Revised Code of Ethics in the Phils - 2010

Such an interest shall not be held unless a neither

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Unformatted text preview: financial interest in an entity and an audit client also has a financial interest in that entity. However, independence is deemed not to be compromised if these interests are immaterial and the audit client cannot exercise significant influence over the entity. If such interest is material to any party, and the audit client can exercise significant influence over the other entity, no safeguards could reduce the threat to an acceptable level. 171 Accordingly, the firm shall not have such an interest and any individual with such an interest shall, before becoming a member of the audit team, either: (a) Dispose of the interest; or (b) Dispose of a sufficient amount of the interest so that the remaining interest is no longer material. 290.113 A self-interest, familiarity or intimidation threat may be created if a member of the audit team, or a member of that individual’s immediate family, or the firm, has a financial interest in an entity when a director, officer or controlling owner of the audit client is also known to have a financial interest in that entity. The existence and significance of any threat will depend upon factors such as: • The role of the professional on the audit team; • Whether ownership of the entity is closely or widely held; • Whether the interest gives the investor the ability to control or significantly influence the entity; and • The materiality of the financial interest. • The significance of any threat shall be evaluated and safeguards applied when necessary to eliminate the threat or reduce it to an acceptable level. Examples of such safeguards include: • Removing the member of the audit team with the financial interest from the audit team; or • Having a professional accountant review the work of the member of the audit team. 290.114 The holding by a firm, or a member of the audit team, or a member of that individual’s immediate family, of a direct financial interest or a material indirect financial interest in the audit client as a trustee creates a self-interest threat. Similarly, a self-interest threat is created when: (a) A partner in the office in which the engagement partner practices in connection with the audit; (b) Other partners and managerial employees who provide non-assurance services to the audit client, except those whose involvement is minimal; or (c) Their immediate family members, hold a direct financial interest or a material indirect financial interest in the audit client as trustee. Suc...
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