
                  The degree of transparency with which the inducement is offered.
                  Whether the inducement was required or requested by the recipient.
                  The known previous behaviour or reputation of the offeror.


Consideration of Further Actions
250.10 A1 If the professional accountant becomes aware of an inducement
          offered with actual or perceived intent to improperly influence
          behaviour, threats to compliance with the fundamental principles might
          still be created even if the requirements in paragraphs R250.7 and
          R250.8 are met.
250.10 A2 Examples of actions that might be safeguards to address such threats
          include:
                  Informing senior management or those charged with governance
                  of the employing organization of the professional accountant or
                  the offeror regarding the offer.
                  Amending or terminating the business relationship with the offeror.

Inducements with No Intent to Improperly Influence Behaviour
250.11 A1   The requirements and application material set out in the conceptual
            framework apply when a professional accountant has concluded there
            is no actual or perceived intent to improperly influence the behaviour of
            the recipient or of another individual.
250.11 A2   If such an inducement is trivial and inconsequential, any threats created
            will be at an acceptable level.
250.11 A3 Examples of circumstances where offering or accepting such an
          inducement might create threats even if the professional accountant has
          concluded there is no actual or perceived intent to improperly influence
          behaviour include:
                  Self-interest threats
                  o     A professional accountant is offered part-time employment by
                        a vendor.
                  Familiarity threats
                  o     A professional accountant regularly takes a customer or
                        supplier to sporting events.
                  Intimidation threats
                  o     A professional accountant accepts hospitality, the nature of
                        which could be perceived to be inappropriate were it to be
                        publicly disclosed.
250.11 A4 Relevant factors in evaluating the level of such threats created by
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                              offering or accepting such an inducement include the same factors set
                              out in paragraph 250.9 A3 for determining intent.

                  250.11 A5   Examples of actions that might eliminate threats created by offering or
                              accepting such an inducement include:
                                    Declining or not offering the inducement.
                                    Transferring responsibility for any business-related decision
                                    involving the counterparty to another individual who the
                                    professional accountant has no reason to believe would be, or
                                    would be perceived to be, improperly influenced in making the
                                    decision.


250.11 A6   Examples of actions that might be safeguards to address such threats created by
            offering or accepting such an inducement include:
                    Being transparent with senior management or those charged with governance of
                    the employing organization of the professional accountant or of the counterparty
                    about offering or accepting an inducement.
                    Registering the inducement in a log maintained by the employing organization of
                    the accountant or the counterparty.
                    Having an appropriate reviewer, who is not otherwise involved in undertaking the
                    professional activity, review any work performed or decisions made by the
                    accountant with respect to the individual or organization from which the
                    accountant accepted the inducement.

                    Donating the inducement to charity after receipt and appropriately disclosing the
                    donation, for example, to those charged with governance or the individual who
                    offered the inducement.
                    Reimbursing the cost of the inducement, such as hospitality, received.
                    As soon as possible, returning the inducement, such as a gift, after it was initially
                    accepted.

Immediate or Close Family Members
R250.12     A professional accountant shall remain alert to potential threats to the accountant's
            compliance with the fundamental principles created by the offering of an inducement:
            (a)     By an immediate or close family member of the accountant to a counterparty with
                    whom the accountant has a professional relationship; or
            (b)     To an immediate or close family member of the accountant by a counterparty with
                    whom the accountant has a professional relationship.
R250.13     Where the professional accountant becomes aware of an inducement being offered to
            or made by an immediate or close family member and concludes there is intent to
            improperly influence the behaviour of the accountant or of the counterparty, or
            considers a reasonable and informed third party would be likely to conclude such intent
            exists, the accountant shall advise the immediate or close family member not to offer
            or accept the inducement.
250.13 A1   The factors set out in paragraph 250.9 A3 are relevant in determining whether there is
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             actual or perceived intent to improperly influence the behaviour of the professional
             accountant or of the counterparty. Another factor that is relevant is the nature or
             closeness of the relationship, between:
             (a)   The accountant and the immediate or close family member;

             (b)   The immediate or close family member and the counterparty; and
             (c)   The accountant and the counterparty.
             For example, the offer of employment, outside of the normal recruitment process, to the
             spouse of the accountant by a counterparty with whom the accountant is negotiating a
             significant contract might indicate such intent.


250.13 A2    The application material in paragraph 250.10 A2 is also relevant in addressing threats
             that might be created when there is actual or perceived intent to improperly influence
             the behaviour of the professional accountant or of the counterparty even if the
             immediate or close family member has followed the advice given pursuant to
             paragraph R250.13.

 Application of the Conceptual Framework
250.14 A1 Where the professional accountant becomes aware of an inducement offered in the
          circumstances addressed in paragraph R250.12, threats to compliance with the
          fundamental principles might be created where:
          (a) The immediate or close family member offers or accepts the inducement contrary to
              the advice of the accountant pursuant to paragraph R250.13; or
          (b) The accountant does not have reason to believe an actual or perceived intent to
              improperly influence the behaviour of the accountant or of the counterparty exists.
250.14 A2 The application material in paragraphs 250.11 A1 to 250.11 A6 is relevant for the
          purposes of identifying, evaluating and addressing such threats. Factors that are relevant
          in evaluating the level of threats in these circumstances also include the nature or
          closeness of the relationships set out in paragraph 250.13 A1.

Other Considerations
250.15 A1 If a professional accountant is offered an inducement by the employing organization
         relating to financial interests, compensation and incentives linked to performance, the
         requirements and application material set out in Section 240 apply.

250.15 A2 If a professional accountant encounters or is made aware of inducements that might
          result in non-compliance or suspected non-compliance with laws and regulations by
          other individuals working for or under the direction of the employing organization, the
          requirements and application material set out in Section 260 apply.
250.15 A3 If a professional accountant faces pressure to offer or accept inducements that might
          create threats to compliance with the fundamental principles, the requirements and
          application material set out in Section 270 apply.
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RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS
Introduction
260.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.

260.2      A self-interest or intimidation threat to compliance with the principles of integrity and
           professional behaviour is created when a professional accountant becomes aware of
           non- compliance or suspected non-compliance with laws and regulations.
260.3      A professional accountant might encounter or be made aware of non-compliance or suspected
           non-compliance in the course of carrying out professional activities. This section guides the
           accountant in assessing the implications of the matter and the possible courses of action when
           responding to non-compliance or suspected non-compliance with:
           (a)   Laws and regulations generally recognized to have a direct effect on the determination
                 of material amounts and disclosures in the employing organization's financial
                 statements; and
           (b)   Other laws and regulations that do not have a direct effect on the determination of the
                 amounts and disclosures in the employing organization's financial statements, but
                 compliance with which might be fundamental to the operating aspects of the employing
                 organization's business, to its ability to continue its business, or to avoid material penalties.

Objectives of the Professional Accountant in Relation to Non-compliance with Laws and
Regulations
260.4      A distinguishing mark of the accountancy profession is its acceptance of the responsibility to
           act in the public interest. When responding to non-compliance or suspected non-compliance,
           the objectives of the professional accountant are:
           (a)   To comply with the principles of integrity and professional behaviour;

           (b)   By alerting management or, where appropriate, those charged with governance of the
                 employing organization, to seek to:
                 (i)    Enable them to rectify, remediate or mitigate the consequences of the identified or
                        suspected non-compliance; or

                 (ii)   Deter the non-compliance where it has not yet occurred; and
           (c)   To take such further action as appropriate in the public interest.

Requirements and Application Material
General
260.5 A1   Non-compliance with laws and regulations ("non-compliance") comprises acts of omission or
           commission, intentional or unintentional, which are contrary to the prevailing laws or
           regulations committed by the following parties:

           (a)   The professional accountant's employing organization;
           (b)   Those charged with governance of the employing organization;

           (c)   Management of the employing organization; or
           (d)   Other individuals working for or under the direction of the employing organization.
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260.5 A2   Examples of laws and regulations which this section addresses include those that deal with:
                 Fraud, corruption and bribery.
                 Money laundering, terrorist financing and proceeds of crime.
                 Securities markets and trading.
                 Banking and other financial products and services.
                 Data protection.
                 Tax and pension liabilities and payments.
                 Environmental protection.
                 Public health and safety.
260.5 A3   Non-compliance might result in fines, litigation or other consequences for the employing
           organization, potentially materially affecting its financial statements. Importantly, such non-
           compliance might have wider public interest implications in terms of potentially substantial
           harm to investors, creditors, employees or the general public. For the purposes of this section,
           non-compliance that causes substantial harm is one that results in serious adverse
           consequences to any of these parties in financial or non-financial terms. Examples include the
           perpetration of a fraud resulting in significant financial losses to investors, and breaches of
           environmental laws and regulations endangering the health or safety of employees or the
           public.
R260.6     When encountering such non-compliance or suspected non-compliance, the accountant shall
           obtain an understanding of those legal or regulatory provisions, if any, and comply with them,
           including:

           (a)   Any requirement to report the matter to an appropriate authority; and
           (b)   Any prohibition on alerting the relevant party.

260.6 A1   A prohibition on alerting the relevant party might arise, for example, pursuant to anti-money
           laundering legislation.
260.7 A1   This section applies regardless of the nature of the employing organization, including whether
           or not it is a public interest entity.

260.7 A2   A professional accountant who encounters or is made aware of matters that are clearly
           inconsequential is not required to comply with this section. Whether a matter is clearly
           inconsequential is to be judged with respect to its nature and its impact, financial or otherwise,
           on the employing organization, its stakeholders and the general public.

260.7 A3   This section does not address:
           (a)   Personal misconduct unrelated to the business activities of the employing organization;
                 and

           (b)   Non-compliance by parties other than those specified in paragraph 260.5 A1.
           The professional accountant might nevertheless find the guidance in this section helpful in
           considering how to respond in these situations.

Responsibilities of the Employing Organization's Management and Those Charged with
Governance
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260.8 A1    The employing organization's management, with the oversight of those charged with
            governance, is responsible for ensuring that the employing organization's business activities
            are conducted in accordance with laws and regulations. Management and those charged with
            governance are also responsible for identifying and addressing any non-compliance by:
            (a)   The employing organization;

            (b)   An individual charged with governance of the employing organization;

            (c)   A member of management; or
            (d)   Other individuals working for or under the direction of the employing organization.

Responsibilities of All Professional Accountants

R260.9       If protocols and procedures exist within the professional accountant's employing organization
            to address non-compliance or suspected non-compliance, the accountant shall consider them
            in determining how to respond to such non-compliance.
260.9 A1    Many employing organizations have established protocols and procedures regarding how to
            raise non-compliance or suspected non-compliance internally. These protocols and procedures
            include, for example, an ethics policy or internal whistle-blowing mechanism. Such protocols
            and procedures might allow matters to be reported anonymously through designated channels.

R260.10     Where a professional accountant becomes aware of a matter to which this section applies, the
            steps that the accountant takes to comply with this section shall be taken on a timely basis.
            For the purpose of taking timely steps, the accountant shall have regard to the nature of the
            matter and the potential harm to the interests of the employing organization, investors,
            creditors, employees or the general public.

Responsibilities of Senior Professional Accountants in Service
260.11 A1   Senior professional accountants in service ("senior professional accountants") are directors,
            officers or senior employees able to exert significant influence over, and make decisions
            regarding, the acquisition, deployment and control of the employing organization's human,
            financial, technological, physical and intangible resources. There is a greater expectation for
            such individuals to take whatever action is appropriate in the public interest to respond to non-
            compliance or suspected non-compliance than other professional accountants within the
            employing organization. This is because of senior professional accountants' roles, positions
            and spheres of influence within the employing organization.

Obtaining an Understanding of the Matter
R260.12 If, in the course of carrying out professional activities, a senior professional accountant
           becomes aware of information concerning non-compliance or suspected non-compliance, the
           accountant shall obtain an understanding of the matter. This understanding shall include:
            (a)   The nature of the non-compliance or suspected non-compliance and the circumstances
                  in which it has occurred or might occur;
            (b)   The application of the relevant laws and regulations to the circumstances; and
            (c)   An assessment of the potential consequences to the employing organization, investors,
                  creditors, employees or the wider public.

260.12 A1 A senior professional accountant is expected to apply knowledge and expertise, and exercise
          professional judgment. However, the accountant is not expected to have a level of
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            understanding of laws and regulations greater than that which is required for the accountant's
            role within the employing organization. Whether an act constitutes non-compliance is ultimately
            a matter to be determined by a court or other appropriate adjudicative body.
260.12 A2 Depending on the nature and significance of the matter, the senior professional accountant
          might cause, or take appropriate steps to cause, the matter to be investigated internally. The
          accountant might also consult on a confidential basis with others within the employing
          organization or Institute, or with legal counsel.

Addressing the Matter
R260.13    If the senior professional accountant identifies or suspects that non-compliance has occurred
            or might occur, the accountant shall, subject to paragraph R260.9, discuss the matter with the
            accountant's immediate superior, if any. If the accountant's immediate superior appears to be
            involved in the matter, the accountant shall discuss the matter with the next higher level of
            authority within the employing organization.
260.13 A1 The purpose of the discussion is to enable a determination to be made as to how to address
          the matter.
R260.14     The senior professional accountant shall also take appropriate steps to:

            (a)   Have the matter communicated to those charged with governance;
            (b)   Comply with applicable laws and regulations, including legal or regulatory provisions
                  governing the reporting of non-compliance or suspected non-compliance to an
                  appropriate authority;
            (c)   Have the consequences of the non-compliance or suspected non-compliance rectified,
                  remediated or mitigated;

            (d)   Reduce the risk of re-occurrence; and

            (e)   Seek to deter the commission of the non-compliance if it has not yet occurred.

260.14 A1 The purpose of communicating the matter to those charged with governance is to obtain their
          concurrence regarding appropriate actions to take to respond to the matter and to enable them
          to fulfill their responsibilities.

260.14 A2 Some laws and regulations might stipulate a period within which reports of non-compliance or
          suspected non-compliance are to be made to an appropriate authority.

R260.15     In addition to responding to the matter in accordance with the provisions of this section, the
            senior professional accountant shall determine whether disclosure of the matter to the
            employing organization's external auditor, if any, is needed.
260.15 A1 Such disclosure would be pursuant to the senior professional accountant's duty or legal
          obligation to provide all information necessary to enable the auditor to perform the audit.

Determining Whether Further Action Is Needed
R260.16     The senior professional accountant shall assess the appropriateness of the response of the
            accountant's superiors, if any, and those charged with governance.

260.16 A1 Relevant factors to consider in assessing the appropriateness of the response of the senior
          professional accountant's superiors, if any, and those charged with governance include
          whether:
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                  The response is timely.
                  They have taken or authorized appropriate action to seek to rectify, remediate or mitigate
                  the consequences of the non-compliance, or to avert the non-compliance if it has not yet
                  occurred.

                  The matter has been disclosed to an appropriate authority where appropriate and, if so,
                  whether the disclosure appears adequate.

R260.17     In light of the response of the senior professional accountant's superiors, if any, and those
            charged with governance, the accountant shall determine if further action is needed in the
            public interest.
260.17 A1 The determination of whether further action is needed, and the nature and extent of it, will
           depend on various factors, including:
                  The legal and regulatory framework.
                  The urgency of the situation.
                  The pervasiveness of the matter throughout the employing organization.
                  Whether the senior professional accountant continues to have confidence in the integrity
                  of the accountant's superiors and those charged with governance.

                  Whether the non-compliance or suspected non-compliance is likely to recur.
                  Whether there is credible evidence of actual or potential substantial harm to the interests
                  of the employing organization, investors, creditors, employees or the general public.

260.17 A2 Examples of circumstances that might cause the senior professional accountant no longer to
          have confidence in the integrity of the accountant's superiors and those charged with
          governance include situations where:

                  The accountant suspects or has evidence of their involvement or intended involvement
                  in any non-compliance.

                  Contrary to legal or regulatory requirements, they have not reported, or authorized the
                  reporting of, the matter to an appropriate authority within a reasonable period.
R260.18     The senior professional accountant shall exercise professional judgment in determining the
            need for, and nature and extent of, further action. In making this determination, the accountant
            shall take into account whether a reasonable and informed third party would be likely to
            conclude that the accountant has acted appropriately in the public interest.

260.18 A1 Further action that the senior professional accountant might take includes:
                  Informing the management of the parent entity of the matter if the employing organization
                  is a member of a group.

                  Disclosing the matter to an appropriate authority

                  Resigning from the employing organization.
260.18 A2 Resigning from the employing organization is not a substitute for taking other actions that might
          be needed to achieve the senior professional accountant's objectives under this section.
          However, there might be limitations as to the further actions available to the accountant. In
          such circumstances, resignation might be the only available course of action.
Seeking Advice
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260.19 A1 As assessment of the matter might involve complex analysis and judgments, the senior
          professional accountant might consider:
                  Consulting internally.
                  Obtaining legal advice to understand the accountant's options and the professional or
                  legal implications of taking any particular course of action.
                  Consulting on a confidential basis with the Institute.

Determining Whether to Disclose the Matter to an Appropriate Authority

260.20 A1 Disclosure of the matter to an appropriate authority would be precluded if doing so would be
          contrary to law or regulation. Otherwise, the purpose of making disclosure is to enable an
          appropriate authority to cause the matter to be investigated and action to be taken in the public
          interest.
260.20 A2 The determination of whether to make such a disclosure depends in particular on the nature
          and extent of the actual or potential harm that is or might be caused by the matter to investors,
          creditors, employees or the general public. For example, the senior professional accountant
          might determine that disclosure of the matter to an appropriate authority is an appropriate
          course of action if:

                  The employing organization is engaged in bribery (for example, of local or foreign
                  government officials for purposes of securing large contracts).

                  The employing organization is regulated and the matter is of such significance as to
                  threaten its license to operate.

                  The employing organization is listed on a securities exchange and the matter might result
                  in adverse consequences to the fair and orderly market in the employing organization's
                  securities or pose a systemic risk to the financial markets.
                  It is likely that the employing organization would sell products that are harmful to public
                  health or safety.

                  The employing organization is promoting a scheme to its clients to assist them in evading
                  taxes.

260.20 A3 The determination of whether to make such a disclosure will also depend on external factors
          such as:
                  Whether there is an appropriate authority that is able to receive the information, and
                  cause the matter to be investigated and action to be taken. The appropriate authority will
                  depend upon the nature of the matter. For example, the appropriate authority would be
                  Securities and Exchange Board of India (SEBI) in the case of fraudulent financial
                  reporting or an environmental protection agency, e.g. Environment Pollution
                  (Prevention & Control) Authority for National Capital Region of Delhi in the case of a
                  breach of environmental laws and regulations.

                  Whether there exists robust and credible protection from civil, criminal or professional
                  liability or retaliation afforded by legislation or regulation, such as under whistle-blowing
                  legislation or regulation.

                  Whether there are actual or potential threats to the physical safety of the senior
                  professional accountant or other individuals.
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R260.21     If the senior professional accountant determines that disclosure of the matter to an appropriate
            authority is an appropriate course of action in the circumstances, that disclosure is permitted
            pursuant to paragraph R114.1(d) of the Code. When making such disclosure, the accountant
            shall act in good faith and exercise caution when making statements and assertions.

Imminent Breach
R260.22     In exceptional circumstances, the senior professional accountant might become aware of
            actual or intended conduct that the accountant has reason to believe would constitute an
            imminent breach of a law or regulation that would cause substantial harm to investors,
            creditors, employees or the general public. Having first considered whether it would be
            appropriate to discuss the matter with management or those charged with governance of the
            employing organization, the accountant shall exercise professional judgment and determine
            whether to disclose the matter immediately to an appropriate authority in order to prevent or
            mitigate the consequences of such imminent breach. If disclosure is made, that disclosure is
            permitted pursuant to paragraph R114.1(d) of the Code.

Documentation
260.23 A1 In relation to non-compliance or suspected non-compliance that falls within the scope of this
           section, the senior professional accountant is encouraged to have the following matters
           documented:

                   The matter.
                   The results of discussions with the accountant's superiors, if any, and those charged with
                   governance and other parties.
                   How the accountant's superiors, if any, and those charged with governance have
                   responded to the matter.

                   The courses of action the accountant considered, the judgments made and the decisions
                   that were taken.

                   How the accountant is satisfied that the accountant has fulfilled the responsibility set out
                   in paragraph R260.17.

Responsibilities of Professional Accountants Other than Senior Professional Accountants
R260.24     If, in the course of carrying out professional activities, a professional accountant becomes
            aware of information concerning non-compliance or suspected non-compliance, the
            accountant shall seek to obtain an understanding of the matter. This understanding shall include
            the nature of the non-compliance or suspected non-compliance and the circumstances in which
            it has occurred or might occur.
260.24 A1 The professional accountant is expected to apply knowledge and expertise, and exercise
           professional judgment. However, the accountant is not expected to have a level of
           understanding of laws and regulations greater than that which is required for the accountant's
           role within the employing organization. Whether an act constitutes non-compliance is ultimately
           a matter to be determined by a court or other appropriate adjudicative body.
260.24 A2 Depending on the nature and significance of the matter, the professional accountant might
           consult on a confidential basis with others within the employing organization or the Institute, or
           with legal counsel.
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R260.25     If the professional accountant identifies or suspects that non-compliance has occurred or might
            occur, the accountant shall, subject to paragraph R260.9, inform an immediate superior to
            enable the superior to take appropriate action. If the accountant's immediate superior appears
            to be involved in the matter, the accountant shall inform the next higher level of authority within
            the employing organization.

R260.26     In exceptional circumstances, the professional accountant may determine that disclosure of
            the matter to an appropriate authority is an appropriate course of action. If the accountant does
            so pursuant to paragraphs 260.20 A2 and A3, that disclosure is permitted pursuant to
            paragraph R114.1(d) of the Code. When making such disclosure, the accountant shall act in
            good faith and exercise caution when making statements and assertions.

Documentation

260.27 A1 In relation to non-compliance or suspected non-compliance that falls within the scope of this
            section, the professional accountant is encouraged to have the following matters documented:

                  The matter.
                  The results of discussions with the accountant's superior, management and, where
                  applicable, those charged with governance and other parties.

                  How the accountant's superior has responded to the matter.
                  The courses of action the accountant considered, the judgments made and the decisions
                  that were taken.
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SECTION 270
PRESSURE TO BREACH THE FUNDAMENTAL PRINCIPLES
Introduction
270.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.

270.2      Pressure exerted on, or by, a professional accountant might create an intimidation or other
           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
           in such circumstances.

Requirements and Application Material
General
R270.3     A professional accountant shall not:
           (a)   Allow pressure from others to result in a breach of compliance with the fundamental
                 principles; or

           (b)   Place pressure on others that the accountant knows, or has reason to believe, would
                 result in the other individuals breaching the fundamental principles.
270.3 A1   A professional accountant might face pressure that creates threats to compliance with the
           fundamental principles, for example an intimidation threat, when undertaking a professional
           activity. Pressure might be explicit or implicit and might come from:
                 Within the employing organization, for example, from a colleague or superior.
                 An external individual or organization such as a vendor, customer or lender.
                 Internal or external targets and expectations.
270.3 A2   Examples of pressure that might result in threats to compliance with the fundamental principles
           include:
                 Pressure related to conflicts of interest:
                 o     Pressure from a family member bidding to act as a vendor to the professional
                       accountant's employing organization to select the family member over another
                       prospective vendor.

                 See also Section 210, Conflicts of Interest.
                 Pressure to influence preparation or presentation of information:
                 o     Pressure to report misleading financial results to meet investor, analyst or lender
                       expectations.

                 o     Pressure from elected officials on public sector accountants to misrepresent
                       programs or projects to voters.
                 o     Pressure from colleagues to misstate income, expenditure or rates of return to
                       bias decision-making on capital projects and acquisitions.
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                 o      Pressure from superiors to approve or process expenditures that are not legitimate
                        business expenses.
                 o      Pressure to suppress internal audit reports containing adverse findings.
                 See also Section 220, Preparation and Presentation of Information.

                 Pressure to act without sufficient expertise or due care:
                 o      Pressure from superiors to inappropriately reduce the extent of work performed.
                 o      Pressure from superiors to perform a task without sufficient skills or training or
                        within unrealistic deadlines.

                 See also Section 230, Acting with Sufficient Expertise.
                 Pressure related to financial interests:
                 o      Pressure from superiors, colleagues or others, for example, those who might
                        benefit from participation in compensation or incentive arrangements to
                        manipulate performance indicators.

                 See also Section 240, Financial Interests, Compensation and Incentives Linked to
                 Financial Reporting and Decision Making.
                 Pressure related to inducements:
                 o      Pressure from others, either internal or external to the employing organization, to
                        offer inducements to influence inappropriately the judgment or decision making
                        process of an individual or organization.

                 o      Pressure from colleagues to accept a bribe or other inducement, for example to
                        accept inappropriate gifts or entertainment from potential vendors in a bidding
                        process.
                 See also Section 250, Inducements, Including Gifts and Hospitality.

                 Pressure related to non-compliance with laws and regulations:
                 o      Pressure to structure a transaction to evade tax.
                 See also Section 260, Responding to Non-compliance with Laws and Regulations.

270.3 A3   Factors that are relevant in evaluating the level of threats created by pressure include:
                 The intent of the individual who is exerting the pressure and the nature and extent of the
                 pressure.

                 The application of laws, regulations, and professional standards to the circumstances.
                 The culture and leadership of the employing organization including the extent to which
                 they reflect or emphasize the importance of ethical behaviour and the expectation
                 that employees will act ethically. For example, a corporate culture that tolerates
                 unethical behaviour might increase the likelihood that the pressure would result in
                 a threat to compliance with the fundamental principles.

                 Policies and procedures, if any, that the employing organization has established, such
                 as ethics or human resources policies that address pressure.
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270.3 A4   Discussing the circumstances creating the pressure and consulting with others about those
           circumstances might assist the professional accountant to evaluate the level of the threat. Such
           discussion and consultation, which requires being alert to the principle of confidentiality, might
           include:

                 Discussing the matter with the individual who is exerting the pressure to seek to resolve
                 it.

                 Discussing the matter with the accountant's superior, if the superior is not the individual
                 exerting the pressure.

                 Escalating the matter within the employing organization, including when appropriate,
                 explaining any consequential risks to the organization, for example with:
                 o     Higher levels of management.

                 o     Internal or external auditors.

                 o     Those charged with governance.

                 Disclosing the matter in line with the employing organization's policies, including ethics
                 and whistleblowing policies, using any established mechanism, such as a confidential
                 ethics hotline.
                 Consulting with:

                 o     A colleague, superior, human resources personnel, or another professional
                       accountant;

                 o     Institute or industry associations; or

                 o     Legal counsel.

270.3 A5   An example of an action that might eliminate threats created by pressure is the professional
           accountant's request for a restructure of, or segregation of, certain responsibilities and duties
           so that the accountant is no longer involved with the individual or entity exerting the pressure.

Documentation
270.4 A1   The professional accountant is encouraged to document:
                 The facts.
                 The communications and parties with whom these matters were discussed.
                 The courses of action considered.
                 How the matter was addressed.
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PART 3  PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE ..............................
Section 300 Applying the Conceptual Framework  Professional Accountants in Public Practice
.........................................................................................................
Section 310 Conflicts of Interest ...........................................................................................

Section 320 Professional Appointments ...............................................................................

Section 321 Second Opinions...............................................................................................
Section 330 Fees and Other Types of Remuneration...........................................................

Section 340 Inducements, Including Gifts and Hospitality............................

Section 350 Custody of Client Assets ...................................................................................
Section 360 Responding to Non-Compliance with Laws and Regulations during the course of financial
            statement Audit Engagements of Listed Companies.
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PART 3  PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE
SECTION 300
APPLYING THE CONCEPTUAL FRAMEWORK  PROFESSIONAL ACCOUNTANTS IN
PUBLIC PRACTICE
Introduction
300.1      This Part of the Code sets out requirements and application material for professional
           accountants in public practice when applying the conceptual framework set out in Section 120.
           It does not describe all of the facts and circumstances, including professional activities,
           interests and relationships, that could be encountered by professional accountants in public
           practice, which create or might create threats to compliance with the fundamental principles.
           Therefore, the conceptual framework requires professional accountants in public practice to be
           alert for such facts and circumstances.
300.2      The requirements and application material that apply to professional accountants in public
           practice are set out in:
                 Part 3  Professional Accountants in Public Practice Sections 300 to 399, which applies
                 to all professional accountants in public practice, whether they provide assurance
                 services or not.
                 Independence Standards as follows:
                 o     Part 4A  Independence for Audit and Review Engagements, Sections 400 to 899,
                       which applies to professional accountants in public practice when performing audit
                       and review engagements.

                 o     Part 4B  Independence for Assurance Engagements Other than Audit and
                       Review Engagements, Sections 900 to 999, which applies to professional
                       accountants in public practice when performing assurance engagements other
                       than audit or review engagements.

300.3      In this Part, the term "professional accountant" refers to individual professional accountants in
           public practice and their firms.

Requirements and Application Material
General
R300.4     A professional accountant shall comply with the fundamental principles set out in Section 110
           and apply the conceptual framework set out in Section 120 to identify, evaluate and address
           threats to compliance with the fundamental principles.
R300.5     When dealing with an ethics issue, the professional accountant shall consider the context in
           which the issue has arisen or might arise. Where an individual who is a professional accountant
           in public practice is performing professional activities pursuant to the accountant's relationship
           with the firm, whether as a contractor or employee, the individual shall comply with the
           provisions in Part 2 that apply to these circumstances.

300.5 A1   Examples of situations in which the provisions in Part 2 apply to a professional accountant in
           public practice include:
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                 Facing a conflict of interest when being responsible for selecting a vendor for the firm
                 when an immediate family member of the accountant might benefit financially from the
                 contract. The requirements and application material set out in Section 210 apply in
                 these circumstances.

                 Preparing or presenting financial information for the accountant's client or firm. The
                 requirements and application material set out in Section 220 apply in these
                 circumstances.

                 Being offered an inducement such as being regularly offered complimentary tickets to
                 attend sporting events by a supplier of the firm. The requirements and application
                 material set out in Section 250 apply in these circumstances.

                 Facing pressure from an engagement partner to report chargeable hours inaccurately
                 for a client engagement. The requirements and application material set out in Section
                 270 apply in these circumstances.

Identifying Threats
300.6 A1   Threats to compliance with the fundamental principles might be created by a broad range of
           facts and circumstances. The categories of threats are described in paragraph 120.6 A3. The
           following are examples of facts and circumstances within each of those categories of threats
           that might create threats for a professional accountant when undertaking a professional
           service:

           (a)   Self-interest Threats
                       A professional accountant having a direct financial interest in a client.
                       A professional accountant quoting a low fee to obtain a new engagement and the
                       fee is so low that it might be difficult to perform the professional service in
                       accordance with applicable technical and professional standards for that price.
                       A professional accountant having a close business relationship with a client.
                       A professional accountant having access to confidential information that might be
                       used for personal gain.
                       A professional accountant discovering a significant error when evaluating the
                       results of a previous professional service performed by a member of the
                       accountant's firm.
           (b)   Self-review Threats

                       A professional accountant issuing an assurance report on the effectiveness of the
                       operation of financial systems after implementing the systems.
                       A professional accountant having prepared the original data used to generate
                       records that are the subject matter of the assurance engagement.

           (c)   Advocacy Threats
                       A professional accountant promoting the interests of, or shares in, a client.
                       A professional accountant acting as an advocate on behalf of a client in litigation
                       or disputes with third parties.
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                        A professional accountant lobbying in favor of legislation on behalf of a client.
            (d)   Familiarity Threats
                        A professional accountant having a close or immediate family member who is a
                        director or officer of the client.

                        A director or officer of the client, or an employee in a position to exert significant
                        influence over the subject matter of the engagement, having recently served as
                        the engagement partner.

                        An audit team member having a long association with the audit client.
            (e)   Intimidation Threats
                        A professional accountant being threatened with dismissal from a client
                        engagement or the firm because of a disagreement about a professional matter.

                        A professional accountant feeling pressured to agree with the judgment of a client
                        because the client has more expertise on the matter in question.

                        A professional accountant being informed that a planned promotion will not occur
                        unless the accountant agrees with an inappropriate accounting treatment.
                        A professional accountant having accepted a significant gift from a client and being
                        threatened that acceptance of this gift will be made public.

Evaluating Threats
300.7 A1    The conditions, policies and procedures described in paragraph 120.6 A1 and 120.8 A2 might
            impact the evaluation of whether a threat to compliance with the fundamental principles is at
            an acceptable level. Such conditions, policies and procedures might relate to:
            (a)   The client and its operating environment; and

            (b)   The firm and its operating environment.
300.7 A2 The professional accountant's evaluation of the level of a threat is also impacted by the nature
          and scope of the professional service.

The Client and its Operating Environment
300.7 A3 The professional accountant's evaluation of the level of a threat might be impacted by whether
          the client is:

            (a)   An audit client and whether the audit client is a public interest entity;
            (b)   An assurance client that is not an audit client; or
            (c)   A non-assurance client.
            For example, providing a non-assurance service to an audit client thatis a public interest entity
            might be perceived to result in a higher level of threat to compliance with the principle of
            objectivity with respect to the audit.

300.7 A4 The corporate governance structure, including the leadership of a client might promote
           compliance with the fundamental principles. Accordingly, a professional accountant's
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           evaluation of the level of a threat might also be impacted by a client's operating environment.
           For example:

                 The client requires appropriate individuals other than management to ratify or approve
                 the appointment of a firm to perform an engagement.

                 The client has competent employees with experience and seniority to make managerial
                 decisions.
                 The client has implemented internal procedures that facilitate objective choices in
                 tendering non-assurance engagements.
                 The client has a corporate governance structure that provides appropriate oversight and
                 communications regarding the firm's services.

The Firm and its Operating Environment
300.7 A5   A professional accountant's evaluation of the level of a threat might be impacted by the work
           environment within the accountant's firm and its operating environment. For example:

                 Leadership of the firm that promotes compliance with the fundamental principles and
                 establishes the expectation that assurance team members will act in the public interest.
                 Policies or procedures for establishing and monitoring compliance with the fundamental
                 principles by all personnel.

                 Compensation, performance appraisal and disciplinary policies and procedures that
                 promote compliance with the fundamental principles.
                 Management of the reliance on revenue received from a single client.
                 The engagement partner having authority within the firm for decisions concerning
                 compliance with the fundamental principles, including decisions about accepting or
                 providing services to a client.

                 Educational, training and experience requirements.
                 Processes to facilitate and address internal and external concerns or complaints.

Consideration of New Information or Changes in Facts and Circumstances
300.7 A6   New information or changes in facts and circumstances might:
           (a)   Impact the level of a threat; or

           (b)   Affect the professional accountant's conclusions about whether safeguards applied
                 continue to address identified threats as intended.
           In these situations, actions that were already implemented as safeguards might no longer be
           effective in addressing threats. Accordingly, the application of the conceptual framework
           requires that the professional accountant re-evaluate and address the threats accordingly.
           (Ref: Paras. R120.9 and R120.10).

