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Unformatted text preview: t may be appropriate to eliminate the threats or reduce them to an acceptable
level and identify certain situations where no safeguards could reduce the threats to an
acceptable level. The paragraphs do not describe all of the circumstances and relationships that
create or may create a threat to independence. The firm and the members of the audit team shall
evaluate the implications of similar, but different, circumstances and relationships and
determine whether safeguards, including the safeguards in paragraphs200.12 to 200.15, can be
applied when necessary to eliminate the threats to independence or reduce them to an
290.101 Paragraphs 290.102 to 290.126 contain references to the materiality of a financial interest, loan,
or guarantee, or the significance of a business relationship. For the purpose of 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. 48 Financial Interests
290.102 Holding a financial interest in an audit client may create a self-interest threat. The existence and
significance of any threat created depends on:
(a) The role of the person holding the financial interest,
(b) Whether the financial interest is direct or indirect, and
(c) The materiality of the financial interest.
290.103 Financial interests may be held through an intermediary (for example, a collective investment
vehicle, estate or trust). The determination of whether such financial interests are direct or
indirect will depend upon whether the beneficial owner has control over the investment vehicle
or the ability to influence its investment decisions. When control over the investment vehicle or
the ability to influence investment decisions exists, this Code defines that financial interest to
be a direct financial interest. Conversely, when the beneficial owner of the financial interest has
no control over the investment vehicle or ability to influence its investment decisions, this Code
defines that financial interest to be an indirect financial interest.
290.104 If a memb...
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- Spring '14