DPM 1420

1420—Independence
This Section of the Manual provides policies and guidance for maintaining independence. The
policies and guidance apply to Deloitte Touche Tohmatsu Limited (DTTL), each Member Firm,
Partners, Professional Staff, and others employed by DTTL or a Member Firm.
 Chapter 1: General Policies
 Chapter 2: Firm and Personal Financial Relationships with Restricted Entities
 Chapter 3: Employment Relationships with Restricted Entities
 Chapter 4: Business Relationships with Restricted Entities
 Chapter 5: Audit Services to Restricted Entities
 Chapter 6: Non-Assurance Services to Restricted Entities
 Chapter 7: Audit Reports with a Restriction on Use and Distribution
 Chapter 8: Policies Applicable to Assurance Clients
 Chapter 9: Administration and Quality Controls
 Definitions
 Appendices
Effective Date:
Issued 12 March 2021 and effective 15 June 2021
Paragraphs 1.19-1.20, 2.63-2.64, 4.2, 5.5-5.9, 5.21-5.26, 9.25 and the following
definitions (including the applicable paragraphs where used): Affiliate (where the Audit
Client is subject to SEC independence rules), Audit and Professional Engagement Period,
Beneficial Owner with Significant Influence, Entity Under Audit, Investment Company
Complex, SEC Restricted Entity, are effective immediately.
© 2021 For information, contact Deloitte Touche Tohmatsu Limited.

Table of Contents
Table of Contents...........................................................................................................2
Chapter 1 – General Policies.........................................................................................10

Introduction...................................................................................................................10
Structure of this Section and Terminology Used...................................................................10
General Policies...............................................................................................................12
Additional Requirements for SEC Restricted Entities – General Standard of Independence. 14
Applying the Conceptual Framework to Independence...........................................................14
Having an Inquiring Mind.........................................................................................14
Exercising Professional Judgment..............................................................................15
Reasonable and Informed Third Party........................................................................15
Identifying Threats..........................................................................................................15
Evaluating Threats...........................................................................................................17
Acceptable Level.....................................................................................................17
Factors Relevant in Evaluating the Level of Threats......................................................17
The Client and its Operating Environment...................................................................17
Member Firms and their Operating Environment..........................................................18
Consideration of New Information or Changes in Facts and Circumstances......................18
Addressing Threats..........................................................................................................19
Safeguards............................................................................................................19
Consideration of Significant Judgments Made and Overall Conclusions Reached................19
General Documentation of Independence for Audit and Assurance Engagements.......................20
Breach of an Independence Requirement............................................................................20
Responsibilities of Partners, Professional Staff and Others Employed by DTTL or Member Firms. .20
Complying with the Independence Policies and Procedures....................................................20
Knowing when the Independence Policies Apply...................................................................21
Determining Whether an Entity is a Restricted Entity or an Assurance Client............................22
Prompt Reporting of Financial Interests and Securities Account Information.............................22
Consulting Others as Needed............................................................................................22
Confirming Compliance with Independence Policies..............................................................22
Consequences of Non-compliance with Independence Policies and Procedures..........................23

Applicability of Independence Policies to Retired Partners......................................................23
Additional Requirements for SEC Restricted Entities—Retired Partners............................23
Applicability of Independence Policies to Contractors............................................................23
Chapter 2 - Firm and Personal Financial Relationships with Restricted Entities.............25

Introduction...................................................................................................................25
Direct and Indirect Financial Interests................................................................................25
Additional Requirements for SEC Restricted Entities—Direct and Indirect Financial
Interests...............................................................................................................26
Financial Interests Held Through Intermediaries...................................................................26
2
Additional Requirements for SEC Restricted Entities – Financial Interests Held Through
Intermediaries........................................................................................................27
Financial Interests in an Entity Controlling a Restricted Entity................................................28
Period Deemed to Participate on an Engagement.................................................................28
Alternative Financial Investment Vehicles............................................................................28
Structured Deposits.........................................................................................................28
Insurance Products with an Investment Component..............................................................28
Employee Compensation and Benefit Plans..........................................................................29

Additional Requirements for SEC Restricted Entities—Employee Compensation and
Benefit Plans..........................................................................................................29
Financial Interests Received Unintentionally........................................................................30

Additional Requirements for SEC Restricted Entities—Inheritance, Gifts and Other
Unsolicited Receipt of Financial Interests....................................................................31
Retirement Benefit Plans of DTTL or a Member Firm.............................................................31

Additional Requirements for SEC Restricted Entities—Retirement Benefit Plans of
DTTL or a Member Firm...........................................................................................31
Financial Interests Held as Trustee or Executor of a Trust or Estate........................................31

Additional Requirements for SEC Restricted Entities—Trusts and Estates.........................32
Financial Interests in Common with a Restricted Entity.........................................................32

Additional Requirements for SEC Restricted Entities— Financial Interests in Common
with a Restricted Entity............................................................................................33
Close Family Members......................................................................................................34

Additional Requirements for SEC Restricted Entities—Financial Interests of Close
Family Members.....................................................................................................34
Other Personal Relationships.............................................................................................34

Loans and Guarantees......................................................................................................35
Loans and Guarantees with a Restricted Entity.....................................................................35
Loans and Guarantees with a Restricted Entity that is a Bank or Similar Institution...................35
Loans and Guarantees with a Restricted Entity that is not a Bank or Similar Institution..............35
Loans and Guarantees to or from a Restricted Entity Involving DTTL or a Member Firm.............36
Additional Requirements for SEC Restricted Entities—Loans and Guarantees....................36
Accounts with Financial Institutions....................................................................................37
Additional Requirements for SEC Restricted Entities—Bank Accounts..............................37
Additional Requirements for SEC Restricted Entities—Securities Accounts........................38
Additional Requirements for SEC Restricted Entities—Other Accounts.............................38
Additional Requirements for Payments to Accounts at SEC Restricted Entities..................39
Insurance Products..........................................................................................................39
Additional Requirements for SEC Restricted Entities—Insurance Products........................39
Surety Bonds and Similar Products.....................................................................................39
Additional Requirement for SEC Restricted Entities—Surety Bonds and Similar Products....40
3
Additional Requirements for New SEC Audit Clients—Financial Interests and Other Financial
Relationships..................................................................................................................40
Global Independence Monitoring System.............................................................................40
Outside Investors in Member Firms....................................................................................41
Additional Requirements for SEC Restricted Entities – Outside Investors.........................41
Chapter 3 - Employment and Other Relationships with Restricted Entities....................42

Introduction...................................................................................................................42
Serving as a Director or Officer of a Restricted Entity............................................................42
Service as Company Secretary..........................................................................................42

Additional Requirements for SEC Restricted Entities—Service as Company Secretary........43
Employment by, or Activities Involving, a Restricted Entity....................................................43
Employment and Activities of Current Partners and Professional Staff......................................43

Additional Requirements for SEC Restricted Entities—Employment and Activities of
Current Partners and Professional Staff......................................................................43
Employment of Former Partners and Professional Staff by a Restricted Entity...........................43

Additional Requirements for Public Interest Restricted Entities—Key Audit Partners..........45
Additional Requirements for Public Interest Restricted Entities—Managing Partner of
the Member Firm....................................................................................................45
Additional Requirements for Public Interest Restricted Entities—Other Leaders.................46
Additional Requirements for Public Interest Restricted Entities Other than
SEC Restricted Entities—Business Combinations..........................................................46
Additional Requirements for SEC Restricted Entities—Employment and Roles of
Former Partners and Professional Staff by an SEC Restricted Entity................................47
Employment Discussions with a Restricted Entity.................................................................50
Additional Requirements for SEC Restricted Entities—Employment Discussions with
an SEC Restricted Entity..........................................................................................50
Recent Service with a Restricted Entity...............................................................................51
Service During Period Covered by the Audit Report...............................................................51
Service Prior to Period Covered by the Audit Report..............................................................51
Additional Requirements for SEC Restricted Entities—Former Employees of Restricted

Entities 51
Family and Personal Relationships......................................................................................52
Immediate Family Members..............................................................................................52

Additional Requirements for SEC Restricted Entities – Immediate Family Members...........53
Close Family Members......................................................................................................53

Additional Requirements for SEC Restricted Entities – Close Family Members...................54
Other Close Relationships of an Audit Team Member.............................................................54
Relationships of Partners, Professional Staff and Others Employed by DTTL or a Member

Firm 55
Temporary Personnel Assignments.....................................................................................56
Additional Requirements for SEC Restricted Entities—Temporary Personnel Assignments...56
Chapter 4 - Business Relationships with Restricted Entities..........................................57

Introduction...................................................................................................................57
Vendor Business Relationships...........................................................................................57
Additional Requirements for Data Set Purchases..........................................................59
Additional Requirements for SEC Restricted Entities — Vendor Business Relationships.......59
4
Additional Requirements for SEC Restricted Entities — Leasing Arrangements..................60
Marketplace Business Relationships....................................................................................61
Additional Requirements for SEC Restricted Entities—Marketplace Business Relationships. .62
Interactions with Other Service Providers on a Client Project.................................................63