300.7 A7   Examples of new information or changes in facts and circumstances that might impact the level
           of a threat include:
                 When the scope of a professional service is expanded.
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                 When the client becomes a listed entity or acquires another business unit.
                 When the firm merges with another firm.
                 When the professional accountant is jointly engaged by two clients and a dispute
                 emerges between the two clients.

                 When there is a change in the professional accountant's personal or immediate family
                 relationships.

Addressing Threats
300.8 A1   Paragraphs R120.10 to 120.10 A2 set out requirements and application material for addressing
           threats that are not at an acceptable level.

Examples of Safeguards
300.8 A2   Safeguards vary depending on the facts and circumstances. Examples of actions that in certain
           circumstances might be safeguards to address threats include:
                 Assigning additional time and qualified personnel to required tasks when an engagement
                 has been accepted might address a self-interest threat.

                 Having an appropriate reviewer who was not a member of the team review the work
                 performed or advise as necessary might address a self-review threat.

                 Using different partners and engagement teams with separate reporting lines for the
                 provision of non-assurance services to an assurance client might address self-review,
                 advocacy or familiarity threats.

                 Involving another firm to perform or re-perform part of the engagement might address
                 self-interest, self-review, advocacy, familiarity or intimidation threats.

                 Separating teams when dealing with matters of a confidential nature might address a
                 self-interest threat.

300.8 A3   The remaining sections of Part 3 and Independence Standards describe certain threats that
           might arise during the course of performing professional services and include examples of
           actions that might address threats.

Appropriate Reviewer
300.8 A4   An appropriate reviewer is a professional with the necessary knowledge, skills, experience and
           authority to review, in an objective manner, the relevant work performed or service provided.
           Such an individual might be a professional accountant.

Communicating with Those Charged with Governance
R300.9     When communicating with those charged with governance in accordance with the Code, a
           professional accountant shall determine the appropriate individual(s) within the entity's
           governance structure with whom to communicate. If the accountant communicates with a
           subgroup of those charged with governance, the accountant shall determine whether
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            communication with all of those charged with governance is also necessary so that they are
            adequately informed.

300.9 A1   In determining with whom to communicate, a professional accountant might consider:
            (a)   The nature and importance of the circumstances; and

            (b)   The matter to be communicated.
300.9 A2    Examples of a subgroup of those charged with governance include an audit committee or an
            individual member of those charged with governance.
R300.10     If a professional accountant communicates with individuals who have management
            responsibilities as well as governance responsibilities, the accountant shall be satisfied that
            communication with those individuals adequately informs all of those in a governance role with
            whom the accountant would otherwise communicate.

300.10 A1 In some circumstances, all of those charged with governance are involved in managing the
          entity, for example, a small business where a single owner manages the entity and no one else
          has a governance role. In these cases, if matters are communicated to individual(s) with
          management responsibilities, and those individual(s) also have governance responsibilities,
          the professional accountant has satisfied the requirement to communicate with those charged
          with governance.
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SECTION 310
CONFLICTS OF INTEREST
Introduction
310.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.

310.2      A conflict of interest creates threats to compliance with the principle of objectivity and might
           create threats to compliance with the other fundamental principles. Such threats might be
           created when:

           (a)   A professional accountant provides a professional service related to a particular matter
                 for two or more clients whose interests with respect to that matter are in conflict; or
           (b)   The interests of a professional accountant with respect to a particular matter and the
                 interests of the client for whom the accountant provides a professional service related to
                 that matter are in conflict.

310.3      This section sets out specific requirements and application material relevant to applying the
           conceptual framework to conflicts of interest. When a professional accountant provides an
           audit, review or other assurance service, independence is also required in accordance with
           Independence Standards.

Requirements and Application Material
General

R310.4 A professional accountant shall not allow a conflict of interest to compromise professional or
          business judgment.
310.4 A1   Examples of circumstances that might create a conflict of interest include:

                 Providing a transaction advisory service to a client seeking to acquire an audit client,
                 where the firm has obtained confidential information during the course of the audit that
                 might be relevant to the transaction.

                 Providing advice to two clients at the same time where the clients are competing to
                 acquire the same company and the advice might be relevant to the parties' competitive
                 positions.

                 Providing services to a seller and a buyer in relation to the same transaction.
                 Preparing valuations of assets for two parties who are in an adversarial position with
                 respect to the assets.

                 Representing two clients in the same matter who are in a legal dispute with each other,
                 such as during divorce proceedings, or the dissolution of a partnership.
                 In relation to a license agreement, providing an assurance report for a licensor on the
                 royalties due while advising the licensee on the amounts payable.

                 Advising a client to invest in a business in which, for example, the spouse of the
                 professional accountant has a financial interest.

                 Providing strategic advice to a client on its competitive position while having a joint
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                  venture or similar interest with a major competitor of the client.
                  Advising a client on acquiring a business which the firm is also interested in acquiring.

Conflict Identification
General
R310.5      Before accepting a new client relationship, engagement, or business relationship, a
            professional accountant shall take reasonable steps to identify circumstances that might create
            a conflict of interest, and therefore a threat to compliance with one or more of the fundamental
            principles. Such steps shall include identifying:

            (a)   The nature of the relevant interests and relationships between the parties involved; and

            (b)   The service and its implication for relevant parties.
310.5 A1    An effective conflict identification process assists a professional accountant when taking
            reasonable steps to identify interests and relationships that might create an actual or potential
            conflict of interest, both before determining whether to accept an engagement and throughout
            the engagement. Such a process includes considering matters identified by external parties,
            for example clients or potential clients. The earlier an actual or potential conflict of interest is
            identified, the greater the likelihood of the accountant being able to address threats created by
            the conflict of interest.

310.5 A2    An effective process to identify actual or potential conflicts of interest will take into account
            factors such as:
                  The nature of the professional services provided.
                  The size of the firm.
                  The size and nature of the client base.
                  The structure of the firm, for example, the number and geographic location of offices.
310.5 A3    More information on client acceptance is set out in Section 320, Professional Appointments.

Changes in Circumstances
R310.6      A professional accountant shall remain alert to changes over time in the nature of services,
            interests and relationships that might create a conflict of interest while performing an
            engagement.
310.6 A1    The nature of services, interests and relationships might change during the engagement. This
            is particularly true when a professional accountant is asked to conduct an engagement in a
            situation that might become adversarial, even though the parties who engage the accountant
            initially might not be involved in a dispute.

Network Firms
R310.7      If the firm is a member of a network, a professional accountant shall consider conflicts of
            interest that the accountant has reason to believe might exist or arise due to interests and
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           relationships of a network firm.
310.7 A1   Factors to consider when identifying interests and relationships involving a network firm
           include:
                 The nature of the professional services provided.
                 The clients served by the network.
                 The geographic locations of all relevant parties.

Threats Created by Conflicts of Interest
310.8 A1   In general, the more direct the connection between the professional service and the matter on
           which the parties' interests conflict, the more likely the level of the threat is not at an acceptable
           level.

310.8 A2   Factors that are relevant in evaluating the level of a threat created by a conflict of interest
           include measures that prevent unauthorized disclosure of confidential information when
           performing professional services related to a particular matter for two or more clients whose
           interests with respect to that matter are in conflict. These measures include:

                 The existence of separate practice areas for specialty functions within the firm, which
                 might act as a barrier to the passing of confidential client information between practice
                 areas.

                 Policies and procedures to limit access to client files.
                 Confidentiality agreements signed by personnel and partners of the firm.
                 Separation of confidential information physically and electronically.
                 Specific and dedicated training and communication.
310.8 A3   Examples of actions that might be safeguards to address threats created by a conflict of interest
           include:

                 Having separate engagement teams who are provided with clear policies and
                 procedures on maintaining confidentiality.

                 Having an appropriate reviewer, who is not involved in providing the service or otherwise
                 affected by the conflict, review the work performed to assess whether the key judgments
                 and conclusions are appropriate.

Disclosure and Consent

General
R310.9     A professional accountant shall exercise professional judgment to determine whether the
           nature and significance of a conflict of interest are such that specific disclosure and explicit
           consent are necessary when addressing the threat created by the conflict of interest.
310.9 A1   Factors to consider when determining whether specific disclosure and explicit consent are
           necessary include:

                 The circumstances creating the conflict of interest.
                 The parties that might be affected.
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                 The nature of the issues that might arise.
                 The potential for the particular matter to develop in an unexpected manner.
310.9 A2   Disclosure and consent might take different forms, for example:
                 General disclosure to clients of circumstances where, as is common commercial
                 practice, the professional accountant does not provide professional services exclusively
                 to any one client (for example, in a particular professional service and market sector).
                 This enables the client to provide general consent accordingly. For example, an
                 accountant might make general disclosure in the standard terms and conditions for the
                 engagement.
                 Specific disclosure to affected clients of the circumstances of the particular conflict in
                 sufficient detail to enable the client to make an informed decision about the matter and
                 to provide explicit consent accordingly. Such disclosure might include a detailed
                 presentation of the circumstances and a comprehensive explanation of any planned
                 safeguards and the risks involved.
                 Consent might be implied by clients' conduct in circumstances where the professional
                 accountant has sufficient evidence to conclude that clients know the circumstances at
                 the outset and have accepted the conflict of interest if they do not raise an objection to
                 the existence of the conflict.
310.9 A3   It is generally necessary:

           (a)   To disclose the nature of the conflict of interest and how any threats created were
                 addressed to clients affected by a conflict of interest; and

           (b)   To obtain consent of the affected clients to perform the professional services when
                 safeguards are applied to address the threat.

310.9 A4   If such disclosure or consent is not in writing, the professional accountant is encouraged to
           document:

           (a)   The nature of the circumstances giving rise to the conflict of interest;
           (b)   The safeguards applied to address the threats when applicable; and
           (c)   The consent obtained.

When Explicit Consent is Refused
R310.10 If a professional accountant has determined that explicit consent is necessary in accordance
           with paragraph R310.9 and the client has refused to provide consent, the accountant shall
           either:

           (a)   End or decline to perform professional services that would result in the conflict of interest;
                 or

           (b)   End relevant relationships or dispose of relevant interests to eliminate the threat or
                 reduce it to an acceptable level.
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Confidentiality

General
R310.11     A professional accountant shall remain alert to the principle of confidentiality, including when
            making disclosures or sharing information within the firm or network and seeking guidance
            from third parties.

310.11 A1   Subsection 114 sets out requirements and application material relevant to situations that might
            create a threat to compliance with the principle of confidentiality.

When Disclosure to Obtain Consent would Breach Confidentiality
R310.12     When making specific disclosure for the purpose of obtaining explicit consent would result in a
            breach of confidentiality, and such consent cannot therefore be obtained, the firm shall only
            accept or continue an engagement if:

            (a)   The firm does not act in an advocacy role for one client in an adversarial position against
                  another client in the same matter;
            (b)   Specific measures are in place to prevent disclosure of confidential information between
                  the engagement teams serving the two clients; and
            (c)   The firm is satisfied that a reasonable and informed third party would be likely to conclude
                  that it is appropriate for the firm to accept or continue the engagement because a
                  restriction on the firm's ability to provide the professional service would produce a
                  disproportionate adverse outcome for the clients or other relevant third parties.

310.12 A1 A breach of confidentiality might arise, for example, when seeking consent to perform:
                  A transaction-related service for a client in a hostile takeover of another client of the firm.
                  A forensic investigation for a client regarding a suspected fraud, where the firm has
                  confidential information from its work for another client who might be involved in the
                  fraud.
Documentation

R310.13     In the circumstances set out in paragraph R310.12, the professional accountant shall
            document:
            (a)   The nature of the circumstances, including the role that the accountant is to undertake;

            (b)   The specific measures in place to prevent disclosure of information between the
                  engagement teams serving the two clients; and
            (c)   Why it is appropriate to accept or continue the engagement.
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SECTION 320
PROFESSIONAL APPOINTMENTS
Introduction
320.1       Professional accountants are required to comply with the fundamental principles and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats.

320.2       Acceptance of a new client relationship or changes in an existing engagement might create a
            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
            in such circumstances.

Requirements and Application Material
Client and Engagement Acceptance
General
320.3 A1 Threats to compliance with the principles of integrity or professional behaviour might be created,
          for example, from questionable issues associated with the client (its owners, management or
          activities). Issues that, if known, might create such a threat include client involvement in illegal
          activities, dishonesty, questionable financial reporting practices or other unethical behaviour.

320.3 A2    Factors that are relevant in evaluating the level of such a threat include:
                   Knowledge and understanding of the client, its owners, management and those charged
                   with governance and business activities.

                   The client's commitment to address the questionable issues, for example, through
                   improving corporate governance practices or internal controls.
320.3 A3    A self-interest threat to compliance with the principle of professional competence and due care
            is created if the engagement team does not possess, or cannot acquire, the competencies to
            perform the professional services.
320.3 A4    Factors that are relevant in evaluating the level of such a threat include:

                   An appropriate understanding of:
                   o     The nature of the client's business;
                   o     The complexity of its operations;
                   o     The requirements of the engagement; and
                   o     The purpose, nature and scope of the work to be performed.
                   Knowledge of relevant industries or subject matter.
                   Experience with relevant regulatory or reporting requirements.
                   The existence of quality control policies and procedures designed to provide reasonable
                   assurance that engagements are accepted only when they can be performed
                   competently.
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 320.3 A5    Examples of actions that might be safeguards to address a self-interest threat include:
                   Assigning sufficient engagement personnel with the necessary competencies.
                   Agreeing on a realistic time frame for the performance of the engagement.
                   Using experts where necessary.


R320. 3 A6   Professional accountants while accepting engagement of attest functions are required to
             comply with the "Know Your client" (KYC) Norms of the Institute as under:-

             1. Where Client is an individual /proprietor
                     A. General Information
                       Name of the Individual
                       PAN No. or Aadhar Card No. of the Individual
                       Business Description
                       Copy of last Audited Financial Statement
                      B. Engagement Information
                       Type of Engagement
              2. Where Client is a Corporate Entity
                     A. General Information
                       Name and Address of the Entity
                       Business Description
                       Name of the Parent Company in case of Subsidiary
                       Copy of last Audited Financial Statement
                      B. Engagement Information
                      Type of Engagement
                      C. Regulatory Information
                      Company PAN No.
                      Company Identification No.
                      Directors' Names & Addresses
                      Directors' Identification No.
                3. Where Client is a Non- Corporate Entity
                      A. General Information
                       Name and Address of the Entity
                       Copy of PAN No.
                       Business Description
                       Partner's Names & Addresses (with their PAN/Aadhar Card/DIN No.)
                       Copy of last Audited Financial Statement
                    B. Engagement Information
                       Type of Engagement

       Explanation: "Attest Functions" for the purpose of this Announcement will include services pertaining
       to Audit, Review, Agreed upon Procedures and Compilation of Financial Statements.

 Changes in a Professional Appointment

 General
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R320.4     Subject to compliance with the provisions of Clause (8) of Part-I of First Schedule to The
            Chartered Accountants Act, 1949, and Council directions thereunder, a professional
            accountant , shall determine whether there are any reasons for not accepting an engagement
            when the accountant:

            (a)   Is asked by a potential client to replace another accountant;
            (b)   Considers tendering for an engagement held by another accountant; or

            (c)   Considers undertaking work that is complementary or additional to that of another
                  accountant.
320.4 A1    There might be reasons for not accepting an engagement. One such reason might be if a threat
            created by the facts and circumstances cannot be addressed by applying safeguards. For
            example, there might be a self-interest threat to compliance with the principle of professional
            competence and due care if a professional accountant accepts the engagement before
            knowing all the relevant facts.

320.4 A2    If a professional accountant is asked to undertake work that is complementary or additional to
            the work of an existing or predecessor accountant, a self-interest threat to compliance with the
            principle of professional competence and due care might be created, for example, as a result
            of incomplete information.
320.4 A3    A factor that is relevant in evaluating the level of such a threat is whether tenders state that,
            before accepting the engagement, contact with the existing or predecessor accountant will be
            requested. This contact gives the proposed accountant the opportunity to inquire whether there
            are any reasons why the engagement should not be accepted.

320.4 A4    Examples of actions that might be safeguards to address such a self-interest threat include:
                  Asking the existing or predecessor accountant to provide any known information of
                  which, in the existing or predecessor accountant's opinion, the proposed accountant
                  needs to be aware before deciding whether to accept the engagement. For example,
                  inquiry might reveal previously undisclosed pertinent facts and might indicate
                  disagreements with the existing or predecessor accountant that might influence the
                  decision to accept the appointment.
                  Obtaining information from other sources such as through inquiries of third parties or
                  background investigations regarding senior management or those charged with
                  governance of the client.

Communicating with the Existing or Predecessor Accountant (except in case of Audit, Review, Report or
any other assignment, as may be prescribed by ICAI from time to time to be governed with the provisions
of Clause (8) of Part-I of First Schedule to The Chartered Accountants Act, 1949, and Council directions
thereunder)

320.5 A1    A proposed accountant will usually need the client's permission, preferably in writing, to initiate
            discussions with the existing or predecessor accountant.
R320.6      If unable to communicate with the existing or predecessor accountant, the proposed
            accountant shall take other reasonable steps to obtain information about any possible threats.

Communicating with the Proposed Accountant
R320.7      When an existing or predecessor accountant is asked to respond to a communication from a
            proposed accountant, the existing or predecessor accountant shall:
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            (a)   Comply with relevant laws and regulations governing the request; and
            (b)   Provide any information honestly and unambiguously.
320.7 A1    An existing or predecessor accountant is bound by confidentiality. Whether the existing or
            predecessor accountant is permitted or required to discuss the affairs of a client with a
            proposed accountant will depend on the nature of the engagement and:

            (a)   Whether the existing or predecessor accountant has permission from the client for the
                  discussion; and
            (b)   The legal and ethics requirements relating to such communications and disclosure,
320.7 A2    Circumstances where a professional accountant is or might be required to disclose confidential
            information, or when disclosure might be appropriate, are set out in paragraph 114.1 A1 of the
            Code.

Changes in Audit or Review Appointments


R320.8      Subject to provisions of Clause (8) of Part I of First Schedule of the Chartered Accountants
            Act, 1949, and Council directions thereunder, in the case of an audit or review of financial
            statements, a professional accountant shall request the existing or predecessor accountant
            to provide known information regarding any facts or other information of which, in the
            existing or predecessor accountant's opinion, the proposed accountant needs to be aware
            before deciding whether to accept the engagement.

           The existing or predecessor accountant shall provide the information            honestly and
           unambiguously

Client and Engagement Continuance
R320.9      For a recurring client engagement, a professional accountant shall periodically review whether
            to continue with the engagement.
320.9 A1    Potential threats to compliance with the fundamental principles might be created after
            acceptance which, had they been known earlier, would have caused the professional
            accountant to decline the engagement. For example, a self-interest threat to compliance with
            the principle of integrity might be created by improper earnings management or balance sheet
            valuations.

Using the Work of an Expert
R320.10     When a professional accountant intends to use the work of an expert, the accountant shall
            determine whether the use is warranted.

320.10 A1 Factors to consider when a professional accountant intends to use the work of an expert
           include the reputation and expertise of the expert, the resources available to the expert, and
           the professional and ethics standards applicable to the expert. This information might be
           gained from prior association with the expert or from consulting others.
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SECTION 321
SECOND OPINIONS
Introduction
321.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.

321.2      Providing a second opinion to an entity that is not an existing client might create a self-interest
           or other 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 in such circumstances.

Requirements and Application Material
General
321.3 A1   A professional accountant might be asked to provide a second opinion on the application of
           accounting, auditing, reporting or other standards or principles to (a) specific circumstances,
           or (b) transactions by or on behalf of a company or an entity that is not an existing client. A
           threat, for example, a self-interest threat to compliance with the principle of professional
           competence and due care, might be created if the second opinion is not based on the same
           facts that the existing or predecessor accountant had, or is based on inadequate evidence.

321.3 A2   A factor that is relevant in evaluating the level of such a self-interest threat is the circumstances
           of the request and all the other available facts and assumptions relevant to the expression of
           a professional judgment.

321.3 A3   Examples of actions that might be safeguards to address such a self-interest threat include:
                 With the client's permission, obtaining information from the existing or predecessor
                 accountant.

                 Describing the limitations surrounding any opinion in communications with the client.
                 Providing the existing or predecessor accountant with a copy of the opinion.

When Permission to Communicate is Not Provided
R321.4     If an entity seeking a second opinion from a professional accountant will not permit the
           accountant to communicate with the existing or predecessor accountant, the accountant shall
           determine whether the accountant may provide the second opinion sought.
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SECTION 330
FEES AND OTHER TYPES OF REMUNERATION
Introduction
330.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.

330.2      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 application material relevant to applying the conceptual framework in such
           circumstances.

Application Material
Level of Fees
330.3 A1   The level of fees quoted might impact a professional accountant's ability to perform
           professional services in accordance with professional standards.
330.3 A2   A professional accountant might quote whatever fee is considered appropriate. Quoting a fee
           lower than another accountant is not in itself unethical. However, the level of fees quoted
           creates a self-interest threat to compliance with the principle of professional competence and
           due care if the fee quoted is so low that it might be difficult to perform the engagement in
           accordance with applicable technical and professional standards.
330.3 A3   Factors that are relevant in evaluating the level of such a threat include:

                  Whether the client is aware of the terms of the engagement and, in particular, the basis
                  on which fees are charged and which professional services the quoted fee covers.
                  Whether the level of the fee is set by an independent third party such as a regulatory
                  body.

330.3 A4   Examples of actions that might be safeguards to address such a self-interest threat include:
                  Adjusting the level of fees or the scope of the engagement.
                  Having an appropriate reviewer review the work performed.

Contingent Fees


 330.4     The fees which are based on a percentage of profits or which are contingent upon the
           findings, or results of such work, is not allowed except in cases which are permitted under
           Regulation 192 of The Chartered Accountants Regulations, 1988.


Referral Fees or Commissions
330.5 A1   A self-interest threat to compliance with the principles of objectivity and professional
           competence and due care is created if a professional accountant pays or receives a referral
           fee or receives a commission relating to a client. Such referral fees or commissions include,
           for example:
                  A fee paid to another professional accountant for the purposes of obtaining new client
                  work when the client continues as a client of the existing accountant but requires
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                 specialist services not offered by that accountant.
                 A fee received for referring a continuing client to another professional accountant or other
                 expert where the existing accountant does not provide the specific professional service
                 required by the client.

330.5 A2   Examples of actions that might be safeguards to address such a self-interest threat include:
                 Disclosing to clients any referral fees or commission arrangements paid to, or received
                 from, another professional accountant for recommending services might address a
                 self-interest threat.

Purchase or Sale of a Firm
330.6 A1   In accordance with the Council guidelines, sale of goodwill is permissible only after the death
           of the proprietor of the Firm, in accordance with the prescribed procedure
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SECTION 340
INDUCEMENTS, INCLUDING GIFTS AND HOSPITALITY
Introduction
340.1     Professional accountants are required to comply with the fundamental principles and
          apply the conceptual framework set out in Section 120 to identify, evaluate and address
          threats.
340.2     Offering or accepting inducements might create a self-interest, familiarity or intimidation
          threat to compliance with the fundamental principles, particularly the principles of integrity,
          objectivity and professional behaviour.
340.3     This section sets out requirements and application material relevant to applying the
          conceptual framework in relation to the offering and accepting of inducements when
          performing professional services that does not constitute non-compliance with laws and
          regulations. This section also requires a professional accountant to comply with relevant
          laws and regulations when offering or accepting inducements.

Requirements and Application Material
General
340.4 A1 An inducement is an object, situation, or action that is used as a means to influence
         another individual's behaviour, but not necessarily with the intent to improperly influence
         that individual's behaviour. Inducements can range from minor acts of hospitality
         between professional accountants and existing or prospective clients to acts that result
         in non-compliance with laws and regulations. An inducement can take many different
         forms, for example:
               Gifts.
               Hospitality.
               Entertainment.
               Political or charitable donations.
               Appeals to friendship and loyalty.
               Employment or other commercial opportunities.
               Preferential treatment, rights or privileges.

Inducements Prohibited by Laws and Regulations
R340.5    The professional accountant shall obtain an understanding of relevant laws and
          regulations, if any, and comply with them when the accountant encounters such
          circumstances.

Inducements Not Prohibited by Laws and Regulations

340.6 A1 The offering or accepting of inducements that is not prohibited by laws and regulations
         might still create threats to compliance with the fundamental principles.


Inducements with Intent to Improperly Influence Behaviour
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R340.7    A professional accountant shall not offer, or encourage others to offer, any inducement
          that is made, or which the accountant considers a reasonable and informed third party
          would be likely to conclude is made, with the intent to improperly influence the behaviour
          of the recipient or of another individual.
R340.8    A professional accountant shall not accept, or encourage others to accept, any
          inducement      that the accountant concludes is made, or considers a reasonable and
          informed third party would be likely to conclude is made, with the intent to improperly
          influence the behaviour of the recipient or of another individual.
340.9 A1 An inducement is considered as improperly influencing an individual's behaviour if it
         causes the individual to act in an unethical manner. Such improper influence can be
         directed either towards the recipient or towards another individual who has some
         relationship with the recipient. The fundamental principles are an appropriate frame of
         reference for a professional accountant in considering what constitutes unethical
         behaviour on the part of the accountant and, if necessary by analogy, other individuals.
340.9 A2 A breach of the fundamental principle of integrity arises when a professional accountant
         offers or accepts, or encourages others to offer or accept, an inducement where the
         intent is to improperly influence the behaviour of the recipient or of another individual.
340.9 A3 The determination of whether there is actual or perceived intent to improperly influence
         behaviour requires the exercise of professional judgment. Relevant factors to consider
         might include:
               The nature, frequency, value and cumulative effect of the inducement.
               Timing of when the inducement is offered relative to any action or decision that it
               might influence.

               Whether the inducement is a customary or cultural practice in the circumstances,
               for example, offering a gift on the occasion of a religious holiday or wedding.

               Whether the inducement is an ancillary part of a professional service, for example,
               offering or accepting lunch in connection with a business meeting.

               Whether the offer of the inducement is limited to an individual recipient or available
               to a broader group. The broader group might be internal or external to the firm, such
               as other suppliers to the client.

               The roles and positions of the individuals at the firm or the client offering or being
               offered the inducement.

               Whether the professional accountant knows, or has reason to believe, that accepting
               the inducement would breach the policies and procedures of the client.

               The degree of transparency with which the inducement is offered.
               Whether the inducement was required or requested by the recipient.
               The known previous behaviour or reputation of the offeror.

Consideration of Further Actions
340.10 A1 If the professional accountant becomes aware of an inducement offered with actual or
          perceived intent to improperly influence behaviour, threats to compliance with the
          fundamental principles might still be created even if the requirements in paragraphs
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           R340.7 and R340.8 are met.
340.10 A2 Examples of actions that might be safeguards to address such threats include:
               Informing senior management of the firm or those charged with governance of the
               client regarding the offer.

               Amending or terminating the business relationship with the client.

Inducements with No Intent to Improperly Influence Behaviour
340.11 A1 The requirements and application material set out in the conceptual framework apply
          when a professional accountant has concluded there is no actual or perceived intent to
          improperly influence the behaviour of the recipient or of another individual.
340.11 A2 If such an inducement is trivial and inconsequential, any threats created will be at an
          acceptable level.
340.11 A3 Examples of circumstances where offering or accepting such an inducement might
          create threats even if the professional accountant has concluded there is no actual or
          perceived intent to improperly influence behaviour include:
               Self-interest threats
               o   A professional accountant is offered hospitality from the prospective acquirer of
                   a client while providing corporate finance services to the client.

               Familiarity threats
               o   A professional accountant regularly takes an existing or prospective client to
                   sporting events.

               Intimidation threats
               o   A professional accountant accepts hospitality from a client, the nature of which
                   could be perceived to be inappropriate were it to be publicly disclosed.


340.11 A4 Relevant factors in evaluating the level of such threats created by offering or accepting
          such an inducement include the same factors set out in paragraph 340.9 A3 for
          determining intent.

340.11 A5 Examples of actions that might eliminate threats created by offering or accepting such
          an inducement include:
               Declining or not offering the inducement.
               Transferring responsibility for the provision of any professional services to the client
               to another individual who the professional accountant has no reason to believe
               would be, or would be perceived to be, improperly influenced when providing the
               services.
340.11 A6 Examples of actions that might be safeguards to address such threats created by
          offering or accepting such an inducement include:


               Being transparent with senior management of the firm or of the client about offering
               or accepting an inducement.

               Registering the inducement in a log monitored by senior management of the firm or
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                  another individual responsible for the firm's ethics compliance or maintained by the
                  client.
                      Having an appropriate reviewer, who is not otherwise involved in providing the
                      professional service, review any work performed or decisions made by the
                      professional accountant with respect to the client from which the accountant
                      accepted the inducement.
                      Donating the inducement to charity after receipt and appropriately disclosing the
                      donation, for example, to a member of senior management of the firm or the
                      individual who offered the inducement.
                      Reimbursing the cost of the inducement, such as hospitality, received.
                      As soon as possible, returning the inducement, such as a gift, after it was initially
                      accepted.

  Immediate or Close Family Members
  R340.12 A professional accountant shall remain alert to potential threats to the accountant's
          compliance with the fundamental principles created by the offering of an inducement:
                (a)      By an immediate or close family member of the accountant to an existing or
                         prospective client of the accountant.

                (b)      To an immediate or close family member of the accountant by an existing or
                         prospective client of the accountant.

  R340.13 Where the professional accountant becomes aware of an inducement being offered to or
          made by an immediate or close family member and concludes there is intent to
          improperly influence the behaviour of the accountant or of an existing or prospective
          client of the accountant, or considers a reasonable and informed third party would be
          likely to conclude such intent exists, the accountant shall advise the immediate or close
          family member not to offer or accept the inducement.

340.13 A1 The factors set out in paragraph 340. 9 A3 are relevant in determining whether there is
          actual or perceived intent to improperly influence the behaviour of the professional
          accountant or of the existing or prospective client. Another factor that is relevant is the
          nature or closeness of the relationship, between:
                (a)      The accountant and the immediate or close family member;
                (b)      The immediate or close family member and the existing or prospective client; and
                (c)      The accountant and the existing or prospective client.
            For example, the offer of employment, outside of the normal recruitment process, to the
            spouse of the accountant by a client for whom the accountant is providing a business
            valuation for a prospective sale might indicate such intent.
340.13 A2 The application material in paragraph 340.10 A2 is also relevant in addressing threats that
          might be created when there is actual or perceived intent to improperly influence the
          behavior of the professional accountant, or of the existing or prospective client even if the
          immediate or close family member has followed the advice given pursuant to paragraph
          R340.13.

 Application of the Conceptual Framework
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340.14 A1 Where the professional accountant becomes aware of an inducement offered in the
          circumstances addressed in paragraph R340.12, threats to compliance with the
          fundamental principles might be created where:
             (a)    The immediate or close family member offers or accepts the inducement
                    contrary to the advice of the accountant pursuant to paragraph R340.13; or
             (b)    The accountant does not have reason to believe an actual or perceived intent to
                    improperly influence the behaviour of the accountant or of the existing or
                    prospective client exists.
340.14 A2 The application material in paragraphs 340.11 A1 to 340.11 A6 is relevant for the
         purposes of identifying, evaluating and addressing such threats. Factors that are relevant
         in evaluating the level of threats in these circumstances also include the nature or
         closeness of the relationships set out in paragraph 340.13 A1.

Other Considerations
340.15 A1 If a professional accountant encounters or is made aware of inducements that might
         result in non-compliance or suspected non-compliance with laws and regulations by a
         client or individuals working for or under the direction of the client, the requirements and
         application material in Section 360 apply.
340.15 A2 If a firm, network firm or an audit team member is being offered gifts or hospitality from an
          audit client, the requirement and application material set out in Section 420 apply.
340.15 A3 If a firm or an assurance team member is being offered gifts or hospitality from an
          assurance client, the requirement and application material set out in Section 906 apply.
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SECTION 350
CUSTODY OF CLIENT ASSETS
Introduction
350.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.
350.2      Holding client assets creates a self-interest or other threat to compliance with the principles of
           professional behaviour and objectivity. This section sets out specific requirements and
           application material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material
Before Taking Custody
R350.3     A professional accountant shall not assume custody of client money or other assets unless
           permitted to do so by law and in accordance with any conditions under which such custody
           may be taken.

R350.4     As part of client and engagement acceptance procedures related to assuming custody of client
           money or assets, a professional accountant shall:
           (a)   Make inquiries about the source of the assets; and

           (b)   Consider related legal and regulatory obligations.
350.4 A1   Inquiries about the source of client assets might reveal, for example, that the assets were
           derived from illegal activities, such as money laundering. In such circumstances, a threat would
           be created and the provisions of Section 360 would apply.

After Taking Custody
R350.5     A professional accountant entrusted with money or other assets belonging to others shall:

           (a)   Comply with the laws and regulations relevant to holding and accounting for the assets;
           (b)   Keep the assets separately from personal or firm assets;
           (c)   Use the assets only for the purpose for which they are intended; and

           (d)   Be ready at all times to account for the assets and any income, dividends, or gains
                 generated, to any individuals entitled to that accounting.
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SECTION 360
RESPONDING TO NON-COMPLIANCE WITH LAWS AND REGULATIONS DURING
THE COURSE OF FINANCIAL STATEMENT AUDIT ENGAGEMENTS OF LISTED
COMPANIES
Introduction
360.1      Professional accountants are required to comply with the fundamental principles and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats.

360.2      A self-interest or intimidation threat to compliance with the principles of integrity and
           professional behaviour is created when a professional accountant becomes aware of
           non- compliance or suspected non-compliance with laws and regulations.
360.3      A professional accountant might encounter or be made aware of non-compliance or suspected
           non-compliance during the course of Financial Statement Audit Engagements of Listed Companies. This
           section guides the accountant in assessing the implications of the matter and the possible
           courses of action when responding to non-compliance or suspected non-compliance with:
           (a)   Laws and regulations generally recognized to have a direct effect on the determination
                 of material amounts and disclosures in the client's financial statements; and

           (b)   Other laws and regulations that do not have a direct effect on the determination of the
                 amounts and disclosures in the client's financial statements, but compliance with which
                 might be fundamental to the operating aspects of the client's business, to its ability to
                 continue its business, or to avoid material penalties.

