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Unformatted text preview: example, by way of aninheritance, gift or as a result of a merger, and such interest would
not bepermitted to be held under this section, then:
(a) If the interest is received by the firm, the financial interest shallbe disposed of immediately,
or a sufficient amount of an indirectfinancial interest shall be disposed of so that the
remaininginterest is no longer material, or
(b) If the interest is received by a member of the assurance team, ora member of that
individual’s immediate family, the individualwho received the financial interest shall
immediately dispose ofthe financial interest, or dispose of a sufficient amount of anindirect
financial interest so that the remaining interest is nolonger material.
291.112 When an inadvertent violation of this section as it relates to a financialinterest in an assurance
client occurs, it is deemed not to compromiseindependence if:
(a) The firm has established policies and procedures that requireprompt notification to the firm
of any breaches resulting from thepurchase, inheritance or other acquisition of a financial
interest inthe assurance client;
(b) The actions taken in paragraph 291.111(a)–(b) are taken asapplicable; and
(c) The firm applies other safeguards when necessary to reduce anyremaining threat to an
acceptable level. Examples of suchsafeguards include:
• Having a professional accountant review the work of the memberof the assurance team;
or • Excluding the individual from any significant decision-makingconcerning the
assurance engagement. The firm shall determine whether to discuss the matter with those chargedwith governance. 97 Loans and Guarantees
291.113 A loan, or a guarantee of a loan, to a member of the assurance team, or amember of that
individual’s immediate family, or the firm from anassurance client that is a bank or a similar
institution, may create a threat toindependence. If the loan or guarantee is not made under
normal lendingprocedures, terms and conditions, a self-interest threat would be created
thatwould be so significant that no safeguards could reduce the threat to anAcceptable level.
Accordingly, neither a member of the assurance team, amember of that individual’s immediate
family, nor a firm shall accept sucha loan or guarantee.
291.114 If a loan to a firm from an assurance client that i...
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This document was uploaded on 04/03/2014.
- Spring '14