Additional Requirements for SEC Restricted Entities - Interactions with Other Service
Providers on a Client Project.....................................................................................63
Evaluation of Materiality and Significance of a Marketplace Business Relationship.....................63
Commission or Referral Fee Relationships...........................................................................64

Additional Requirements for SEC Restricted Entities - Commission or Referral Fee
Relationships..........................................................................................................64
Reseller Relationships......................................................................................................64
Additional Requirements for SEC Restricted Entities - Reseller Relationships....................65
Joint Proposals 65
Additional Requirements for SEC Restricted Entities – Joint Proposals.............................65
Investment Relationships.................................................................................................66
Additional Requirements for SEC Restricted Entities – Investments................................67
Co-developed Solution.....................................................................................................67
Additional Requirements for SEC Restricted Entities – Development or Maintenance of
Commercial Offerings..............................................................................................68
Business Relationships of Immediate Family Members..........................................................68
Other Relationships in the Marketplace...............................................................................69
Sponsorship Relationships................................................................................................69
Events Organized by a Restricted Entity or where a Restricted Entity is a Co-Sponsor
of the Event...........................................................................................................69
DTTL or Member Firm Organized Events.....................................................................70
Additional Requirements for SEC Restricted Entities – DTTL or Member Firm Organized
Events..................................................................................................................70
Membership Relationships.................................................................................................70
Publishing Arrangements..................................................................................................71
Additional Requirements for SEC Restricted Entities – Publishing Arrangements...............72
Speaking Engagements....................................................................................................72
Additional Requirements for SEC Restricted Entities – Speaking Engagements.................72
Internal Consultants to DTTL and Member Firms..................................................................73
Additional Requirements for SEC Restricted Entities—Internal Consultants......................73
Accepting and Monitoring Business Relationships..................................................................74
Chapter 5 - Audit Services to Restricted Entities...........................................................76

General Provisions...........................................................................................................76
Entities Requiring Independence........................................................................................76
Affiliates of Audit Clients...................................................................................................76

Additional Requirements for SEC Restricted Entities—Entities under Common Control
with an Entity under Audit which are not Affiliates.......................................................77
Public Interest Entities.....................................................................................................77
5
Changes in Affiliates........................................................................................................78
Affiliates Resulting from a Merger or Acquisition..........................................................78
Additional Requirements for SEC Restricted Entities—Affiliates Resulting from a Merger or
Acquisition.............................................................................................................80
Updating the Deloitte Entity Search and Compliance System..................................................81

Period During which Independence is Required....................................................................81
Additional Requirements for SEC Restricted Entities—Period During which Independence
is Required............................................................................................................82
Additional Requirements for SEC Restricted Entities—Audit of Prior-Period Financial
Statements Following a Change in Auditor..................................................................82
Additional Requirements for SEC Restricted Entities—Re-Issuing a Previously Issued
Audit Report or Currently Dated Consents..................................................................83
Audit Committee Pre-approval of Audit Services for SEC Issuer Audit Clients and Registered
Investment Company Audit Clients....................................................................................83
Audit Committee Communications.....................................................................................83
Additional Requirements for Audit Clients that are Listed Entities other than SEC Restricted Entities
—Communications with Audit Committees...........................................................................84
Additional Requirements for Audits Performed Pursuant to PCAOB Standards...........................84

Initial Communications with the Audit Committee under PCAOB Rule 3526......................84
Periodic Communication with the Audit Committee under PCAOB Rule 3526....................85
Fees.............................................................................................................................. 85
Relative Size of Fees........................................................................................................85

Additional Requirements for Public Interest Restricted Entities—Relative Size of Fees........86
Contingent Fees 87
Overdue Fees 87
Additional Requirements for SEC Restricted Entities—Overdue Fees................................88
Legal Protection Clauses...................................................................................................88
Additional Requirements for SEC Restricted Entities—Legal Protection Clauses.................88
Additional Requirements for SEC Restricted Entities—Legal Protection Clauses for
Component Auditors of a PCAOB Group Audit..............................................................88
Additional Requirements for SEC Restricted Entities—Foreign Private Issuers Where
Legal Protection Is Provided Under Local Law..............................................................89
Actual or Threatened Litigation..........................................................................................90
Additional Requirements for SEC Restricted Entities—Litigation......................................91
Former Employees of Restricted Entities.............................................................................91
Long Association with Restricted Entities.............................................................................91
Evaluation and Compensation Policies................................................................................91
Additional Requirements for SEC Restricted Entities—Evaluation and Compensation..........92
Gifts and Hospitality........................................................................................................92
Additional Requirements for SEC Restricted Entities—Gifts and Hospitality.......................93
Group Audits..................................................................................................................93
Serving as Group Auditor..................................................................................................93
Serving as Component Auditor..........................................................................................93

Breach of Applicable Independence Requirements................................................................94
Communication of Breaches to Those Charged with Governance.............................................96
Breaches Before the Previous Audit Report Was Issued.........................................................97
Documentation 97
6
Additional Requirements for Audits Conducted Pursuant to PCAOB Standards –
Communication of Breaches to Those Charged with Governance....................................98
Chapter 6 - Non-Assurance Services to Restricted Entities............................................99

General Policies...............................................................................................................99
Evaluating Threats...........................................................................................................99
Multiple Non-Assurance Services Provided to the Same Audit Client..............................100
Addressing Threats........................................................................................................100
Approval Process 100
Non-Assurance Services after the Final Year of the Audit.....................................................102

Additional requirements for SEC Restricted Entities – Non-Assurance Services after
the Final Year of the Audit......................................................................................102
Providing Non-Assurance Services to a Restricted Entity that Later Becomes a Public

Interest Restricted Entity................................................................................................102
Additional Requirements for SEC Restricted Entities – Providing Non-Assurance Services
to a Restricted Entity that Later Becomes an SEC Restricted Entity...............................102
Audit Committee Pre-approval of Services for SEC Issuer Audit Clients and Registered Investment
Company Audit Clients...................................................................................................102
Fee Arrangements 103

Contingent Fees....................................................................................................103
Additional Requirements for SEC Restricted Entities—Contingent Fees...........................104
Commissions........................................................................................................104
Legal Protection Clauses.................................................................................................104

Additional Requirements for SEC Restricted Entities—Legal Protection Clauses...............104
Termination Clauses.......................................................................................................104
Temporary Personnel Assignments...................................................................................105

Additional Requirements for SEC Restricted Entities—Temporary Personnel Assignments. 105
Restrictions on Non-Assurance Services............................................................................105
Not Subject to Audit Exception........................................................................................105

Additional Requirements for SEC Restricted Entities—Not Subject to Audit Exception.......105
Management Responsibilities...........................................................................................106
Additional Requirements for SEC Restricted Entities—Management Responsibilities.........108
Administrative Services..................................................................................................109
Additional Requirements for SEC Restricted Entities—Administrative Services................110
Accounting and Bookkeeping Services...............................................................................110

General Requirements for Restricted Entities—Accounting and Bookkeeping Services......110
Accounting and Bookkeeping Services that are Routine and Mechanical.........................111
Requirements for Restricted Entities other than Public Interest Restricted Entities and
SEC Restricted Entities—Accounting and Bookkeeping Services....................................112
Additional Requirements for Public Interest Restricted Entities other than
SEC Restricted Entities—Accounting and Bookkeeping Services....................................112
Additional Requirements for SEC Restricted Entities—Accounting and Bookkeeping
Services..............................................................................................................112
7
Tax Services 114
General Provisions.................................................................................................114
Tax Return Preparation Services..............................................................................114
Additional Requirements for SEC Restricted Entities—Tax Compliance Services...............115
Tax Calculations for the Purpose of Preparing Accounting Entries.................................115
Requirements for Restricted Entities other than Public Interest Restricted Entities and SEC
Restricted Entities—Tax Calculations for the Purpose of Preparing the Accounting Entries.115
Additional Requirements for Public Interest Restricted Entities other than SEC
Restricted Entities—Tax Calculations for the Purpose of Preparing Accounting Entries......115
Additional Requirements for SEC Restricted Entities—Tax Calculations for the Purpose
of Preparing Accounting Entries...............................................................................115
Tax Planning and Other Tax Advisory Services...........................................................116
Tax Services Involving Valuations............................................................................117
Additional Requirements for SEC Restricted Entities – Tax Services Involving Valuations..117
Assistance in the Resolution of Tax Disputes.............................................................117
Resolution of Tax Matters Involving Acting as an Advocate..........................................118
Additional Requirements for SEC Restricted Entities—Assistance in the Resolution of
Tax Disputes........................................................................................................118
Additional Requirements for Restricted Entities Subject to PCAOB Rules—Tax Planning
and Other Tax Advisory Services to an SEC Restricted Entity.......................................119
Additional Requirements for Restricted Entities Subject to PCAOB Rules—Tax Services
to an Individual in a Financial Reporting Oversight Role..............................................119
Tax Services Resulting in Joint Liability.....................................................................120
Additional Requirements for SEC Restricted Entities – Tax Services Resulting in Joint
Liability...............................................................................................................120
Information Technology Systems Services.........................................................................120

Restricted Entities—Information Technology Systems Services.....................................122
Additional Requirements for SEC Restricted Entities—Information Technology Systems
Services..............................................................................................................122
Appraisal and Valuation Services......................................................................................123

