Represent a large proportion of the revenue of an

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Unformatted text preview: relating to the outcome or result of a transaction or the result of the work performed. For the purposes of this section, fees are not regarded as being contingent if a court or other public authority has established them. 290.211 A contingent fee charged by a firm in respect of an assurance engagement creates self-interest and advocacy threats that cannot be reduced to an acceptable level by the application of any safeguard. Accordingly, a firm should not enter into any fee arrangement for an assurance engagement under which the amount of the fee is contingent on the result of the assurance work or on items that are the subject matter information of the assurance engagement. 290.212 (1) A contingent fee charged by a firm in respect of a non-assurance service provided to an assurance client may also create self-interest and advocacy threats. If the amount of the fee for a non-assurance engagement was agreed to, or contemplated, during an assurance engagement and was contingent on the result of that assurance engagement, the threats could not be reduced to an acceptable level by the application of any safeguard. Accordingly, the only acceptable action is not to accept such arrangements. (2) For other types of contingent fee arrangements, the significance of the threats created will depend on factors such as: (a) The range of possible fee amounts; (b) The degree of variability; (c) The basis on which the fee is to be determined; 92 By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants [Issued January 2007] PART I: BY-LAWS ON PROFESSIONAL ETHICS (d) (e) (3) Whether the outcome or result of the transaction is to be reviewed by an independent third party; and The effect of engagement. the event or transaction on the assurance The significance of the threats should be evaluated and, if the threats are other than clearly insignificant, safeguards should be considered and applied as necessary to reduce the threats to an acceptable level. Such safeguards might include: (a) Disclosing to the audit committee, or others governance, the extent and nature of fees charged; charged with (b) Review or determination of the final fee by an unrelated third party; or (c) Quality and control policies and procedures. Gifts and Hospitality 290.213 Accepting gifts or hospitality from an assurance client may create self-interest and familiarity threats. When a firm or a member of the assurance team accepts gifts or hospitality, unless the value is clearly insignificant, the threats to independence cannot be reduced to an acceptable level by the application of any safeguard. Consequently, a firm or a member of the assurance team should not accept such gifts or hospitality. Actual or Threatened Litigation 290.214 (1) When litigation takes place, or appears likely, between the firm or a member of the assurance team and the assurance client, a self-interest or intimidation threat may be created. The relationship between client managem...
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