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Unformatted text preview: ) require the engagement partner to form a
conclusion on compliance with the independence requirements that apply to the engagement. Networks and Network Firms
290.13 If a firm is deemed to be a network firm, the firm shall be independent of the audit clients of the
other firms within the network (unless otherwise stated in this Code). The independence
42 requirements in this section that apply to a network firm apply to any entity, such as a consulting
practice or professional law practice, that meets the definition of a network firm irrespective of
whether the entity itself meets the definition of a firm.
290.14 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 on 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 co-operation and the firms share
a common brand name, a common system of quality control, or significant professional resources
and consequently is deemed to be a network.
290.15 The judgment as to whether the larger structure is a network shall be made in light of whether a
reasonable and informed third party would be likely to conclude, weighing all the specific facts
and circumstances, that the entities are associated in such a way that a network exists. This
judgment shall be applied consistently throughout the network.
290.16 Where the larger structure is aimed at co-operation and it is clearly aimed at profit or cost sharing
among the entities within the structure, it is deemed to be a network. However, the sharing of
immaterial costs does not in itself create a network. In addition, if the sharing of costs is limited
only to those cos...
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- Spring '14