Objectives of the Professional Accountant in Relation to Non-compliance with Laws and
Regulations

360.4      A distinguishing mark of the accountancy profession is its acceptance of the responsibility to
           act in the public interest. When responding to non-compliance or suspected non-compliance,
           the objectives of the professional accountant are:
           (a)   To comply with the principles of integrity and professional behaviour;
           (b)   By alerting management or, where appropriate, those charged with governance of the
                 client, to seek to:

                 (i)    Enable them to rectify, remediate or mitigate the consequences of the identified or
                        suspected non-compliance; or
                 (ii)   Deter the commission of the non-compliance where it has not yet occurred; and

           (c)   To take such further action as appropriate in the public interest.

Requirements and Application Material
General
360.5 A1   Non-compliance with laws and regulations ("non-compliance") comprises acts of omission or
           commission, intentional or unintentional, which are contrary to the prevailing laws or
           regulations committed by the following parties:
           (a)   A client;
           (b)   Those charged with governance of a client;
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           (c)   Management of a client; or
           (d)   Other individuals working for or under the direction of a client.

360.5 A2   Examples of laws and regulations which this section addresses include those that deal
           with:
                 Fraud, corruption and bribery.
                 Money laundering, terrorist financing and proceeds of crime.
                 Securities markets and trading.
                 Banking and other financial products and services.
                 Data protection.
                 Tax and pension liabilities and payments.
                 Environmental protection.
                 Public health and safety.
360.5 A3   Non-compliance might result in fines, litigation or other consequences for the client,
           potentially materially affecting its financial statements. Importantly, such non-
           compliance might have wider public interest implications in terms of potentially
           substantial harm to investors, creditors, employees or the general public. For the
           purposes of this section, an act that causes substantial harm is one that results in
           serious adverse consequences to any of these parties in financial or non-financial
           terms. Examples include the perpetration of a fraud resulting in significant financial
           losses to investors, and breaches of environmental laws and regulations endangering
           the health or safety of employees or the public.

R360.6     When encountering such non-compliance or suspected non-compliance, the accountant
           shall obtain an understanding of legal or regulatory provisions governing such non-
           compliance or suspected non-compliance, and comply with them, including:
           (a)   Any requirement to report the matter to an appropriate authority; and

           (b)   Any prohibition on alerting the client.
360.6 A1   A prohibition on alerting the client might arise, for example, pursuant to anti-money
           laundering legislation.

360.7 A1   This section applies to financial statement audit engagements of public interest entities.
360.7 A2   A professional accountant who encounters or is made aware of matters that are
           clearly inconsequential is not required to comply with this section. Whether a
           matter is clearly inconsequential is to be judged with respect to its nature and its impact,
           financial or otherwise, on the client, its stakeholders and the general public.

360.7 A3   This section does not address:
           (a)   Personal misconduct unrelated to the business activities of the client; and
           (b)   Non-compliance by parties other than those specified in paragraph 360.5 A1.
                 The accountant might nevertheless find the guidance in this section helpful in
                 considering how to respond in these situations.
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Responsibilities of Management and Those Charged with Governance

360.8 A1   Management, with the oversight of those charged with governance, is responsible for
           ensuring that the client's business activities are conducted in accordance with laws
           and regulations. Management and those charged with governance are also
           responsible for identifying and addressing any non-compliance by:

            (a)   The client;

            (b)   An individual charged with governance of the entity;
            (c)   A member of management; or
            (d)   Other individuals working for or under the direction of the client.

Responsibilities of the Professional Accountant

R360.9     Where a professional accountant becomes aware of a matter to which this section applies,
           the steps that the accountant takes to comply with this section shall be taken on a timely
           basis. In taking timely steps, the accountant shall have regard to the nature of the
           matter and the potential harm to the interests of the entity, investors, creditors,
           employees or the general public.

Obtaining an Understanding of the Matter
R360.10     If a professional accountant engaged to perform an audit of financial statements
            becomes aware of information concerning non-compliance or suspected non-
            compliance, the accountant shall obtain an understanding of the matter. This
            understanding shall include the nature of the non-compliance or suspected non-
            compliance and the circumstances in which it has occurred or might occur.

360.10 A1 The professional accountant might become aware of the non-compliance or suspected
          non- compliance in the course of performing the engagement or through information
          provided by other parties.
360.10 A2 The professional accountant is expected to apply knowledge and expertise, and
          exercise professional judgment. However, the accountant is not expected to have a level
          of knowledge of laws and regulations greater than that which is required to
          undertake the engagement. Whether an act constitutes non-compliance is ultimately a
          matter to be determined by a court or other appropriate adjudicative body.
360.10 A3 Depending on the nature and significance of the matter, the professional accountant
          might consult on a confidential basis with others within the firm, a network firm or the
          Institute or with legal counsel.

R360.11     If the professional accountant identifies or suspects that non-compliance has occurred or
            might occur, the accountant shall discuss the matter with the appropriate level of
            management and, where appropriate, those charged with governance.
360.11 A1 The purpose of the discussion is to clarify the professional accountant's understanding of
          the facts and circumstances relevant to the matter and its potential consequences. The
          discussion also might prompt management or those charged with governance to
          investigate the matter.

360.11 A2 The appropriate level of management with whom to discuss the matter is a
          question of professional judgment. Relevant factors to consider include:
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                  The nature and circumstances of the matter.
                  The individuals actually or potentially involved.
                  The likelihood of collusion.
                  The potential consequences of the matter.
                  Whether that level of management is able to investigate the matter and take
                  appropriate action.

360.11 A3 The appropriate level of management is usually at least one level above the
          individual or individuals involved or potentially involved in the matter. In the context
          of a group, the appropriate level might be management at an entity that controls the
          client.

360.11 A4 The professional accountant might also consider discussing the matter with internal
          auditors, where applicable.
R360.12     If the professional accountant believes that management is involved in the non-
            compliance or suspected non-compliance, the accountant shall discuss the matter with
            those charged with governance.

Addressing the Matter
R360.13     In discussing the non-compliance or suspected non-compliance with management and,
            where appropriate, those charged with governance, the professional accountant shall
            advise them to take appropriate and timely actions, if they have not already done so, to:
            (a)   Rectify, remediate or mitigate the consequences of the non-compliance;
            (b)   Deter the commission of the non-compliance where it has not yet occurred; or

            (c)   Disclose the matter to an appropriate authority where required by law or
                  regulation or where considered necessary in the public interest.
R360.14     The professional accountant shall consider whether management and those charged
            with governance understand their legal or regulatory responsibilities with respect to
            the non- compliance or suspected non-compliance.
360.14 A1 If management and those charged with governance do not understand their legal or
          regulatory responsibilities with respect to the matter, the professional accountant might
          suggest appropriate sources of information or recommend that they obtain legal advice.
R360.15     The professional accountant shall comply with applicable:

            (a)   Laws and regulations, including legal or regulatory provisions governing the
                  reporting of non-compliance or suspected non-compliance to an appropriate
                  authority; and

            (b)   Requirements under auditing standards, including those relating to:
                        Identifying and responding to non-compliance, including fraud.
                        Communicating with those charged with governance.
                        Considering the implications of the non-compliance or suspected non-
                        compliance for the auditor's report.

360.15 A1 Some laws and regulations might stipulate a period within which reports of non-
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           compliance or suspected non-compliance are to be made to an appropriate authority.

Communication with Respect to Groups

R360.16    Where a professional accountant becomes aware of non-compliance or suspected
           non- compliance in relation to a component of a group in either of the following two
           situations, the accountant shall communicate the matter to the group engagement
           partner unless prohibited from doing so by law or regulation:

           (a)   The accountant is, for purposes of an audit of the group financial statements,
                 requested by the group engagement team to perform work on financial
                 information related to the component; or

           (b)   The accountant is engaged to perform an audit of the component's financial
                 statements for purposes other than the group audit, for example, a statutory audit.

           The communication to the group engagement partner shall be in addition to responding to
           the matter in accordance with the provisions of this section.
360.16 A1 The purpose of the communication is to enable the group engagement partner to be
          informed about the matter and to determine, in the context of the group audit, whether
          and, if so, how to address it in accordance with the provisions in this section. The
          communication requirement in paragraph R360.16 applies regardless of whether the
          group engagement partner's firm or network is the same as or different from the
          professional accountant's firm or network.

R360.17    Where the group engagement partner becomes aware of non-compliance or suspected
           non- compliance in the course of an audit of group financial statements, the group
           engagement partner shall consider whether the matter might be relevant to one or more
           components:

           (a)   Whose financial information is subject to work for purposes of the audit of the
                 group financial statements; or

           (b)   Whose financial statements are subject to audit for purposes other than the group
                 audit, for example, a statutory audit.

           This consideration shall be in addition to responding to the matter in the context of the
           group audit in accordance with the provisions of this section.


R360.18    If the non-compliance or suspected non-compliance might be relevant to one or more of
           the components specified in paragraph R360.17(a) and (b), the group engagement
           partner shall take steps to have the matter communicated to those performing work at
           the components, unless prohibited from doing so by law or regulation. If necessary,
           the group engagement partner shall arrange for appropriate inquiries to be made
           (either of management or from publicly available information) as to whether the relevant
           component(s) specified in paragraph R360.17(b) is subject to audit and, if so, to ascertain
           to the extent practicable the identity of the auditor.360.18 A1 The purpose of the
           communication is to enable those responsible for work at the components to be informed
           about the matter and to determine whether and, if so, how to address it in accordance
           with the provisions in this section. The communication requirement applies regardless
           of whether the group engagement partner's firm or network is the same as or different
           from the firms or networks of those performing work at the components.
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Determining Whether Further Action Is Needed
R360.19    The professional accountant shall assess the appropriateness of the response of
           management and, where applicable, those charged with governance.

360.19 A1 Relevant factors to consider in assessing the appropriateness of the response of
          management and, where applicable, those charged with governance include whether:

                 The response is timely.
                 The non-compliance or suspected non-compliance has been adequately
                 investigated.
                 Action has been, or is being, taken to rectify, remediate or mitigate the
                 consequences of any non-compliance.

                 Action has been, or is being, taken to deter the commission of any non-
                 compliance where it has not yet occurred.

                 Appropriate steps have been, or are being, taken to reduce the risk of re-
                 occurrence, for example, additional controls or training.
                 The non-compliance or suspected non-compliance has been disclosed to an
                 appropriate authority where appropriate and, if so, whether the disclosure appears
                 adequate.

R360.20    In light of the response of management and, where applicable, those charged with
           governance, the professional accountant shall determine if further action is needed in the
           public interest.

360.20 A1 The determination of whether further action is needed, and the nature and extent of it,
          will depend on various factors, including:
                 The legal and regulatory framework.
                 The urgency of the situation.
                 The pervasiveness of the matter throughout the client.
                 Whether the professional accountant continues to have confidence in the
                 integrity of management and, where applicable, those charged with governance.

                 Whether the non-compliance or suspected non-compliance is likely to recur.
                 Whether there is credible evidence of actual or potential substantial harm to the
                 interests of the entity, investors, creditors, employees or the general public.

360.20 A2 Examples of circumstances that might cause the professional accountant no longer to
          have confidence in the integrity of management and, where applicable, those charged
          with governance include situations where:

                  The accountant suspects or has evidence of their involvement or intended
                  involvement in any non-compliance.

                  The accountant is aware that they have knowledge of such non-compliance
                  and, contrary to legal or regulatory requirements, have not reported, or
                  authorized the reporting of, the matter to an appropriate authority within a
                  reasonable period.

R360.21     The professional accountant shall exercise professional judgment in determining the
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            need for, and nature and extent of, further action. In making this determination, the
            accountant shall take into account whether a reasonable and informed third party
            would be likely to conclude that the accountant has acted appropriately in the public
            interest.
360.21 A1 Further action that the professional accountant might take includes:

                  Disclosing the matter to an appropriate authority
                  Withdrawing from the engagement and the professional relationship where
                  permitted by law or regulation.

360.21 A2 Withdrawing from the engagement and the professional relationship is not a substitute
          for taking other actions that might be needed to achieve the professional accountant's
          objectives under this section. However, there might be limitations as to the further
          actions available to the accountant. In such circumstances, withdrawal might be the
          only available course of action.
R360.22     Where the professional accountant has withdrawn from the professional relationship
            pursuant to paragraphs R360.20 and 360.21 A1, the accountant shall, on request by
            the proposed accountant pursuant to paragraph R320.8, provide all relevant facts
            and other information concerning the identified or suspected non-compliance to the
            proposed accountant.

360.22 A1 The facts and other information to be provided are those that, in the predecessor
          accountant's opinion, the proposed accountant needs to be aware of before deciding
          whether to accept the audit appointment. Section 320 addresses communications from
          proposed accountants.

360.23 A1 As assessment of the matter might involve complex analysis and judgments, the
          professional accountant might consider:

                  Consulting internally.
                  Obtaining legal advice to understand the accountant's options and the
                  professional or legal implications of taking any particular course of action.

                  Consulting on a confidential basis with the Institute.

Determining Whether to Disclose the Matter to an Appropriate Authority
360.24 A1 Disclosure of the matter to an appropriate authority would be precluded if doing so
           would be contrary to law or regulation. Otherwise, the purpose of making disclosure
           is to enable an appropriate authority to cause the matter to be investigated and action to
           be taken in the public interest.

360.24 A2 The determination of whether to make such a disclosure depends in particular on the
          nature and extent of the actual or potential harm that is or might be caused by the matter
          to investors, creditors, employees or the general public. For example, the professional
          accountant might determine that disclosure of the matter to an appropriate authority is
          an appropriate course of action if:

                  The entity is engaged in bribery (for example, of local or foreign government
                  officials for purposes of securing large contracts).
                  The entity is regulated and the matter is of such significance as to threaten its
                  license to operate.
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                  The entity is listed on a securities exchange and the matter might result in
                  adverse consequences to the fair and orderly market in the entity's securities or
                  pose a systemic risk to the financial markets.

                  It is likely that the entity would sell products that are harmful to public health or
                  safety.
                  The entity is promoting a scheme to its clients to assist them in evading taxes.
360.24 A3 The determination of whether to make such a disclosure will also depend on external
          factors such as:
                  Whether there is an appropriate authority that is able to receive the information,
                  and cause the matter to be investigated and action to be taken. The appropriate
                  authority will depend on the nature of the matter. For example, the appropriate
                  authority would be a Securities and Exchange Board of India (SEBI) in the case of
                  fraudulent financial reporting or an environmental protection agency e.g.
                  Environment Pollution (Prevention & Control) Authority for National Capital Region
                  of Delhi in the case of a breach of environmental laws and regulations.
                  Whether there exists robust and credible protection from civil, criminal or
                  professional liability or retaliation afforded by legislation or regulation, such as
                  under whistle-blowing legislation or regulation.

                  Whether there are actual or potential threats to the physical safety of the
                  professional accountant or other individuals.

R360.25    If the professional accountant determines that disclosure of the non-compliance or
           suspected non-compliance to an appropriate authority is an appropriate course of
           action in the circumstances, that disclosure is permitted pursuant to paragraph
           R114.1(d) of the Code. When making such disclosure, the accountant shall act in good
           faith and exercise caution when making statements and assertions. The accountant shall
           also consider whether it is appropriate to inform the client of the accountant's intentions
           before disclosing the matter.

Imminent Breach
R360.26    In exceptional circumstances, the professional accountant might become aware of
           actual or intended conduct that the accountant has reason to believe would constitute
           an imminent breach of a law or regulation that would cause substantial harm to
           investors, creditors, employees or the general public. Having first considered whether it
           would be appropriate to discuss the matter with management or those charged with
           governance of the entity, the accountant shall exercise professional judgment and
           determine whether to disclose the matter immediately to an appropriate authority in
           order to prevent or mitigate the consequences of such imminent breach.

Documentation

R360.27    In relation to non-compliance or suspected non-compliance that falls within the scope of
           this section, the professional accountant shall document:

                  How management and, where applicable, those charged with governance have
                  responded to the matter.
                  The courses of action the accountant considered, the judgments made and the
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                 decisions that were taken, having regard to the reasonable and informed third
                 party test.
                 How the accountant is satisfied that the accountant has fulfilled the responsibility set
                 out in paragraph R360.20.

360.27 A1 This documentation is in addition to complying with the documentation requirements
          under applicable auditing standards. SAs, for example, require a professional accountant
          performing an audit of financial statements to:
                 Prepare documentation sufficient to enable an understanding of significant
                 matters arising during the audit, the conclusions reached, and significant
                 professional judgments made in reaching those conclusions;

                 Document discussions of significant matters with management, those charged
                 with governance, and others, including the nature of the significant matters
                 discussed and when and with whom the discussions took place; and

                 Document identified or suspected non-compliance, and the results of discussion
                 with management and, where applicable, those charged with governance and
                 other parties outside the entity.
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PART 4A  INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS.....................
Section 400 Applying the Conceptual Framework to Independence for
            Audit and Review Engagements..............................................................................
Section 410 Fees ..................................................................................................................

Section 411 Compensation and Evaluation Policies.............................................................

Section 420 Gifts and Hospitality.................................................................
Section 430 Actual or Threatened Litigation .........................................................................
Section 510 Financial Interests .............................................................................................
Section 511 Loans and Guarantees......................................................................................
Section 520 Business Relationships .....................................................................................

Section 521 Family and Personal Relationships...................................................................
Section 522 Recent Service with an Audit Client .................................................................
Section 523 Serving as a Director or Officer of an Audit Client ............................................

Section 524 Employment with an Audit Client ......................................................................

Section 525 Temporary Personnel Assignments ..................................................................
Section 540 Long Association of Personnel (Including Partner Rotation) with an Audit
            Client...................................................................................................

Section 550 Auditor Rotation ..................................................................
Section 600 Provision of Non-Assurance Services to an Audit Client ..................................
        Subsection 601  Accounting and Bookkeeping Services.......................................

            Subsection 602  Administrative Services ...............................................................
            Subsection 603  Valuation Services.......................................................................
            Subsection 604  Tax Services ................................................................................

            Subsection 605  Internal Audit Services ................................................................
            Subsection 606  Information Technology Systems Services .................................
            Subsection 607  Litigation Support Services .........................................................
            Subsection 608  Legal Services.............................................................................

            Subsection 609  Recruiting Services .....................................................................
            Subsection 610  Corporate Finance Services .......................................................
Section 800 Reports on Special Purpose Financial Statements That Include a
            Restriction on Use and Distribution (Audit and Review Engagements)...................
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INDEPENDENCE STANDARDS (PARTS 4A AND 4B)

PART 4A  INDEPENDENCE FOR AUDIT AND REVIEW
           ENGAGEMENTS
SECTION 400
APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR AUDIT AND
REVIEW ENGAGEMENTS
Introduction
General
400.1     It is in the public interest and required by the Code that professional accountants in public
          practice be independent when performing audit or review engagements in accordance with the
          requirements of the Code along with any additional requirements prescribed from time to time
          under the applicable Act, Regulation etc. such as the Companies Act 2013, the Reserve Bank
          of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory
          Development Authority (IRDA) etc.

400.2     This Part applies to both audit and review engagements. The terms "audit," "audit team," "audit
          engagement," "audit client," and "audit report" apply equally to review, review team, review
          engagement, review client, and review engagement report.

400.3     In this Part, the term "professional accountant" refers to individual professional accountants in
          public practice and their firms.
400.4     SQC 1 requires a firm to establish policies and procedures designed to provide it with
          reasonable assurance that the firm, its personnel and, where applicable, others subject to
          independence requirements (including network firm personnel), maintain independence where
          required by relevant ethics requirements. SAs and SREs establish responsibilities for
          engagement partners and engagement teams at the level of the engagement for audits and
          reviews, respectively. The allocation of responsibilities within a firm will depend on its size,
          structure and organization. Many of the provisions of this Part do not prescribe the specific
          responsibility of individuals within the firm for actions related to independence, instead referring
          to "firm" for ease of reference. Firms assign responsibility for a particular action to an individual
          or a group of individuals (such as an audit team), in accordance with SQC 1. In addition, an
          individual professional accountant remains responsible for compliance with any provisions that
          apply to that accountant's activities, interests or relationships.

400.5     Independence is linked to the principles of objectivity and integrity. It comprises:
          (a)   Independence of mind  the state of mind that permits the expression of a conclusion
                without being affected by influences that compromise professional judgment, thereby
                allowing an individual to act with integrity, and exercise objectivity and professional
                skepticism.
          (b)   Independence in appearance  the avoidance of facts and circumstances that are so
                significant that a reasonable and informed third party would be likely to conclude that a
                firm's, or an audit team member's, integrity, objectivity or professional skepticism has
                been compromised.

          In this Part, references to an individual or firm being "independent" mean that the individual or
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                 firm has complied with the provisions of this Part.
    400.6        When performing audit engagements, the Code requires firms to comply with the fundamental
                 principles and be independent. This Part sets out specific requirements and application
                 material on how to apply the conceptual framework to maintain independence when performing
                 such engagements. The conceptual framework set out in Section 120 applies to independence
                 as it does to the fundamental principles set out in Section 110.
    R400.6.1     Additional independence requirements are set out for a statutory auditor under the Companies Act
                 2013. Section 139 of the Companies Act, 2013 prescribes the auditor rotation requirements which
                 have been discussed in detail in Section 550.
                 Section 141(3) of the Companies Act 2013 (subject to amendments as may be made from time to
                 time) is as follows:
                141 (3) The following persons shall not be eligible for appointment as an auditor of a company,
                namely:--
                (a) a body corporate other than a limited liability partnership registered under the Limited Liability
                Partnership Act, 2008;
                (b) an officer or employee of the company;
                (c) a person who is a partner, or who is in the employment, of an officer or employee of the
                company;
                (d) a person who, or his relative or partner--
                (i) is holding any security of or interest in the company or its subsidiary, or of its holding or associate
                company or a subsidiary of such holding company:
                 Provided that the relative may hold security or interest in the company of face value not exceeding
                 one thousand rupees or such sum as may be prescribed1;
                 (ii) is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary
                 of such holding company, in excess of such amount as may be prescribed2; or
                 (iii) has given a guarantee or provided any security in connection with the indebtedness of any third
                 peson to the company, or its subsidiary, or its holding or associate company or a subsidiary of
                 such                                       holding company, for such amount as may be prescribed3;
                 (e) a person or a firm who, whether directly or indirectly, has business relationship4 with the
                 company, or its subsidiary, or its holding or associate company or subsidiary of such holding
                 company or associate company of such nature as may be prescribed;

1
  (1) For the purpose of proviso to sub-clause (i) of clause (d) of sub-section (3) of section 141, a relative of an auditor may hold
securities in the company of face value not exceeding rupees one lakh:
Provided that the condition under this sub-rule shall, wherever relevant, be also applicable in the case of a company not having share
capital or other securities:
Provided further that in the event of acquiring any security or interest by a relative, above the threshold prescribed, the corrective action
to maintain the limits as specified above shall be taken by the auditor within sixty days of such acquisition or interest.
2
  For the purpose of sub-clause (ii) of clause (d) of sub-section (3) of section 141, a person who or whose relative or partner is indebted
to the company or its subsidiary or its holding or associate company or a subsidiary of such holding company, in excess of rupees five
lakhs shall not be eligible for appointment.

3 For the purpose of sub-clause (iii) of clause (d) of sub-section (3) of section 141, a person who or whose relative or partner has given a
guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its
holding or associate company or a subsidiary of such holding company, in excess of one lakh rupees shall not be eligible for
appointment.
4
  For the purpose of clause (e) of sub-section (3) of section 141, the term "business relationship" shall be construed as any transaction
entered into for a commercial purpose, except -
(i) commercial transactions which are in the nature of professional services permitted to be rendered by an auditor or audit firm under
the Act and the Chartered Accountants Act, 1949 and the rules or the regulations made under those Acts;
(ii) commercial transactions which are in the ordinary course of business of the company at arm's length pri ce - like sale of products or
services to the auditor, as customer, in the ordinary course of business, by companies engaged in the business of telecommunications,
airlines, hospitals, hotels and such other similar businesses.
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            (f) a person whose relative is a director or is in the employment of the company as a director
            or key managerial personnel;
            (g) a person who is in full time employment elsewhere or a person or a partner of a firm
            holding appointment as its auditor, if such persons or partner is at the date of such
            appointment or reappointment holding appointment as auditor of more than twenty
            companies
            (h) a person who has been convicted by a court of an offence involving fraud and a period of
            ten years has not elapsed from the date of such conviction;
            (i) a person who, directly or indirectly, renders any service referred to in section 144 to the
            company or its holding company or its subsidiary company.
            Explanation -- For the purposes of this clause, the term "directly or indirectly" shall have the
            meaning assigned to it in the Explanation to section 144.
            (4) Where a person appointed as an auditor of a company incurs any of the disqualifications
            mentioned in sub-section (3) after his appointment, he shall vacate his office as such auditor
            and such vacation shall be deemed to be a casual vacancy in the office of the auditor.


400.7       This Part describes:

            (a)   Facts and circumstances, including professional activities, interests and relationships,
                  that create or might create threats to independence;

            (b)   Potential actions, including safeguards, that might be appropriate to address any such
                  threats; and

            (c)   Some situations where the threats cannot be eliminated or there can be no safeguards
                  to reduce them to an acceptable level.

Public Interest Entities
400.8       Some of the requirements and application material set out in this Part reflect the extent of public
            interest in certain entities which are defined to be public interest entities. Firms are encouraged
            to determine whether to treat additional entities, or certain categories of entities, as public
            interest entities because they have a large number and wide range of stakeholders. Factors to
            be considered include:

                  The nature of the business, such as the holding of assets in a fiduciary capacity for a
                  large number of stakeholders. Examples might include financial institutions, such as
                  banks and insurance companies, and pension funds.

                  Size.
                  Number of employees.

Reports that Include a Restriction on Use and Distribution
400.9       An audit report might include a restriction on use and distribution. If it does and the conditions
            set out in Section 800 are met, then the independence requirements in this Part may be
            modified as provided in Section 800.

Assurance Engagements other than Audit and Review Engagements
400.10      Independence standards for assurance engagements that are not audit or review
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            engagements are set out in Part 4B  Independence for Assurance Engagements Other than
            Audit and Review Engagements.

Requirements and Application Material
General
R400.11     A firm performing an audit engagement shall be independent.

R400.12     A firm shall apply the conceptual framework set out in Section 120 to identify, evaluate and
            address threats to independence in relation to an audit engagement.

Related Entities
R400.20     As defined, an audit client that is a listed entity includes all of its related entities. For all other
            entities, references to an audit client in this Part include related entities over which the client
            has direct or indirect control. When the audit team knows, or has reason to believe, that a
            relationship or circumstance involving any other related entity of the client is relevant to the
            evaluation of the firm's independence from the client, the audit team shall include that related
            entity when identifying, evaluating and addressing threats to independence. Besides the
            above, where the audit client is subject to the provisions of Companies Act, 2013, additional
            restrictions are prescribed under Section 141 and 144 of the Companies Act, 2013.


Period During which Independence is Required
R400.30     Independence, as required by this Part, shall be maintained during both:
            (a)    The engagement period; and
            (b)    The period covered by the financial statements.
400.30 A1   The engagement period starts when the audit team begins to perform the audit. The engagement
            period ends when the audit report is issued. When the engagement is of a recurring nature, it ends
            at the later of the notification by either party that the professional relationship has ended or the
            issuanceof the final audit report. Where the audit client is a statutory audit client under the
            Companies Act, 2013, the engagement period shall be determined in accordance with the
            provisions of the Companies Act, 2013.

R400.31      If an entity becomes an audit client during or after the period covered by the financial
             statements on which the firm will express an opinion, the firm shall determine whether any
             threats to independence are created by:

            (a)    Financial or business relationships with the audit client during or after the period covered
                   by the financial statements but before accepting the audit engagement; or

            (b)    Previous services provided to the audit client by the firm or a network firm.
400.31 A1 Threats to independence are created if a non-assurance service was provided to an audit client
          during, or after the period covered by the financial statements, but before the audit team begins
          to perform the audit, and the service would not be permitted during the engagement period.

400.31 A2 Subject to the applicable restrictions under Companies Act, 2013, examples of actions that
          might be safeguards to address such threats include:
                   Using professionals who are not audit team members to perform the service.
                   Having an appropriate reviewer review the audit and non-assurance work as appropriate.
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                  Engaging another firm outside of the network to evaluate the results of the non-
                  assurance service or having another firm outside of the network re-perform the non-
                  assurance service to the extent necessary to enable the other firm to take responsibility
                  for the service.

Communication with those Charged with Governance
400.40 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to communicating with
           those charged with governance.
400.40 A2 Even when not required by the Code, applicable professional standards, laws or regulations,
           regular communication is encouraged between a firm and those charged with governance of
            the client regarding relationships and other matters that might, in the firm's opinion, reasonably
            bear on independence. Such communication enables those charged with governance to:

            (a)   Consider the firm's judgments in identifying and evaluating threats;
            (b)   Consider how threats have been addressed including the appropriateness of safeguards
                  when they are available and capable of being applied; and

            (c)   Take appropriate action.
            Such an approach can be particularly helpful with respect to intimidation and familiarity threats.


Network Firms

400.50 A1 Firms frequently form larger structures with other firms and entities to enhance their ability to
          provide professional services. Whether these larger structures create a network depends on
          the particular facts and circumstances. It does not depend on whether the firms and entities
          are legally separate and distinct. Reference may be made to the Guidelines of Network issued
          by the Institute in this regard.

R400.51     A network firm shall be independent of the audit clients of the other firms within the network as
            required by this Part.

400.51 A1 The independence requirements in this Part that apply to a network firm apply to any entity that
          meets the definition of a network firm.


General Documentation of Independence for Audit and Review Engagements

R400.60     A firm shall document conclusions regarding compliance with this Part, and the substance of
            any relevant discussions that support those conclusions. In particular:
            (a)   When safeguards are applied to address a threat, the firm shall document the nature of
                  the threat and the safeguards in place or applied; and

            (b)   When a threat required significant analysis and the firm concluded that the threat was
                  already at an acceptable level, the firm shall document the nature of the threat and the
                  rationale for the conclusion.
400.60 A1   Documentation provides evidence of the firm's judgments in forming conclusions regarding
            compliance with this Part. However, a lack of documentation does not determine whether a
            firm considered a particular matter or whether the firm is independent.

Mergers and Acquisitions
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When a Client Merger Creates a Threat

400.70 A1 An entity might become a related entity of an audit client because of a merger or acquisition. A
          threat to independence and, therefore, to the ability of a firm to continue an audit engagement
          might be created by previous or current interests or relationships between a firm or network
          firm and such a related entity.
R400.71     In the circumstances set out in paragraph 400.70 A1,
            (a)   The firm shall identify and evaluate previous and current interests and relationships with
                  the related entity that, taking into account any actions taken to address the threat, might
                  affect its independence and therefore its ability to continue the audit engagement after
                  the effective date of the merger or acquisition; and

            (b)   Subject to paragraph R400.72, the firm shall take steps to end any interests or
                  relationships that are not permitted by the Code by the effective date of the merger or
                  acquisition.
R400.72     As an exception to paragraph R400.71(b), if the interest or relationship cannot reasonably be
            ended by the effective date of the merger or acquisition, the firm shall:
            (a)   Evaluate the threat that is created by the interest or relationship; and

            (b)   Discuss with those charged with governance the reasons why the interest or relationship
                  cannot reasonably be ended by the effective date and the evaluation of the level of the
                  threat.
400.72 A1   In some circumstances, it might not be reasonably possible to end an interest or relationship
            creating a threat by the effective date of the merger or acquisition. This might be because the
            firm provides a non-assurance service to the related entity, which the entity is not able to
            transition in an orderly manner to another provider by that date.

400.72 A2 Factors that are relevant in evaluating the level of a threat created by mergers and acquisitions
          when there are interests and relationships that cannot reasonably be ended include:

                  The nature and significance of the interest or relationship.
                  The nature and significance of the related entity relationship (for example, whether the
                  related entity is a subsidiary or parent).
                  The length of time until the interest or relationship can reasonably be ended.
R400.73     Subject to applicable restrictions under Companies Act, 2013 or any other laws and
            regulations, if, following the discussion set out in paragraph R400.72(b), those charged with
            governance request the firm to continue as the auditor, the firm shall do so only if:

            (a)   The interest or relationship will be ended as soon as reasonably possible but no later
                  than six months after the effective date of the merger or acquisition;
            (b)   Any individual who has such an interest or relationship, including one that has arisen
                  through performing a non-assurance service that would not be permitted by Section 600
                  and its subsections, will not be a member of the engagement team for the audit or the
                  individual responsible for the engagement quality control review; and

            (c)   Transitional measures will be applied, as necessary, and discussed with those charged
                  with governance.
400.73 A1 Examples of such transitional measures include:
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                  Having a professional accountant review the audit or non-assurance work as
                  appropriate.

                  Having a professional accountant, who is not a member of the firm expressing the opinion
                  on the financial statements, perform a review that is equivalent to an engagement quality
                  control review.
                  Engaging another firm to evaluate the results of the non-assurance service or having
                  another firm re-perform the non-assurance service to the extent necessary to enable the
                  other firm to take responsibility for the service.
R400.74    The firm might have completed a significant amount of work on the audit prior to the effective
           date of the merger or acquisition and might be able to complete the remaining audit procedures
           within a short period of time. In such circumstances, if those charged with governance request
           the firm to complete the audit while continuing with an interest or relationship identified in
           paragraph 400.70 A1, the firm shall only do so if it:

            (a)   Has evaluated the level of the threat and discussed the results with those charged with
                  governance;

            (b)   Complies with the requirements of paragraph R400.73(a) to (c); and

            (c)   Ceases to be the auditor no later than the date that the audit report is issued.

If Objectivity Remains Compromised
R400.75     Even if all the requirements of paragraphs R400.71 to R400.74 could be met, the firm shall
            determine whether the circumstances identified in paragraph 400.70 A1 create a threat that
            cannot be addressed such that objectivity would be compromised. If so, the firm shall cease to
            be the auditor.

Documentation
R400.76     The firm shall document:
            (a)   Any interests or relationships identified in paragraph 400.70 A1 that will not be ended by
                  the effective date of the merger or acquisition and the reasons why they will not be
                  ended;

            (b)   The transitional measures applied;
            (c)   The results of the discussion with those charged with governance; and
            (d)   The reasons why the previous and current interests and relationships do not create a
                  threat such that objectivity would be compromised.


