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Unformatted text preview: elationship shall not be
entered into, or it shall be reduced to an insignificant level or terminated.
In the case of a member of the audit team, unless any such financial interest is immaterial and
the relationship is insignificant to that member, the individual shall be removed from the audit
If the business relationship is between an immediate family member of a member of the audit
team and the audit client or its management, the significance of any threat shall be evaluated
and safeguards applied when necessary to eliminate the threat or reduce it to an acceptable
290.125 A business relationship involving the holding of an interest by the firm, or a member of the
audit team, or a member of that individual’s immediate family, in a closely-held entity when
54 the audit client or a director or officer of the client, or any group thereof, also holds an interest
in that entity does not create threats to independence if:
(a) The business relationship is insignificant to the firm, the member of the audit team and
the immediate family member, and the client; (b) The financial interest is immaterial to the investor or group of investors; and (c) The financial interest does not give the investor, or group of investors, the ability to
control the closely-held entity. 290.126 The purchase of goods and services from an audit client by the firm, or a member of the audit
team, or a member of that individual’s immediate family, does not generally create a threat to
independence if the transaction is in the normal course of business and at arm’s length.
However, such transactions may be of such a nature or magnitude that they create a self-interest
threat. 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:
• Eliminating or reducing the magnitude of the transaction; or • Removing the individual from the audit team. Family and Personal Relationships
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This document was uploaded on 04/03/2014.
- Spring '14