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Section 600 Provision of Non-assurance Services to an Audit client…
Section 600
Provision of Non-assurance Services to an Audit client
Materiality = in relation to audit client's AFS (professional judgement)
Level of professional judgement involved
Firm/network firm may not assume management responsibility for audit client (leading, directing entity; making decisions regarding resources)
Can create:
self-review, self-interest, familiarity and advocacy threats
NB important to note different considerations for PIE vs non PIE audit client
If non-assurance services have been provided and client later becomes PIE? (par R600.9)
Section 601 - Accounting and bookkeeping services
Creates self-review threat
Advice regarding application of accounting standards/policies; assessing appropriateness of controls; proposing adjusting journal entries allowed (considered part of audit process) as long as management takes responsibility for making decisions in preparation of accounting records and AFS
Not PIE: Not allowed unless services are routine/mechanical in nature; and firm addresses threats not at acceptable level (safeguards: using individuals not part of audit team; appropriate reviewer)
PIE: not allowed except if routine/mechanical in nature and division for which provided for are immaterial to AFS of audit client
Section 602 - Administrative services
does not require professional judgement, usually does not create threat
Section 603 - Valuation services
Self-review/advocacy threat
Not PIE: should not provide if it involves significant degree of subjectivity; and will have material effect on AFS
PIE: should not provide if material effect on AFS
Framework
Par 600.1 - 600.10
Section 604 - Tax services
Tax return preparation:
does not usually create threat
Tax calculations for preparation of accounting entries:
Current and deferred tax - self-review threat
Evaluation of level depend on materiality of calculation
PIE: May not be provided if material to AFS (if immaterial safeguards in par 604.5.A3 should be applied)
Tax planning and other advisory services:
How to structure affairs in tax efficient manner
Apply safeguards as can create self-review/advocacy threat
Should not be provided if effectiveness of advice dependent on accounting treatment/presentation in the AFS with reasonable doubt and outcome of tax advice material impact on AFS
Tax services involving valuations:
Allowed if result will not have direct effect on AFS, is immaterial or subject to external review
Assistance in resolution of ta disputes:
Evaluate level and apply safeguards/actions
Section 605 - Internal Audit Services
Should not assume management responsibility (specific examples par R605.4) or assume significant part
PIE should not be provided if relates to significant part of internal controls over fin reporting; financial accounting systems material to acc records; amounts to disclosures material to AFS
Section 606 - Information Technology Systems Services
Allowed as long as do not assume management responsibility (examples of this in par 606.3.A2 and R606.4)
PIE: not allowed to design/implement IT system if forms significant part of internal controls over AFS or generate info significant to AFS
Section 607 - Litigation Support Services
Allowed, evaluate level and apply safeguards.
If it involves estimating damages/amounts, section 603 i.t.o. valuation services applicable
Section 608 - Legal services
Determine role:
advisory role (allowed but evaluate level and apply safeguards);
general counsel (not allowed as senior management position);
advocacy role (not allowed if amounts material to AFS, apply safeguards)
Section 609: Recruiting services
Allowed but audit client should still assume management responsibility regarding making decisions
May not act as negotiator on client's behalf
May not be involved in services regarding director/officer or senior management position
Section 610: Corporate Finance Services
Allowed but should not
provide services involving promoting, dealing in or underwriting client's shares
advice where effectiveness depends on particular accounting treatment or presentation in the AFS on which there is reasonable doubt regarding appropriate acc treatment and outcome will have a material impact on AFS