SEC Restricted Entities—Appraisal and Valuation Services...........................................124
Additional Requirements for Public Interest Restricted Entities other than
SEC Restricted Entities—Valuation Services...............................................................124
Additional Requirements for SEC Restricted Entities—Appraisal and Valuation Services....124
Actuarial Services 126

SEC Restricted Entities— Actuarial Services..............................................................127
Restricted Entities—Actuarial Services......................................................................127
Additional Requirements for SEC Restricted Entities—Actuarial Services........................127
Internal Audit Services...................................................................................................127

Restricted Entities—Internal Audit Services...............................................................130
Additional Requirements for SEC Restricted Entities—Internal Audit Services.................130
Recruiting and Human Resource Services..........................................................................131

8
Additional Requirements for SEC Restricted Entities—Recruiting and Human Resources
Services..............................................................................................................132
Corporate Finance Services.............................................................................................133

Additional Requirements for SEC Restricted Entities—Corporate Finance, Investment
Advisory or Management, Broker-Dealer, and Investment Banking Services..................134
Legal Services 134

Acting as General Counsel......................................................................................135
Acting in an Advocacy Role.....................................................................................135
Acting as Company Secretary.................................................................................135
Additional Requirements for SEC Restricted Entities—Legal Services.............................136
Litigation Support and Expert Services..............................................................................136

Additional Requirements for SEC Restricted Entities—Litigation Support and Expert
Services..............................................................................................................137
Additional Requirements for SEC Restricted Entities—Provision of Expert Services
when Retained by a Group.....................................................................................138
Immigration Services.....................................................................................................138
Additional Requirements for SEC Restricted Entities – Immigration Services..................138
Serving as a Member of a Supervisory Body......................................................................138

Additional Requirements for SEC Restricted Entities – Serving as a Member of a
Supervisory Body..................................................................................................139
Chapter 7 - Audit Reports with a Restriction on Use and Distribution..........................140

Introduction..................................................................................................................140
General Policies.............................................................................................................140
Public Interest Restricted Entities.....................................................................................141
Affiliates 141
Independence of DTTL and Member Firms.........................................................................141
Requirements for SEC Restricted Entities...........................................................................141

Financial Interests, Loans and Guarantees, Marketplace Business Relationships, and Family
and Personal Relationships..............................................................................................141
Employment with a Restricted Entity................................................................................142
Providing Non-Assurance Services....................................................................................142
Chapter 8 - Policies Applicable to Assurance Clients...................................................143

Introduction..................................................................................................................143
Reports that Include a Restriction on Use and Distribution...........................................144
Audit and Review Engagements...............................................................................144
General Policies.............................................................................................................144
Multiple Responsible Parties and Parties Taking Responsibility for the Subject Matter
Information .........................................................................................................144
DTTL and other Member Firms.........................................................................................145
Related Entities 145
Period during which Independence is Required...................................................................145

General Documentation of Independence for Assurance Engagements...................................146
Member Firm and Personal Financial Relationships—Assurance Clients...................................147
9
Financial Interests 147
Financial Interests in an Entity Controlling an Assurance Client....................................147
Financial Interests Held as Trustee..........................................................................147
Financial Interests Received Unintentionally..............................................................148
Financial Interests of Close Family Members.............................................................148
Financial Interests of Other Individuals.....................................................................149
Loans and Guarantees....................................................................................................149

Loans and Guarantees with an Assurance Client........................................................149
Loans and Guarantees with an Assurance Client that is a Bank or Similar Institution.......149
Accounts with Financial Institutions.........................................................................150
Loans and Guarantees with an Assurance Client that is not a Bank or Similar Institution..150
Employment Relationships—Assurance Clients...................................................................150
Service as Director or Officer...........................................................................................150
Service as Company Secretary........................................................................................150
Employment with Assurance Clients.................................................................................151

Employment of Current Partners and Professional Staff with an Assurance Client............151
Employment of Former Partners and Professional Staff with an Assurance Client............151
Employment Discussions with an Assurance Client..............................................................152
Recent Service with an Assurance Client...........................................................................152

Service During the Period Covered by the Assurance Report........................................152
Service Prior to the Period Covered by the Assurance Report.......................................153
Family and Personal Relationships....................................................................................153
Immediate Family of an Assurance Team Member..............................................................153
Close Family of an Assurance Team Member......................................................................154
Other Close Relationships of an Assurance Team Member....................................................154
Relationships of Partners, Professional Staff and Others Employed by the Member Firm...........155
Business Relationships...................................................................................................156
Long Association with an Assurance Client.........................................................................157
Fees............................................................................................................................157
Relative Size of Fees......................................................................................................157
Contingent Fees 157
Overdue Fees 158

Actual or Threatened Litigation........................................................................................158
Provision of Non-Assurance Services to Assurance Clients....................................................159
General Policies 159

Evaluating Threats................................................................................................159
Multiple Non-Assurance Services Provided to the Same Assurance Client.......................160
Addressing Threats................................................................................................160
Prohibition on Assuming Management Responsibilities................................................160
Other Considerations Related to Providing Specific Non-Assurance Services...................162
Assurance Reports that Include a Restriction on Use and Distribution....................................162
Financial Interests, Loans and Guarantees, Business, Family and Personal Relationships..........163
10
Gifts and Hospitality.......................................................................................................163
Breach of an Independence Provision for Assurance Engagements........................................164
Chapter 9 - Administration and Quality Controls.........................................................166

Introduction..................................................................................................................166
Role and Responsibilities of the Director of Independence....................................................166
Quality Controls.............................................................................................................167
Consultation Process......................................................................................................169
Engagement Acceptance Process......................................................................................169
Business Relationship Process..........................................................................................170
Breach of Applicable Independence Requirements..............................................................170
Independence Related Regulatory Inspection Findings and Investigations..............................170
Restricted Entities 170
Deloitte Entity Search and Compliance System...................................................................170
Service Request Management (SRM) Application ...............................................................171
Global Independence Monitoring System...........................................................................171
Confirmation Process......................................................................................................172
Independence-Related Learning.......................................................................................173
Practice Reviews 174
Inspection and Testing...................................................................................................174
Disciplinary Process.......................................................................................................174
Employment by, or Activities Involving, a Restricted Entity..................................................174

Partner and Employee Contractual Arrangements......................................................175
Member Firm Independence Confirmation.........................................................................175
Independence-Related Communications............................................................................175
Long Association with Restricted Entities...........................................................................176
Identification and Monitoring of Associated Entities and Member Firm Investments..................176
Outside Investors in Member Firms..................................................................................176
Member Firm Transactions..............................................................................................176
Definitions.................................................................................................................177
Appendices................................................................................................................194
Appendix A1 Assessment of enterprise application services.............................................194
Appendix A2 Assessment of human capital services.......................................................194
11
Appendix A3 Assessment of outsourcing/extended business services................................194
Appendix A4 Assessment of strategy and operations services..........................................194
Appendix A5 Assessment of technology and integration services......................................194
Appendix B1 Assessment of valuation services..............................................................194
Appendix B2 Assessment of dispute; consulting services................................................194
Appendix B3 Assessment of reorganizational services....................................................194
Appendix B4 Assessment of corporate finance services..................................................194
Appendix C1 Assessment of merger & acquisition ("M&A") and related services.................194
Appendix D1 Assessment of services generally provided to entities in an investment
company complex..................................................................................194
Appendix E1 Assessment of the enterprise risk services (ERS) function............................194
Appendix F1 Tax Alert 03042, assessment of firm position on assisting attest Clients with tax
accruals, tax provisions, and related FASB statement 109 computations........194
Appendix F2 Assessment of tax compliance and planning services...................................194
Appendix G Guidance on Including and Updating Entity Information in DESC...................194
Appendix H Examples of Impermissible and Permissible Marketplace Activities with
Restricted Entities..................................................................................194
Appendix I Assisting Restricted Entities before Tax Forums..........................................194
Appendix J Guidance on Applying Inspection and Testing Policies..................................194
Appendix K Expected Member Firm Disciplinary Policy for an Individual's Breach of
an Independence Policy..........................................................................194
Appendix L Application of DPM 1420 to Independent Non-executive Directors..................194
Appendix M Guidance on Associated Entity of a Member Firm........................................194
Appendix N Guidance on Independence-Related Communications...................................194
Appendix O Frequently Asked Questions – Independence Operating Model for Member
Firm Combinations.................................................................................194
12
Chapter 1 – General Policies
Introduction
1.1 This Section of the Manual sets forth independence policies that apply to DTTL, each
Member Firm, Partners, Professional Staff, and others employed by DTTL or a Member
Firm.
1.2 The policies are based primarily on the requirements of the International Independence
Standards of the International Code of Ethics for Professional Accountants (the Code)
issued by International Ethics Standards Board for Accountants (IESBA) 1. Additionally, the
independence related requirements of the U.S. Securities and Exchange Commission (SEC)
are applicable to SEC Restricted Entities, and those of the Public Company Accounting
Oversight Board (PCAOB) apply to audits that are conducted pursuant to such standards.
However, certain policies in this Section 1420 are more restrictive than would be imposed
under regulatory or professional standards. Where a more restrictive policy has been
adopted, it is based on the conclusion that the policy makes good business sense because
it:
(a) Mitigates risks of noncompliance;
(b) Facilitates assigning or consulting the appropriate individuals on a timely basis; and
(c) Enhances our ability to service global Clients on an integrated basis.
1.3 International Standard on Quality Control 1, Quality Control for Firms that Perform Audits
and Reviews of Financial Statements, and Other Assurance and Related Services
Engagements (ISQC 1), requires a Member Firm to establish policies and procedures
designed to provide it with reasonable assurance that the Member Firm, its personnel and,
where applicable, others subject to independence requirements (including personnel of
DTTL and other Member Firms), maintain independence where required by relevant ethics
requirements. International Standards on Auditing (ISAs), International Standards on
Review Engagements (ISREs) and International Standards on Assurance Engagements
(ISAEs) establish responsibilities for Engagement Partners and Engagement Teams at the
level of the Engagement for Audit, Review, and Assurance Engagements, respectively. The
allocation of responsibilities within a Member Firm will depend on its size, structure and
organization. Unless otherwise specified, many of the provisions of this Section 1420 do
not prescribe the specific responsibility of individuals within a Member Firm for actions
related to independence, instead referring to “Member Firm” for ease of reference. A
Member Firm shall assign responsibility for a particular action to an individual or
a group of individuals (such as an Audit Team), in accordance with ISQC 1. In
addition, all Partners, Professional Staff and others employed by DTTL and the Member
Firms remain responsible for compliance with any provisions that apply to their activities,
interests or relationships.
Structure of this Section and Terminology Used
1.4 Section 1420 is divided as follows:
 Chapter 1: General Policies
 Chapter 2: Firm and Personal Financial Relationships with Restricted Entities