Breach of an Independence Provision for Audit and Review Engagements
When a Firm Identifies a Breach
R400.80     Subject to the eligibility requirements of the auditor mentioned under Section 141 of the
            Companies Act, 2013, if a firm concludes that a breach of a requirement in this Part has
            occurred, the firm shall:

            (a)   End, suspend or eliminate the interest or relationship that created the breach and
                  address the consequences of the breach;
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            (b)   Consider whether any legal or regulatory requirements apply to the breach and, if so:

                  (i)     Comply with those requirements; and
            (c)   Promptly communicate the breach in accordance with its policies and procedures to:
                  (i)     The engagement partner;
                  (ii)    Those with responsibility for the policies and procedures relating to independence;

                  (iii)   Other relevant personnel in the firm and, where appropriate, the network; and
                  (iv)    Those subject to the independence requirements in Part 4A who need to take
                          appropriate action;

            (d)   Evaluate the significance of the breach and its impact on the firm's objectivity and ability
                  to issue an audit report; and
            (e)   Depending on the significance of the breach, determine:

                  (i)     Whether to end the audit engagement; or
                  (ii)    Whether it is possible to take action that satisfactorily addresses the consequences
                          of the breach and whether such action can be taken and is appropriate in the
                          circumstances.
                  In making this determination, the firm shall exercise professional judgment and take into
                  account whether a reasonable and informed third party would be likely to conclude that
                  the firm's objectivity would be compromised, and therefore, the firm would be unable to
                  issue an audit report.
400.80 A1   A breach of a provision of this Part might occur despite the firm having policies and procedures
            designed to provide it with reasonable assurance that independence is maintained. It might be
            necessary to end the audit engagement because of the breach.
400.80 A2 The significance and impact of a breach on the firm's objectivity and ability to issue an audit
          report will depend on factors such as:

                  The nature and duration of the breach.
                  The number and nature of any previous breaches with respect to the current audit
                  engagement.

                  Whether an audit team member had knowledge of the interest or relationship that
                  created the breach.

                  Whether the individual who created the breach is an audit team member or another
                  individual for whom there are independence requirements.
                  If the breach relates to an audit team member, the role of that individual.
                  If the breach was created by providing a professional service, the impact of that service,
                  if any, on the accounting records or the amounts recorded in the financial statements on
                  which the firm will express an opinion.
                  The extent of the self-interest, advocacy, intimidation or other threats created by the
                  breach.

400.80 A3 Depending upon the significance of the breach, examples of actions that the firm might consider
           to address the breach satisfactorily include:
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                 Removing the relevant individual from the audit team.
                 Using different individuals to conduct an additional review of the affected audit work or
                 to re-perform that work to the extent necessary.

                 Recommending that the audit client engage another firm to review or re-perform the
                 affected audit work to the extent necessary.
                 If the breach relates to a non-assurance service that affects the accounting records or
                 an amount recorded in the financial statements, engaging another firm to evaluate the
                 results of the non-assurance service or having another firm re-perform the non-
                 assurance service to the extent necessary to enable the other firm to take responsibility
                 for the service.
R400.81    If the firm determines that action cannot be taken to address the consequences of the breach
           satisfactorily, the firm shall inform those charged with governance as soon as possible and take
           the steps necessary to end the audit engagement in compliance with any applicable legal or
           regulatory requirements.
R400.82    If the firm determines that action can be taken to address the consequences of the breach
           satisfactorily, the firm shall discuss with those charged with governance:
           (a)   The significance of the breach, including its nature and duration;

           (b)   How the breach occurred and how it was identified;

           (c)   The action proposed or taken and why the action will satisfactorily address the
                 consequences of the breach and enable the firm to issue an audit report;

           (d)   The conclusion that, in the firm's professional judgment, objectivity has not been
                 compromised and the rationale for that conclusion; and

           (e)   Any steps proposed or taken by the firm to reduce or avoid the risk of further breaches
                 occurring.

           Such discussion shall take place as soon as possible unless an alternative timing is specified
           by those charged with governance for reporting less significant breaches.

Communication of Breaches to Those Charged with Governance

400.83 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to communicating with
          those charged with governance.

R400.84    With respect to breaches, the firm shall communicate in writing to those charged with
           governance:

           (a)   All matters discussed in accordance with paragraph R400.82 and obtain the concurrence
                 of those charged with governance that action can be, or has been, taken to satisfactorily
                 address the consequences of the breach; and
           (b)   A description of:
                 (i)    The firm's policies and procedures relevant to the breach designed to provide it
                        with reasonable assurance that independence is maintained; and

                 (ii)   Any steps that the firm has taken, or proposes to take, to reduce or avoid the risk
                        of further breaches occurring.

R400.85    If those charged with governance do not concur that the action proposed by the firm in
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           accordance with paragraph R400.80(e)(ii) satisfactorily addresses the consequences of the
           breach, the firm shall take the steps necessary to end the audit engagement in accordance
           with paragraph R400.81.

Breaches Before the Previous Audit Report Was Issued
R400.86    If the breach occurred prior to the issuance of the previous audit report, the firm shall comply
           with the provisions of Part 4A in evaluating the significance of the breach and its impact on the
           firm's objectivity and its ability to issue an audit report in the current period.

R400.87    The firm shall also:
           (a)   Consider the impact of the breach, if any, on the firm's objectivity in relation to any
                 previously issued audit reports, and the possibility of withdrawing such audit reports; and

           (b)   Discuss the matter with those charged with governance.

Documentation
R400.88    In complying with the requirements in paragraphs R400.80 to R400.87, the firm shall document:
           (a)   The breach;
           (b)   The actions taken;
           (c)   The key decisions made;
           (d)   All the matters discussed with those charged with governance; and
           (e)   Any discussions with a professional or regulatory body or oversight authority.
R400.89    If the firm continues with the audit engagement, it shall document:
           (a)   The conclusion that, in the firm's professional judgment, objectivity has not been
                 compromised; and
           (b)   The rationale for why the action taken satisfactorily addressed the consequences of the
                 breach so that the firm could issue an audit report.
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SECTION 410
FEES
Introduction
410.1        Firms are required to comply with the fundamental principles, be independent and apply the
             conceptual framework set out in Section 120 to identify, evaluate and address threats to
             independence.

410.2        The nature and level of fees or other types of remuneration might create a self-interest 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
Fees  Relative Size

All Audit Clients
410.3 A1     When the total fees generated from an audit client by the firm expressing the audit opinion
             represent a large proportion of the total fees of that firm, the dependence on that client and
             concern about losing the client create a self-interest or intimidation threat.
410.3 A2     Factors that are relevant in evaluating the level of such threats include:

                    The operating structure of the firm.
                    Whether the firm is well established or new.
                    The significance of the client qualitatively and/or quantitatively to the firm.
410.3 A3     An example of an action that might be a safeguard to address such a self-interest or
             intimidation threat is increasing the client base in the firm to reduce dependence on the audit
             client.
410.3 A4     A self-interest or intimidation threat is also created when the fees generated by a firm from an
             audit client represent a large proportion of the revenue of one partner or one office of the firm.
410.3 A5     Factors that are relevant in evaluating the level of such threats include:
                    The significance of the client qualitatively and/or quantitatively to the partner or office.
                    The extent to which the compensation of the partner, or the partners in the office, is
                    dependent upon the fees generated from the client.

410.3 A6     Examples of actions that might be safeguards to address such self-interest or intimidation
             threats include:
                    Increasing the client base of the partner or the office to reduce dependence on the audit
                    client.
                    Having an appropriate reviewer who did not take part in the audit engagement review
                    the work.
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R410.4     Where an audit client is a public interest entity and, the total gross annual professional fees
           ("total fees) from the client and its related entities represent more than 15% of the total
           fees received by the firm expressing the opinion on the financial statements of the client, the
           firm shall:
           (a)   Disclose to those charged with governance of the audit client the fact that the total of
                 such fees represents more than 15% of the total fees received by the firm

                 Provided that no such ceiling on the total fees of the Firm would be applicable where
                 such fees do not exceed five lakhs of rupees in respect of a firm including fees
                 received by he firm for other services rendered through the medium of a different firm
                 or firms in which such member or firm may be a partner or proprietor.

                 Provided further that no such ceiling on the total fees of a Firm would be applicable in
                 the case of audit of government Companies, public undertakings, nationalised banks,
                 public financial institutions or where appointments of auditors are made by the
                 Government.; and

           (b)   Discuss whether either of the following actions might be a safeguard to address the
                 threat created by the total fees received by the firm from the client, and if so, apply it:

                 (i)    Prior to the audit opinion being issued on the second year's financial statements,
                        a professional accountant, who is not a member of the firm expressing the opinion
                        on the financial statements, performs an engagement quality control review of that
                        engagement; or Quality Review Board performs a review of that engagement that
                        is equivalent to an engagement quality control review ("a pre-issuance review");
                        or
                 (ii)   After the audit opinion on the second year's financial statements has been issued,
                        and before the audit opinion being issued on the third year's financial statements,
                        a professional accountant, who is not a member of the firm expressing the opinion
                        on the financial statements, or Quality Review Board performs a review of the second
                        year's audit that is equivalent to an engagement quality control review ("a post-
                        issuance review").



R410.5     When the total fees described in paragraph R410.4 significantly exceed 15%, the firm shall
           determine whether the level of the threat is such that a post-issuance review would not reduce
           the threat to an acceptable level. If so, the firm shall have a pre-issuance review performed.
R410.6     If the fees described in paragraph R410.4 continue to exceed 15%, the firm shall each year:

           (a)   Disclose to and discuss with those charged with governance the matters set out in
                 paragraph R410.4; and
           (b)   Comply with paragraphs R410.4(b) and R410.5.

Fees  Overdue
410.7 A1   A self-interest threat might be created if a significant part of fees is not paid before the audit
           report for the following year is issued. It is generally expected that the firm will require payment
           of such fees before such audit report is issued. The requirements and application material set
           out in Section 511 with respect to loans and guarantees might also apply to situations where
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           such unpaid fees exist.

410.7 A2   Examples of actions that might be safeguards to address such a self-interest threat include:
                  Obtaining partial payment of overdue fees.
                  Having an appropriate reviewer who did not take part in the audit engagement review
                  the work performed.

R410.8     When a significant part of fees due from an audit client remains unpaid for a long time, the firm
           shall determine:

           (a)    Whether the overdue fees might be equivalent to a loan to the client; and
           (b)    Whether it is appropriate for the firm to be re-appointed or continue the audit
                  engagement.

Contingent Fees
410.9 A1    The fees which are based on a percentage of profits or which are contingent upon the
            findings, or results of such work, is not allowed except in cases which are permitted under
            Regulation 192 of The Chartered Accountants Regulations, 1988, given as under:-

           (a) in the case of a receiver or a liquidator, the fees may be based on a percentage of the
               realisation or disbursement of the assets;

           (b) in the case of an auditor of a co-operative society, the fees may be based on a
               percentage of the paid-up capital or the working capital or the gross or net income or
               profits;

           (c) in the case of a valuer for the purposes of direct taxes and duties, the fees may be based
               on a percentage of the value of the property valued.

           (d) in the case of certain management consultancy services as may be decided by the
               resolution of the Council from time to time, the fees may be based on percentage basis
               which may be contingent upon the findings, or results of such work;

           (e) in the case of certain fund raising services, the fees may be based on a percentage of the
               fund raised;

           (f) in the case of debt recovery services, the fees may be based on a percentage of the debt
               recovered;

           (g) in the case of services related to cost optimisation, the fees may be based on a
               percentage of the benefit derived; and

           (h) any other service or audit as may be decided by the Council.
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SECTION 411
COMPENSATION AND EVALUATION POLICIES
Introduction
411.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.

411.2       A firm's evaluation or compensation policies might create a self-interest threat. This section
            sets out specific requirements and application material relevant to applying the conceptual
            framework in such circumstances.

Requirements and Application Material
General
411.3 A1 ` When an audit team member for a particular audit client is evaluated on or compensated for
            selling non-assurance services to that audit client, the level of the self-interest threat will
            depend on:

            (a)   What proportion of the compensation or evaluation is based on the sale of such services;
            (b)   The role of the individual on the audit team; and

            (c)   Whether the sale of such non-assurance services influences promotion decisions.
411.3 A2    Examples of actions that might eliminate such a self-interest threat include:
                  Revising the compensation plan or evaluation process for that individual.
                  Removing that individual from the audit team.
411.3 A3 ` An example of an action that might be a safeguard to address such a self-interest threat is
            having an appropriate reviewer review the work of the audit team member.

R411.4      A firm shall not evaluate or compensate a key audit partner based on that partner's success in
            selling non-assurance services to the partner's audit client. This requirement does not preclude
            normal profit-sharing arrangements between partners of a firm.
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SECTION 420
GIFTS AND HOSPITALITY
Introduction
420.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.
420.2       Accepting gifts and hospitality from an audit client might create a self-interest, familiarity or
            intimidation threat This section sets out a specific requirement and application material
            relevant to applying the conceptual framework in such circumstances.

Requirement and Application Material
R420.3 A firm, network firm or an audit team member shall not accept gifts and hospitality from an audit
            client, unless the value is trivial and inconsequential.
420.3 A1 Where a firm, network firm or audit team member is offering or accepting an inducement to or
          from an audit client, the requirements and application material set out in Section 340 apply and
          non-compliance with these requirements might create threats to independence.
420.3 A2 The requirements set out in Section 340 relating to offering or accepting inducements do not
           allow a firm, network firm or audit team member to accept gifts and hospitality where the intent
           is to improperly influence behaviour even if the value is trivial and inconsequential.
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SECTION 430
ACTUAL OR THREATENED LITIGATION
Introduction
 430.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

430.2      When litigation with an audit client occurs, or appears likely, self-interest and intimidation
           threats are created. This section sets out specific application material relevant to applying the
           conceptual framework in such circumstances.

Application Material
General
430.3 A1   The relationship between client management and audit team members must be characterized
           by complete candor and full disclosure regarding all aspects of a client's operations.
           Adversarial positions might result from actual or threatened litigation between an audit client
           and the firm, a network firm or an audit team member. Such adversarial positions might affect
           management's willingness to make complete disclosures and create self-interest and
           intimidation threats.

430.3 A2   Factors that are relevant in evaluating the level of such threats include:
                 The materiality of the litigation.
                 Whether the litigation relates to a prior audit engagement.
430.3 A3   If the litigation involves an audit team member, an example of an action that might eliminate
           such self-interest and intimidation threats is removing that individual from the audit team.

430.3 A4   An example of an action that might be a safeguard to address such self-interest and
           intimidation threats is to have an appropriate reviewer review the work performed.
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SECTION 510
FINANCIAL INTERESTS
Introduction
510.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

510.2      Holding a financial interest in an audit client might create a self-interest threat. This section
           sets out specific requirements and application material relevant to applying the conceptual
           framework in such circumstances.

Requirements and Application Material
General
510.3 A1   A financial interest might be held directly or indirectly through an intermediary such as a
           collective investment vehicle, an estate or a trust. When a beneficial owner has control over
           the intermediary or ability to influence its investment decisions, the Code defines that financial
           interest to be direct. Conversely, when a beneficial owner has no control over the intermediary
           or ability to influence its investment decisions, the Code defines that financial interest to be
           indirect.

510.3 A2   This section contains references to the "materiality" of a financial interest. In determining
           whether such an interest is material to an individual, the combined net worth of the individual
           and the individual's immediate family members may be taken into account.

510.3 A3   Factors that are relevant in evaluating the level of a self-interest threat created by holding a
           financial interest in an audit client include:

                 The role of the individual holding the financial interest.
                 Whether the financial interest is direct or indirect.
                 The materiality of the financial interest.

Financial Interests Held by the Firm, a Network Firm, Audit Team Members and Others

R510.4     Subject to paragraph R510.5, a direct financial interest or a material indirect financial interest
           in the audit client shall not be held by:

           (a)   The firm or a network firm;
           (b)   An audit team member, or any of that individual's immediate family
           (c)   Any other partner in the office in which an engagement partner practices in connection
                 with the audit engagement, or any of that other partner's immediate family; or

           (d)   Any other partner or managerial employee who provides non-audit services to the audit
                 client, except for any whose involvement is minimal, or any of that individual's immediate
                 family.
           It may be noted that if the audit client is a statutory audit client under Companies Act, 2013, in
           accordance with Section 141 (3)(d) (i) of the Companies Act, 2013, an individual practitioner,
           sole proprietor or partner (as the case may be) or his relatives shall not hold any security of or
           interest in such Company or its subsidiary, or of its holding or associate company or a
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            subsidiary of such holding company. However, the relative (who is not otherwise covered as
            immediate family under any of the clauses specified in 510.4) may hold security or interest in
            the company of face value not exceeding rupees one lakh, or such other sum as may be
            prescribed from time to time;
510.4 A1    The office in which the engagement partner practices in connection with an audit engagement
            is not necessarily the office to which that partner is assigned. When the engagement partner
            is located in a different office from that of the other audit team members, professional judgment
            is needed to determine the office in which the partner practices in connection with the
            engagement.

R510.5      As an exception to paragraph R510.4, an immediate family member identified in
            subparagraphs R510.4 (c) or (d) may hold a direct or material indirect financial interest in an
            audit client, provided that:

            (a)   The family member received the financial interest because of employment rights, for
                  example through pension or share option plans, and, when necessary, the firm
                  addresses the threat created by the financial interest; and

            (b) The family member disposes of or forfeits the financial interest as soon as practicable
                when the family member has or obtains the right to do so, or in the case of a stock option,
                when the family member obtains the right to exercise the option
            The above is subject to any additional restrictions applicable to a relative under
            Companies Act, 2013, where applicable.

Financial Interests in an Entity Controlling an Audit Client

R510.6      When an entity has a controlling interest in an audit client and the client is material to the
            entity, neither the firm, nor a network firm, nor an audit team member, nor any of that
            individual's immediate family shall hold a direct or material indirect financial interest in that
            entity.

            Where the audit client is subject to the provisions of the Companies Act, 2013, firm, individual
            practitioner, sole proprietor or partner or his relatives are additionally restricted from holding
            any security of or interest in the holding company. The relative (who is not otherwise covered
            as immediate family) may hold security or interest in the company of face value not exceeding
            rupees one hundred thousand or such other sum as may be prescribed from time to time


Financial Interests Held as Trustee
R510.7      Paragraph R510.4 shall also apply to a financial interest in an audit client held in a trust for
            which the firm, network firm or individual acts as trustee, unless:
            (a)   None of the following is a beneficiary of the trust: the trustee, the audit team member or
                  any of that individual's immediate family, the firm or a network firm;

            (b)   The interest in the audit client held by the trust is not material to the trust;
            (c)   The trust is not able to exercise significant influence over the audit client; and
            (d)   None of the following can significantly influence any investment decision involving a
                  financial interest in the audit client: the trustee, the audit team member or any of that
                  individual's immediate family, the firm or a network firm.
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Financial Interests in Common with the Audit Client
R510.8 (a)         A firm, or a network firm, or an audit team member, or any of that individual's immediate
                   family shall not hold a financial interest in an entity when an audit client also has a
                   financial interest in that entity, unless:
                   (i)     The financial interests are immaterial to the firm, the network firm, the audit team
                           member and that individual's immediate family member and the audit client, as
                           applicable; or

                   (ii)    The audit client cannot exercise significant influence over the entity.
             (b)   Before an individual who has a financial interest described in paragraph R510.8(a) can
                   become an audit team member, the individual or that individual's immediate family
                   member shall either:
                   (i)     Dispose of the interest; or

                   (ii)    Dispose of enough of the interest so that the remaining interest is no longer
                           material.

Financial Interests Received Unintentionally
R510.9       If a firm, a network firm or a partner or employee of the firm or a network firm, or any of that
             individual's immediate family, receives a direct financial interest or a material indirect financial
             interest in an audit client by way of an inheritance, gift, as a result of a merger or in similar
             circumstances and the interest would not otherwise be permitted to be held under this section,
             then:

             (a)   If the interest is received by the firm or a network firm, or an audit team member or any
                   of that individual's immediate family, the financial interest shall be disposed of
                   immediately, or enough of an indirect financial interest shall be disposed of so that the
                   remaining interest is no longer material; or
             (b)   (i)    If the interest is received by an individual who is not an audit team member, or by
                             any of that individual's immediate family, the financial interest shall be disposed of
                             as soon as possible, or enough of an indirect financial interest shall be disposed
                             of so that the remaining interest is no longer material; and

                   (ii)    Pending the disposal of the financial interest, when necessary the firm shall
                           address the threat created.

             The above is subject to additional restrictions under Companies Act, 2013, where applicable.


Financial Interests  Other Circumstances
Immediate Family
510.10 A1 A self-interest, familiarity, or intimidation threat might be created if an audit team member, or
           any of that individual's immediate family, or the firm or a network firm has a financial interest in
           an entity when a director or officer or controlling owner of the audit client is also known to have
           a financial interest in that entity.
510.10 A2 Factors that are relevant in evaluating the level of such threats include:
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                    The role of the individual on the audit team.
                    Whether ownership of the entity is closely or widely held.
                    Whether the interest allows the investor to control or significantly influence the entity.
                    The materiality of the financial interest.
510.10 A3 An example of an action that might eliminate such a self-interest, familiarity, or intimidation
           threat is removing the audit team member with the financial interest from the audit team.
510.10 A4 An example of an action that might be a safeguard to address such a self-interest threat is
           having an appropriate reviewer review the work of the audit team member.

Close Family
510.10 A5   A self-interest threat might be created if an audit team member knows that a close family
            member has a direct financial interest or a material indirect financial interest in the audit client.
                    A6 Factors that are relevant in evaluating the level of such a threat include:-The nature
                    of the relationship between the audit team member and the close family member.

                    Whether the financial interest is direct or indirect.
                    The materiality of the financial interest to the close family member.
510.10 A7 Examples of actions that might eliminate such a self-interest threat include:
                    Having the close family member dispose, as soon as practicable, of all of the financial
                    interest or dispose of enough of an indirect financial interest so that the remaining interest
                    is no longer material.
                    Removing the individual from the audit team.
510.10 A8 An example of an action that might be a safeguard to address such a self-interest threat is
           having an appropriate reviewer review the work of the audit team member.
510.10A8.1 The above is subject to additional restrictions under Companies Act, 2013, where applicable.


Other Individuals
510.10 A9 A self-interest threat might be created if an audit team member knows that a financial interest
          in the audit client is held by individuals such as:

                    Partners and professional employees of the firm or network firm, apart from those who
                    are specifically not permitted to hold such financial interests by paragraph R510.4, or
                    their immediate family members.

                    Individuals with a close personal relationship with an audit team member.
510.10 A10 Factor that are relevant in evaluating the level of such a threat include:
                    The firm's organizational, operating and reporting structure.
                    The nature of the relationship between the individual and the audit team member.
510.10 A11 An example of an action that might eliminate such a self-interest threat is removing the audit
           team member with the personal relationship from the audit team.

510.10 A12 Examples of actions that might be safeguards to address such a self-interest threat include:
                    Excluding the audit team member from any significant decision-making concerning the
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                   audit engagement.
                   Having an appropriate reviewer review the work of the audit team member.

Retirement Benefit Plan of a Firm or Network Firm

510.10 A13 A self-interest threat might be created if a retirement benefit plan of a firm or a network firm
           holds a direct or material indirect financial interest in an audit client.
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SECTION 511
LOANS AND GUARANTEES
Introduction
511.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.
511.2      A loan or a guarantee of a loan with an audit client might create a self-interest threat. This
           section sets out specific requirements and application material relevant to applying the
           conceptual framework in such circumstances.

Requirements and Application Material
General
511.3 A1   This section contains references to the "materiality" of a loan or guarantee. In determining
           whether such a loan or guarantee is material to an individual, the combined net worth of the
           individual and the individual's immediate family members may be taken into account.

Loans and Guarantees with an Audit Client
R511.4     A firm, a network firm, an audit team member, or any of that individual's immediate family shall
           not make or guarantee a loan to an audit client unless the loan or guarantee is immaterial to:

           (a)   The firm, the network firm or the individual making the loan or guarantee, as applicable;
                 and

           (b)   The client.
           The above is subject to the Council guidelines on indebtedness, issued from time to time and
           the additional restrictions under the Companies Act, 2013, where applicable.
           In accordance with Companies Act, 2013, a firm, an individual practitioner, sole proprietor or
           partner (as the case may be) or relatives shall not accept a loan in excess of Rs 5 lakhs (or
           such other limit as may be prescribed from time to time) from the Company, its subsidiary,
           or its holding or associate company or subsidiary of such holding company or
           provide guarantee or any security in connection with the indebtedness of any third person in
           excess of rupees one lakh (or such other limit as may be prescribed from time to time), to the
           Company its subsidiary, or its holding or associate company or subsidiary of
           such holding company .

Loans and Guarantees with an Audit Client that is a Bank or Similar Institution
R511.5     A firm, a network firm, an audit team member, or any of that individual's immediate family shall
           not accept a loan, or a guarantee of a loan, from an audit client that is a bank or a similar
           institution unless the loan or guarantee is made under normal lending procedures, terms and
           conditions,

511.5 A1   Examples of loans include mortgages, bank overdrafts, car loans, and credit card balances.
511.5 A2   Even if a firm or network firm receives a loan from an audit client that is a bank or similar
           institution under normal lending procedures, terms and conditions, the loan might create a self-
           interest threat if it is material to the audit client or firm receiving the loan.
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5115 A3    An example of an action that might be a safeguard to address such a self-interest threat is
           having the work reviewed by an appropriate reviewer, who is not an audit team member, from
           a network firm that is not a beneficiary of the loan.
511.5 A4   The above is subject to the Council guidelines on indebtedness, issued from time to time and
           additional restrictions under the Companies Act, 2013, where applicable.

            In accordance with Companies Act, 2013, a firm, an individual practitioner, sole proprietor or
            partner (as the case may be) or relatives shall not accept a loan in excess of Rs 5 lakhs (or
            such other limit as may be prescribed from time to time) from the Company, its subsidiary,
            or its holding or associate company or subsidiary of such holding company or
            provide guarantee or any security in connection with the indebtedness of any third person in
            excess of rupees one lakh (or such other limit as may be prescribed from time to time), to the
            Company its subsidiary, or its holding or associate company or subsidiary of
            such holding company .
            However, where the audit client is a bank, as per the RBI regulations, a firm, an individual
            practitioner, sole proprietor or partner and members of his family (as defined under the RBI
            regulations) are restricted from being indebted to such banking audit client. Hence in such
            cases, indebtedness limits specified above shall not apply.


Deposits or Brokerage Accounts

R511.6     A firm, a network firm, an audit team member, or any of that individual's immediate family shall
            not have deposits or a brokerage account with an audit client that is a bank, broker or similar
            institution, unless the deposit or account is held under normal commercial terms.

           The above is subject to the Council guidelines on indebtedness, issued from time to time and
           additional restrictions under the Companies Act, 2013, where applicable.

            In accordance with Companies Act, 2013, a firm, an individual practitioner, sole proprietor or
            partner (as the case may be) or relatives shall not be indebted in excess of Rs 5 lakhs (or
            such other limit as may be prescribed from time to time), to the Company, its subsidiary, or its
            holding or associate company or subsidiary of such holding company with respect to a
            brokerage account.
           However, where the audit client is a bank, as per the RBI regulations, a firm, an individual
           practitioner, sole proprietor or partner and members of his family (as defined under the RBI
           regulations) are restricted from being indebted to such banking audit client. Hence in such
           cases, indebtedness limit specified above shall not apply.


Loans and Guarantees with an Audit Client that is Not a Bank or Similar Institution
R511.7     A firm, a network firm, an audit team member, or any of that individual's immediate family shall
            not accept a loan from, or have a borrowing guaranteed by, an audit client that is not a bank or
            similar institution, unless the loan or guarantee is immaterial to:

            (a)   The firm, the network firm, or the individual receiving the loan or guarantee, as
                  applicable; and

            (b)   The client.
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The above is subject to the Council guidelines on indebtedness, issued from time to time and
additional restrictions under the Companies Act, 2013, where applicable.

In accordance with Companies Act, 2013, a firm, an individual practitioner, sole proprietor or
partner (as the case may be) or relatives shall not accept a loan in excess of Rs 5 lakhs (or
such other limit as may be prescribed from time to time) from the Company, its subsidiary, or
its holding or associate company or subsidiary of such holding company or provide guarantee
or any security in connection with the indebtedness of any third person in excess of rupees
one lakh (or such other limit as may be prescribed from time to time), to the Company its
subsidiary, or its holding or associate company or subsidiary of such holding company
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SECTION 520
BUSINESS RELATIONSHIPS
Introduction
520.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.
520.2      A close business relationship with an audit client or its management might create a self-interest
           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
General
520.3 A1   This section contains references to the "materiality" of a financial interest and the "significance"
           of a business relationship. In determining whether such a financial interest is material to an
           individual, the combined net worth of the individual and the individual's immediate family
           members may be taken into account.
520.3 A2   Examples of a close business relationship arising from a commercial relationship or common
           financial interest include:

                 Having a financial interest in a joint venture with either the client or a controlling owner,
                 director or officer or other individual who performs senior managerial activities for that
                 client.

                 Arrangements to combine one or more services or products of the firm or a network firm
                 with one or more services or products of the client and to market the package with
                 reference to both parties.
           
Firm, Network Firm, Audit Team Member or Immediate Family Business Relationships
R520.4     A firm, a network firm or an audit team member shall not have a close business relationship
           with an audit client or its management unless any financial interest is immaterial and the
           business relationship is insignificant to the client or its management and the firm, the network
           firm or the audit team member, as applicable.

           The above is subject to additional restrictions under Companies Act, 2013, where applicable.
           As per section 141(3)(e) of Companies Act, 2013 read with Companies (Audit and Auditors)
           Rules, 2014, a firm, an individual practitioner, sole proprietor or partner (as the case may be)
           shall not, whether directly or indirectly, have business relationship with the company, or its
           subsidiary, or its holding or associate company or subsidiary of such holding company or
           associate company of such nature as may be prescribed.

           The term "business relationship" shall be construed as any transaction entered into for a
           commercial purpose, except -

           (i)    commercial transactions which are in the nature of professional services permitted to
                  be rendered by an auditor or audit firm under the Companies Act, 2013 and the
                  Chartered Accountants Act, 1949 and the rules or the regulations made under those
                  Acts;
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               (ii)   commercial transactions which are in the ordinary course of business of the company
                      at arm's length price - like sale of products or services to the auditor, as customer, in
                      the ordinary course of business, by companies engaged in the business of
                      telecommunications, airlines, hospitals, hotels and such other similar businesses



520.4 A1    A self-interest or intimidation threat might be created if there is a close business relationship
            between the audit client or its management and the immediate family of an audit team member.

Common Interests in Closely-Held Entities
R520.5     A firm, a network firm, an audit team member, or any of that individual's immediate family shall
            not have a business relationship involving the holding of an interest in a closely-held entity
            when an audit client or a director or officer of the client, or any group thereof, also holds an
                 interest in that entity, unless:
            (a)       The business relationship is insignificant to the firm, the network firm, or the individual
                      as applicable, and the client;
            (b)       The financial interest is immaterial to the investor or group of investors; and
            (c)       The financial interest does not give the investor, or group of investors, the ability to
                      control the closely-held entity.

Buying Goods or Services
520.6 A1    The purchase of goods and services from an audit client by a firm, a network firm, an audit
            team member, or any of that individual's immediate family does not usually create a threat to
            independence if the transaction is in the normal course of business and at arm's length.
            However, such transactions might be of such a nature and magnitude that they create a self-
            interest threat.

520.6 A2   Subject to the provisions of Companies Act, 2013, examples of actions that might eliminate
            such a self-interest threat include:

                      Eliminating or reducing the magnitude of the transaction.

                      Removing the individual from the audit team.
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SECTION 521
FAMILY AND PERSONAL RELATIONSHIPS
Introduction
521.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

521.2      Family or personal relationships with client personnel 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
General
521.3 A1   A self-interest, familiarity or intimidation threat might be created by family and personal
           relationships between an audit team member and a director or officer or, depending on their
           role, certain employees of the audit client.

521.3 A2   Factors that are relevant in evaluating the level of such threats include:
                  The individual's responsibilities on the audit team.
                  The role of the family member or other individual within the client, and the closeness of
                  the relationship.

Immediate Family of an Audit Team Member
521.4 A1   A self-interest, familiarity or intimidation threat is created when an immediate family member of
           an audit team member is an employee in a position to exert significant influence over the
           client's financial position, financial performance or cash flows.
521.4 A2   Factors that are relevant in evaluating the level of such threats include:
                  The position held by the immediate family member.
                  The role of the audit team member.
521.4 A3   An example of an action that might eliminate such a self-interest, familiarity or intimidation
           threat is removing the individual from the audit team.
521.4 A4   An example of an action that might be a safeguard to address such a self-interest, familiarity
           or intimidation threat is structuring the responsibilities of the audit team so that the audit team
           member does not deal with matters that are within the responsibility of the immediate family
           member.

R521.5     An individual shall not participate as an audit team member when any of that individual's
           immediate family:

           (a)    Is a director or officer of the audit client;
           (b)    Is an employee in a position to exert significant influence over the preparation of the
                  client's accounting records or the financial statements on which the firm will express an
                  opinion; or
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            (c)   Was in such position during any period covered by the engagement or the financial
                  statements.

           Additionally, under Companies Act, 2013, where applicable, as per Sec 141 (3)(f) of the
           Companies Act, 2013, an individual practitioner, sole proprietor or the firm is ineligible from
           being appointed as an auditor of a Company where relative of an individual practitioner, sole
           proprietor or partner (as the case may be) is a director or is in the employment of the company
           as a director or key managerial personnel as defined under the Companies Act, 2013.


Close Family of an Audit Team Member
521.6 A1    A self-interest, familiarity or intimidation threat is created when a close family member of an
            audit team member is:

            (a)   A director or officer of the audit client; or
            (b)   An employee in a position to exert significant influence over the preparation of the client's
                  accounting records or the financial statements on which the firm will express an opinion.

521.6 A2    Factors that are relevant in evaluating the level of such threats include:
                  The nature of the relationship between the audit team member and the close family
                  member.

                  The position held by the close family member.
                  The role of the audit team member.
521.6 A3    An example of an action that might eliminate such a self-interest, familiarity or intimidation
            threat is removing the individual from the audit team.

521.6 A4    An example of an action that might be a safeguard to address such a self-interest, familiarity
            or intimidation threat is structuring the responsibilities of the audit team so that the audit team
            member does not deal with matters that are within the responsibility of the close family member.
521.6 A5    Additionally, under Companies Act, 2013, where applicable, as per Sec 141 (3)(f) of the
            Companies Act, 2013, an individual practitioner, sole proprietor or the firm is ineligible from
            being appointed as an auditor of a Company where relative of an individual practitioner, sole
            proprietor or partner (as the case may be) is a director or is in the employment of the company
            as a director or key managerial personnel as defined under the Companies Act, 2013.

Other Close Relationships of an Audit Team Member
R521.7      An audit team member shall consult in accordance with firm policies and procedures if the audit
            team member has a close relationship with an individual who is not an immediate or close
            family member, but who is:
            (a)   A director or officer of the audit client; or

            (b)   An employee in a position to exert significant influence over the preparation of the client's
                  accounting records or the financial statements on which the firm will express an opinion.
521.7 A1    Factors that are relevant in evaluating the level of a self-interest, familiarity or intimidation threat
            created by such a relationship include:
                  The nature of the relationship between the individual and the audit team member.
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                   The position the individual holds with the client.
                   The role of the audit team member.

