General Provisions
| 290.150 | Familiarity and self-interest threats are created by using the same senior personnel on an audit engagement over a long period of time. The significance of the threats will depend on factors such as: |
| • | How long the individual has been a member of the audit team; |
| • | The role of the individual on the audit team; |
| • | The structure of the firm; |
| • | The nature of the audit engagement; |
| • | Whether the client's management team has changed; and |
| • | Whether the nature or complexity of the client's accounting and reporting issues has changed. |
The significance of the threats shall be evaluated and safeguards applied when necessary to eliminate the threats or reduce them to an acceptable level. Examples of such safeguards include:
| • | Rotating the senior personnel off the audit team; |
| • | Having a registered auditor who was not a member of the audit team review the work of the senior personnel; or |
| • | Regular independent internal or external quality reviews of the engagement. |
Audit Clients that are Public Interest Entities
| 290.151 | In respect of an audit of a public interest entity, an individual shall not be a key audit partner for more than seven years or as otherwise determined by legislation or regulation. After such time, the individual shall not be a member of the engagement team or be a key audit partner for the client for two years. During that period, the individual shall not participate in the audit of the entity, provide quality control for the engagement, consult with the engagement team or the client regarding technical or industry-specific issues, transactions or events or otherwise directly influence the outcome of the engagement. |
| 290.152 | Despite paragraph 290.151, key audit partners whose continuity is especially important to audit quality may, in rare cases due to unforeseen circumstances outside the firm's control, be permitted an additional year on the audit team as long as the threat to independence can be eliminated or reduced to an acceptable level by applying safeguards. For example, a key audit partner may remain on the audit team for up to one additional year in circumstances where, due to unforeseen events, a required rotation was not possible, as might be the case due to serious illness of the intended engagement partner. |
| 290.153 | The long association of other partners with an audit client that is a public interest entity creates familiarity and self-interest threats. The significance of the threats will depend on factors such as: |
| • | How long any such partner has been associated with the audit client; |
| • | The role, if any, of the individual on the audit team; and |
| • | The nature, frequency and extent of the individual's interactions with the client's management or those charged with governance. |
The significance of the threats shall be evaluated and safeguards applied when necessary to eliminate the threats or reduce them to an acceptable level. Examples of such safeguards include:
| • | Rotating the partner off the audit team or otherwise ending the partner's association with the audit client; or |
| • | Regular independent internal or external quality reviews of the engagement. |
| 290.154 | When an audit client becomes a public interest entity, the length of time the individual has served the audit client as a key audit partner before the client becomes a public interest entity shall be taken into account in determining the timing of the rotation. If the individual has served the audit client as a key audit partner for five years or less when the client becomes a public interest entity, the number of years the individual may continue to serve the client in that capacity before rotating off the engagement is seven years less the number of years already served. If the individual has served the audit client as a key audit partner for six or more years when the client becomes a public interest entity, the partner may continue to serve in that capacity for a maximum of two additional years before rotating off the engagement. |
| 290.155 | When a firm has only a few registered auditors with the necessary knowledge and experience to serve as a key audit partner on the audit of a public interest entity, rotation of key audit partners may not be an available safeguard. If an independent regulator in the relevant jurisdiction has provided an exemption from partner rotation in such circumstances, an individual may remain a key audit partner for more than seven years, in accordance with such regulation, provided that the independent regulator has specified alternative safeguards which are applied, such as a regular independent external review11 |
11 The Regulatory Board has not vet provided such exemption from partner rotation or specified alternative safeguards.