1
This Section 1420 may include (i) extracts from an International Federation of Accountants (IFAC) publication, owned and published
by IFAC in, and/or (ii) trademarks and logos that are trademarks or registered trademarks of IFAC, and each of the foregoing is used
with permission of IFAC. No entity within the Deloitte network is a part of IFAC and such use of IFAC’s copyrighted material in no way
represents an endorsement or promotion by IFAC. Any views or opinions that may be included in this Section 1420 by any entity within
the Deloitte network do not express the views and opinions of IFAC.
13
 Chapter 3: Employment and Other Relationships with Restricted Entities
 Chapter 4: Business Relationships with Restricted Entities
 Chapter 5: Audit Services to Restricted Entities
 Chapter 6: Non-Assurance Services to Restricted Entities
 Chapter 7: Audit Reports with a Restriction on Use and Distribution
 Chapter 8: Policies Applicable to Assurance Clients
 Chapter 9: Administration and Quality Controls
 Definitions
 Appendices
1.5 The policies included in Chapter 1 apply to all Restricted Entities and Assurance Clients
and the terms defined in Definitions are used throughout Section 1420. The independence
requirements that apply to Audit and Review Engagements differ from those that apply to
Assurance Engagements. Moreover, such requirements, in limited circumstances, may be
modified where a Member Firm issues an audit report or assurance report that contains a
restriction on use and distribution. The independence requirements that apply under these
various circumstances can be found in the following chapters of this Section 1420:
Audit Assurance
Reports - Reports -
Restriction Restriction on
Audit Review on Use and Assurance Use and
Chapter Engagements Engagements Distribution Engagements2 Distribution
1     
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Chapter 9 covers administrative processes and the quality controls DTTL and Member
Firms are required to establish and maintain to ensure compliance with the policies in this
Section 1420.
1.6 The policies in Chapters 2 through 7 differ depending on the type of Restricted Entity.
When differences exist, the general policies that apply to all Restricted Entities will be
presented first; next will be the policies that apply to Restricted Entities that are not Public
Interest Restricted Entities, followed by the additional policies for Public Interest Restricted
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Independence requirements in Chapters 2 through 6 apply to any Engagement to provide an assurance or attest report that is used to
satisfy a requirement of the SEC.
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Entities. Presented last are the additional policies that apply to SEC Restricted Entities. If
the Client is a Public Interest Restricted Entity, the policies applicable to all
Restricted Entities and those applicable to Public Interest Restricted Entities
shall be followed. If the Client is an SEC Restricted Entity, the policies applicable
to all Restricted Entities, Public Interest Restricted Entities and SEC Restricted
Entities shall all be followed.
1.7 Independence requirements in Chapters 2 through 6 apply to Audit and Review

Engagements. For purposes of this Section 1420, such Audit and Review Engagements are
those where a Member Firm is engaged to report on a complete set of Financial
Statements or a single Financial Statement. Other audits or reviews, such as the audit of
specific elements, accounts or items of a Financial Statement, are covered by the policies
applicable to Assurance Clients in Chapter 8.
1.8 As used in this Section 1420, the meaning of the following terminology is as follows:
(a) “Audit”, “Audit Engagement,” “Audit Team,” “Audit Client,” “audit services” and
“audit report” include “review,” “Review Engagement,” “Review Team,” “Review
Client,” “review services” and “review report” because the policies applicable to
Review Engagements are the same as those that apply to Audit Engagements;
(b) “Shall” or “should” impose a requirement to comply with the specific provision in
which “shall” or “should” has been used;
(c) “May” generally denotes permission to take a particular action in certain

circumstances, including as an exception to a requirement. It is not used to denote
possibility; and
(d) “Might” generally denotes the possibility of a matter arising, an event occurring or a
course of action being taken. The term does not ascribe any particular level of
possibility or likelihood when used in conjunction with a threat, as the evaluation of
the level of a threat depends on the facts and circumstances of any particular
matter, event or course of action.
1.9 Policies appear as bolded text and guidance appears as unbolded text.
1.10 Throughout this Section 1420, reference is made to the Lead Client Service Partner. In the
case of some Audit Clients and Assurance Clients, the Lead Client Service Partner might
not be the Audit Engagement Partner or Assurance Engagement Partner, or there might be
multiple Audit Clients or Assurance Clients in the group with multiple Engagement
Partners. When used in this Section 1420, the responsibilities of the Lead Client Service
Partner might, based on the particular circumstances, refer to responsibilities of an Audit
Engagement Partner or Assurance Engagement Partner. When the Lead Client Service
Partner is not the Audit Engagement Partner or Assurance Engagement Partner,
the Lead Client Service Partner, Audit Engagement Partner(s) and Assurance
Engagement Partner(s) shall coordinate activities so the requirements of this
Section 1420 can be met for all of the respective Audit and Assurance Clients.
General Policies
1.11 DTTL, Member Firms, all Partners, Professional Staff, and others employed by
DTTL or Member Firms shall comply with the fundamental principles of
objectivity and integrity and be independent, in fact and in appearance, of any
entity for which independence is required. If a Member Firm has Associated
Entities that are not admitted to membership of DTTL (i.e., are not themselves
Member Firms of DTTL), the Member Firm is responsible for the application of the
DTTL independence policies and procedures in those Associated Entities.
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1.12 The policies and requirements as included in this Section 1420 shall apply
equally and individually to the Member Firm, as well as to each Geography Firm
within a Member Firm as further described in Chapter 9 and Appendix O.
1.13 A Member Firm performing an Audit or Assurance Engagement shall be

independent. Independence is linked to the fundamental principles of objectivity and
integrity. It comprises:
(a) Independence of mind – the state of mind that permits the expression of a
conclusion without being affected by influences that compromise professional
judgment, thereby allowing an individual to act with integrity, and exercise
objectivity and professional skepticism.
(b) Independence in appearance – the avoidance of facts and circumstances that are so
significant that a reasonable and informed third party would be likely to conclude
that a Member Firm’s or an Audit or Assurance Team member’s integrity, objectivity
or professional skepticism has been compromised.
1.14 DTTL, Member Firms, Partners, Professional Staff, others employed by DTTL or
Member Firms, and other individuals as determined by the Director of
Independence shall comply with the policies in this Section 1420, as applicable.
1.15 In certain circumstances, the policies in this Section 1420 might apply to an entity which is
controlled by a Partner or a Professional Staff member, alone or acting together with other
Partners or Professional Staff members. The determination of whether the activities,
interests or relationships of such entity are attributable to the Partner or Professional Staff
will depend on the specific facts and circumstances and consultation with the Director of
Independence is encouraged.
1.16 DTTL and the Member Firms shall not change or delete any of the policies in this
Section 1420. When Local Laws are more restrictive than the policies in this
Section 1420, Member Firms shall comply with applicable Local Laws in addition
to the policies in this Section 1420. Even where not required by Local Laws, Member
Firms may choose to adopt policies that are more restrictive than those contained in this
section.
1.17 There might be circumstances where Local Laws preclude a Member Firm from
complying with certain policies in this Section 1420. In such circumstances,
those Local Laws prevail and the Member Firm shall comply with all of the other
policies in this Section 1420. If a conflict exists between this Section 1420 and
Local Laws, the DTTL Senior Managing Director–Global Independence shall be
consulted in order to assess the implications for DTTL, the Member Firm, and the
other Member Firms.
1.18 If a Member Firm believes an exception to any of the policies in this Section 1420
is warranted, the Director of Independence shall request a policy waiver, in
writing, from the DTTL Senior Managing Director–Global Independence. Approval
for such an exception will be rare and will not be given if the waiver to policy would result
in a breach to the applicable independence rules or professional standards.
Additional Requirements for SEC Restricted Entities – General Standard

of Independence
1.19 A Member Firm would not be recognized as independent with respect to an SEC Restricted
Entity, if the Member Firm is not, or a reasonable investor with knowledge of all relevant
facts and circumstances would conclude that the Member Firm is not, capable of exercising
objective and impartial judgment on all issues encompassed within the Member Firm’s
Audit or Assurance Engagement. In determining whether the Member Firm is independent,
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all relevant circumstances are considered, including all relationships between the Member
Firm and the SEC Restricted Entity.
1.20 This Section 1420 does not address all circumstances that might impair
independence and therefore the general standard in paragraph 1.19 shall always
be applied. In considering compliance with the general standard of
independence, a Member Firm shall assess whether a relationship or the
provision of service:
(a) Creates a mutual or conflicting interest between the Member Firm and the
SEC Restricted Entity;
(b) Places the Member Firm in the position of auditing its own work;
(c) Results in the Member Firm acting as management or an employee of the

