Revised Code of Ethics in the Phils - 2010

The reliability and extent of the underlying data the

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Unformatted text preview: ant that no safeguards couldreduce the threat to an acceptable level. Accordingly, a firm shall notprovide such tax advice to an audit client. 290.191 In providing tax services to an audit client, a firm may be requested toperform a valuation to assist the client with its tax reporting obligations orfor tax planning purposes. Where the result of the valuation will have adirect effect on the financial statements, the provisions included inparagraphs 290.175 to 290.180 relating to valuation services are applicable.Where the valuation is performed for tax purposes only and the result of thevaluation will not have a direct effect on the financial statements (that is,the financial statements are only affected through accounting entries relatedto tax), this would not generally create threats to independence if such effecton the financial statements is immaterial or if the valuation is subject toexternal review by a tax authority or similar regulatory authority. If thevaluation is not subject to such an external review and the effect is materialto the financial statements, the existence and significance of any threatcreated will depend upon factors such as: • The extent to which the valuation methodology is supported by taxlaw or regulation, other precedent or established practice and thedegree of subjectivity inherent in the valuation. • The reliability and extent of the underlying data. The significance of any threat created shall be evaluated and safeguardsapplied when necessary to eliminate the threat or reduce it to an acceptablelevel. Examples of such safeguards include: • Using professionals who are not members of the audit team toperform the service; • Having a professional review the audit work or the result of the taxservice; or • Obtaining pre-clearance or advice from the tax authorities. Assistance in the Resolution of Tax Disputes 290.192 An advocacy or self-review threat may be created when the firm representsan audit client in the resolution of a tax dispute once the tax authorities havenotified the client that they have rejected the client’s arguments on aparticular issue and either the tax authority or the client is referring thematter for determination in a formal proceeding, for example before atribunal or court. The existence and significance of any threat will dependon factors such as: • Whethe...
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