 521.7 A2   An example of an action that might eliminate such a self-interest, familiarity or intimidation
            threat is removing the individual from the audit team.

 521.7 A3   An example of an action that might be a safeguard to address such a self-interest, familiarity
            or intimidation threat is structuring the responsibilities of the audit team so that the audit team
            member does not deal with matters that are within the responsibility of the individual with whom
            the audit team member has a close relationship.

521.7 A4     Additionally, under Companies Act, 2013, where applicable, as per Sec 141 (3)(f) of the
             Companies Act, 2013, an individual practitioner, sole proprietor or the firm is ineligible from
             being appointed as an auditor of a Company where relative of an individual practitioner, sole
             proprietor or partner (as the case may be) is a director or is in the employment of the company
             as a director or key managerial personnel as defined under the Companies Act, 2013

 Relationships of Partners and Employees of the Firm
 R521.8     Partners and employees of the firm shall consult in accordance with firm policies and
            procedures if they are aware of a personal or family relationship between:
            (a)    A partner or employee of the firm or network firm who is not an audit team member; and
            (b)    A director or officer of the audit client or an employee of the audit client in a position to
                   exert significant influence over the preparation of the client's accounting records or the
                   financial statements on which the firm will express an opinion.

 521.8 A1   Factors that are relevant in evaluating the level of a self-interest, familiarity or intimidation threat
            created by such a relationship include:
                   The nature of the relationship between the partner or employee of the firm and the
                   director or officer or employee of the client.

                   The degree of interaction of the partner or employee of the firm with the audit team.
                   The position of the partner or employee within the firm.
                   The position the individual holds with the client.
 521.8 A2   Examples of actions that might be safeguards to address such self-interest, familiarity or
            intimidation threats include:

                   Structuring the partner's or employee's responsibilities to reduce any potential influence
                   over the audit engagement.
                   Having an appropriate reviewer review the relevant audit work performed.
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SECTION 522
RECENT SERVICE WITH AN AUDIT CLIENT
Introduction
522.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.
522.2       If an audit team member has recently served as a director or officer, or employee of the audit
            client, a self-interest, self-review or familiarity threat might be created. This section sets out
            specific requirements and application material relevant to applying the conceptual framework
            in such circumstances.

Requirements and Application Material
Service During Period Covered by the Audit Report
R522.3 The audit team shall not include an individual who, during the period covered by the audit
          report:

            (a)   Had served as a director or officer of the audit client; or
            (b)   Was an employee in a position to exert significant influence over the preparation of the
                  client's accounting records or the financial statements on which the firm will express an
                  opinion.

Service Prior to Period Covered by the Audit Report
522.4 A1   A self-interest, self-review or familiarity threat might be created if, before the period covered by
            the audit report, an audit team member:
            (a)   Had served as a director or officer of the audit client; or
            (b)   Was an employee in a position to exert significant influence over the preparation of the
                  client's accounting records or financial statements on which the firm will express an
                  opinion.
            For example, a threat would be created if a decision made or work performed by the individual
            in the prior period, while employed by the client, is to be evaluated in the current period as part
            of the current audit engagement.

522.4 A2    Factors that are relevant in evaluating the level of such threats include:
                  The position the individual held with the client.
                  The length of time since the individual left the client.
                  The role of the audit team member.
522.4 A3   An example of an action that might be a safeguard to address such a self-interest, self-review
           or familiarity threat is having an appropriate reviewer review the work performed by the audit
           team member.
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SECTION 523
SERVING AS A DIRECTOR OR OFFICER OF AN AUDIT CLIENT
Introduction
 523.1      Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.
 523.2      Serving as a director or officer of an audit client creates self-review and self-interest threats.
            This section sets out specific requirements and application material relevant to applying the
            conceptual framework in such circumstances.

Requirements and Application Material
Service as Director or Officer

R523.3      A partner or employee of the firm or a network firm shall not serve as a director or officer of an
            audit client of the firm.

            Further, as per Section 141(3) (b) of the Companies Act, 2013, an officer or employee of the
            company or a person who is a partner, or who is in the employment, of an officer or
            employee of the company, shall not be eligible for appointment as an auditor of a company.

Service as Company Secretary
R523.4     A partner or employee of the firm or a network firm shall not serve as Company Secretary for
           an audit client of the firm, unless:

           (a)    This practice is specifically permitted under local law, professional rules or practice;

           (b)    Management makes all relevant decisions; and
           (c)    The duties and activities performed are limited to those of a routine and administrative
                  nature, such as preparing minutes and maintaining statutory returns.

523.4 A1    Duties of Company Secretary might range from: administrative duties (such as personnel
            management and the maintenance of company records and registers) to duties as diverse as
            ensuring that the company complies with regulations or providing advice on corporate
            governance matters. Usually this position is seen to imply a close association with the entity.
            Therefore, a threat is created if a partner or employee of the firm or a network firm serves as
            Company Secretary for an audit client. (More information on providing non-assurance
            services to an audit client is set out in Section 600, Provision of Non-assurance Services to
            an Audit Client.)
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SECTION 524
EMPLOYMENT WITH AN AUDIT CLIENT
Introduction
524.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.

524.2       Employment relationships with an audit 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 Audit Clients
524.3 A1   A familiarity or intimidation threat might be created if any of the following individuals have been
           an audit team member or partner of the firm or a network firm:

                    A director or officer of the audit client.
                    An employee in a position to exert significant influence over the preparation of the client's
                    accounting records or the financial statements on which the firm will express an opinion.

Former Partner or Audit Team Member Restrictions

R524.4      The firm shall ensure that no significant connection remains between the firm or a network firm
            and:

            (a)     A former partner who has joined an audit client of the firm; or
            (b)     A former audit team member who has joined the audit client,
            if either has joined the audit client as:

            (i)     A director or officer; or

            (ii)    An employee in a position to exert significant influence over the preparation of the client's
                    accounting records or the financial statements on which the firm will express an opinion.

            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.
524.4 A1   Even if the requirements of paragraph R524.4 are met, a familiarity or intimidation threat might
            still be created.
524.4 A2    A familiarity or intimidation threat might also be created if a former partner of the firm or network
            firm has joined an entity in one of the positions described in paragraph 524.3 A1 and the entity
            subsequently becomes an audit client of the firm.
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524.4 A3     Factors that are relevant in evaluating the level of such threats include:
                     The position the individual has taken at the client.
                     Any involvement the individual will have with the audit team.
                     The length of time since the individual was an audit team member or partner of the firm
                     or network firm.

                     The former position of the individual within the audit team, firm or network firm. An
                     example is whether the individual was responsible for maintaining regular contact with
                     the client's management or those charged with governance.

524.4 A4     Examples of actions that might be safeguards to address such familiarity or intimidation threats
             include:
                     Modifying the audit plan.
                     Assigning to the audit team individuals who have sufficient experience relative to the
                     individual who has joined the client.

                     Having an appropriate reviewer review the work of the former audit team member.



Audit Team Members Entering Employment with a Client
R524.5       A firm or network firm shall have policies and procedures that require audit team members to
             notify the firm or network firm when entering employment negotiations with an audit client.

524.5 A1     A self-interest threat is created when an audit team member participates in the audit
             engagement while knowing that the audit team member will, or might, join the client at some
             time in the future.

524.5 A2     An example of an action that might eliminate such a self-interest threat is removing the
             individual from the audit team.

524.5 A3     An example of an action that might be a safeguard to address such a self-interest threat is
             having an appropriate reviewer review any significant judgments made by that individual while
             on the team.

Audit Clients that are Public Interest Entities

Key Audit Partners
R524.6       Subject to paragraph R524.8, if an individual who was a key audit partner with respect to an
             audit client that is a public interest entity joins the client as:

             (a)     A director or officer; or
             (b)     An employee in a position to exert significant influence over the preparation of the client's
                     accounting records or the financial statements on which the firm will express an opinion,

             independence is compromised unless, subsequent to the individual ceasing to be a key audit
             partner:
             (i)     The audit client has issued audited financial statements covering a period of not less
                     than twelve months; and
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            (ii)    The individual was not an audit team member with respect to the audit of those financial
                    statements.

Senior or Managing Partner (Chief Executive or Equivalent) of the Firm
R524.7      Subject to paragraph R524.8, if an individual who was the Senior or Managing Partner (Chief
            Executive or equivalent) of the firm joins an audit 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
                    accounting records or the financial statements on which the firm will express an opinion,

                   independence is compromised, unless twelve months have passed since the individual
                   was the Senior or Managing Partner (Chief Executive or equivalent) of the firm.

Business Combinations
R524.8      As an exception to paragraphs R524.6 and R524.7, 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 partner 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 partner is not material to the firm or network firm as
                    applicable;
            (c)     The former partner 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 partner's position held with the audit client with those
                    charged with governance.
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SECTION 525
TEMPORARY PERSONNEL ASSIGNMENTS
Introduction
525.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

525.2      The loan of personnel to an audit client might create a self-review, advocacy or familiarity
           threat. This section sets out specific requirements and application material relevant to applying
           the conceptual framework in such circumstances.

Requirements and Application Material
General
525.3 A1   Examples of actions that might be safeguards to address threats created by the loan of
           personnel by a firm or a network firm to an audit client include:

                 Conducting an additional review of the work performed by the loaned personnel might
                 address a self-review threat.
                 Not including the loaned personnel as an audit team member might address a familiarity
                 or advocacy threat.

                 Not giving the loaned personnel audit responsibility for any function or activity that the
                 personnel performed during the loaned personnel assignment might address a self-
                 review threat.

525.3 A2   When familiarity and advocacy threats are created by the loan of personnel by a firm or a
           network firm to an audit client, such that the firm or the network firm becomes too closely
           aligned with the views and interests of management, safeguards are often not available.

R525.4     A firm or network firm shall not loan personnel to an audit client unless:
           (a)   Such assistance is provided only for a short period of time;

           (b)   The personnel are not involved in providing non-assurance services that would not be
                 permitted under Section 600 and its subsections; and

           (c)   The personnel do not assume management responsibilities and the audit client is
                 responsible for directing and supervising the activities of the personnel.
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SECTION 540
LONG ASSOCIATION OF PERSONNEL (INCLUDING PARTNER ROTATION) WITH AN
AUDIT CLIENT
Introduction
540.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.

540.2       When an individual is involved in an audit engagement over a long period of time, familiarity and
            self-interest threats might be created. This section sets out requirements and application material
            relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material
All Audit Clients
540.3 A1    Although an understanding of an audit client and its environment is fundamental to audit
            quality, a familiarity threat might be created as a result of an individual's long association as an
            audit team member with:
            (a)     The audit client and its operations;
            (b)     The audit client's senior management; or

            (c)     The financial statements on which the firm will express an opinion or the financial
                    information which forms the basis of the financial statements.
540.3 A2 A self-interest threat might be created as a result of an individual's concern about losing a
           longstanding client or an interest in maintaining a close personal relationship with a member of
           senior management or those charged with governance. Such a threat might influence the
           individual's judgment inappropriately.

540.3 A3 Factors that are relevant to evaluating the level of such familiarity or self-interest threats
           include:
            (a)     In relation to the individual:
                           The overall length of the individual's relationship with the client, including if such
                           relationship existed while the individual was at a prior firm.

                           How long the individual has been an engagement team member, and the nature
                           of the roles performed.
                           The extent to which the work of the individual is directed, reviewed and supervised
                           by more senior personnel.

                           The extent to which the individual, due to the individual's seniority, has the ability
                           to influence the outcome of the audit, for example, by making key decisions or
                           directing the work of other engagement team members.

                           The closeness of the individual's personal relationship with senior management or
                           those charged with governance.
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                           The nature, frequency and extent of the interaction between the individual and
                           senior management or those charged with governance.

             (b)    In relation to the audit client:
                           The nature or complexity of the client's accounting and financial reporting issues
                           and whether they have changed.

                           Whether there have been any recent changes in senior management or those
                           charged with governance.

                           Whether there have been any structural changes in the client's organization which
                           impact the nature, frequency and extent of interactions the individual might have
                           with senior management or those charged with governance.
540.3 A4     The combination of two or more factors might increase or reduce the level of the threats. For
             example, familiarity threats created over time by the increasingly close relationship between an
             individual and a member of the client's senior management would be reduced by the departure of
             that member of the client's senior management.

540.3 A5    An example of an action that might eliminate the familiarity and self-interest threats created by
            an individual being involved in an audit engagement over a long period of time would be rotating
            the individual off the audit team.
540.3 A6 Examples of actions that might be safeguards to address such familiarity or self-interest threats
          include:

                    Changing the role of the individual on the audit team or the nature and extent of the tasks
                    the individual performs.
                    Having an appropriate reviewer who was not an audit team member review the work of
                    the individual.

                    Performing regular independent internal or external quality reviews of the engagement.
R540.4       If a firm decides that the level of the threats created can only be addressed by rotating the individual
             off the audit team, the firm shall determine an appropriate period during which the individual shall
             not:
             (a)    Be a member of the engagement team for the audit engagement;

             (b)    Provide quality control for the audit engagement; or
             (c)    Exert direct influence on the outcome of the audit engagement.
             The period shall be of sufficient duration to allow the familiarity and self-interest threats to be
             addressed. In the case of a public interest entity, paragraphs R540.5 to R540.20 also apply.

Audit Clients that are Public Interest Entities
R540.5       Subject to paragraphs R540.7 to R540.9, in respect of an audit of a public interest entity, an
             individual shall not act in any of the following roles, or a combination of such roles, for a period
             of more than seven cumulative years (the "time-on" period):
             (a)    The engagement partner;

             (b)    The individual appointed as responsible for the engagement quality control review; or
             (c)    Any other key audit partner role.
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             After the time-on period, the individual shall serve a "cooling-off" period in accordance with the
             provisions in paragraphs R540.11 to R540.19.
 R540.6      In calculating the time-on period, the count of years shall not be restarted unless the individual
             ceases to act in any one of the roles in paragraph R540.5(a) to (c) for a minimum period. This
             minimum period is a consecutive period equal to at least the cooling-off period determined in
             accordance with paragraphs R540.11 to R540.13 as applicable to the role in which the
             individual served in the year immediately before ceasing such involvement.
 540.6 A1    For example, an individual who served as engagement partner for four years followed by three
             years off can only act thereafter as a key audit partner on the same audit engagement for three
             further years (making a total of seven cumulative years). Thereafter, that individual is required
             to cool off in accordance with paragraph R540.14.
 R540.7      As an exception to paragraph R540.5, key audit partners whose continuity is especially important
             to audit quality may, in rare cases due to unforeseen circumstances outside the firm's control, and
             with the concurrence of those charged with governance, be permitted to serve an additional year
             as a key audit partner as long as the threat to independence can be eliminated or reduced to an
             acceptable level.

 540.7 A1    For example, a key audit partner may remain in that role on the audit team for up to one additional
             year in circumstances where, due to unforeseen events, a required rotation was not possible, as
             might be the case due to serious illness of the intended engagement partner. In such
             circumstances, this will involve the firm discussing with those charged with governance the reasons
             why the planned rotation cannot take place and the need for any safeguards to reduce any threat
             created.

 R540.8      If an audit client becomes a public interest entity, a firm shall take into account the length of
             time an individual has served the audit client as a key audit partner before the client becomes
             a public interest entity in determining the timing of the rotation. If the individual has served the
             audit client as a key audit partner for a period of five cumulative years or less when the client
             becomes a public interest entity, the number of years the individual may continue to serve the
             client in that capacity before rotating off the engagement is seven years less the number of
             years already served. As an exception to paragraph R540.5, if the individual has served the
             audit client as a key audit partner for a period of six or more cumulative years when the client
             becomes a public interest entity, the individual may continue to serve in that capacity with the
             concurrence of those charged with governance for a maximum of two additional years before
             rotating off the engagement.


R540.9      When a firm has only a few people with the necessary knowledge and experience to serve as a
            key audit partner on the audit of a public interest entity, rotation of key audit partners might not
            be possible. In these circumstances the firm should apply other safeguards to reduce the threat
            to an acceptable level. Such safeguards would include involving an additional professional
            accountant who was not otherwise associated with the audit team to review the work done or
            otherwise advise as necessary. This individual could be someone from outside the firm or
            someone within the firm who was not otherwise associated with the audit team.
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Other Considerations Relating to the Time-on Period

R540.10     In evaluating the threats created by an individual's long association with an audit engagement,
            a firm shall give particular consideration to the roles undertaken and the length of an individual's
            association with the audit engagement prior to the individual becoming a key audit partner.
540.10 A1 There might be situations where the firm, in applying the conceptual framework, concludes that
          it is not appropriate for an individual who is a key audit partner to continue in that role even
          though the length of time served as a key audit partner is less than seven years.

Cooling-off Period

R540.11     If the individual acted as the engagement partner for seven cumulative years, the cooling-off
            period shall be five consecutive years.
R540.12     Where the individual has been appointed as responsible for the engagement quality control review
            and has acted in that capacity for seven cumulative years, the cooling-off period shall be three
            consecutive years.
R540.13     If the individual has acted as a key audit partner other than in the capacities set out in paragraphs
            R540.11 and R540.12 for seven cumulative years, the cooling-off period shall be two consecutive
            years.

Service in a combination of key audit partner roles

R540.14     If the individual acted in a combination of key audit partner roles and served as the engagement
            partner for four or more cumulative years, the cooling-off period shall be five consecutive years.
R540.15     Subject to paragraph R540.16(a), if the individual acted in a combination of key audit partner
            roles and served as the key audit partner responsible for the engagement quality control review
            for four or more cumulative years, the cooling-off period shall be three consecutive years.
R540.16     If an individual has acted in a combination of engagement partner and engagement quality control
            review roles for four or more cumulative years during the time-on period, the cooling-off period
            shall:
            (a)      As an exception to paragraph R540.15, be five consecutive years where the individual has
                     been the engagement partner for three or more years; or
            (b)      Be three consecutive years in the case of any other combination.

R540.17     If the individual acted in any combination of key audit partner roles other than those addressed in
            paragraphs R540.14 to R540.16, the cooling-off period shall be two consecutive years.

Service at a Prior Firm

R540.18     In determining the number of years that an individual has been a key audit partner as set out
            in paragraph R540.5, the length of the relationship shall, where relevant, include time while the
            individual was a key audit partner on that engagement at a prior firm.
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 Shorter Cooling-off Period Established by Law or Regulation
 R540.19      Where a legislative or regulatory body (or organization authorized or recognized by such
              legislative or regulatory body) has established a cooling-off period for an engagement partner
              of less than five consecutive years, the higher of that period or three years may be substituted
              for the cooling-off period of five consecutive years specified in paragraphs R540.11, R540.14
              and R540.16(a) provided that the applicable time-on period does not exceed seven years.

 Restrictions on Activities During the Cooling-off Period

 R540.20      For the duration of the relevant cooling-off period, the individual shall not:

              (a)    Be an engagement team member or provide quality control for the audit engagement;

              (b)    Consult with the engagement team or the client regarding technical or industry-specific
                     issues, transactions or events affecting the audit engagement (other than discussions with
                     the engagement team limited to work undertaken or conclusions reached in the last year of
                     the individual's time-on period where this remains relevant to the audit);
              (c)    Be responsible for leading or coordinating the professional services provided by the firm
                     or a network firm to the audit client, or overseeing the relationship of the firm or a network
                     firm with the audit client; or
              (d)    Undertake any other role or activity not referred to above with respect to the audit client,
                     including the provision of non-assurance services that would result in the individual:
                     (i)    Having significant or frequent interaction with senior management or those
                            charged with governance; or
                     (ii)   Exerting direct influence on the outcome of the audit engagement.

 540.20 A1 The provisions of paragraph R540.20 are not intended to prevent the individual from assuming
           a leadership role in the firm or a network firm, such as that of the Senior or Managing Partner
           (Chief Executive or equivalent).

 Provisions applicable to audit clients under other regulations
 540.21       In case of an audit client being a company, in accordance with the Companies, Act, 2013, the
              members of a company may resolve to provide that in the Firm appointed by them, the
              auditing partner and its team shall be rotated at such intervals as may be resolved by the
              members. If they resolve to provide shorter time on period, such shorter period will prevail.
 R540.22      Additional rotation requirements are prescribed by certain regulators such as Reserve Bank of
               India for certain NBFCs5, National Housing Board for Housing Finance Companies6, and any


5 In accordance with the Non-Banking Financial Companies  Corporate Governance (Reserve Bank) Directions, 2015,
issued by the Reserve Bank of India vide Notification No.DNBR. 019/CGM (CDS)-2015 dated April 10, 2015, the rotation
requirements are as follows:

Extent of the Directions
(i) These Directions shall apply to every non-deposit accepting Non-Banking Financial Company with asset size of
Rs.500 crore and above (NBFCs-ND-SI), as per its last audited balance sheet, and all deposit accepting Non-Banking
Financial Companies (NBFCs-D), henceforth called as Applicable NBFCs.

(ii) The provisions of these Directions shall not apply to a Systemically Important Core Investment Company as
defined in the Core Investment Companies (Reserve Bank) Directions, 2011.
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               other, subject to amendments as may be made from time to time.




 Rotation of partners of the Statutory Auditors Audit Firm
All Applicable NBFCs shall rotate the partner/s of the Chartered Accountant firm conducting the audit, every three
years so that same partner does not conduct audit of the company continuously for more than a period of three
years. However, the partner so rotated will be eligible for conducting the audit of the NBFC after an interval of three
years, if the NBFC, so decides. NBFCs shall incorporate appropriate terms in the letter of appointment of the firm of
auditors and ensure its compliance.

6
 In accordance with the "Housing Finance Companies Corporate Governance (National Housing Bank) Directions,
2016 Directions issued vide Notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated 9 February 2017, the rotation
requirements are as follows:
Extent of the Directions
These Directions shall apply to every non-public deposit accepting Housing Finance Company (HFC) with assets size of
50 crore and above, as per the last audited balance sheet, and all public deposit accepting / holding Housing Finance
Companies (HFCs), henceforth called Applicable HFCs.
Rotation of partners of the Statutory Auditors Audit Firm
Rotation of partners of the Statutory Auditors Audit Firm All Applicable HFCs shall rotate the partner/s of the
Chartered Accountant firm conducting the audit, every three years so that same partner does not conduct audit of
the company continuously for more than a period of three years. However, the partner so rotated will be eligible for
conducting the audit of the HFC after an interval of three years, if the HFC, so decides. HFCs shall incorporate
appropriate terms in the letter of appointment of the firm of auditors and ensure its compliance.
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    SECTION 550
    AUDITOR ROTATION
    Introduction

    Auditor rotation requirements prescribed under various regulations are set out below. This is not an
    exhaustive list. Members shall comply with requirements stipulated by any other regulator not covered
    hereunder. Further, these regulations are subject to amendments, as may be made from time to time.

    Auditor rotation requirements under the Companies Act, 2013

    In accordance with Section 139(2) of the Companies Act, 2013, no listed company or a company
    belonging to such class or classes of companies as may be prescribed7, shall appoint or re-appoint--
    (a) an individual as auditor for more than one term of five consecutive years; and
    (b) an audit firm as auditor for more than two terms of five consecutive years:

    8
    [Provided that--


    (i) an individual auditor who has completed his term under clause (a) shall not be eligible for re-
    appointment as auditor in the same company for five years from the completion of his term;
    (ii) an audit firm which has completed its term under clause (b), shall not be eligible for re-appointment as
    auditor in the same company for five years from the completion of such term:
    Provided further that as on the date of appointment no audit firm having a common partner or partners to
    the other audit firm, whose tenure has expired in a company immediately preceding the financial year, shall
    be appointed as auditor of the same company for a period of five years:
    Provided also that every company, existing on or before the commencement of this Act which is required
    to comply with the provisions of this sub-section, shall comply with requirements of this sub-section within
    a period which shall not be later than the date of the first annual general meeting of the company held,
    within the period specified under sub-section (1) of section 96, after three years from the date of
    commencement of this Act.
    Provided also that, nothing contained in this sub-section shall prejudice the right of the company to
    remove an auditor or the right of the auditor to resign from such office of the company


    For detailed provisions, please refer to the complete Section 139 of the Companies Act 2013

    Auditor rotation requirements for stock brokers

    In accordance with the SEBI circular SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 issued dated 26 September
    2016, the prescribed rotation requirements are as under:

    5.3. No stock broker shall appoint or re-appoint--

7
 For the purposes of sub-section (2) of section 139, the class of companies shall mean the following classes
of companies excluding one person companies and small companies:-
(a) all unlisted public companies having paid up share capital of rupees ten crore or more;
(b) all private limited companies having paid up share capital of rupees fifty crore or more
(c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but
having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.
8
 In case of Specified IFSC Private Company- All provisos to sub section (2) of section 139 shall not apply. - Notification
Dated 4th January 2017.
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    a) an individual as statutory auditor for more than one term of five consecutive years;
    b) an audit firm as statutory auditor for more than two terms of five consecutive years:

Provided that--
5.4. An individual statutory auditor who has completed his term under clause 5.3 (a) above shall not be
eligible for re-appointment as statutory auditor in the same stock broker for five years from the completion of
his term.

5.5. An statutory audit firm which has completed its term under clause 5.3 (b) above, shall not be eligible for
re-appointment as statutory auditor in the same stock broker for five years from the completion of such term:

5.6. Provided further that as on the date of appointment no statutory audit firm having a common partner or
partners to the other audit firm, whose tenure has expired in a stock broker immediately preceding the
financial year, shall be appointed as statutory auditor of the same stock broker for a period of five years:

5.7. The above provisions shall be applicable from April 01, 2017

Auditor rotation requiremnts for Mutual funds

In accordance with Para B(2) of the SEBI circular SEBI/HO/IMD/DF2/CIR/P/2017/125 issued dated 30
November 2017, the prescribed rotation requirements are as under:

With respect to appointment of auditors in terms of Regulation 55 (1) of SEBI (MFs) Regulation, 1996, it has
been decided that:

i    No mutual fund shall appoint an auditor for more than 2 terms of maximum five consecutive years. Such
     auditor may be re-appointed after cooling off period of 5 years.

ii. Further, during the cooling-off period of five years, the incoming auditor may not include:

     a. Any firm that has common partner(s) with the outgoing audit firm

     b. Any associate / affiliate firm(s) of the outgoing audit firm which are under the same network of audit
        firms wherein the term "same network" includes the firms operating or functioning, hitherto or in future,
        under the same brand name, trade name or common control

iii. Existing auditors may be appointed for a maximum of 10 years (including all preceding years for which an
     auditor has been appointed in terms of Regulation 55 (1) of SEBI (Mutual Funds) Regulation, 1996). In
     this respect, the following may be noted:

     a. Auditors who have conducted audit of the Mutual Fund for less than 9 years (as on date of issuance of
        this circular) may continue for the residual period of service.
     b. Auditors who have conducted audit of the Mutual Fund for 9 years or more (as on date of issuance of
        this circular) may continue for a maximum of 1 year from date of issuance of this circular.
     c. Such auditors shall subsequently be eligible for re-appointment after a cooling-off period of 5 years, in
        terms of Para B (2) (i) and Para B (2) (ii) above.

Statutory Central Auditors (SCA) rotation requirements for Indian Private Sector Banks/ All Foreign
Banks operating in India

In accordance with the RBI circular DBS.ARS.BC.04/08.91.001/2017-18 issued dated 27 July 2017, an audit
firm, subject to its fulfilling the prescribed eligibility norms will be allowed to continue as the SCA for a
particular bank for a period of four years and, thereafter, after completing its four year tenure in a particular
private/foreign bank, will not be eligible for appointment as SCA of the same bank for a period of six years.
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Auditor rotation requirements for appointed under Employees' provident funds scheme,
1952
As per paragraph 24(c) of the Employees' provident funds scheme, 1952, the same auditors should not be
appointed for two consecutive years and not more than two years in a block of six years.
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SECTION 600
PROVISION OF NON-ASSURANCE SERVICES TO AN AUDIT CLIENT
Introduction
600.1      Firms are required to comply with the fundamental principles, be independent, and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.
600.2      Firms and network firms might provide a range of non-assurance services to their audit clients,
           consistent with their skills and expertise. Providing non-assurance services to audit clients
           might create threats to compliance with the fundamental principles and threats to
           independence.
600.3      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 audit clients. The subsections that follow set out specific requirements
           and application material relevant when a firm or network firm provides certain non-assurance
           services to audit clients and indicate the types of threats that might be created as a result.
           Some of the subsections include requirements that expressly prohibit a firm or network firm
           from providing certain services to an audit client in certain circumstances because the threats
           created cannot be addressed by applying safeguards.

Requirements and Application Material
General
R600.4     Before a firm or a network firm accepts an engagement to provide a non-assurance service to
           an audit client, the firm shall determine whether providing such a service might create a threat
           to independence.

600.4 A1   The requirements and application material in this section assist the firm in analyzing certain
           types of non-assurance services and the related threats that might be created if a firm or
           network firm provides non-assurance services to an audit client.
           Additionally, Section 141(3) (i) of the Companies Act, 2013 provides that a person who,
           directly or indirectly, renders any service referred to in section 144 to the company or its
           holding company or its subsidiary company shall not be eligible for appointment as an auditor
           of a company,
           As per Section 144 of the Companies Act, 2013, an auditor appointed under the Companies
           Act 2013 shall provide to the company only such other services as are approved by the
           Board of Directors or the audit committee, as the case may be, but which shall not include
           any of the following services (whether such services are rendered directly or indirectly to the
           company or its holding company or subsidiary company), namely:--
           (a) accounting and book keeping services;
           (b) internal audit;
           (c) design and implementation of any financial information system;
           (d) actuarial services;
           (e) investment advisory services;
           (f) investment banking services;
           (g) rendering of outsourced financial services;
           (h) management services; and
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            (i) any other kind of services as may be prescribed:


            Explanation.--For the purposes of this sub-section, the term "directly or indirectly" shall include
            rendering of services by the auditor,--
            (i) in case of auditor being an individual, either himself or through his relative or any other
            person connected or associated with such individual or through any other entity, whatsoever,
            in which such individual has significant influence or control, or whose name or trade mark or
            brand is used by such individual;
            (ii) in case of auditor being a firm, either itself or through any of its partners or through its
            parent, subsidiary or associate entity or through any other entity, whatsoever, in which the
            firm or any partner of the firm has significant influence or control, or whose name or trade
            mark or brand is used by the firm or any of its partners.
600.4 A2    New business practices, the evolution of financial markets and changes in information
            technology, are among the developments that make it impossible to draw up an all-inclusive
            list of non-assurance services that might be provided to an audit client. As a result, the Code
            does not include an exhaustive list of all non-assurance services that might be provided to an
            audit client.

Evaluating Threats
600.5 A1 Factors that are relevant in evaluating the level of threats created by providing a non-assurance
         service to an audit client include:

                     The nature, scope and purpose of the service.
                     The degree of reliance that will be placed on the outcome of the service as part of the
                     audit.

                     The legal and regulatory environment in which the service is provided.

                     Whether the outcome of the service will affect matters reflected in the financial
                     statements on which the firm will express an opinion, and, if so:

                  o         The extent to which the outcome of the service will have a material effect on the
                            financial statements.

                  o         The degree of subjectivity involved in determining the appropriate amounts or
                            treatment for those matters reflected in the financial statements.
                     The level of expertise of the client's management and employees with respect to the type
                     of service provided.

                     The extent of the client's involvement in determining significant matters of judgment.
                     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         Accounting records or financial statements on which the firm will express an
                            opinion.

                  o         Internal controls over financial reporting.
                     Whether the client is a public interest entity. For example, providing a non-assurance
                     service to an audit client that is a public interest entity might be perceived to result in a
                     higher level of a threat.
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600.5 A2    Subsections 601 to 610 include examples of additional factors that are relevant in evaluating
            the level of threats created by providing the non-assurance services set out in those
            subsections.

Materiality in Relation to Financial Statements
600.5 A3    Subsections 601 to 610 refer to materiality in relation to an audit client's financial statements.
            The concept of materiality in relation to an audit is addressed in SA 320, Materiality in Planning
            and Performing an Audit, and in relation to a review in SRE 2400 (Revised), Engagements to
            Review Historical Financial Statements. 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 information needs of users.

Multiple Non-assurance Services Provided to the Same Audit Client
600.5 A4    A firm or network firm might provide multiple non-assurance services to an audit client. In these
            circumstances the consideration of the combined effect of threats created by providing those
            services is relevant to the firm's evaluation of threats.

Addressing Threats
600.6 A1    Subsections 601 to 610 include examples of actions, including safeguards, that might address
            threats to independence created by providing those non-assurance services when threats are
            not at an acceptable level. Those examples are not exhaustive.
600.6 A2 Some of the subsections include requirements that expressly prohibit a firm or network firm
           from providing certain services to an audit client in certain circumstances because the threats
           created cannot be addressed by applying safeguards.

600.6 A3    Paragraph 120.10 A2 includes a description of safeguards. In relation to providing non-
            assurance services to audit clients, safeguards are actions, individually or in combination, that
            the firm takes that effectively reduce threats to independence to an acceptable level. In some
            situations, when a threat is created by providing a non-assurance service to an audit client,
            safeguards might not be available. In such situations, the application of the conceptual
            framework set out in Section 120 requires the firm to decline or end the non-assurance service
            or the audit engagement.

Prohibition on Assuming Management Responsibilities

R600.7      A firm or a network firm shall not assume a management responsibility for an audit client.
            Further, under Section 144 of the Companies Act, 2013, where applicable, the restriction also
            applies to the holding company and subsidiary company of such audit client.

600.7 A1    Management responsibilities involve controlling, leading and directing an entity, including
            making decisions regarding the acquisition, deployment and control of human, financial,
            technological, physical and intangible resources.
600.7 A2    Providing a non-assurance service to an audit client creates self-review and self-interest
            threats if the firm or network firm assumes a management responsibility when performing the
            service. Assuming a management responsibility also creates a familiarity threat and might
            create an advocacy threat because the firm or network firm becomes too closely aligned with
            the views and interests of management.

600.7 A3    Determining whether an activity is a management responsibility depends on the circumstances
            and requires the exercise of professional judgment. Examples of activities that would be
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            considered a management responsibility include:
                  Setting policies and strategic direction.
                  Hiring or dismissing employees.
                  Directing and taking responsibility for the actions of employees in relation to the
                  employees' work for the entity.
                  Authorizing transactions.
                  Controlling or managing bank accounts or investments.
                  Deciding which recommendations of the firm or network firm or other third parties to
                  implement.