SEC Restricted Entity; or
(d) Places the Member Firm in a position of being an advocate for the SEC
Restricted Entity.
Applying the Conceptual Framework to Independence
1.21 The conceptual framework specifies an approach to identify, evaluate and address threats
to independence. A Member Firm shall apply the conceptual framework in relation
to an Audit or Assurance Engagement.
1.22 The conceptual framework assists Member Firms in complying with the independence
requirements and meeting the responsibility to act in the public interest. The conceptual
framework accommodates a wide range of facts and circumstances, including the various
Professional Services, interests and relationships that create threats to independence. In
addition, the conceptual framework deters a Member Firm from concluding that a situation
is permitted solely because that situation is not specifically prohibited under this Section
1420.
1.23 When applying the conceptual framework, a Member Firm shall:
(a) Have an inquiring mind;
(b) Exercise professional judgment; and
(c) Use the Reasonable and Informed Third Party Test.
Having an Inquiring Mind
1.24 An inquiring mind is a prerequisite to obtaining an understanding of known facts and

circumstances necessary for the proper application of the conceptual framework. Having
an inquiring mind involves:
(a) Considering the source, relevance and sufficiency of information obtained, taking
into account the nature, scope and outputs of the Professional Service being
undertaken; and
(b) Being open and alert to a need for further investigation or other action.
1.25 When considering the source, relevance and sufficiency of information obtained, the
Member Firm might consider, among other matters, whether:
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 New information has emerged or there have been changes in facts and
circumstances.
 The information or its source might be influenced by bias or self-interest.
 There is reason to be concerned that potentially relevant information might be
missing from the facts and circumstances known to the Member Firm.
 There is an inconsistency between the known facts and circumstances and the
Member Firm’s expectations.
 The information provides a reasonable basis on which to reach a conclusion.
 There might be other reasonable conclusions that could be reached from the
information obtained.
1.26 Paragraph 1.23 requires an inquiring mind when identifying, evaluating and addressing
threats to the fundamental principles of integrity and objectivity and to independence.
Exercising Professional Judgment
1.27 Professional judgment involves the application of relevant training, professional

knowledge, skill and experience commensurate with the facts and circumstances, taking
into account the nature and scope of the particular Professional Services, and the interests
and relationships involved.
1.28 Professional judgment is required when a Member Firm applies the conceptual framework
in order to make informed decisions about the courses of actions available, and to
determine whether such decisions are appropriate in the circumstances. In making this
determination, the Member Firm might consider matters such as whether:
 The Member Firm’s expertise and experience are sufficient to reach a conclusion.
 There is a need to consult with others with relevant expertise or experience.
 The Member Firm’s own preconception or bias might be affecting the exercise of
professional judgment.
Reasonable and Informed Third Party
1.29 The Reasonable and Informed Third Party Test is a consideration by the Member Firm
about whether the same conclusions would likely be reached by another party. Such
consideration is made from the perspective of a reasonable and informed third party, who
weighs all the relevant facts and circumstances that the Member Firm knows, or could
reasonably be expected to know, at the time that the conclusions are made. The
reasonable and informed third party does not need to be a Professional Accountant, but
would possess the relevant knowledge and experience to understand and evaluate the
appropriateness of the Member Firm’s conclusions in an impartial manner.
Identifying Threats
1.30 A Member Firm shall identify threats to independence.
1.31 An understanding of the facts and circumstances, including any Professional Services,
interests and relationships that might create a threat to independence, is a prerequisite to
the identification of threats. The existence of certain conditions, policies and procedures
established by the profession, legislation, regulation or by DTTL and the Member Firms
might also help identify threats to independence. Paragraph 1.41 below includes general
examples of such conditions, policies and procedures which are also factors that are
relevant in evaluating the level of threats.
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1.32 Threats to independence might be created by a broad range of facts and circumstances. It
is not possible to define every situation that creates threats. In addition, the nature of
Engagements and work assignments might differ and consequently different types of
threats might be created. A circumstance might create more than one threat to
independence.
1.33 The following are categories of threats to independence, and examples of facts and
circumstances within each of the categories that might create such threats:
 Self-interest threat – the threat that a financial or other interest will inappropriately
influence an Audit or Assurance Team member’s judgment or behavior. For
example:
o Having a Direct Financial Interest in a Restricted Entity.
o Having a business relationship with a Restricted Entity.
o Discovering a significant error when evaluating the results of a previous
Professional Service performed by a Member Firm.
 Self-review threat – the threat that an Audit or Assurance Team member will not
appropriately evaluate the results of a previous judgment made, or Professional
Service performed by such team or Member Firm or by another Member Firm, on
which the Audit or Assurance Team member will rely when forming a judgment as
part of the Audit or Assurance Engagement. For example:
o Issuing an audit or assurance report on the effectiveness of the operation of
financial systems after implementing the systems.
o Having prepared the original data used to generate records that are the
subject matter of the Audit or Assurance Engagement.
 Advocacy threat – the threat that a Member Firm will promote a Restricted Entity’s or
Assurance Client’s position to the point that the Audit or Assurance Team’s
objectivity is compromised. For example:
o Promoting the interests of, or shares in, a Restricted Entity.
o Acting as an advocate on behalf of a Restricted Entity in litigation or disputes
with third parties.
o Lobbying in favor of legislation on behalf of a Restricted Entity.
 Familiarity threat – the threat that due to a long or close relationship with a Restricted
Entity or Assurance Client, or its Directors, Officers, or employees, an Audit or
Assurance Team member will be too sympathetic to the entity’s interests or too
accepting of their work. For example:
o Having a Close or Immediate Family Member who is a Director or Officer of a
Restricted Entity.
o A Director or Officer of a Restricted Entity, or an employee in a position to
exert significant influence over the subject matter of the Engagement, having
recently served as an Audit or Assurance Team member.
o An Audit or Assurance Team member having a long association with the
Restricted Entity.
 Intimidation threat – the threat that an Audit or Assurance team member will be
deterred from acting objectively because of actual or perceived pressures, including
attempts by the Directors or Officers or employees of a Restricted Entity or an
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Assurance Client to exercise undue influence over the Audit or Assurance Team
member. For example:
o Being threatened with dismissal from an Audit or Assurance Engagement or
the Member Firm because of a disagreement about a professional matter.
o Feeling pressured to agree with the judgment of a Restricted Entity because
the Client has more expertise on the matter in question.
Evaluating Threats
1.34 When a Member Firm identifies a threat to independence, the Member Firm shall
evaluate whether such a threat is at an Acceptable Level.
Acceptable Level
1.35 An Acceptable Level is the level at which a Member Firm using the Reasonable and
Informed Third Party Test would likely conclude that that the Member Firm or an Audit or
Assurance Team member complies with the fundamental principles of integrity and
objectivity and is independent.
Factors Relevant in Evaluating the Level of Threats
1.36 The consideration of qualitative as well as quantitative factors is relevant in the Member
Firm’s evaluation of threats, as is the combined effect of multiple threats, if applicable.
1.37 The existence of conditions, policies and procedures established by the profession,
legislation, regulation or by DTTL and the Member Firms might impact the evaluation of
whether a threat to independence is at an Acceptable Level. Such conditions, policies and
procedures might relate to:
 The Audit Client or Assurance Client and its operating environment; and
 The Member Firm and its operating environment.
1.38 A Member Firm’s evaluation of the level of a threat to independence is also impacted by
the nature and scope of the Professional Service.
The Client and its Operating Environment

1.39 The evaluation of the level of a threat might be impacted by whether the Client is:
 An Audit Client and whether the Audit Client is a Public Interest Entity; or
 An Assurance Client that is not an Audit Client.

