Specify the appropriate mitigating action that should

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Unformatted text preview: e framework to the particular circumstances they face. 290.13 The nature of the threats to independence and the applicable safeguards necessary to eliminate the threats or reduce them to an acceptable level differ depending on the characteristics of the individual assurance engagement: whether it is a financial statement audit engagement or another type of assurance engagement; and in the latter case, the purpose, subject matter information and intended users of the report. A firm should, therefore, evaluate the relevant circumstances, the nature of the assurance engagement and the threats to independence in deciding whether it is appropriate to accept or continue an engagement, as well as the nature of the safeguards required and whether a particular individual should be a member of the assurance team. 48 By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants [Issued January 2007] PART I: BY-LAWS ON PROFESSIONAL ETHICS Inserted 25 May 2007; With effect from 31 December 2008 for assurance reports dated on or after this date. Networks and Network Firms 290.14 An entity that belongs to a network might be a firm, which is defined in these By-Laws as a member firm, an entity that controls the member firm through ownership, management or other means and an entity controlled by the member firm through ownership, management or other means, or the entity might be another type of entity, such as a consulting practice. The independence requirements in this section that apply to a network firm apply to any entity that meets the definition of a network firm irrespective of whether the entity itself meets the definition of a firm. 290.15 If a firm is considered to be a network firm, the firm is required to be independent of the financial statement audit clients of the other firms within the network. In addition, for assurance clients that are not financial statement audit clients, consideration should be given to any threats the firm has reason to believe may be created by financial interests in the client held by other entities in the network or by relationships between the client and other entities in the network. 290.16 To enhance their ability to provide professional services, firms frequently form larger structures with other firms and entities. Whether these larger structures create a network depends upon the particular facts and circumstances and does not depend on whether the firms and entities are legally separate and distinct. For example, a larger structure may be aimed only at facilitating the referral of work, which in itself does not meet the criteria necessary to constitute a network. Alternatively, a larger structure might be such that it is aimed at cooperation and the firms share a common brand name, a common system of quality control, or significant professional resources and consequently is considered to be a network. 290.17 The judgment as to whether the larger structure is a network should be mad...
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