Fees - Relative Size
| 291.151 | When the total fees from an assurance client represent a large proportion of the total fees of the firm expressing the conclusion, the dependence on that client and concern about losing the client creates a self-interest or intimidation threat. The significance of the threat will depend on factors such as: |
| • | The operating structure of the firm; |
| • | Whether the firm is well established or new; and |
| • | The significance of the client qualitatively and/or quantitatively to the firm. |
The significance of the 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:
| • | Reducing the dependency on the client; |
| • | External quality control reviews; or |
| • | Consulting a third party, such as the Regulatory Board or another registered auditor, on key assurance judgments. |
| 291.152 | A self-interest or intimidation threat is also created when the fees generated from an assurance client represent a large proportion of the revenue from an individual partner's clients. The significance of the threat shall be evaluated and safeguards applied when necessary to eliminate the threat or reduce it to an acceptable level. An example of such a safeguard is having an additional registered auditor, who was not a member of the assurance team, review the work or otherwise advise as necessary. |
Fees - Overdue
| 291.153 | A self-interest threat may be created if fees due from an assurance client remain unpaid for a long time, especially if a significant part is not paid before the issue of the assurance report, if any, for the following period. Generally the firm is expected to require payment of such fees before any such report is issued. If fees remain unpaid after the report has been issued, the existence and significance of any threat shall be evaluated and safeguards applied when necessary to eliminate the threat or reduce it to an acceptable level. An example of such a safeguard is having another registered auditor, who did not take part in the assurance engagement, provide advice or review the work performed. The firm shall determine whether the overdue fees might be regarded as being equivalent to a loan to the client and whether, because of the significance of the overdue fees, it is appropriate for the firm to be re-appointed or continue the assurance engagement. |
Contingent Fees
| 291.154 | Contingent fees are fees calculated on a predetermined basis relating to the outcome of a transaction or the result of the services performed by the firm. For the purposes of this section, fees are not regarded as being contingent if established by a court or other public authority. |
| 291.155 | A contingent fee charged directly or indirectly, for example through an intermediary, by a firm in respect of an assurance engagement creates a self-interest threat that is so significant that no safeguards could reduce the threat to an acceptable level. Accordingly, a firm shall not enter into any such fee arrangement. |
| 291.156 | A contingent fee charged directly or indirectly, for example through an intermediary, by a firm in respect of a non-assurance service provided to an assurance client may also create a self-interest threat. If the outcome of the non-assurance service, and therefore, the amount of the fee, is dependent on a future or contemporary judgment related to a matter that is material to the subject matter information of the assurance engagement, no safeguards could reduce the threat to an acceptable level. Accordingly, such arrangements shall not be accepted. |
| 291.157 | For other contingent fee arrangements charged by a firm for a non-assurance service to an assurance client, the existence and significance of any threats will depend on factors such as: |
| • | The range of possible fee amounts; |
| • | Whether an appropriate authority determines the outcome of the matter upon which the contingent fee will be determined; |
| • | The nature of the service; and |
| • | The effect of the event or transaction on the subject matter information. |
The significance of any 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:
| • | Having a registered auditor review the relevant assurance work or otherwise advise as necessary; or |
| • | Using professionals who are not members of the assurance team to perform the non-assurance service. |