For example, providing a Non-Assurance Service to an Audit Client that is a Public Interest
Entity might be perceived to result in a higher level of threat to independence and to
compliance with the fundamental principle of objectivity with respect to the audit.
1.40 The corporate governance structure, including the leadership of an Audit Client or
Assurance Client, might promote compliance with the independence requirements.
Accordingly, the evaluation of the level of a threat might also be impacted by the Client’s
operating environment. For example:
 The Client requires appropriate individuals other than management to ratify or
approve the appointment of a Member Firm to perform an Engagement.
 The Client has competent employees with experience and seniority to make
managerial decisions.
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 The Client has implemented internal procedures that facilitate objective choices in
tendering non-Assurance Engagements.
 The Client has a corporate governance structure that provides appropriate oversight
and communications regarding the Member Firm’s services.
Member Firms and their Operating Environment

1.41 A Member Firm’s evaluation of the level of a threat might be impacted by its work and
operating environment. For example:
 Leadership of the Member Firm promotes compliance with the independence
requirements and establishes the expectation that Partners and Professional Staff
will act in the public interest.
 Policies or procedures for establishing and monitoring compliance with the
independence requirements by all Partners, Professional Staff and others employed
by Member Firms.
 Compensation, performance appraisal and disciplinary policies and procedures that
promote compliance with the independence requirements.
 Management of the reliance on revenue received from a single Audit Client or
Assurance Client.
 The Lead Client Service Partner having authority within the Member Firm for
decisions concerning compliance with the independence requirements, including
decisions about accepting or providing services to an Audit Client or Assurance
Client.
 Educational, training and experience requirements.
 Processes to facilitate and address internal and external concerns or complaints
Consideration of New Information or Changes in Facts and

Circumstances
1.42 If a Member Firm becomes aware of new information or changes in facts and
circumstances that might impact whether a threat to independence or to
compliance with the fundamental principles of integrity and objectivity has been
eliminated or reduced to an Acceptable Level, the Member Firm shall re-evaluate
and address that threat accordingly.
1.43 Remaining alert throughout the period during which independence is required assists in
determining whether new information has emerged or changes in facts and circumstances
have occurred, that:
(a) Impact the level of a threat; or
(b) Affect the Member Firm’s conclusions about whether Safeguards applied continue to
address identified threats as intended.
In these situations, actions that were already implemented as Safeguards might no longer
be effective in addressing threats. Accordingly, the application of the conceptual
framework requires that the Member Firm re-evaluate and address the threats accordingly
(see paragraphs 1.34 and 1.46).
1.44 If new information results in the identification of a new threat, the Member Firm is
required to evaluate and, as appropriate, address this threat.
1.45 Examples of new information or changes in facts and circumstances that might impact the
level of a threat include:
 When the scope of a Professional Service is expanded.
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 When an Audit Client becomes a Listed Entity or acquires another business unit.
 When a Member Firm merges with another firm.
 When there is a change in the Audit or Assurance Team member’s personal or
immediate family relationships.
Addressing Threats
1.46 If a Member Firm determines that the identified threats to independence are not
at an Acceptable Level, the Member Firm shall address the threats by eliminating
them or reducing them to an Acceptable Level. The Member Firm shall do so by:
(a) Eliminating the circumstances, including interests or relationships, that are

creating the threats;
(b) Applying Safeguards, where available and capable of being applied, to

reduce the threats to an Acceptable Level; or
(c) Declining or ending the specific Professional Service.
1.47 Depending on the facts and circumstances, a threat might be addressed by eliminating the
circumstance creating the threat. However, there are some situations in which threats can
only be addressed by declining or ending the specific Professional Service. This is because
the circumstances that created the threats cannot be eliminated and Safeguards are not
capable of being applied to reduce the threat to an Acceptable Level.
Safeguards
1.48 Safeguards are actions that, taken individually or in combination, effectively reduce
threats to independence to an Acceptable Level.
1.49 Safeguards vary depending on the facts and circumstances. Examples of actions that in
certain circumstances might be Safeguards to address threats include:
 Having an Appropriate Reviewer who was not a member of the team review the
work performed or advise as necessary might address a self-review threat.
 Using different Partners and Engagement Teams with separate reporting lines for the
provision of Non-Assurance Services to an Audit Client or Assurance Client might
address self-review, advocacy or familiarity threats.
 Involving another Member Firm or firm to perform or re-perform part of the

Engagement might address self-interest, self-review, advocacy, familiarity or
intimidation threats.
 Disclosing to Audit Clients or Assurance Clients any referral fees or commission

arrangements received for recommending services or products might address a self-
interest threat.
Consideration of Significant Judgments Made and Overall Conclusions

Reached
1.50 A Member Firm shall form an overall conclusion about whether the actions that
the Member Firm takes, or intends to take, to address the threats to
independence will eliminate those threats or reduce them to an Acceptable Level.
In forming the overall conclusion, the Member Firm shall:
(a) Review any significant judgments made or conclusions reached; and
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(b) Use the Reasonable and Informed Third Party Test.
General Documentation of Independence for Audit and Assurance Engagements
1.51 A Member Firm shall document conclusions regarding compliance with the
independence requirements in this Section 1420 and the substance of any
relevant discussions that support those conclusions. In particular:
(a) When Safeguards are applied to address a threat, the Member Firm shall
document the nature of the threat and the Safeguards in place or applied;
and
(b) When a threat required significant analysis and it was concluded that the
threat was already at an Acceptable Level, the Member Firm shall document
the nature of the threat and the rationale for the conclusion.
1.52 Documentation provides evidence of the judgments made in forming conclusions regarding
compliance with this Section 1420. However, a lack of documentation, unless specifically
noted, does not determine whether a Member Firm considered a particular matter or
whether the Member Firm is independent.
Breach of an Independence Requirement
1.53 If a breach of an independence requirement applicable to a particular Audit or

Assurance Engagement occurs, the actions specified in paragraphs 5.103 to
5.117 or 8.144 to 8.149, as applicable, shall be taken.
Responsibilities of Partners, Professional Staff and Others Employed by DTTL or

Member Firms
Complying with the Independence Policies and Procedures
1.54 Partners, Professional Staff and others employed by DTTL or a Member Firm are
responsible for understanding and complying with all applicable independence
policies and procedures. Partners, Professional Staff and others employed by
DTTL or a Member Firm shall:
(a) Read all relevant independence policies;
(b) Understand the extent to which the policies apply to them and their
Immediate and Close Family Members;
(c) Provide information to their Immediate Family Members about the
independence policies and where required, obtain from them financial,
employment and other information needed to fulfill the independence
compliance and reporting requirements;
(d) Understand that there are limitations or restrictions on our ability to
provide services to, and have business relationships with, Restricted
Entities and Assurance Clients;
(e) Comply with applicable independence policies and procedures at all times
during employment or association with DTTL or a Member Firm and, and in
certain cases, after leaving DTTL or a Member Firm; and
(f) Promptly notify those designated within their Member Firm of
circumstances and relationships that create a threat to independence so
that appropriate action can be taken.
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1.55 If legal or regulatory requirements or professional standards in a Member Firm’s
jurisdiction are more restrictive than the independence policies in this Section
1420, the Member Firm shall:
(a) Include the more restrictive requirements in the policies of the Member
Firm; and
(b) When the more restrictive requirements apply to other Member Firms and
individuals outside of the Member Firm’s jurisdiction, make those Member
Firms and individuals aware that they are required to comply with the more
restrictive requirements, as applicable.
Knowing when the Independence Policies Apply
1.56 The policies in this Section 1420 restrict those financial, employment and business
relationships that Partners and Professional Staff might have with Restricted Entities and
Assurance Clients that are deemed to create a threat to independence. Certain policies
apply only to Partners and Professional Staff members who provide any Professional
Services to the Restricted Entity. Other policies apply only to Covered Persons (most often
with respect to SEC Restricted Entities). In the case of Engagements to provide services to
Assurance Clients, the policies generally apply to those who are members of the Assurance
Team.
1.57 In order to be compliant with this Section 1420 with respect to their financial,
business, employment and other relationships, every time a Partner or a
Professional Staff member is assigned to provide Professional Services to a
Client, an individual shall:
(a) Determine whether the entity involved is a Restricted Entity, including
whether it is a Public Interest Restricted Entity or an SEC Restricted Entity,
or whether it is an Assurance Client and remain alert to changes in this
status throughout the course of the Engagement;
(b) Recognize whether they are an Audit or Assurance Team member or a
Covered Person;
(c) Understand the independence policies that apply to them, their Immediate
Family Members and Close Family Members; and
(d) Comply with such policies.
1.58 When Professional Staff are promoted to Manager or Partner or, when a Partner
assumes a new leadership role or is transferred to a new Office, the Partner and
Professional Staff member shall determine what new independence restrictions
and requirements apply. For example, an individual might now be deemed a Covered
Person with respect to different SEC Restricted Entities than when such individual was
located in the prior Office.
1.59 Partners and Professional Staff members are urged to avoid having any investments,
loans, other financial relationships or business relationships with an entity if there is a
likelihood that the relationships might later become prohibited under this Section 1420
(e.g., it is designated as a “watchlist” entity in Deloitte Entity Search and Compliance
(DESC) system due to a pending restriction). If the relationships become prohibited, such
relationships will be required to be terminated immediately, regardless of any costs or
losses that might be incurred. A Member Firm’s compliance with the applicable
independence obligations will always take precedence over personal interests.
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Determining Whether an Entity is a Restricted Entity or an Assurance
Client
1.60 In applying the policies that relate to financial, employment or business

relationships, DTTL, a Member Firm, a Partner, a Professional Staff member or
other individual employed by DTTL or a Member Firm, shall determine whether
the relevant entity is a Restricted Entity, including whether it is a Public Interest
Restricted Entity or an SEC Restricted Entity, or is an Assurance Client.
1.61 The DESC system shall be checked to determine whether an entity is a Restricted
Entity or an SEC Restricted Entity. The DESC system includes those Restricted Entities
as prescribed in Appendix G.
1.62 On an exceptional basis, certain small, privately-owned Restricted Entities might be

excluded from the requirement to be maintained in the DESC system if the Member Firm
has determined, and the DTTL Senior Managing Director–Global Independence has
concurred, that the independence restrictions will practically only apply within the
jurisdiction where the Restricted Entity is domiciled.
1.63 If a Member Firm maintains a local list of Restricted Entities in addition to the list
in the DESC system, Partners and Professional Staff of that Member Firm shall
also check such list.
Prompt Reporting of Financial Interests and Securities Account