                  Reporting to those charged with governance on behalf of management.
                  Taking responsibility for:
                  o      The preparation and fair presentation of the financial statements in accordance
                         with the applicable financial reporting framework.

                  o      Designing, implementing, monitoring or maintaining internal control.
600.7 A4    Providing advice and recommendations to assist the management of an audit client in
            discharging its responsibilities is not assuming a management responsibility. (Ref: Para.
            R600.7 to 600.7 A3).
R600.8      Subject to applicable restrictions under Companies Act, 2013, to avoid assuming a
            management responsibility when providing any non-assurance service to an audit client, the
            firm shall be satisfied that client management makes all judgments and decisions that are
            the proper responsibility of management. This includes ensuring that the client's
            management:





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            (a)   Designates an individual who possesses suitable skill, knowledge and experience to be
                  responsible at all times for the client's decisions and to oversee the services. Such an
                  individual, preferably within senior management, would understand:
                   (i)    The objectives, nature and results of the services; and
                  (ii)    The respective client and firm or network firm responsibilities.

                  However, the individual is not required to possess the expertise to perform or re-perform
                  the services.
            (b)   Provides oversight of the services and evaluates the adequacy of the results of the
                  service performed for the client's purpose.

            (c)   Accepts responsibility for the actions, if any, to be taken arising from the results of the
                  services.

Providing Non-Assurance Services to an Audit Client that Later Becomes a Public Interest Entity
R600.9      A non-assurance service provided, either currently or previously, by a firm or a network firm to
            an audit client compromises the firm's independence when the client becomes a public interest
            entity unless:

            (a)   The previous non-assurance service complies with the provisions of this section that
                  relate to audit clients that are not public interest entities;
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            (b)     Non-assurance services currently in progress that are not permitted under this section
                    for audit clients that are public interest entities are ended before, or as soon as
                    practicable after, the client becomes a public interest entity; and
            (c)     The firm addresses threats that are created that are not at an acceptable level.

Considerations for Certain Related Entities
R600.10     This section includes requirements that prohibit firms and network firms from assuming
            management responsibilities or providing certain non-assurance services to audit clients. As
            an exception to those requirements, a firm or network firm may assume management
            responsibilities or provide certain non-assurance services that would otherwise be prohibited
            to the following related entities of the client on whose financial statements the firm will express
            an opinion:
            (a)     An entity that has direct or indirect control over the client (other than an engagement to
                    which Companies Act, 2013 applies);

            (b)     An entity with a direct financial interest in the client if that entity has significant influence
                    over the client and the interest in the client is material to such entity; or
            (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 financial statements 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 financial statements the firm will express an opinion;
            (iii)   The services do not create a self-review threat because the results of the services will
                    not be subject to audit procedures; and
            (iv)    The firm addresses other threats created by providing such services that are not at an
                    acceptable level.

SUBSECTION 601  ACCOUNTING AND BOOKKEEPING SERVICES

601.1 A1 Accounting and bookkeeping services comprise a broad range of services including:
          Preparing accounting records and financial statements.
          Recording transactions.
          Payroll services.

601.1 A2 Management is responsible for the preparation and fair presentation of the financial statements
          in accordance with the applicable financial reporting framework. These responsibilities include:
           Determining accounting policies and the accounting 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. Examples include:
                    o Purchase orders
                    o Payroll time records
                    o Customer orders
           Originating or changing journal entries.
           Determining or approving the account classifications of transactions.
 601.1 A3 The audit process necessitates dialogue between the firm and the management of the audit
          client, which might involve:
           Applying           accounting standards or policies and financial statement disclosure
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                 requirements.
                 Assessing the appropriateness of financial and accounting control and the methods used in
                 determining the stated amounts of assets and liabilities.
                 Proposing adjusting journal entries.

          These activities are considered to be a normal part of the audit process and do not usually
          create threats as long as the client is responsible for making decisions in the preparation of
          accounting records and financial statements.
601.1 A4 Similarly, the client might request technical assistance on matters such as resolving account
         reconciliation problems or analyzing and accumulating information for regulatory reporting. In
         addition, the client might request technical advice on accounting issues such as the conversion
         of existing financial statements from one financial reporting framework to another. Examples
         include:
            Complying with group accounting policies.
            Transitioning to a different financial reporting framework such as International Financial
              Reporting Standards.
         Such services do not usually create threats provided neither the firm nor network firm assumes a
         management responsibility for the client.

R. 601.2 As per the provisions of the Guidance Note on Independence of Auditors, it is not permitted to do
         the book keeping work of the Audit client. Further, under Companies Act, 2013, where applicable,
         the restriction also applies to the subsidiary company or holding Company of the audit client




SUBSECTION 602  ADMINISTRATIVE SERVICES
Introduction
602.1         Providing administrative services to an audit client does not usually create a threat.
602.2         In addition to the specific application material in this subsection, the requirements and
              application material in paragraphs 600.1 to R600.10 are relevant to applying the conceptual
              framework when providing administrative services.

Application Material
All Audit Clients
602.3 A1   Administrative services involve assisting clients with their routine or mechanical tasks within
            the normal course of operations. Such services require little to no professional judgment and
            are clerical in nature.
602.3 A2      Examples of administrative services include:

                     Word processing services.
                     Preparing administrative or statutory forms for client approval.
                     Submitting such forms as instructed by the client.
                     Monitoring statutory filing dates, and advising an audit client of those dates.


SUBSECTION 603  VALUATION SERVICES

Introduction
603.1         Providing valuation services to an audit client might create a self-review or advocacy threat.
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603.2        In addition to the specific requirements and application material in this subsection, the
             requirements and application material in paragraphs 600.1 to R600.10 are relevant to applying
             the conceptual framework when providing valuation services to an audit client. This subsection
             includes requirements that prohibit firms and network firms from providing certain valuation
             services to audit clients in some circumstances because the threats created cannot be
             addressed by applying safeguards.

Requirements and Application Material
All Audit Clients
603.3 A1     A valuation comprises 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 a business as a whole.

603.3 A2     If a firm or network firm is requested to perform a valuation to assist an audit client with its tax
             reporting obligations or for tax planning purposes and the results of the valuation will not have
             a direct effect on the financial statements, the application material set out in paragraphs 604.9
             A1 to 604.9 A5, relating to such services, applies.

603.3 A3     Factors that are relevant in evaluating the level of self-review or advocacy threats created by
             providing valuation services to an audit client include:

                    The use and purpose of the valuation report.
                    Whether the valuation report will be made public.
                    The extent of the client's involvement in determining and approving the valuation
                    methodology and other significant matters of judgment.

                    The degree of subjectivity inherent in the item for valuations involving standard or
                    established methodologies.

                    Whether the valuation will have a material effect on the financial statements.
                    The extent and clarity of the disclosures related to the valuation in the financial
                    statements.

                    The degree of dependence on future events of a nature that might create significant
                    volatility inherent in the amounts involved.
603.3 A4     Examples of actions that might be safeguards to address threats include:
                    Using professionals who are not audit 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
                    audit work or service performed might address a self-review threat.

Audit Clients that are Not Public Interest Entities
R603.4       A firm or a network firm shall not provide a valuation service to an audit client that is not a public
             interest entity if:
             (a)    The valuation involves a significant degree of subjectivity; and

             (b)    The valuation will have a material effect on the financial statements on which the firm will
                    express an opinion.
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603.4 A1     Certain valuations do not involve a significant degree of subjectivity. This is likely to be the case
             when the underlying assumptions are either established by law or regulation, or are widely
             accepted and 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 performed by two or more parties are not likely to be materially different.

Audit Clients that are Public Interest Entities
R603.5       A firm or a network firm shall not provide a valuation service to an audit client that is a public
             interest entity if the valuation service would have a material effect, individually or in the
             aggregate, on the financial statements on which the firm will express an opinion.

SUBSECTION 604  TAX SERVICES
Introduction
604.1        Providing tax services to an audit client might create a self-review or advocacy threat.
604.2        In addition to the specific requirements and application material in this subsection, the
             requirements and application material in paragraphs 600.1 to R600.10 are relevant to applying
             the conceptual framework when providing a tax service to an audit client. This subsection
             includes requirements that prohibit firms and network firms from providing certain tax services
             to audit clients in some circumstances because the threats created cannot be addressed by
             applying safeguards.

Requirements and Application Material
All Audit Clients
604.3 A1     Tax services comprise a broad range of services, including activities such as:
                    Tax return preparation.
                    Tax calculations for the purpose of preparing the accounting entries.
                    Tax planning and other tax advisory services.
                    Tax services involving valuations.
                    Assistance in the resolution of tax disputes.
             While this subsection deals with each type of tax service listed above under separate headings,
             in practice, the activities involved in providing tax services are often inter-related.
604.3 A2     Factors that are relevant in evaluating the level of threats created by providing any tax service
             to an audit client 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.

Tax Return Preparation
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All Audit Clients

604.4 A1     Providing tax return preparation services does not usually create a threat.
604.4 A2     Tax return preparation services involve:
                    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 and responding on behalf of the
                    audit client to the tax authorities' requests for additional information and analysis (for
                    example, providing explanations of and technical support for the approach being taken).
604.4 A3     Tax return preparation services are usually based on historical information and principally
             involve analysis and presentation of such historical information under existing tax law, including
             precedents and established practice. Further, the tax returns are subject to whatever review or
             approval process the tax authority considers appropriate.

Tax Calculations for the Purpose of Preparing Accounting Entries

All Audit Clients
604.5 A1    Preparing calculations of current and deferred tax liabilities (or assets) for an audit client for
             the purpose of preparing accounting entries that will be subequently audited by the firm
             creates a self-review threat.
604.5 A2     In addition to the factors in paragraph 604.3 A2, a factor that is relevant in evaluating the level
             of the threat created when preparing such calculations for an audit client is whether the
             calculation might have a material effect on the financial statements on which the firm will
             express an opinion.

Audit Clients that are Not Public Interest Entities

604.5 A3     Examples of actions that might be safeguards to address such a self-review threat when the
             audit client is not a public interest entity include:

                    Using professionals who are not audit team members to perform the service.
                    Having an appropriate reviewer who was not involved in providing the service review the
                    audit work or service performed.

Audit Clients that are Public Interest Entities

R604.6       A firm or a network firm shall not prepare tax calculations of current and deferred tax liabilities
             (or assets) for an audit client that is a public interest entity for the purpose of preparing
             accounting entries that are material to the financial statements on which the firm will express
             an opinion.

604.6 A1     The examples of actions that might be safeguards in paragraph 604.5 A3 to address self-review
             threats are also applicable when preparing tax calculations of current and deferred tax liabilities
             (or assets) to an audit client that is a public interest entity that are immaterial to the financial
             statements on which the firm will express an opinion.

Tax Planning and Other Tax Advisory Services

All Audit Clients
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604.7 A1    Providing tax planning and other tax advisory services might create a self-review or advocacy
            threat.
604.7 A2 Tax planning or other tax advisory services comprise a broad range of services, such as
           advising the client how to structure its affairs in a tax efficient manner or advising on the
           application of a new tax law or regulation.

604.7 A3   In addition to paragraph 604.3 A2, factors that are relevant in evaluating the level of self-review
            or advocacy threats created by providing tax planning and other tax advisory services to audit
            clients include:

                  The degree of subjectivity involved in determining the appropriate treatment for the tax
                  advice in the financial statements.
                  Whether the tax treatment is supported by a private ruling or has otherwise been cleared
                  by the tax authority before the preparation of the financial statements.

                  For example, whether the advice provided as a result of the tax planning and other tax
                  advisory services:

                  o     Is clearly supported by a tax authority or other precedent.
                  o     Is an established practice.
                  o     Has a basis in tax law that is likely to prevail.
                  The extent to which the outcome of the tax advice will have a material effect on the
                  financial statements.
                  Whether the effectiveness of the tax advice depends on the accounting treatment or
                  presentation in the financial statements and there is doubt as to the appropriateness of
                  the accounting treatment or presentation under the relevant financial reporting
                  framework.

604.7 A4    Examples of actions that might be safeguards to address such threats include:
                  Using professionals who are not audit 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 audit work or service performed might address a self-review threat.
                  Obtaining pre-clearance from the tax authorities might address self-review or advocacy
                  threats.

When Effectiveness of Tax Advice Is Dependent on a Particular Accounting Treatment or Presentation
R604.8 A firm or a network firm shall not provide tax planning and other tax advisory services to an
          audit client when the effectiveness of the tax advice depends on a particular accounting
          treatment or presentation in the financial statements and:

            (a)   The audit team has reasonable doubt as to the appropriateness of the related accounting
                  treatment or presentation under the relevant financial reporting framework; and
            (b)   The outcome or consequences of the tax advice will have a material effect on the
                  financial statements on which the firm will express an opinion.

Tax Services Involving Valuations
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All Audit Clients

604.9 A1     Providing tax valuation services to an audit client might create a self-review or advocacy threat.
604.9 A2     A firm or a network firm might perform a valuation for tax purposes only, where the result of the
             valuation will not have a direct effect on the financial statements (that is, the financial
             statements are only affected through accounting entries related to tax). This would not usually
             create threats if the effect on the financial statements is immaterial or the valuation is subject
             to external review by a tax authority or similar regulatory authority.
604.9 A3     If the valuation that is performed for tax purposes is not subject to an external review and the
             effect is material to the financial statements, in addition to paragraph 604.3 A2, the following
             factors are relevant in evaluating the level of self-review or advocacy threats created by
             providing those services to an audit client:

                    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.
604.9 A4     Examples of actions that might be safeguards to address threats include:

                    Using professionals who are not audit 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
                    audit work or service performed might address a self-review threat.

                    Obtaining pre-clearance from the tax authorities might address self-review or advocacy
                    threats.

604.9 A5     A firm or network firm might also perform a tax valuation to assist an audit client with its tax
             reporting obligations or for tax planning purposes where the result of the valuation will have a
             direct effect on the financial statements. In such situations, the requirements and application
             material set out in Subsection 603 relating to valuation services apply.

Assistance in the Resolution of Tax Disputes
All Audit Clients
604.10 A1 Providing assistance in the resolution of tax disputes to an audit client might create a self-
          review or advocacy threat.
604.10 A2    A tax dispute might reach a point when the tax authorities have notified an audit 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, for example, before an Income Tax
             tribunal or court.

604.10 A3 In addition to paragraph 604.3 A2, factors that are relevant in evaluating the level of self-review
          or advocacy threats created by assisting an audit client in the resolution of tax disputes 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 financial
                    statements on which the firm will express an opinion.

                    Whether the advice that was provided is the subject of the tax dispute.
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                  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.
604.10 A4 Examples of actions that might be safeguards to address threats include:
                  Using professionals who are not audit 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
                  audit work or the service performed might address a self-review threat.

Resolution of Tax Matters Involving Acting as An Advocate

R604.11     A firm or a network firm shall not provide tax services that involve assisting in the resolution of
            tax disputes to an audit client if:
            (a)   The services involve acting as an advocate for the audit client before an Income Tax
                  tribunal or court in the resolution of a tax matter; and

            (b)   The amounts involved are material to the financial statements on which the firm will
                  express an opinion.

604.11 A1   Paragraph R604.11 does not preclude a firm or network firm from having a continuing advisory
            role in relation to the matter that is being heard before an Income Tax tribunal or 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.
604.11 A2   What constitutes an "Income Tax tribunal or court" depends on how tax proceedings are heard
            in India.
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SUBSECTION 605  INTERNAL AUDIT SERVICES
Requirements and Application Material
All Audit Clients
605.1 A1    Internal audit services involve assisting the audit client in the performance 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 by:
                    o     Reviewing the means used to identify, measure, classify and report 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 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.
605.2 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 management and those charged with
         governance.


R605. 3    A statutory auditor of an entity cannot be its internal auditor as it will not be possible for him to
           give an independent and objective opinion. Further, under Companies Act, 2013, where
           applicable, the restriction also applies to the subsidiary company or holding Company of the audit
           client.


SUBSECTION 606  INFORMATION TECHNOLOGY SYSTEMS SERVICES
Introduction
606.1       Providing information technology (IT) systems services to an audit client might create a self-
            review threat.
606.2       In addition to the specific requirements and application material in this subsection, the
            requirements and application material in paragraphs 600.1 to R600.10 are relevant to applying
            the conceptual framework when providing an IT systems service to an audit client. This
            subsection includes requirements that prohibit firms and network firms from providing certain
            IT systems services to audit clients in some circumstances because the threats created cannot
            be addressed by applying safeguards.
            The provisions stated below are subject to the restrictions under Companies Act, 2013,
            where applicable, which prohibit services related to design and implementation of any
            financial information system to the Company, its holding company and subsidiary company.
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Requirements and Application Material
All Audit Clients

606.3 A1    Services related to IT systems include the design or implementation of hardware or software
            systems. The IT systems might:

            (a)      Aggregate source data;
            (b)      Form part of the internal control over financial reporting; or
            (c)      Generate information that affects the accounting records or financial statements,
                     including related disclosures.

            However, the IT systems might also involve matters that are unrelated to the audit client's
            accounting records or the internal control over financial reporting or financial statements.

606.3 A2    Paragraph R600.7 precludes a firm or a network firm from assuming a management
            responsibility. Providing the following IT systems services to an audit client does not usually
            create a threat as long as personnel of the firm or network firm do not assume a management
            responsibility:

            (a)      Designing or implementing IT systems that are unrelated to internal control over financial
                     reporting;
            (b)      Designing or implementing IT systems that do not generate information forming a
                     significant part of the accounting records or financial statements;

            (c)      Implementing "off-the-shelf" accounting or financial information reporting software that
                     was not developed by the firm or network firm, if the customization required to meet the
                     client's needs is not significant; and

            (d)      Evaluating and making recommendations with respect to an IT system designed,
                     implemented or operated by another service provider or the client.

R606.4      When providing IT systems services to an audit client the firm or network firm shall be satisfied
            that:

            (a)     The client acknowledges its responsibility for establishing and monitoring a system of
                    intrnal controls;
            (b) The client assigns the responsibility to make all management decisions with respect to
                the design and implementation of the hardware or software system to a competent
                employee, preferably within senior management;

            (c)     The client makes all management decisions with respect to the design and
                    implementation process;
            (d) The client evaluates the adequacy and results of the design and implementation of the
                system; and
            (e)     The client is responsible for operating the system (hardware or software) and for the data
                    it uses or generates.

606.4 A1    Factors that are relevant in evaluating the level of a self-review threat created by providing IT
            systems services to an audit client include:

                     The nature of the service.
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                    The nature of IT systems and the extent to which they impact or interact with the client's
                    accounting records or financial statements.

                    The degree of reliance that will be placed on the particular IT systems as part of the
                    audit.
606.4 A2     An example of an action that might be a safeguard to address such a self-review threat is using
             professionals who are not audit team members to perform the service.

Audit Clients that are Public Interest Entities
R606.5       A firm or a network firm shall not provide IT systems services to an audit client that is a public
             interest entity if the services involve designing or implementing IT systems that:

             (a)    Form a significant part of the internal control over financial reporting; or
             (b)    Generate information that is significant to the client's accounting records or financial
                    statements on which the firm will express an opinion.
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SUBSECTION 607  LITIGATION SUPPORT SERVICES
Introduction
607.1       Providing certain litigation support services to an audit client might create a self-review or
            advocacy threat.
607.2       In addition to the specific application material in this subsection, the requirements and
            application material in paragraphs 600.1 to R600.10 are relevant to applying the conceptual
            framework when providing a litigation support service to an audit client.

Application Material
All Audit Clients

607.3 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.

607.3 A2    Factors that are relevant in evaluating the level of self-review or advocacy threats created by
            providing litigation support services to an audit client include:
                    The legal and regulatory environment in which the service is provided, for example,
                    whether an expert witness is chosen and appointed by a court.
                    The nature and characteristics of the service.
                    The extent to which the outcome of the litigation support service will have a material
                    effect on the financial statements on which the firm will express an opinion.

607.3 A3    An example of an action that might be a safeguard to address such a self-review or advocacy
            threat is using a professional who was not an audit team member to perform the service.

607.3 A4    If a firm or a network firm provides a litigation support service to an audit client and the service
            involves estimating damages or other amounts that affect the financial statements on which
            the firm will express an opinion, the requirements and application material set out in Subsection
            603 related to valuation services apply.

SUBSECTION 608  LEGAL SERVICES
Introduction
608.1       Providing legal services to an audit client might create a self-review or advocacy threat.
608.2       In addition to the specific requirements and application material in this subsection, the
            requirements and application material in paragraphs 600.1 to R600.10 are relevant to applying
            the conceptual framework when providing a legal service to an audit client. This subsection
            includes requirements that prohibit firms and network firms from providing certain legal services
            to audit clients in some circumstances because the threats cannot be addressed by applying
            safeguards.


Requirements and Application Material
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All Audit Clients

608.3 A1    Legal services are defined as any services for which the individual providing the services must
            either:
            (a)     Have the required legal training to practice law; or
            (b)     Be admitted to practice law before the courts of India.

Acting in an Advisory Role

608.4 A1    Legal advisory services might include a wide and diversified range of service areas
            including both corporate and commercial services to audit clients, such as:
                    Contract support.
                    Supporting an audit client in executing a transaction.
                    Mergers and acquisitions.
                    Supporting and assisting an audit client's internal legal department.
                    Legal due diligence and restructuring.
608.4 A2    Factors that are relevant in evaluating the level of self-review or advocacy threats created by
            providing legal advisory services to an audit client include:
                    The materiality of the specific matter in relation to the client's financial statements.
                    The complexity of the legal matter and the degree of judgment necessary to provide the
                    service.

608.4 A3    Examples of actions that might be safeguards to address threats include:
                    Using professionals who are not audit 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
                    audit work or the service performed might address a self-review threat.

Acting as General Counsel
R608.5      A partner or employee of the firm or the network firm shall not serve as General Counsel for
            legal affairs of an audit client.
608.5 A1    The position of General Counsel is usually a senior management position with broad
            responsibility for the legal affairs of a company.

Acting in an Advocacy Role
R608.6     A firm or a network firm shall not act in an advocacy role for an audit client in resolving a dispute
           or litigation when the amounts involved are material to the financial statements on which the
           firm will express an opinion.

608.6 A1    Examples of actions that might be safeguards to address a self-review threat created when
            acting in an advocacy role for an audit client when the amounts involved are not material to the
            financial statements on which the firm will express an opinion include:
                    Using professionalswho are not audit team members to perform the service.
                    Having an appropriate reviewer who was not involved in providing the service review the
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                    audit work or the service performed.

SUBSECTION 609  RECRUITING SERVICES
Introduction
609.1       Providing recruiting services to an audit client might create a self-interest, familiarity or
            intimidation threat.

609.2       In addition to the specific requirements and application material in this subsection, the
            requirements and application material in paragraphs 600.1 to R600.10 are relevant to applying
            the conceptual framework when providing a recruiting service to an audit client. This subsection
            includes requirements that prohibit firms and network firms from providing certain types of
            recruiting services to audit clients in some circumstances because the threats created cannot
            be addressed by applying safeguards.

Requirements and Application Material
All Audit Clients
609.3 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.

609.3 A2 Paragraph R600.7 precludes a firm or a network firm from assuming a management
          responsibility. Providing the following services does not usually create a threat as long as
          personnel of the firm or network firm does 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 financial
                    accounting, administrative or control positions.

R609.4      When a firm or network firm provides recruiting services to an audit client, the firm shall be
            satisfied that:

            (a)     The client assigns the responsibility to make all management decisions with respect to
                    hiring the candidate for the position to a competent employee, preferably within senior
                    management; and

            (b)     The client makes all management decisions with respect to the hiring process, including:
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                        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.

609.5 A1    Factors that are relevant in evaluating the level of self-interest, familiarity or intimidation threats
            created by providing recruiting services to an audit client 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.

609.5 A2    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 audit team members to perform the
            service.

Recruiting Services that are Prohibited

R609.6      When providing recruiting services to an audit client, the firm or the network firm shall not act
            as a negotiator on the client's behalf.

R609.7      A firm or a network firm shall not provide a recruiting service to an audit client if the service
            relates to:
            (a)    Searching for or seeking out candidates; or

            (b)    Undertaking reference checks of prospective candidates,
            with respect to the following positions:

            (i)    A 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 accounting records or the financial statements on which the
                   firm will express an opinion.

SUBSECTION 610  CORPORATE FINANCE SERVICES
Introduction
610.1       Providing corporate finance services to an audit client might create a self-review or advocacy
            threat.

610.2       In addition to the specific requirements and application material in this subsection, the
            requirements and application material in paragraphs 600.1 to R600.10 are relevant to applying
            the conceptual framework when providing a corporate finance service to an audit client. This
            subsection includes requirements that prohibit firms and network firms from providing certain
            corporate finance services in some circumstances to audit clients because the threats created
            cannot be addressed by applying safeguards.

            The provisions stated below are subject to restrictions under Companies Act, 2013, where
            applicable, which apply to the Company including its holding company and subsidiary
            company.
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Requirements and Application Material
All Audit Clients
610.3 A1    Examples of corporate finance services that might create a self-review or advocacy threat
            include:

                    Assisting an audit client in developing corporate strategies.
                    Identifying possible targets for the audit client to acquire.
                    Advising on disposal transactions.
                    Assisting in finance raising transactions.
                    Providing structuring advice.
                    Providing advice on the structuring of a corporate finance transaction or on financing
                    arrangements that will directly affect amounts that will be reported in the financial
                    statements on which the firm will express an opinion.

610.3 A2    Factors that are relevant in evaluating the level of such threats created by providing corporate
            finance services to an audit client include:
                    The degree of subjectivity involved in determining the appropriate treatment for the
                    outcome or consequences of the corporate finance advice in the financial statements.

                    The extent to which:
                    o     The outcome of the corporate finance advice will directly affect amounts recorded
                          in the financial statements.

                    o     The amounts are material to the financial statements.
                    Whether the effectiveness of the corporate finance advice depends on a particular
                    accounting reatment or presentation in the financial statements and there is doubt as to
                    the appropriateness of the related accounting treatment or presentation under the
                    relevant financial reporting framework.

610.3 A3    Examples of actions that might be safeguards to address threats include:
                  Using professionals who are not audit 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
                  audit work or service performed might address a self-review threat.

Corporate Finance Services that are Prohibited

R610.4      A firm or a network firm shall not provide corporate finance services to an audit client that
            involve promoting, dealing in, or underwriting the audit client's shares.

R610.5      A Firm or a network Firm shall not provide corporate finance advice to an audit client where
            the effectiveness of such advice depends on a particular accounting treatment or
            presentation in the financial statements on which the firm will express an opinion and

            (a)     The audit team has reasonable doubt as to the appropriateness of the related accounting
                    treatment or presentation under the relevant financial reporting framework; and

            (b)     The outcome or consequences of the corporate finance advice will have a material effect
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on the financial statements on which the firm will express an opinion.
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SECTION 800
REPORTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS THAT INCLUDE A
RESTRICTION ON USE AND DISTRIBUTION (AUDIT AND REVIEW ENGAGEMENTS)
Introduction
800.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

800.2      This section sets out certain modifications to Part 4A which are permitted in certain
           circumstances involving audits of special purpose financial statements where the report
           includes a restriction on use and distribution. In this section, an engagement to issue a
           restricted use and distribution report in the circumstances set out in paragraph R800.3 is
           referred to as an "eligible audit engagement."

Requirements and Application Material
General
R800.3     When a firm intends to issue a report on an audit of special purpose financial statements which
           includes a restriction on use and distribution, the independence requirements set out in Part
           4A shall be eligible for the modifications that are permitted by this section, but only if:

           (a)   The firm communicates with the intended users of the report regarding the modified
                 independence requirements that are to be applied in providing the service; and

           (b)   The intended users of the report understand the purpose and limitations of the report and
                 explicitly agree to the application of the modifications.
800.3 A1   The intended users of the report might obtain an understanding of the purpose and limitations
           of the report by participating, either directly, or indirectly through a representative who has
           authority to act for the intended users, in establishing the nature and scope of the engagement.
           In either case, this participation helps the firm to communicate with intended users about
           independence matters, including the circumstances that are relevant to applying the
           conceptual framework. It also allows the firm to obtain the agreement of the intended users to
           the modified independence requirements.

R800.4     Where the intended users are a class of users who are not specifically identifiable by name at
           the time the engagement terms are established, the firm shall subsequently make such users
           aware of the modified independence requirements agreed to by their representative.
800.4 A1   For example, where the intended users are a class of users such as lenders in a syndicated
           loan arrangement, the firm might describe the modified independence requirements in an
           engagement letter to the representative of the lenders. The representative might then make
           the firm's engagement letter available to the members of the group of lenders to meet the
           requirement for the firm to make such users aware of the modified independence requirements
           agreed to by the representative.

R800.5     When the firm performs an eligible audit engagement, any modifications to Part 4A shall be
           limited to those set out in paragraphs R800.7 to R800.14. The firm shall not apply these
           modifications when an audit of financial statements is required by law or regulation.
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R800.6     If the firm also issues an audit report that does not include a restriction on use and distribution
            for the same client, the firm shall apply Part 4A to that audit engagement.

Public Interest Entities
R800.7      When the firm performs an eligible audit engagement, the firm does not need to apply the
            independence requirements set out in Part 4A that apply only to public interest entity audit
            engagements.

Related Entities
R800.8     When the firm performs an eligible audit engagement, references to "audit client" in Part 4A do
           not need to include its related entities. However, when the audit team knows or has reason to
           believe that a relationship or circumstance involving a related entity of the client is relevant to
           the evaluation of the firm's independence of the client, the audit team shall include that related
           entity when identifying, evaluating and addressing threats to independence.


.Financial Interests, Loans and Guarantees, Close Business Relationships, and Family and Personal
 Relationships

R800.10     When the firm performs an eligible audit engagement:
            (a)    The relevant provisions set out in Sections 510, 511, 520, 521, 522, 524 and 525 need
                   apply only to the members of the engagement team, their immediate family members
                   and, where applicable, close family members;

            (b)    The firm shall identify, evaluate and address any threats to independence created by
                   interests and relationships, as set out in Sections 510, 511, 520, 521, 522, 524 and 525,
                   between the audit client and the following audit team members:

                   (i)     Those who provide consultation regarding technical or industry specific issues,
                           transactions or events; and

                   (ii)    Those who provide quality control for the engagement, including those who
                           perform the engagement quality control review; and
            (c)    The firm shall evaluate and address any threats that the engagement team has reason
                   to believe are created by interests and relationships between the audit client and others
                   within the firm who can directly influence the outcome of the audit engagement.
800.10 A1 Others within a firm who can directly influence the outcome of the audit engagement include
          those who recommend the compensation, or who provide direct supervisory, management or
          other oversight, of the audit engagement partner in connection with the performance of the
          audit engagement including those at all successively senior levels above the engagement partner
          through to the individual who is the firm's Senior or Managing Partner (Chief Executive or
          equivalent).

R800.11 When the firm performs an eligible audit engagement, the firm shall evaluate and address any
         threats that the engagement team has reason to believe are created by financial interests in
         the audit client held by individuals, as set out in paragraphs R510.4(c) and (d), R510.5, R510.7
         and 510.10 A5 and A9.

R800.12    When the firm performs an eligible audit engagement, the firm, in applying the provisions set
            out in paragraphs R510.4(a), R510.6 and R510.7 to interests of the firm, shall not hold a
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           material direct or a material indirect financial interest in the audit client.

Employment with an Audit Client
R800.13 When the firm performs an eligible audit engagement, the firm shall evaluate and address any
         threats created by any employment relationships as set out in paragraphs 524.3 A1 to 524.5
         A3.

Providing Non-Assurance Services
R800.14    If the firm performs an eligible audit engagement and provides a non-assurance service to the
           audit client, the firm shall comply with Sections 410 to 430 and Section 600, including its
           subsections, subject to paragraphs R800.7 to R800.9.
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PART 4B  INDEPENDENCE FOR ASSURANCE ENGAGEMENTS OTHER
      THAN AUDIT AND REVIEW ENGAGEMENTS ......................................................
Section 900 Applying the Conceptual Framework to Independence for Assurance
        Engagements Other than Audit and Review Engagements.....................................
Section 905 Fees ..................................................................................................................

Section 906 [Reserved for Gifts and Hospitality] ..................................................................
Section 907 Actual or Threatened Litigation .........................................................................

Section 910 Financial Interests .............................................................................................
Section 911 Loans and Guarantees......................................................................................
Section 920 Business Relationships .....................................................................................

Section 921 Family and Personal Relationships...................................................................
Section 922 Recent Service with an Assurance Client .........................................................
Section 923 Serving as a Director or Officer of an Assurance Client ...................................

Section 924 Employment with an Assurance Client .............................................................

Section 940 Long Association of Personnel with an Assurance Client .................................
Section 950 Provision of Non-Assurance Services to Assurance Clients Other than
             Audit and Review Engagement Clients....................................................................

Section 990 Reports that Include a Restriction on Use and Distribution (Assurance
        Engagements Other than Audit and Review Engagements) ...................................
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PART 4B  INDEPENDENCE FOR ASSURANCE ENGAGEMENTS
OTHER THAN AUDIT AND REVIEW ENGAGEMENTS
SECTION 900
APPLYING THE CONCEPTUAL FRAMEWORK TO INDEPENDENCE FOR
ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW ENGAGEMENTS
Introduction
General
900.1     This Part applies to assurance engagements other than audit and review engagements
          (referred to as "assurance engagements" in this Part). Examples of such engagements include:

                An audit of specific elements, accounts or items of a financial statement.
                Performance assurance on a company's key performance indicators.
                Report in Form No. 3CEB under Section 92E of the Income tax Act, 1961 and such
                other assurance services required to be performed by an "accountant" within the
                meaning of the Explanation provided below sub-section (2) of section 288 of the Income
                Tax Act, 1961 (`tax assurance services')
900.2     In this Part, the term "professional accountant" refers to individual professional accountants in
          public practice and their firms.
900.3     SQC 1 requires a firm to establish policies and procedures designed to provide it with
          reasonable assurance that the firm, its personnel and, where applicable, others subject to
          independence requirements maintain independence where required by relevant ethics
          standards. SAEs establish responsibilities for engagement partners and engagement teams
          at the level of the engagement. The allocation of responsibilities within a firm will depend on its
          size, structure and organization. Many of the provisions of Part 4B do not prescribe the specific
          responsibility of individuals within the firm for actions related to independence, instead referring
          to "firm" for ease of reference. Firms assign responsibility for a particular action to an individual
          or a group of individuals (such as an assurance team) in accordance with SQC 1. In addition,
          an individual professional accountant remains responsible for compliance with any provisions
          that apply to that accountant's activities, interests or relationships.

900.4     Independence is linked to the principles of objectivity and integrity. It comprises:
          (a)   Independence of mind  the state of mind that permits the expression of a conclusion
                without being affected by influences that compromise professional judgment, thereby
                allowing an individual to act with integrity, and exercise objectivity and professional
                skepticism.