Information
1.64 Partners and Client-Facing Managers are required to promptly report and keep
current their publicly available Financial Interests and Securities Accounts, as
well as those of their Immediate Family Members. A DTTL approved independence
monitoring system is where Financial Interests in publicly available investments and
Securities Accounts are to be reported. (See paragraphs 9.30 to 9.39.)
1.65 Unless otherwise specified, Professional Staff other than Client-Facing Managers
are not required to report Financial Interests and Securities Accounts, but they
are nevertheless required to comply with all applicable independence policies.
Consulting Others as Needed
1.66 Partners, Professional Staff and others employed by DTTL or a Member Firm shall
consult the Director of Independence, and when appropriate, the Lead Client
Service Partner, when they need assistance identifying, evaluating or addressing
possible threats to independence, or resolving independence issues or concerns.
1.67 Partners, Professional Staff and others employed by DTTL or a Member Firm shall
promptly notify the Director of Independence of any breaches of the policies in
this Section 1420.
Confirming Compliance with Independence Policies
1.68 Partners, Professional Staff and others employed by DTTL or a Member Firm
shall, upon request, confirm in writing their compliance with all applicable
independence policies, as discussed in paragraphs 9.40 to 9.43.
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Consequences of Non-compliance with Independence Policies and
Procedures
1.69 Lack of compliance with independence policies and procedures exposes DTTL and Member
Firms to a great risk and might result in:
(a) Professional sanctions against DTTL, Member Firms and/or the individuals involved;
(b) Regulatory sanctions against DTTL, Member Firms and/or the individuals involved;
(c) Litigation;
(d) Client dissatisfaction, including loss of Clients; and
(e) Reputational damage.
Accordingly, Partners, Professional Staff and others employed by DTTL or a

Member Firm who fail to comply with all applicable independence policies and
procedures will be subject to the applicable disciplinary process (see Appendix K).
Ignorance of the policies is not considered a legitimate excuse for failure to comply.
Applicability of Independence Policies to Retired Partners
1.70 If a Retired Partner provides services for DTTL or a Member Firm, whether paid
or unpaid, that if performed by a current Partner would result in that Partner
being deemed an Audit or Assurance Team member with respect to a Restricted
Entity or an Assurance Client, the Retired Partner shall comply with the policies
in this Section 1420 applicable to the Audit or Assurance Team assigned to the
Restricted Entity.
1.71 If a Retired Partner would not be deemed an Audit or Assurance Team member
but participates on any other Engagement for a Restricted Entity, the Retired
Partner shall not hold a Financial Interest in that Restricted Entity.
1.72 If a Retired Partner regularly devotes most of their time for DTTL or a Member
Firm to an activity that is essentially the same as that performed by a current
Partner or Professional Staff member, the same independence policies shall
apply to such individual as those that apply to a Partner or Professional Staff
member performing the activity.
Additional Requirements for SEC Restricted Entities—Retired Partners
1.73 If a Retired Partner provides services to DTTL or a Member Firm, whether paid or
unpaid, that if performed by a current Partner would result in that Partner being
deemed a Covered Person with respect to an SEC Restricted Entity, the Retired
Partner shall comply with the policies in this Section 1420 applicable to Covered
Persons.
Applicability of Independence Policies to Contractors
1.74 In addition to the policies in Chapter 4, persons who are not employees or
Partners of DTTL or a Member Firm, such as contractors, might be required to
comply with certain policies in this Section 1420 based on the role of such
individual. In the situations described below, the individual shall comply with
the following:
 If the individual participates on a non-Assurance Engagement for a

Restricted Entity, such person and the Immediate Family Member of such
person shall not hold a Financial Interest in that Restricted Entity.
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 If the individual participates on an Audit or Assurance Engagement, such
person shall comply with the policies in this Section 1420 applicable to the
Audit or Assurance Team members and Covered Persons in the case of an
SEC Restricted Entity.
 If the individual is engaged by DTTL or a Member Firm in a capacity in

which they are likely to be perceived by outsiders as a representative,
spokesperson or employee of DTTL or a Member Firm, the individual shall
not be associated with a Restricted Entity as a Director, Officer, member of
management or in the case of an SEC Restricted Entity, a Beneficial Owner
with Significant Influence over the Entity Under Audit.
The agreements with such individuals shall specify the applicable independence
requirements and DTTL or the Member Firm shall obtain a confirmation that the
individual has complied, and will continue to comply, with the requirements
during the applicable period.
1.75 In addition to the circumstances outlined in paragraph 1.74, a Member firm shall
determine whether an individual who is not an employee or a Partner of DTTL or
a Member Firm should be required to comply with all of the policies in this
Section 1420. It would generally not be required to subject such individuals to all policies
in this Section 1420 unless the individual performs activities for DTTL or the Member Firm
over a long duration of time that are essentially the same as those of a Partner or
Professional Staff, and the individual would be perceived by outsiders to be a Partner or
Professional Staff. Factors that are relevant in evaluating whether the individual is
required to comply with the policies in Section 1420 include whether the individual:
 Has a Deloitte title that a Partner or Professional Staff would ordinarily have (e.g.
senior manager, principal, Services Leader).
 Works exclusively with DTTL or the Member Firm.
 Is required to attend trainings, internal meetings and other events along with
Partners or Professional Staff of DTTL or the Member Firm.
 Is evaluated under the performance management system of DTTL or the Member

Firm.
 Is entitled to certain benefits not normally given to contractors of DTTL or the

Member Firm.
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1420—Independence
Chapter 2 - Firm and Personal Financial Relationships with Restricted

Entities
Introduction
2.1 Chapter 1 in this Section 1420 requires a Member Firm to apply the conceptual framework
to identify, evaluate and address threats to independence.
2.2 Holding a Financial Interest in, or having an other financial relationship with, a Restricted
Entity might create a self-interest threat to independence.
2.3 The evolution of financial markets and new financial offerings (e.g., cryptocurrency, digital
wallets, crowdfunding, etc.) make it impossible to draw up an all-inclusive list of Financial
Interests and other financial relationships that might be issued or offered by a Restricted
Entity or its management. When evaluating the level of a self-interest threat that might
be created by, or prohibitions arising from, new types of Financial Interests and other
financial relationships with a Restricted Entity or its management, the provisions and
principles in this chapter may be applied by drawing analogies between such non-
traditional relationships and the relationships specifically addressed in this chapter (e.g.,
digital wallets with bank accounts).
2.4 Factors that are relevant in evaluating the level of a self-interest threat created by holding
a Financial Interest in, or by having a financial relationship with, a Restricted Entity
include:
 The role of the individual holding the Financial Interest or having the financial
relationship.
 Whether the Financial Interest is a Direct Financial Interest or an Indirect Financial

Interest.
 The materiality of the Financial Interest or of the financial relationship.
2.5 This chapter covers the policies on Financial Interests in and other financial relationships
with Restricted Entities. Certain policies apply to all Partners and Professional Staff and
their Immediate Family Members, whereas others apply to Audit Team members or
Covered Persons. Understanding the definitions of Audit Team and Covered Person is
important to ensure compliance with these policies. Unless otherwise stated, the policies
on Financial Interests and other financial relationships as included in this chapter also
apply to an entity whose operating, financial, or accounting policies can be controlled by a
Partner or Professional Staff, alone or acting together with other Partners or Professional
Staff, or an entity that is controlled by an Immediate Family Member of a Partner or
Professional Staff.
Direct and Indirect Financial Interests
2.6 A Direct Financial Interest or Material Indirect Financial Interest in a Restricted

Entity shall not be held by:
(a) DTTL;
(b) A Member Firm;
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(c) A Partner or any of that individual’s Immediate Family Members;
(d) An Audit Team member or any of that individual’s Immediate Family

Members; or
(e) An individual who participates on any Engagement for that Restricted Entity
or any of that individual’s Immediate Family Members.
2.7 Notwithstanding paragraph 2.6, a Partner or any of that individual’s Immediate