          (b)   Independence in appearance  the avoidance of facts and circumstances that are so
                significant that a reasonable and informed third party would be likely to conclude that a
                firm's or an assurance team member's integrity, objectivity or professional skepticism
                has been compromised.

          In this Part, references to an individual or firm being "independent" mean that the individual or
          firm has complied with the provisions of this Part.
900.5     When performing assurance engagements, the Code requires firms to comply with the
          fundamental principles and be independent. This Part sets out specific requirements and
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           application material on how to apply the conceptual framework to maintain independence when
           performing such engagements. The conceptual framework set out in Section 120 applies to
           independence as it does to the fundamental principles set out in Section 110.

900.6      This Part describes:
            (a)   Facts and circumstances, including professional activities, interets and relationships,
                  that create or might create threats to independence;

            (b)   Potential actions, including safeguards, that might be appropriate to address any such
                  threats; and

            (c)   Some situations where the threats cannot be eliminated or there can be no safeguards
                  to reduce the threats to an acceptable level.

Description of Other Assurance Engagements
900.7      Assurance engagements are designed to enhance intended users' degree of confidence about
           the outcome of the evaluation or measurement of a subject matter against criteria. In an
           assurance engagement, the firm expresses a conclusion designed to enhance the degree of
           confidence of the intended users (other than the responsible party) about the outcome of the
           evaluation or measurement of a subject matter against criteria. The Assurance Framework
           describes the elements and objectives of an assurance engagement and identifies
           engagements to which SAEs apply. For a description of the elements and objectives of an
           assurance engagement, refer to the Assurance Framework.
900.8      The outcome of the evaluation or measurement of a subject matter is the information that
           results from applying the criteria to the subject matter. The term "subject matter information" is
           used to mean the outcome of the evaluation or measurement of a subject matter.

900.9      Assurance engagements might be assertion-based or direct reporting. In either case, they
           involve three separate parties: a firm, a responsible party and intended users.
900.10     In an assertion-based assurance engagement, the evaluation or measurement of the subject
           matter is performed by the responsible party. The subject matter information is in the form of
           an assertion by the responsible party that is made available to the intended users.

900.11     In a direct reporting assurance engagement, the firm:

           (a)    Directly performs the evaluation or measurement of the subject matter; or
           (b)    Obtains a representation from the responsible party that has performed the evaluation
                  or measurement that is not available to the intended users. The subject matter
                  information is provided to the intended users in the assurance report.

Reports that Include a Restriction on Use and Distribution
900.12     An assurance report might include a restriction on use and distribution. If it does and the
           conditions set out in Section 990 are met, then the independence requirements in this Part may
           be modified as provided in Section 990.

Audit and Review Engagements
900.13     Independence standards for audit and review engagements are set out in Part 4A 
           Independence for Audit and Review Engagements. If a firm performs both an assurance
           engagement and an audit or review engagement for the same client, the requirements in Part
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           4A continue to apply to the firm, a network firm and the audit or review team members.

Requirements and Application Material
General

R900.14    A firm performing an assurance engagement shall be independent.

R900.15    A firm shall apply the conceptual framework set out in Section 120 to identify, evaluate and
           address threats to independence in relation to an assurance engagement.

           The Firm shall comply with the additional restrictions apply under the Income Tax,
           1961 to an "accountant".

           The term "accountant" shall have the same meaning as in the Explanation below sub-section
           (2) of section 288 of the Income Tax Act, 1961. It reads as under:

          "Accountant" means a chartered accountant as defined in clause (b) of sub-section (1) of section
          2 of the Chartered Accountants Act, 1949 who holds a valid certificate of practice under sub-
          section (1) of section 6 of that Act, but does not include except for the purposes of representing
          the assessee under sub-section (1) -
          (a) in case of an assessee, being a company, the person who is not eligible for appointment as
               an auditor of the said company in accordance with the provisions of sub-section (3) of section
               141 of the Companies Act, 2013 (18 of 2013); or
          (b) in any other case,--
          (i) the assessee himself or in case of the assessee, being a firm or association of persons or
               Hindu undivided family, any partner of the firm, or member of the association or the family;
          (ii) in case of the assessee, being a trust or institution, any person referred to in clauses (a), (b),
               (c) and (cc) of sub-section (3) of section 13;
          (iii) in case of any person other than persons referred to in sub-clauses (i) and (ii), the person
                who is competent to verify the return under section 139 in accordance with the provisions of
                section 140;
          (iv) any relative of any of the persons referred to in sub-clauses (i), (ii) and (iii);
          (v) an officer or employee of the assessee;
          (vi) an individual who is a partner, or who is in the employment, of an officer or employee of the
                assessee;
          (vii) an individual who, or his relative or partner--
                (i) is holding any security of, or interest in, the assessee:
                Provided that the relative may hold security or interest in the assessee of the face value not
                exceeding one hundred thousand rupees;
                (ii) is indebted to the assessee:
                Provided that the relative may be indebted to the assessee for an amount not exceeding one
                hundred thousand rupees;
                (iii) has given a guarantee or provided any security in connection with the indebtedness of
                     any third person to the assessee:
                Provided that the relative may give guarantee or provide any security in connection with the
                indebtedness of any third person to the assessee for an amount not exceeding one hundred
                thousand rupees;
          (viii) a person who, whether directly or indirectly, has business relationship with the assessee of
                such nature as may be prescribed;
          (ix) a person who has been convicted by a court of an offence involving fraud and a period of
                  ten years has not elapsed from the date of such conviction.

Network firms

R900.16    When a firm has reason to believe that interests and relationships of a network firm create a
           threat to the firm's independence, the firm shall evaluate and address any such threat.
900.16 A1 Network firms are discussed in paragraphs 400.50 A1 to 400.54 A1.
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Related Entities
R900.17     When the assurance team knows or has reason to believe that a relationship or circumstance
            involving a related entity of the assurance client is relevant to the evaluation of the firm's
            independence from the client, the assurance team shall include that related entity when
            identifying, evaluating and addressing threats to independence.

Types of Assurance Engagements

Assertion-based Assurance Engagements

R900.18     When performing an assertion-based assurance engagement:
            (a)    The assurance team members and the firm shall be independent of the assurance client
                   (the party responsible for the subject matter informatin, and which might be responsible
                   for the subject matter) as set out in this Part. The independence requirements set out in
                   this Part prohibit certain relationships between assurance team members and (i)
                   directors or officers, and (ii) individuals at the client in a position to exert significant
                   influence over the subject matter information;

            (b)    The firm shall apply the conceptual framework set out in Section 120 to relationships
                   with individuals at the client in a position to exert significant influence over the subject
                   matter of the engagement; and

            (c)    The firm shall evaluate and address any threats that the firm has reason to believe are
                   created by network firm interests and relationships.

R900.19     When performing an assertion-based assurance engagement where the responsible party is
            responsible for the subject matter information but not the subject matter:

            (a)    The assurance team members and the firm shall be independent of the party responsible
                   for the subject matter information (the assurance client); and

            (b)    The firm shall evaluate and address any threats the firm has reason to believe are
                   created by interests and relationships between an assurance team member, the firm, a
                   network firm and the party responsible for the subject matter.
900.19 A1 In the majority of assertion-based assurance engagements, the responsible party is
           responsible for both the subject matter information and the subject matter. However, in some
           engagements, the responsible party might not be responsible for the subject matter. An
           example might be when a firm is engaged to perform an assurance engagement regarding a
           report that an environmental consultant has prepared about a company's sustainability
           practices for distribution to intended users. In this case, the environmental consultant is the
           responsible party for the subject matter information but the company is responsible for the
           subject matter (the sustainability practices).

Direct Reporting Assurance Engagements
R900.20     When performing a direct reporting assurance engagement:

            (a)    The assurance team members and the firm shall be independent of the assurance client
                   (the party responsible for the subject matter); and

            (b)    The firm shall evaluate and address any threats to independence the firm has reason to
                   believe are created by network firm interests and relationships.
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Multiple Responsible Parties
900.21 A1 In some assurance engagements, whether assertion-based or direct reporting, there might be
          several responsible parties. In determining whether it is necessary to apply the provisions in
          this Part to each responsible party in such engagements, the firm may take into account certain
          matters. These matters include whether an interest or relationship between the firm, or an
          assurance team member, and a particular responsible party would create a threat to
          independence that is not trivial and inconsequential in the context of the subject matter
          information. This determination will take into account factors such as:

            (a)   The materiality of the subject matter information (or of the subject matter) for which the
                  particular responsible party is responsible.
            (b)   The degree of public interest associated with the engagement.
            If the firm determines that the threat created by any such interest or relationship with a
            particular responsible party would be trivial and inconsequential, it might not be necessary to
            apply all of the provisions of this section to that responsible party.

Period During which Independence is Required
R900.30     Independence, as required by this Part, shall be maintained during both:
            (a)   The engagement period; and
            (b)   The period covered by the subject matter information.

900.30 A1 The engagement period starts when the assurance team begins to perform assurance services
          with respect to the particular engagement. The engagement period ends when the assurance
            report is issued. When the engagement is of a recurring nature, it ends at the later of the
            notification by either party that the professional relationship has ended or the issuance of the
            final assurance report.
R900.31     If an entity becomes an assurance client during or after the period covered by the subject
            matter information on which the firm will express a conclusion, the firm shall determine whether
            any threats to independence are created by:
            (a)   Financial or business relationships with the assurance client during or after the period
                  covered by the subject matter information but before accepting the assurance
                  engagement; or
            (b)   Previous services provided to the assurance client.

R900.32     Threats to independence are created if a non-assurance service was provided to the assurance
            client during, or after the period covered by the subject matter information, but before the
            assurance team begins to perform assurance services, and the service would not be permitted
            during the engagement period. In such circumstances, the firm shall evaluate and address any
            threat to independence created by the service. If the threats are not at an acceptable level, the
            firm shall only accept the assurance engagement if the threats are reduced to an acceptable
            level.

900.32 A1 Examples of actions that might be safeguards to address such threats include:
                  Using professionals who are not assurance team members to perform the service.
                  Having an appropriate reviewer review the assurance and non-assurance work as
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                  appropriate.
R900.33     Subject to the applicable restrictions stated under Section R900.15, if a non-assurance service
            that would not be permitted during the engagement period has not been completed and it is
            not practical to complete or end the service before the commencement of professional
            services in connection with the assurance engagement, the firm shall only accept the
            assurance engagement if:

            (a)   The firm is satisfied that:

                  (i)    The non-assurance service will be completed within a short period of time; or
                  (ii)   The client has arrangements in place to transition the service to another provider
                         within a short period of time;

            (b)   The firm applies safeguards when necessary during the service period; and
            (c)   The firm discusses the matter with those charged with governance.



General Documentation of Independence for Assurance Engagements Other than Audit and Review
Engagements

R900.40     A firm shall document conclusions regarding compliance with this Part, and the substance of
            any relevant discussions that support those conclusions. In particular:

            (a)   When safeguards are applied to address a threat, the firm shall document the nature of
                  the threat and the safeguards in place or applied; and
            (b)   When a threat required significant analysis and the firm concluded that the threat was
                  already at an acceptable level, the firm shall document the nature of the threat and the
                  rationale for the conclusion.

900.40 A1 Documentation provides evidence of the firm's judgments in forming conclusions regarding
          compliance with this Part. However, a lack of documentation does not determine whether a
          firm considered a particular matter or whether the firm is independent.



Breach of an Independence Provision for Assurance Engagements Other than Audit and Review
Engagements
When a Firm Identifies a Breach

R900.50     Subject to the additional restrictions under Section R900.15 of the code, if a firm concludes that
            a breach of a requirement in this Part has occurred, the firm shall:

            (a)   End, suspend or eliminate the interest or relationship that created the breach;
            (b)   Evaluate the significance of the breach and its impact on the firm's objectivity and ability
                  to issue an assurance report; and

            (c)   Determine whether action can be taken that satisfactorily addresses the consequences
                  of the breach.

            In making this determination, the firm shall exercise professional judgment and take into
            account whether a reasonable and informed third party would be likely to conclude that the
            firm's objectivity would be compromised, and therefore, the firm would be unable to issue an
            assurance report.
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R900.51     If the firm determines that action cannot be taken to address the consequences of the breach
            satisfactorily, the firm shall, as soon as possible, inform the party that engaged the firm or those
            charged with governance, as appropriate. The firm shall also take the steps necessary to end
            the assurance engagement in compliance with any applicable legal or regulatory requirements
            relevant to ending the assurance engagement.
R900.52 Subject to the additional restrictions under Section R900.15 of the code, if the firm determines
          that action can be taken to address the consequences of the breach satisfactorily, the firm
          shall discuss the breach and the action it has taken or proposes to take with the party that
          engaged the firm or those charged with governance, as appropriate. The firm shall discuss
          the breach and the proposed action on a timely basis, taking into account the
          circumstances of the engagement and the breach.
R900.53     If the party that engaged the firm does not, or those charged with governance do not concur
            that the action proposed by the firm in accordance with paragraph R900.50(c) satisfactorily
            addresses the consequences of the breach, the firm shall take the steps necessary to end the
            assurance engagement in compliance with any applicable legal or regulatory requirements
            relevant to ending the assurance engagement.

Documentation
R900.54     In complying with the requirements in paragraphs R900.50 to R900.53, the firm shall
            document:
            (a)   The breach;

            (b)   The actions taken;

            (c)   The key decisions made; and
            (d)   All the matters discussed with the party that engaged the firm or those charged with
                  governance.

R900.55     If the firm continues with the assurance engagement, it shall document:
            (a)   The conclusion that, in the firm's professional judgment, objectivity has not been
                  compromised; and

            (b)   The rationale for why the action taken satisfactorily addressed the consequences of the
                  breach so that the firm could issue an assurance report.
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SECTION 905
FEES
Introduction
905.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

905.2      The nature and level of fees or other types of remuneration might create a self-interest 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
FeesRelative Size
905.3 A1   When the total fees generated from an assurance client by the firm expressing the conclusion
           in an assurance engagement represent a large proportion of the total fees of that firm, the
           dependence on that client and concern about losing the client create a self-interest or
           intimidation threat.
905.3 A2   Factors that are relevant in evaluating the level of such threats include:
                 The operating structure of the firm.
                 Whether the firm is well established or new.
                 The significance of the client qualitatively and/or quantitatively to the firm.
905.3 A3 An example of an action that might be a safeguard to address such a self-interest or
           intimidation threat is increasing the client base in the firm to reduce dependence on the
           assurance client.

905.3 A4   A self-interest or intimidation threat is also created when the fees generated by the firm from
           an assurance client represent a large proportion of the revenue from an individual partner's
           clients.

905.3 A5 Examples of actions that might be safeguards to address such a self-interest or intimidation
          threat include:
                 Increasing the client base of the partner to reduce dependence on the assurance client.
                 Having an appropriate reviewer who was not an assurance team member review the
                 work.

FeesOverdue
905.4 A1   A self-interest threat might be created if a significant part of fees is not paid before the
           assurance report, if any, for the following period is issued. It is generally expected that the firm
           will require payment of such fees before any such report is issued. The requirements and
           application material set out in Section 911 with respect to loans and guarantees might also
           apply to situations where such unpaid fees exist.
905.4 A2   Examples of actions that might be safeguards to address such a self-interest threat include:
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                  Obtaining partial payment of overdue fees.
                  Having an appropriate reviewer who did not take part in the assurance engagement
                  review the work performed.
R905.5     When a significant part of fees due from an assurance client remains unpaid for a long time,
           the firm shall determine:

           (a)    Whether the overdue fees might be equivalent to a loan to the client; and
           (b)    Whether it is appropriate for the firm to be re-appointed or continue the assurance
                  engagement.

Contingent Fees
905.6 A1   The fees which are based on a percentage of profits or which are contingent upon the
           findings, or results of such work, is not allowed except in cases which are permitted under
           Regulation 192 of The Chartered Accountants Regulations, 1988, mentioned in Para 410.9
           A1.
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SECTION 906
GIFTS AND HOSPITALITY

Introduction
906.1    Firms are required to comply with the fundamental principles, be independent and apply
         the conceptual framework set out in Section 120 to identify, evaluate and address
         threats to independence.
906.2    Accepting gifts and hospitality from an assurance client might create a self-interest,
         familiarity or intimidation threat. This section sets out a specific requirement and
         application material relevant to applying the conceptual framework in such
         circumstances.

Requirement and Application Material
R906.3   A firm or an assurance team member shall not accept gifts and hospitality from an
         assurance client, unless the value is trivial and inconsequential.
906.3A1 Where a firm or assurance team member is offering or accepting an inducement to or
        from an assurance client, the requirements and application material set out in Section
        340 apply and non-compliance with these requirements might create threats to
        independence.
906.3 A2 The requirements set out in Section 340 relating to offering or accepting inducements
         do not allow a firm or assurance team member to accept gifts and hospitality where the
         intent is to improperly influence behaviour even if the value is trivial and
         inconsequential.
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SECTION 907
ACTUAL OR THREATENED LITIGATION
Introduction

907.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.
907.2      When litigation with an assurance client occurs, or appears likely, self-interest and intimidation
           threats are created. This section sets out specific application material relevant to applying the
           conceptual framework in such circumstances.

Application Material
General
907.3 A1   The relationship between client management and assurance team members must be
           characterized by complete candor and full disclosure regarding all aspects of a client's
           operations. Adversarial positions might result from actual or threatened litigation between an
           assurance client and the firm or an assurance team member. Such adversarial positions might
           affect management's willingness to make complete disclosures and create self-interest and
           intimidation threats.

907.3 A2   Factors that are relevant in evaluating the level of such threats include:
                 The materiality of the litigation.
                 Whether the litigation relates to a prior assurance engagement.
907.3 A3   If the litigation involves an assurance team member, an example of an action that might
           eliminate such self-interest and intimidation threats is removing that individual from the
           assurance team.

907.3 A4   An example of an action that might be a safeguard to address such self-interest and
           intimidation threats is having an appropriate reviewer review the work performed.
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SECTION 910
FINANCIAL INTERESTS
Introduction
910.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.
910.2       Holding a financial interest in an assurance client might create a self-interest threat. This
            section sets out specific requirements and application material relevant to applying the
            conceptual framework in such circumstances.

Requirements and Application Material
General
910.3 A1    A financial interest might be held directly or indirectly through an intermediary such as a
            collective investment vehicle, an estate or a trust. When a beneficial owner has control over
            the intermediary or ability to influence its investment decisions, the Code defines that financial
            interest to be direct. Conversely, when a beneficial owner has no control over the intermediary
            or ability to influence its investment decisions, the Code defines that financial interest to be
            indirect.

910.3 A2 This section contains references to the "materiality" of a financial interest. In determining
           whether such an interest is material to an individual, the combined net worth of the individual
           and the individual's immediate family members may be taken into account.

910.3 A3 Factors that are relevant in evaluating the level of a self-interest threat created by holding a
           financial interest in an assurance client include:

                  The role of the individual holding the financial interest.
                  Whether the financial interest is direct or indirect.
                  The materiality of the financial interest.

Financial Interests Held by the Firm, Assurance Team Members and Immediate Family

R910.4     A direct financial interest or a material indirect financial interest in the assurance client shall
            not be held by:

            (a)   The firm; or
            (b)   An assurance team member or any of that individual's immediate family.

            Additional restrictions apply in case of tax assurance services under the Income Tax Act,
            1961(reference may be made to para 900.15);


Financial Interests in an Entity Controlling an Assurance Client
R910.5      When an entity has a controlling interest in the assurance client and the client is material to the
            entity, neither the firm, nor an assurance team member, nor any of that individual's immediate
            family shall hold a direct or material indirect financial interest in that entity.

            Additional restrictions apply in case of tax assurance services under the Income Tax Act, 1961
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               (reference may be made to para 900.15)
Financial Interests Held as Trustee
R910.6     Paragraph R910.4 shall also apply to a financial interest in an assurance client held in a trust
           for which the firm or individual acts as trustee unless:

           (a)      None of the following is a beneficiary of the trust: the trustee, the assurance team
                    member or any of that individual's immediate family, or the firm;

           (b)      The interest in the assurance client held by the trust is not material to the trust;
           (c)      The trust is not able to exercise significant influence over the assurance client; and
           (d)      None of the following can significantly influence any investment decision involving a
                    financial interest in the assurance client: the trustee, the assurance team member or any
                    of that individual's immediate family, or the firm.

               Additional restrictions apply in case of tax assurance services under the Income Tax Act,
               1961 (reference may be made to para 900.15)

Financial Interests Received Unintentionally
R910.7     If a firm, an assurance team member, or any of that individual's immediate family, receives a
           direct financial interest or a material indirect financial interest in an assurance client by way of
           an inheritance, gift, as a result of a merger, or in similar circumstances and the interest would
           not otherwise be permitted to be held under this section, then:
           (a)      If the interest is received by the firm, the financial interest shall be disposed of
                    immediately, or enough of an indirect financial interest shall be disposed of so that the
                    remaining interest is no longer material; or
           (b)       If the interest is received by an assurance team member, or by any of that individual's
                     immediate family, the individual who received the financial interest shall immediately
                     dispose of the financial interest, or dispose of enough of an indirect financial interest so
                     that the remaining interest is no longer material.
               Additional restrictions apply in case of tax assurance services under the Income Tax Act, 1961
               (reference may be made to para 900.15)

Financial Interests  Other Circumstances

Close Family
910.8 A1   A self-interest threat might be created if an assurance team member knows that a close family
           member has a direct financial interest or a material indirect financial interest in the assurance
           client.
910.8 A2   Factors that are relevant in evaluating the level of such a threat include:

                    The nature of the relationship between the assurance team member and the close family
                    member.
                    Whether the financial interest is direct or indirect.
                    The materiality of the financial interest to the close family member.
910.8 A3   Examples of actions that might eliminate such a self-interest threat include:
                    Having the close family member dispose, as soon as practicable, of all of the financial
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                    interest or dispose of enough of an indirect financial interest so that the remaining
                    interest is no longer material.
                    Removing the individual from the assurance team.

910.8 A4    An example of an action that might be a safeguard to address such a self-interest threat is
            having an appropriate reviewer review the work of the assurance team member.

             Additional restrictions apply in case of tax assurance services under the Income Tax Act,
             1961 (reference may be made to para 900.15)

Other Individuals
910.8 A5    A self-interest threat might be created if an assurance team member knows that a financial
            interest is held in the assurance client by individuals such as:

                    Partners and professional employees of the firm, apart from those who are specifically
                    not permitted to hold such financial interests by paragraph R910.4, or their immediate
                    family members.

                    Individuals with a close personal relationship with an assurance team member.
910.8 A6    An example of an action that might eliminate such a self-interest threat is removing the
            assurance team member with the personal relationship from the assurance team.

910.8 A7    Examples of actions that might be safeguards to address such a self-interest threat include:
                    Excluding the assurance team member from any significant decision-making concerning
                    the assurance engagement.

                    Having an appropriate reviewer review the work of the assurance team member.
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 SECTION 911
 LOANS AND GUARANTEES
 Introduction
 911.1       Firms are required to comply with the fundamental principles, be independent and apply the
             conceptual framework set out in Section 120 to identify, evaluate and address threats to
             independence.
 911.2       A loan or a guarantee of a loan with an assurance client might create a self-interest threat. This
             section sets out specific requirements and application material relevant to applying the
             conceptual framework in such circumstances.

 Requirements and Application Material
 General
 911.3 A1    This section contains references to the "materiality" of a loan or guarantee. In determining
             whether such a loan or guarantee is material to an individual, the combined net worth of the
             individual and the individual's immediate family members may be taken into account.

 Loans and Guarantees with an Assurance Client
 R911.4      A firm, an assurance team member, or any of that individual's immediate family shall not make
             or guarantee a loan to an assurance client unless the loan or guarantee is immaterial to both:

             (a)    The firm or the individual making the loan or guarantee, as applicable; and
             (b)    The client.

The above is subject to restrictions applicable to a tax assurance client (reference may be made to para
900.15)


 Loans and Guarantees with an Assurance Client that is a Bank or Similar Institution
 R911.5      A firm, an assurance team member, or any of that individual's immediate family shall not accept
             a loan, or a guarantee of a loan, from an assurance client that is a bank or a similar institution
             unless the loan or guarantee is made under normal lending procedures, terms and conditions.

 911.5 A1    Examples of loans include mortgages, bank overdrafts, car loans and credit card balances.
 911.5 A2    Even if a firm receives a loan from an assurance client that is a bank or similar institution under
             normal lending procedures, terms and conditions, the loan might create a self-interest threat if
             it is material to the assurance client or firm receiving the loan.
 911.5 A3    An example of an action that might be a safeguard to address such a self-interest threat is
             having the work reviewed by an appropriate reviewer, who is not an assurance team member,
             from a network firm that is not a beneficiary of the loan.

The above is subject to restrictions applicable to a tax assurance client (reference may be made to para
900.15)

 Deposit or Brokerage Accounts
 R911.6      A firm, an assurance team member, or any of that individual's immediate family shall not have
             deposits or a brokerage account with an assurance client that is a bank, broker, or similar
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             institution, unless the deposit or account is held under normal commercial terms.

 The above is subject to restrictions applicable to a tax assurance client (reference may be made to para
 900.15)


 Loans and Guarantees with an Assurance Client that is not a Bank or Similar Institution
 R911.7      A firm or an assurance team member, or any of that individual's immediate family, shall not
             accept a loan from, or have a borrowing guaranteed by, an assurance client that is not a bank
             or similar institution, unless the loan or guarantee is immaterial to both:

             (a)   The firm, or the individual receiving the loan or guarantee, as applicable; and

             (b) The client.
The above is subject to applicable restrictions applicable to a tax assurance client (reference may be made
to para 900.15)
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 SECTION 920
 BUSINESS RELATIONSHIPS
 Introduction
 920.1        Firms are require to comply with the fundamental principles, be independent and apply the
              conceptual framework set out in Section 120 to identify, evaluate and address threats to
              independence.
 920.2        A close business relationship with an assurance client or its management might create a self-
              interest 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
 General

 920.3 A1     This section contains references to the "materiality" of a financial interest and the "significance"
              of a business relationship. In determining whether such a financial interest is material to an
              individual, the combined net worth of the individual and the individual's immediate family
              members may be taken into account.

 920.3 A2     Examples of a close business relationship arising from a commercial relationship or common
              financial interest include:
                    Having a financial interest in a joint venture with either the client or a controlling owner,
                    director or officer or other individual who performs senior managerial activities for that
                    client.
                    Arrangements to combine one or more services or products of the firm with one or more
                    services or products of the client and to market the package with reference to both
                    parties.
                    Distribution or marketing arrangements under which the firm distributes or markets the
                    client's products or services, or the client distributes or markets the firm's products or
                    services.

 Firm, Assurance Team Member or Immediate Family Business Relationships
 R920.4       A firm or an assurance team member shall not have a close business relationship with an
              assurance client or its management unless any financial interest is immaterial and the business
              relationship is insignificant to the client or its management and the firm or the assurance team
              member, as applicable.

 920.4 A1    A self-interest or intimidation threat might be created if there is a close business relationship
             between the assurance client or its management and the immediate family of an assurance
             team member.
The above is subject to restrictions applicable to a tax assurance client (reference may be made to 900.15)

 Buying Goods or Services
 920.5 A1     The purchase of goods and services from an assurance client by a firm, or an assurance team
              member, or any of that individual's immediate family does not usually create a threat to
              independence if the transaction is in the normal course of business and at arm's length.
              However, such transactions might be of such a nature and magnitude that they create a self-
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           interest threat.
           The above is subject to applicable restrictions applicable to a tax assurance client (reference
           may be made to 900.15)

920.5 A2   Examples of actions that might eliminate such a self-interest threat include:
                 Eliminating or reducing the magnitude of the transaction.
                 Removing the individual from the assurance team.
           The above is subject to applicable restrictions applicable to a tax assurance client (reference
           may be made to 900.15)
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SECTION 921
FAMILY AND PERSONAL RELATIONSHIPS
Introduction
921.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

921.2      Family or personal relationships with client personnel 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
General
921.3 A1   A self-interest, familiarity or intimidation threat might be created by family and personal
           relationships between an assurance team member and a director or officer or, depending on
           their role, certain employees of the assurance client.

921.3 A2   Factors that are relevant in evaluating the level of such threats include:
                 The individual's responsibilities on the assurance team.
                 The role of the family member or other individual within the client, and the closeness of
                 the relationship.

Immediate Family of an Assurance Team Member
921.4 A1   A self-interest, familiarity or intimidation threat is created when an immediate family member
           of an assurance team member is an employee in a position to exert significant influence over
           the subject matter of the engagement.
921.4 A2   Factors that are relevant in evaluating the level of such threats include:
                 The position held by the immediate family member.
                 The role of the assurance team member.
921.4 A3   An example of an action that might eliminate such a self-interest, familiarity or intimidation
           threat is removing the individual from the assurance team.
921.4 A4   An example of an action that might be a safeguard to address such a self-interest, familiarity
           or intimidation threat is structuring the responsibilities of the assurance team so that the
           assurance team member does not deal with matters that are within the responsibility of the
           immediate family member.

R921.5     An individual shall not participate as an assurance team member when any of that individual's
           immediate family:
           (a)   Is a director or officer of the assurance client;

           (b)   Is an employee in a position to exert significant influence over the subject matter
                 information of the assurance engagement; or
           (c)   Was in such a position during any period covered by the engagement or the subject
                 matter information.
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The above is subject to applicable restrictions applicable to a tax assurance client (reference may be
made to 900.15)

Close Family of an Assurance Team Member
921.6 A1     A self-interest, familiarity or intimidation threat is created when a close family member of an
             assurance team member is:

             (a)   A director or officer of the assurance client; or
             (b)   An employee in a position to exert significant influence over the subject matter
                   information of the assurance engagement.

921.6 A2     Factors that are relevant in evaluating the level of such threats include:
                     The nature of the relationship between the assurance team member and the close
                     family member.

                     The position held by the close family member.
                     The role of the assurance team member.
921.6 A3     An example of an action that might eliminate such a self-interest, familiarity or intimidation
             threat is removing the individual from the assurance team.
921.6 A4    An example of an action that might be a safeguard to address such a self-interest, familiarity
            or intimidation threat is structuring the responsibilities of the assurance team so that the
            assurance team member does not deal with matters that are within the responsibility of the
            close family member.


The above is subject to applicable restrictions applicable to a tax assurance client (reference may be
made to 900.15)


Other Close Relationships of an Assurance Team Member
R921.7      An assurance team member shall consult in accordance with firm policies and procedures if
             the assurance team member has a close relationship with an individual who is not an
             immediate or close family member, but who is:
             (a)   A director or officer of the assurance client; or
             (b)   An employee in a position to exert significant influence over the subject matter
                   information of the assurance engagement.

921.7 A1 Factors that are relevant in evaluating the level of a self-interest, familiarity or intimidation threat
          created by such relationships include:
                   The nature of the relationship between the individual and the assurance team member.
                   The position the individual holds with the client.
                   The role of the assurance team member.
921.7 A2 An example of an action that might eliminate such a self-interest, familiarity or intimidation
           threat is removing the individual from the assurance team.
921.7 A3    An example of an action that might be a safeguard to address such a self-interest, familiarity
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           or intimidation threat is structuring the responsibilities of the assurance team so that the
           assurance team member does not deal with matters that are within the responsibility of the
           individual with whom the assurance team member has a close relationship.


Relationships of Partners and Employees of the Firm
921.8 A1   A self-interest, familiarity or intimidation threat might be created by a personal or family
           relationship between:
           (a)    A partner or employee of the firm who is not an assurance team member; and

           (b)    A director or officer of the assurance client or an employee in a position to exert
                  significant influence over the subject matter information of the assurance engagement.
921.8 A2   Factors that are relevant in evaluating the level of such threats include:

                  The nature of the relationship between the partner or employee of the firm and the
                  director or officer or employee of the client.
                  The degree of interaction of the partner or employee of the firm with the assurance team.
                  The position of the partner or employee within the firm.
                  The role of the individual within the client.
921.8 A3   Examples of actions that might be safeguards to address such self-interest, familiarity or
           intimidation threats include:

                  Structuring the partner's or employee's responsibilities to reduce any potential influence
                  over the assurance engagement.

                  Having an appropriate reviewer review the relevant assurance work performed.

The above is subject to applicable restrictions applicable to a tax assurance client (reference may be
made to 900.15)
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SECTION 922
RECENT SERVICE WITH AN ASSURANCE CLIENT
Introduction
922.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.
922.2       If an assurance team member has recently served as a director or officer or employee of the
            assurance client, a self-interest, self-review or familiarity threat might be created. This section
            sets out specific requirements and application material relevant to applying the conceptual
            framework in such circumstances.

Requirements and Application Material
Service During the Period Covered by the Assurance Report
R922.3 The assurance team shall not include an individual who, during the period covered by the
          assurance report:

            (a)    Had served as a director or officer of the assurance client; or
            (b)    Was an employee in a position to exert significant influence over the subject matter
                   information of the assurance engagement.

Service Prior to the Period Covered by the Assurance Report
922.4 A1 A self-interest, self-review or familiarity threat might be created if, before the period covered by
          the assurance report, an assurance team member:

            (a)    Had served as a director or officer of the assurance client; or
            (b)    Was an employee in a position to exert significant influence over the subject matter
                   information of the assurance engagement.

            For example, a threat would be created if a decision made or work performed by the individual
            in the prior period, while employed by the client, is to be evaluated in the current period as part
            of the current assurance engagement.
922.4 A2    Factors that are relevant in evaluating the level of such threats include:
                   The position the individual held with the client.
                   The length of time since the individual left the client.
                   The role of the assurance team member.
922.4 A3    An example of an action that might be a safeguard to address such a self-interest, self-review
            or familiarity threat is having an appropriate reviewer review the work performed by the
            assurance team member.
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SECTION 923
SERVING AS A DIRECTOR OR OFFICER OF AN ASSURANCE CLIENT
Introduction

923.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.
923.2       Serving as a director or officer of an assurance client creates self-review and self-interest
            threats. This section sets out specific requirements and application material relevant to
            applying the conceptual framework in such circumstances.

Requirements and Application Material
Service as Director or Officer
R923.3      A partner or employee of the firm shall not serve as a director or officer of an assurance client
            of the firm.

            The above is subject to applicable restrictions applicable to a tax assurance client (reference
            may be made to 900.15)

Service as Company Secretary
R923.4      A partner or employee of the firm shall not serve as Company Secretary for an assurance client
            of the firm unless:
            (a)   This practice is specifically permitted under local law, professional rules or practice;

            (b)   Management makes all decisions; and
            (c)   The duties and activities performed are limited to those of a routine and administrative
                  nature, such as preparing minutes and maintaining statutory returns.

923.4 A1    Duties of Company Secretary might range from: administrative duties (such as personnel
            management and the maintenance of company records and registers) to duties as diverse as
            ensuring that the company complies with regulations or providing advice on corporate
            governance matters. Usually this position is seen to imply a close association with the entity.
            Therefore, a threat is created if a partner or employee of the firm serves as Company
            Secretary for an assurance client. (More information on providing non-assurance services to
            an assurance client is set out in Section 950, Provision of Non-assurances Services to an
            Assurance Client.)
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SECTION 924
EMPLOYMENT WITH AN ASSURANCE CLIENT
Introduction

924.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.

924.2      Employment relationships with an 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
General
924.3 A1    A familiarity or intimidation threat might be created if any of the following individuals have been
            an assurance team member or partner of the firm:

                  A director or officer of the assurance client.
                  An employee who is in a position to exert significant influence over the subject matter
                  information of the assurance engagement.

Former Partner or Assurance Team Member Restrictions

R924.4      If a former partner has joined an assurance client of the firm or a former assurance team
            member has joined the assurance client as:

            (a)   A director or officer; or
            (b)   An employee in a position to exert significant influence over the subject matter
                  information of the assurance engagement,

            the individual shall not continue to participate in the firm's business or professional activities.
924.4 A1    Even if one of the individuals described in paragraph R924.4 has joined the assurance client
            in such a position and does not continue to participate in the firm's business or professional
            activities, a familiarity or intimidation threat might still be created.

924.4 A2   A familiarity or intimidation threat might also be created if a former partner of the firm has joined
           an entity in one of the positions described in paragraph 924.3 A1 and the entity subsequently
           becomes an assurance client of the firm.

924.4 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 assurance team.
                  The length of time since the individual was an assurance team member or partner of the
                  firm.
                  The former position of the individual within the assurance team or firm. An example is
                  whether the individual was responsible for maintaining regular contact with the client's
                  management or those charged with governance.
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924.4 A4 Examples of actions that might be safeguards to address such a familiarity or intimidation threat
          include:

                  Making arrangements such that the individual is not entitled to any benefits or payments
                  from the firm, unless made in accordance with fixed pre-determined arrangements.

                  Making arrangements such that any amount owed to the individual is not material to the
                  firm.
                  Modifying the plan for the assurance engagement.
                  Assigning to the 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 assurance team member.

Assurance Team Members Entering Employment Negotiations with a Client
R924.5      A firm shall have policies and procedures that require assurance team members to notify the
            firm when entering employment negotiations with an assurance client.

924.5 A1    A self-interest threat is created when an assurance team member participates in the assurance
            engagement while knowing that the assurance team member will, or might, join the client
            sometime in the future.

924.5 A2    An example of an action that might eliminate such a self-interest threat is removing the
            individual from the assurance engagement.

924.5 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 assurance team
            member while on the team.
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SECTION 940
LONG ASSOCIATION OF PERSONNEL WITH AN ASSURANCE CLIENT
Introduction
940.1      Firms are required to comply with the fundamental principles, be independent and apply the
           conceptual framework set out in Section 120 to identify, evaluate and address threats to
           independence.
940.2      When an individual is involved in an assurance engagement of a recurring nature over a long
           period of time, familiarity and self-interest threats might be created. This section sets out
           requirements and application material relevant to applying the conceptual framework in such
           circumstances.

Requirements and Application Material
General
940.3 A1   A familiarity threat might be created as a result of an individual's long association with:

           (a)   The assurance client;
           (b)   The assurance client's senior management; or
           (c)   The subject matter and subject matter information of the assurance engagement.
940.3 A2   A self-interest threat might be created as a result of an individual's concern about losing a
           longstanding assurance client or an interest in maintaining a close personal relationship with a
           member of senior management or those charged with governance. Such a threat might
           influence the individual's judgment inappropriately.

940.3 A3   Factors that are relevant to evaluating the level of such familiarity or self-interest threats
           include:

                 The nature of the assurance engagement.
                 How long the individual has been an assurance team member, the individual's seniority
                 on the team, and the nature of the roles performed, including if such a relationship
                 existed while the individual was at a prior firm.

                 The extent to which the work of the individual is directed, reviewed and supervised by
                 more senior personnel.

                 The extent to which the individual, due to the individual's seniority, has the ability to
                 influence the outcome of the assurance engagement, for example, by making key
                 decisions or directing the work of other engagement team members.

                 The closeness of the individual's personal relationship with the assurance client or, if
                 relevant, senior management.
                 The nature, frequency and extent of interaction between the individual and the assurance
                 client.
                 Whether the nature or complexity of the subject matter or subject matter information has
                 changed.
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                 Whether there have been any recent changes in the individual or individuals who are the
                 responsible party or, if relevant, senior management.

940.3 A4   The combination of two or more factors might increase or reduce the level of the threats. For
           example, familiarity threats created over time by the increasingly close relationship between
           an individual and the assurance client would be reduced by the departure of the individual who
           is the responsible party.
940.3 A5   An example of an action that might eliminate the familiarity and self-interest threats in relation
           to a specific engagement would be rotating the individual off the assurance team.

940.3 A6   Examples of actions that might be safeguards to address such familiarity or self-interest threats
           include:

                 Changing the role of the individual on the assurance team or the nature and extent of
                 the tasks the individual performs.
                 Having an appropriate reviewer who was not an assurance team member review the
                 work of the individual.

                 Performing regular independent internal or external quality reviews of the engagement.
R940.4     If a firm decides that the level of the threats created can only be addressed by rotating the
           individual off the assurance team, the firm shall determine an appropriate period during which
           the individual shall not:
           (a)   Be a member of the engagement team for the assurance engagement;

           (b)   Provide quality control for the assurance engagement; or

           (c)   Exert direct influence on the outcome of the assurance engagement.
           The period shall be of sufficient duration to allow the familiarity and self-interest threats to be
           addressed.
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SECTION 950
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 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. This section sets out specific requirements and application material relevant to
            applying the conceptual framework in such circumstances.

Requirements and Application Material
General
R950.3      Before a firm accepts an engagement to provide a non-assurance service to an assurance
            client, the firm shall determine whether providing such a service might create a threat to
            independence.

950.3 A1    The requirements and application material in this section assist firms in analyzing certain types
            of non-assurance services and the related threats that might be created when a firm accepts
            or provides non-assurance services to an assurance client.
950.3 A2    New business practices, the evolution of financial markets and changes in information
            technology are among the developments that make it impossible to draw up an all-inclusive list
            of non-assurance services that might be provided to an assurance client. As a result, the Code
            does not include an exhaustive listing of all non-assurance services that might be provided to
            an assurance client.
            Additional restrictions apply to a tax assurance client (reference may be made           to para
            900.15).
Evaluating Threats
950.4 A1 Factors that are relevant in evaluating the level of threats created by providing a non-assurance
           service to an assurance client include:

                 The nature, scope and purpose of the service.
                 The degree of reliance that will be placed on the outcome of the service as part of the
                 assurance engagement.

                 The legal and regulatory environment in which the service is 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.
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                  The level of expertise of the client's management and employees with respect to the type
                  of service provided.

Materiality in Relation to an Assurance Client's Information
950.4 A2    The concept of materiality in relation to an assurance client's information is addressed in
            Standard on Assurance Engagements (SAE) 3000 (Revised), Assurance Engagements
            other than Audits or Reviews of Historical Financial Information. 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

950.4 A3    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.

Addressing Threats
950.5 A1    Paragraph 120.10 A2 includes a description of safeguards. In relation to providing non-
            assurance services to assurance clients, safeguards are actions, individually or in combination,
            that the firm takes that effectively reduce threats to independence to an acceptable level. In
            some situations, when a threat is created by providing a service to an assurance client,
            safeguards might not be available. In such situations, the application of the conceptual
            framework set out in Section 120 requires the firm to decline or end the non-assurance service
            or the assurance engagement.

Prohibition on Assuming Management Responsibilities
R950.6      A firm shall not assume a management responsibility related to the subject matter or subject
            matter information of an assurance engagement provided by the firm. If the firm assumes a
            management responsibility as part of any other service provided to the assurance client, the
            firm shall ensure that the responsibility is not related to the subject matter or subject matter
            information of the assurance engagement provided by the firm.
950.6 A1    Management responsibilities involve controlling, leading and directing an entity, including
            making decisions regarding the acquisition, deployment and control of human, financial,
            technological, physical and intangible resources.
950.6 A2    Providing a non-assurance service to an assurance client creates self-review and self-interest
            threats if the firm assumes a management responsibility when performing the service. In
            relation to providing a service related to the subject matter or subject matter information of an
            assurance engagement provided by the firm, assuming a management responsibility also
            creates a familiarity threat and might create an advocacy threat because the firm becomes too
            closely aligned with the views and interests of management.
950.6 A3    Determining whether an activity is a management responsibility depends on the circumstances
            and requires the exercise of professional judgment. Examples of activities that would be
            considered a management responsibility include:
                   Setting policies and strategic direction.
                   Hiring or dismissing employees.
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                  Directing and taking responsibility for the actions of employees in relation to the
                  employees' work for the entity.
                  Authorizing transactions.
                  Controlling or managing bank accounts or investments.
                  Deciding which recommendations of the firm or other third parties to implement.
                  Reporting to those charged with governance on behalf of management.
                  Taking responsibility for designing, implementing, monitoring and maintaining internal
                  control.
950.6 A4    Providing advice and recommendations to assist the management of an assurance client in
            discharging its responsibilities is not assuming a management responsibility. (Ref: Paras.
            R950.6 to 950.6 A3).
R950.7      o avoid assuming a management responsibility when providing non-assurance services to an
            assurance client that are related to the subject matter or subject matter information of the
            assurance engagement, the firm shall be satisfied that client management makes all related
            judgments and decisions that are the proper responsibility of management. This includes
            ensuring that the client's management:

            (a)   Designates an individual who possesses suitable skill, knowledge and experience to be
                  responsible at all times for the client's decisions and to oversee the services. Such an
                  individual, preferably within senior management, would understand:

                  (i)    The objectives, nature and results of the services; and
                  (ii)   The respective client and firm responsibilities.

                  However, the individual is not required to possess the expertise to perform or re-perform
                  the services.
            (b)   Provides oversight of the services and evaluates the adequacy of the results of the
                  service performed for the client's purpose; and

            (c)   Accepts responsibility for the actions, if any, to be taken arising from the results of the
                  services.
                  Additional restrictions apply to a tax assurance client (reference may be made to para
                  900.15).

Other Considerations Related to Providing Specific Non-Assurance Services
950.8 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:
            (a)   Developing and preparing prospective information and subsequently providing
                  assurance on this information.

            (b)   Performing a valuation that forms part of the subject matter information of an assurance
                  engagement.
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SECTION 990
REPORTS THAT INCLUDE A RESTRICTION ON USE AND DISTRIBUTION
(ASSURANCE ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
ENGAGEMENTS)
Introduction
990.1       Firms are required to comply with the fundamental principles, be independent and apply the
            conceptual framework set out in Section 120 to identify, evaluate and address threats to
            independence.

990.2       This section sets out certain modifications to Part 4B which are permitted in certain
            circumstances involving assurance engagements where the report includes a restriction on
            use and distribution. In this section, an engagement to issue a restricted use and distribution
            assurance report in the circumstances set out in paragraph R990.3 is referred to as an "eligible
            assurance engagement."

Requirements and Application Material
General
R990.3     When a firm intends to issue a report on an assurance engagement which includes a restriction
           on use and distribution, the independence requirements set out in Part 4B shall be eligible for
           the modifications that are permitted by this section, but only if:

            (a)   The firm communicates with the intended users of the report regarding the modified
                  independence requirements that are to be applied in providing the service; and

            (b)   The intended users of the report understand the purpose, subject matter information and
                  limitations of the report and explicitly agree to the application of the modifications.

990.3 A1    The intended users of the report might obtain an understanding of the purpose, subject matter
            information, and limitations of the report by participating, either directly, or indirectly through a
            representative who has authority to act for the intended users, in establishing the nature and
            scope of the engagement. In either case, this participation helps the firm to communicate with
            intended users about independence matters, including the circumstances that are relevant to
            applying the conceptual framework. It also allows the firm to obtain the agreement of the
            intended users to the modified independence requirements.

R990.4     Where the intended users are a class of users who are not specifically identifiable by name at
           the time the engagement terms are established, the firm shall subsequently make such users
           aware of the modified independence requirements agreed to by their representative.
990.4 A1    For example, where the intended users are a class of users such as lenders in a syndicated
            loan arrangement, the firm might describe the modified independence requirements in an
            engagement letter to the representative of the lenders. The representative might then make
            the firm's engagement letter available to the members of the group of lenders to meet the
            requirement for the firm to make such users aware of the modified independence requirements
            agreed to by the representative.

R990.5     When the firm performs an eligible assurance engagement, any modifications to Part 4B shall
           be limited to those modifications set out in paragraphs R990.7 and R990.8.
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R990.6     If the firm also issues an assurance report that does not include a restriction on use and
           distribution for the same client, the firm shall apply Part 4B to that assurance engagement.

Financial Interests, Loans and Guarantees, Close Business, Family and Personal Relationships
R990.7     When the firm performs an eligible assurance engagement:

           (a)   The relevant provisions set out in Sections 910, 911, 920, 921, 922 and 924 need apply
                 only to the members of the engagement team, and their immediate and close family
                 members;

           (b)   The firm shall identify, evaluate and address any threats to independence created by
                 interests and relationships, as set out in Sections 910, 911, 920, 921, 922 and 924,
                 between the assurance client and the following assurance team members;
                 (i)    Those who provide consultation regarding technical or industry specific issues,
                        transactions or events; and

                 (ii)   Those who provide quality control for the engagement, including those who
                        perform the engagement quality control review; and

           (c)   The firm shall evaluate and address any threats that the engagement team has reason
                 to believe are created by interests and relationships between the assurance client and
                 others within the firm who can directly influence the outcome of the assurance
                 engagement, as set out in Sections 910, 911, 920, 921, 922 and 924.
990.7 A1   Others within the firm who can directly influence the outcome of the assurance engagement
           include those who recommend the compensation, or who provide direct supervisory,
           management or other oversight, of the assurance engagement partner in connection with the
           performance of the assurance engagement.

R990.8     When the firm performs an eligible assurance engagement, the firm shall not hold a material
           direct or a material indirect financial interest in the assurance client.
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GLOSSARY, INCLUDING LISTS OF ABBREVIATIONS
In the Code of Ethics for Professional Accountants (including Independence Standards), the
singular shall be construed as including the plural as well as the reverse, and the terms below
have the following meanings assigned to them.
In this Glossary, explanations of defined terms are shown in regular font; italics are used for
explanations of described terms which have a specific meaning in certain parts of the Code or for
additional explanations of defined terms. References are also provided to terms described in the
Code.

Act                       The Chartered Accountants Act, 1949



Acceptable level          A level at which a professional accountant using the reasonable and informed
                          third party test would likely conclude that the accountant complies with the
                          fundamental principles.

Advertising               The communication to the public of information as to the services or skills
                          provided by professional accountants in public practice with a view to procuring
                          professional business.

Appropriate reviewer      An appropriate reviewer is a professional with the necessary knowledge, skills,
                          experience and authority to review, in an objective manner, the relevant work
                          performed or service provided. Such an individual might be a professional
                          accountant.
                          This term is described in paragraph 300.8 A4.

Assurance client          The responsible party that is the person (or persons) who:

                          (a)   In a direct reporting engagement, is responsible for the subject matter; or

                          (b)   In an assertion-based engagement, is responsible for the subject matter
                                information and might be responsible for the subject matter.

Assurance engagement      An engagement in which a professional accountant in public practice expresses
                          a conclusion designed to enhance the degree of confidence of the intended
                          users other than the responsible party about the outcome of the evaluation or
                          measurement of a subject matter against criteria.

                          (For guidance on assurance engagements, see the Framework for Assurance
                          Engagements issued by the Auditing and Assurance Standards Board. The
                          Framework for Assurance Engagements describes the elements and
                          objectives of an assurance engagement and identifies engagements to
                          which Standards on Auditing (SAs), Standards on Review Engagements
                          (SREs) and Standards on Assurance Engagements (SAEs) apply.)
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  Assurance team         (a)             All members of the engagement team for the assurance engagement;

                            (b)          All others within a firm who can directly influence the outcome of the
                                         assurance engagement, including:

                                  (i)      Those who recommend the compensation of, or who provide direct
                                           supervisory, management or other oversight of the assurance
                                           engagement partner in connection with the performance of the
                                           assurance engagement;

                                  (ii)     Those who provide consultation regarding technical or industry specific
                                           issues, transactions or events for the assurance engagement; and
                                  (iii) Those who provide quality control for the assurance engagement,
                                        including those who perform the engagement quality control review for
                                        the assurance engagement.

Audit                 In Part 4A, the term "audit" applies equally to "review."

Audit client          An entity in respect of which a firm conducts an audit engagement. When the client
                      is a listed entity, audit client will always include its related entities. When the audit
                      client is not a listed entity, audit client includes those related entities over which the
                      client has direct or indirect control. (See also paragraph R400.20.)

                      In Part 4A, the term "audit client" applies equally to "review client."

Audit engagement   A reasonable assurance engagement in which a professional accountant in public
                      practice expresses an opinion whether financial statements are prepared, in all
                      material respects (or give a true and fair view or are presented fairly, in all material
                      respects), in accordance with an applicable financial reporting framework, such as
                      an engagement conducted in accordance with Standards on Auditing. This
                      includes a Statutory Audit, which is an audit required by legislation or other
                      regulation.

                      In Part 4A, the term "audit engagement" applies equally to "review engagement."

Audit report          In Part 4A, the term "audit report" applies equally to "review report."

Audit team            (a)         All members of the engagement team for the audit engagement;
                      (b)         All others within a firm who can directly influence the outcome of the audit
                                  engagement, including:

                                  (i)       Those who recommend the compensation of, or who provide direct
                                            supervisory, management or other oversight of the engagement
                                            partner in connection with the performance of the audit engagement,
                                            including those at all successively senior levels above the
                                            engagement partner through to the individual who is the firm's Senior
                                            or Managing Partner (Chief Executive or equivalent);

                                  (ii)      Those who provide consultation regarding technical or industry-
                                            specific issues, transactions or events for the engagement; and
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                                   (iii)   Those who provide quality control for the engagement, including those
                                           who perform the engagement quality control review for the
                                           engagement; and


                            (c)    All those within a network firm who can directly influence the outcome of the
                                   audit engagement.

                            In Part 4A, the term "audit team" applies equally to "review team."

Close family                A parent, child or sibling who is not an immediate family member.


Conceptual framework        This term is described in Section 120.

Contingent fee               A fee calculated on a predetermined basis relating to the outcome of a transaction
                            or the result of the services performed by the firm. A fee that is established by a
                            court or other public authority is not a contingent fee.

Cooling-off period          This term is described in paragraph R540.5 for the purposes of paragraphs
                            R540.11 to R540.19.

 Council                    The Governing body of the Institute constituted under the Act for the
                            management of the affairs of the Institute and for discharging the functions
                            assigned to it under the Act.

Direct financial interest   A financial interest:
                            (a)    Owned directly by and under the control of an individual or entity (including
                                   those managed on a discretionary basis by others); or

                            (b)    Beneficially owned through a collective investment vehicle, estate, trust or
                                   other intermediary over which the individual or entity has control, or the ability
                                   to influence investment decisions.

Director or officer         Those charged with the governance of an entity, or acting in an equivalent capacity,
                            regardless of their title which might vary from jurisdiction to jurisdiction. In case of a
                            Company, as defined under Sections 2(34) and 2(59) of the Companies Act, 2013


Eligible audit              This term is described in paragraph 800.2 for the purposes of Section 800.
engagement

Eligible assurance          This term is described in paragraph 990.2 for the purposes of Section 990.
engagement

Engagement partner          The partner or other person in the firm who is responsible for the engagement and
                            its performance, and for the report that is issued on behalf of the firm, and who,
                            where required, has the appropriate authority from a professional, legal or
                            regulatory body.
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                     The engagement period starts when the audit team begins to perform the audit.
                     The engagement period ends when the audit report is issued. When the
Engagement period    engagement is of a recurring nature, it ends at the later of the notification by either
                     party that the professional relationship has ended or the issuance of the final audit
(Audit and Review)
                     report. Where the audit client is a statutory audit client under Companies Act,
                     2013, the engagement period shall be determined in accordance with the
                     provisions contained in the Companies Act, 2013
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Engagement                The engagement period starts when the assurance team begins to perform
period                    assurance services with respect to the particular engagement. The
(Assurance
                          engagement period ends when the assurance report is issued. When the
Engagements
Other than                engagement is of a recurring nature, it ends at the later of the notification by
                          either party that the professional relationship has ended or the issuance of the
Audit and Review
                          final assurance report.
Engagements)


Engagement quality        A process designed to provide an objective evaluation, on or before the report is
control review            issued, of the significant judgments the engagement team made and the
                          conclusions it reached in formulating the report.

Engagement team           All partners and staff performing the engagement, and any individuals engaged by
                          the firm or a network firm who perform assurance procedures on the engagement.
                          This excludes external experts engaged by the firm or by a network firm.
                          The term "engagement team" also excludes individuals within the client's internal
                          audit function who provide direct assistance on an audit engagement when the
                          external auditor complies with the requirements of SA 610 (Revised), Using the
                          Work of Internal Auditors.

Existing accountant       A professional accountant in public practice currently holding an audit
                          appointment or carrying out accounting, tax, consulting or similar professional
                          services for a client.

External expert           An individual (who is not a partner or a member of the professional staff,
                          including temporary staff, of the firm or a network firm) or organization
                          possessing skills, knowledge and experience in a field other than accounting or
                          auditing, whose work in that field is used to assist the professional accountant
                          in obtaining sufficient appropriate evidence.

Financial interest        An interest in an equity or other security, debenture, loan or other debt instrument
                          of an entity, including rights and obligations to acquire such an interest and
                          derivatives directly related to such interest.

Financial statements      A structured representation of historical financial information, including related
                          notes, intended to communicate an entity's economic resources or obligations at a
                          point in time or the changes therein for a period of time in accordance with a
                          financial reporting framework. The related notes ordinarily comprise a summary of
                          significant accounting policies and other explanatory information. The term can
                          relate to a complete set of financial statements, but it can also refer to a single
                          financial statement, for example, a balance sheet, or a statement of revenues and
                          expenses, and related explanatory notes.

Financial statements on   In the case of a single entity, the financial statements of that entity. In the case
which the firm will       of consolidated financial statements, also referred to as group financial
express an opinion        statements, the consolidated financial statements.
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Firm                     A sole practitioner, partnership including limited liability partnership or
                         any such entity of professional accountants, as may be permitted by law;

                         Paragraphs 400.4 and 900.3 explain how the word "firm" is used to address the
                         responsibility of professional accountants and firms for compliance with Parts
                         4A and 4B, respectively.

Fundamental principles   This term is described in paragraph 110.1 A1.Each of the fundamental principles
                         is, in turn, described in the following paragraphs:

                         Integrity                                R111.1
                         Objectivity                              R112.1

                         Professional competence and due care R113.1
                         Confidentiality                          R114.1

                         Professional behaviour                   R115.1

Historical financial     Information expressed in financial terms in relation to a particular entity, derived
information              primarily from that entity's accounting system, about economic events occurring in
                         past time periods or about economic conditions or circumstances at points in time
                         in the past.
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                                                     THE CODE

 Immediate family              A spouse (or equivalent) or dependent.

 Independence                  Independence comprises:

                               (a)   Independence of mind  the state of mind that permits the expression of
                                     a conclusion without being affected by influences that compromise
                                     professional judgment, thereby allowing an individual to act with integrity,
                                     and exercise objectivity and professional skepticism.
                               (b)   Independence in appearance  the avoidance of facts and circumstances
                                     that are so significant that a reasonable and informed third party would
                                     be likely to conclude that a firm's, or an audit or assurance team
                                     member's, integrity, objectivity or professional skepticism has been
                                     compromised.

                               As set out in paragraphs 400.5 and 900.4, references to an individual or firm
                               being "independent" mean that the individual or firm has complied with Parts
                               4A and 4B, as applicable.

 Indirect financial interest   A financial interest beneficially owned through a collective investment vehicle,
                               estate, trust or other intermediary over which the individual or entity has no
                               control or ability to influence investment decisions.

Institute                      The Institute of Chartered Accountants of India constituted under the provisions
                               of The Chartered Accountants Act, 1949.

Key audit partner              The engagement partner, the individual responsible for the engagement quality
                               control review, and other audit partners, if any, on the engagement team who make
                               key decisions or judgments on significant matters with respect to the audit of the
                               financial statements on which the firm will express an opinion. Depending upon the
                               circumstances and the role of the individuals on the audit, "other audit partners"
                               might include, for example, audit partners responsible for significant subsidiaries or
                               divisions.

 Listed entity                 An entity whose shares, stock or debt are quoted or listed on a recognized stock
                               exchange, or are marketed under the regulations of a recognized stock exchange
                               or other equivalent body.

 May                            This term is used in the Code to denote permission to take a particular action
                               in certain circumstances, including as an exception to a requirement. It is not
                               used to denote possibility.

 Might                         This term is used in the Code to denote the possibility of a matter arising, an
                               event occurring or a course of action being taken. The term does not ascribe
                               any particular level of possibility or likelihood when used in conjunction with a
                               threat, as the evaluation of the level of a threat depends on the facts and
                               circumstances of any particular matter, event or course of action.
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                                               THE CODE
Network firm              A firm or entity that belongs to a network in accordance with the networking
                          guidelines issued by ICAI

Non-compliance with       Non-compliance with laws and regulations ("non-compliance") comprises acts
laws and regulations      of omission or commission, intentional or unintentional, which are contrary to
                          the prevailing laws or regulations committed by the following parties:
(Professional
Accountants in Service) (a)     The professional accountant's employing organization;

                          (b)   Those charged with governance of the employing organization;
                          (c)   Management of the employing organization; or

                         (d)    Other individuals working for or under the direction of the employing
                                organization.
                         This term is described in paragraph 260.5 A1.


Non-compliance with       Non-compliance with laws and regulations ("non-compliance") comprises acts
laws and regulations      of omission or commission, intentional or unintentional, which are contrary to
(Professional             the prevailing laws or regulations committed by the following parties:
Accountants in Public     (a)   A client;
Practice)
                          (b)   Those charged with governance of a client;

                          (c)   Management of a client; or
                          (d)   Other individuals working for or under the direction of a client. This term is
                                described in paragraph 360.5 A1.
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                                                  THE CODE

Office                      A distinct sub-group, whether organized on geographical or practice lines.

Predecessor accountant      A professional accountant in public practice being the immediately preceding
                            accountant who has held same or similar assignment comprising same /similar
                            scope of work

Professional accountant     An individual who is a member of the Institute of Chartered Accountants of
                            India.

                            In Part 1, the term "professional accountant" refers to individual professional
                            accountants in service and to professional accountants in public practice and their
                            firms.
                            In Part 2, the term "professional accountant" refers to professional accountants in
                            service.
                            In Parts 3, 4A and 4B, the term "professional accountant" refers to professional
                            accountants in public practice and their firms.

 Professional accountant    A professional accountant working in areas such as commerce, industry,
 in service                 service, the public sector, education, the not-for-profit sector, or in regulatory or
                            professional bodies, who might be an employee, contractor director
                            (executive or non-executive), owner-manager or volunteer.

 Professional accountant Member of the Institute of Chartered Accountants of India who is in practice in
                         terms of section 2 of The Chartered Accountants Act, 1949...
 in public practice
                           The term "professional accountant in public practice" is also used to refer to a
                           firm of professional accountants in public practice.
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                                                  THE CODE

Professional activity       An activity requiring accountancy or related skills undertaken by a
                            professional accountant, including accounting, auditing, tax, management
                            consulting, and financial management.

Professional services       Professional activities performed for clients.

Proposed accountant         A professional accountant in public practice who is considering accepting an
                            audit appointment or an engagement to perform accounting, tax, consulting or
                            similar professional services for a prospective client (or in some cases, an
                            existing client).

Public interest entity      (a)   A listed entity; or

                            (b)   An entity:
                                  (i)    Defined by regulation or legislation as a public interest entity; or


                                  (ii)   For which the audit is required by regulation or legislation to be
                                         conducted in compliance with the same independence requirements
                                         that apply to the audit of listed entities. Such regulation might be
                                         promulgated by any relevant regulator, including an audit regulator.

                            For purpose of this definition, it may be noted that Banks and Insurance
                            Companies are to be considered as Public Interest Entities.

                            Other entities might also be considered by the Firms to be public interest
                            entities, as set out in paragraph 400.8.

Quality Review              Board constituted vide Notification GSR. 448 (E) dated 28th June, 2007 by the
Board                       Government of India in the exercise of the powers conferred by Sec. 28A of
                            the Chartered Accountants Act, 1949, consequent to the Chartered
                            Accountants (Amendment) Act, 2006


                            The reasonable and informed third party test is a consideration by the
Reasonable and
                            professional accountant about whether the same conclusions would likely be
informed third party
                            reached by another party. Such consideration is made from the perspective of
Reasonable and              a reasonable and informed third party, who weighs all the relevant facts and
informed third party test   circumstances that the accountant knows, or could reasonably be expected to
                            know, at the time that the conclusions are made. The reasonable and informed
                            third party does not need to be an accountant, but would possess the relevant
                            knowledge and experience to understand and evaluate the appropriateness of
                            the accountant's conclusions in an impartial manner.

                            These terms are described in paragraph R120.5 A4.

Related entity              An entity that has any of the following relationships with the client:
                            (a)   An entity that has direct or indirect control over the client if the client is
                                  material to such entity;

                            (b)   An entity with a direct financial interest in the client if that entity has
                                  significant influence over the client and the interest in the client is material
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                                             THE CODE




                           to such entity;
                    (c)    An entity over which the client has direct or indirect control;
                    (d)    An entity in which the client, or an entity related to the client under (c)
                           above, has a direct financial interest that gives it significant influence over
                           such entity and the interest is material to the client and its related entity
                           in (c); and

                    (e)    An entity which is under common control with the client (a "sister entity")
                           if the sister entity and the client are both material to the entity that controls
                           both the client and sister entity.

Relative                  As per Sub-section (77) of section 2 of Companies Act, 2013 read with
                          rule 4 of the Companies (Specification of definitions details) Rules, 2014.,
                          "relative``, with reference to any person, means any one who is related to
                          another, if--
                          (i) they are members of a Hindu Undivided Family;
                          (ii) they are husband and wife; or
                          (iii) one person is related to the other in such manner as may be prescribed

                          List of relatives in terms of clause (77) of section 2.- A person shall be
                          deemed to be the relative of another, if he or she is related to another in
                          the following manner, namely:-
                          (1) Father:
                          Provided that the term Father includes step-father.
                           (2) Mother:
                          Provided that the term Mother includes the step-mother.
                          (3) Son:
                          Provided that the term Son includes the step-son.
                          (4) Son`s wife.
                          (5) Daughter.
                          (6) Daughter`s husband.
                          (7) Brother:
                          Provided that the term Brother includes the step-brother;
                          (8) Sister:
                          Provided that the term Sister includes the step-sister.


Review client       An entity in respect of which a firm conducts a review engagement.

Review engagement    An assurance engagement, conducted in accordance with Standards on Review
                    Engagements or equivalent, in which a professional accountant in public practice
                    expresses a conclusion on whether, on the basis of the procedures which do not
                    provide all the evidence that would be required in an audit, anything has come
                    to the accountant's attention that causes the accountant to believe that the
                    financial statements are not prepared, in all material respects, in accordance with
                    an applicable financial reporting framework.

Review team         (a)    All members of the engagement team for the review engagement; and
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                                                THE CODE



                          (b)   All others within a firm who can directly influence the outcome of the
                                review engagement, including:

                                (i)     Those who recommend the compensation of, or who provide direct
                                        supervisory, management or other oversight of the engagement
                                        partner in connection with the performance of the review engagement,
                                        including those at all successively senior levels above the
                                        engagement partner through to the individual who is the firm's Senior
                                        or Managing Partner (Chief Executive or equivalent);
                                (ii)    Those who provide consultation regarding technical or industry
                                        specific issues, transactions or events for the engagement; and

                                (iii)   Those who provide quality control for the engagement, including those
                                        who perform the engagement quality control review for the
                                        engagement; and

                          (c)   All those within a network firm who can directly influence the outcome of
                                the review engagement.

Safeguards                Safeguards are actions, individually or in combination, that the professional
                          accountant takes that effectively reduce threats to compliance with the
                          fundamental principles to an acceptable level.
                          This term is described in paragraph 120.10 A2.

Senior professional       Senior professional accountants in service are directors, officers or senior
accountant in service     employees able to exert significant influence over, and make decisions
                          regarding, the acquisition, deployment and control of the employing
                          organization's human, financial, technological, physical and intangible
                          resources.

                          This term is described in paragraph 260.11 A1.

Substantial harm          This term is described in paragraphs 260.5 A3 and 360.5 A3.

Special purpose financial Financial statements prepared in accordance with a financial reporting
statements                framework designed to meet the financial information needs of specified users.
Those charged with        The person(s) or organization(s) (for example, a corporate trustee) with
governance                responsibility for overseeing the strategic direction of the entity and obligations
                          related to the accountability of the entity. This includes overseeing the financial
                          reporting process. For some entities, those charged with governance might
                          include management personnel, for example, executive members of a
                          governance board of a private or public sector entity, or an owner- manager.

Threats                   This term is described in paragraph 120.6 A3 and includes the following
                          categories:
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                                     THE CODE



                 Self interest            120.6 A3(a)
                 Self-review              120.6 A3(b)
                 Advocacy                 120.6 A3(c)
                 Familiarity              120.6 A3(d)
                 Intimidation             120.6 A3(e)

Time-on period   This term is described in paragraph R540.5.
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                                          THE CODE


   LISTS OF ABBREVIATIONS AND STANDARDS REFERRED TO IN THE CODE

LIST OF ABBREVIATIONS


Abbreviation            Explanation

Assurance Framework     Framework for Assurance Engagements

AASB                    Auditing and Assurance Standards Board

IFAC                    International Federation of Accountants

SAs                     Standards on Auditing

SAEs                    Standards on Assurance Engagements

SQCs                    Standards on Quality Control

SREs                    Standards on Review Engagements


LIST OF STANDARDS REFERRED TO IN THE CODE


Standard                Full Title

SA 320                  Materiality In Planning and Performing an Audit

SA 610 (Revised)        Using the Work of Internal Auditors

SAE 3000 (Revised)      Assurance Engagements Other than Audits or Reviews of Historical
                        Financial Information

SQC 1                   Quality Control for Firms that Perform Audits and Reviews of
                        Financial Statements, and Other Assurance and Related Services
                        Engagements
SRE 2400 (Revised)      Engagements to Review Historical Financial Statements
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                                     EFFECTIVE DATE
The restructured Code will be effective as of April 1, 2019.

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