Family Members may hold a Direct Financial Interest or Material Indirect
Financial Interest in a Restricted Entity that is a Collective Investment Fund
provided the Partner is not:
(a) A Covered Person with respect to:

i. The Collective Investment Fund that is an Audit Client; or
ii. The Collective Investment Fund that is not itself an Audit Client but is an
Affiliate of another Audit Client; or
(b) A member of the Engagement Team with respect to the audit of the
investment adviser or manager of the Collective Investment Fund.
Additional Requirements for SEC Restricted Entities—Direct and Indirect

Financial Interests
2.8 Many of the SEC’s independence rules impact only those Partners and Professional Staff
who meet the definition of “Covered Person.” It is important to understand the definition
of a Covered Person so that Partners and Professional Staff can determine (1) for which
SEC Restricted Entities they are deemed to be a Covered Person, and (2) the restrictions
that apply to them and certain family members because of their status as Covered Persons
with respect to that SEC Restricted Entity.
2.9 Even when not otherwise prohibited under this chapter the following, or any
group of the following, shall not have beneficial ownership of more than five
percent of an SEC Restricted Entity’s equity securities or control an SEC
Restricted Entity:
(a) A Partner, including a former Partner with capital balances in a Member

Firm, or any of that individual’s Immediate Family Members (when
permitted under paragraph 2.7);
(b) A Professional Staff member or any of that individual’s Immediate Family

Members; or
(c) A Close Family Member of a Covered Person with respect to the SEC
Restricted Entity.
2.10 DTTL, a Member Firm, a Covered Person with respect to an SEC Restricted Entity
or any of that individual’s Immediate Family Members shall not have the ability
to exercise significant influence over an entity that has the ability to exercise
significant influence over that SEC Restricted Entity.
Financial Interests Held Through Intermediaries
2.11 A Financial Interest might be held directly or indirectly through an intermediary such as a
collective investment vehicle, an estate or trust. When a beneficial owner has control over
the intermediary or ability to influence its investment decision, such Financial Interest is
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considered to be direct. Conversely, when a beneficial owner has no control over the
intermediary or ability to influence its investment decisions, such Financial Interest is
considered to be indirect.
2.12 Examples of Direct Financial Interests include:
 Investments made through discretionary fund managers where the fund manager
has authority to make investment decisions without prior consultation with the
owner (e.g., discretionary fund manager arrangements, managed accounts, blind
investment accounts, and blind trusts).
 Collective investment vehicles.
 Investments made through an investment club.
 Financial interests over which a person has been given a power of attorney if the
power of attorney is currently in effect.
2.13 Factors that are relevant in evaluating whether the holder has control over the
intermediary include:
 The ability to select investments that the intermediary holds.
 The ability to transfer, liquidate or dispose of the underlying investments that the
intermediary holds.
 Having authority over the intermediary, for example, as a trustee, executor or

member of management.
Additional Requirements for SEC Restricted Entities – Financial Interests

Held Through Intermediaries
2.14 The SEC treats certain Financial Interests beneficially owned through an intermediary as
Direct Financial Interests. A Financial Interest in an SEC Restricted Entity owned through
an intermediary is considered to be a Direct Financial Interest of DTTL, a Member Firm, a
Partner or Professional Staff under this Section 1420 and subject to all related
requirements if:
(a) DTTL, the Member Firm, the Partner or Professional Staff, or any of that individual’s
Immediate Family Members, alone or together with other persons, controls the
intermediary, or supervises or participates in the intermediary’s investment
decisions; or
(b) The Financial Interest in the SEC Restricted Entity amounts to 20% or more of the
value of the intermediary’s total investments, unless the intermediary is a diversified
management investment company, as defined by Section 5(b)(1) of the U.S.
Investment Company Act of 1940.
2.15 The SEC’s rules provide that a Material Indirect Financial Interest in an SEC Restricted
Entity that is owned through an intermediary is permissible if:
(a) The intermediary is a diversified management investment company (as defined by

the U.S. Investment Company Act of 1940) that invests in an SEC Restricted Entity;
and
30
(b) The Covered Person and their Immediate Family Members collectively do not own
more than five percent of the outstanding shares of such diversified management
investment company.
Financial Interests in an Entity Controlling a Restricted Entity
2.16 When an entity has a controlling interest in a Restricted Entity and the Restricted
Entity is Material to that entity, a Direct Financial Interest or Material Indirect
Financial Interest in such controlling entity shall not be held by:
(a) DTTL;
(b) A Member Firm; or
(c) An Audit Team member or any of that individual’s Immediate Family

Members.
Period Deemed to Participate on an Engagement
2.17 Certain individuals and their Immediate Family Members, are prohibited under paragraphs
2.6 and 2.7 from holding a Direct Financial Interest or Material Indirect Financial Interest
in a Restricted Entity if they participate on any Engagement for that Restricted Entity.
Although such Engagement might have ended during the Audit Client’s fiscal year
and the Partner or Professional Staff member might not expect to provide any
other Professional Services to the Restricted Entity during such year, no Direct
Financial Interest or Material Indirect Financial Interest in such Restricted Entity
shall be acquired until the Member Firm has signed the audit report for that fiscal
year. Similarly, an Audit Team member or any of that individual’s Immediate
Family Members shall not acquire a Direct Financial Interest or Material Indirect
Financial Interest that is prohibited under paragraph 2.16 until the Member Firm
has signed the audit report for that fiscal year.
Alternative Financial Investment Vehicles
2.18 There are numerous alternative investment vehicles available to the public. Among such
vehicles are securities that invest in collateralized mortgage or debt obligations,
securitized asset investments and exchange traded funds. Some of these vehicles might
invest in the assets or obligations of a Restricted Entity. DTTL, Member Firms, Partners
and Professional Staff considering such an investment shall investigate the
investment to determine the nature of the underlying assets or obligations prior
to obtaining such a Financial Interest. Any questions regarding the permissibility
of such an investment shall be discussed with the Director of Independence.
Structured Deposits
2.19 Certain deposit accounts link a deposit account (such as a bank savings or checking
account) to an investment component. For example, the investment component can be
linked to a stock index, a single company’s equities or bonds, a basket of equities or
bonds, a currency rate or an interest rate. DTTL, Member Firms, Partners and
Professional Staff considering such an account shall determine whether the
investment component of the deposit is linked to a diverse basket of securities.
If the investment component is not linked to a diverse basket of securities, the
underlying securities would generally be treated as Direct Financial Interests.
Any questions regarding the permissibility of such a deposit account shall be
discussed with the Director of Independence.
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Insurance Products with an Investment Component
2.20 Insurance products might be sold with an investment component. For example, in the case
of a unit-linked or “unitized” insurance policy, the policy holder’s premium is used to
purchase “units” in an investment fund. The value of the policy at maturity is dependent
upon the growth of the fund in which the policy is invested. Another example is a variable
annuity that guarantees future payments to the holder. The holder typically selects the
investments that will be held through the annuity and the annuity’s value depends on the
performance of the underlying investments selected by the holder. The investments
selected by the policy holders in these types of products are considered Direct
Financial Interests and shall only be held if permissible under paragraphs 2.6,
2.7 and 2.16.
Employee Compensation and Benefit Plans
2.21 As an exception to paragraph 2.6, an Immediate Family Member of a Partner or

Professional Staff who is not an Audit Team member may hold a Direct or
Material Indirect Financial Interest in a Restricted Entity, provided that:
(a) The Immediate Family Member received the Financial Interest because of
employment rights, for example through pension or stock option plans, and,
when necessary, the Member Firm addresses the threat created by the
Financial Interest; and
(b) The Immediate Family Member disposes of or forfeits the Financial Interest
as soon as practicable when the Immediate Family Member has or obtains
the right to do so, or in the case of a stock option, when the Immediate
Family Member obtains the right to exercise the option.
When such an exception is necessary, the Director of Independence shall be
consulted.
2.22 In the case of a stock option in a Restricted Entity that is received by the
Immediate Family Member of a Partner who is not a Covered Person, if the
market value of the stock is less than the exercise price of the stock option at the
time the option becomes exercisable, the individual may continue to hold the
option. Once the market value of the stock is greater than the exercise price of
the option, the Immediate Family Member shall exercise the option and dispose
of the Financial Interest as soon as practicable.
2.23 Entities might encourage employees to purchase such entity’s stock by creating incentives,
such as offering the stock to employees at a discount. An Immediate Family Member of
a Partner or Professional Staff member may acquire a Financial Interest in a
Restricted Entity through a stock purchase plan sponsored by such Restricted
Entity provided:
(a) The individual is not an Immediate Family Member of a Covered Person with
respect to the Restricted Entity; and
(b) The Financial Interest is disposed of as soon as any restrictions on

disposition lapse.
Additional Requirements for SEC Restricted Entities—Employee

Compensation and Benefit Plans
2.24 If an Immediate Family Member of a Covered Person receives a Financial

Interest in an SEC Restricted Entity as a result of participating in their employer’s
32
employee compensation or benefits program, such Financial Interest would
impair independence unless:
(a) The Covered Person is a Covered Person only by reason of either providing
non-audit services to the SEC Restricted Entity or being a Partner in the
Office in which the Audit Engagement Partner primarily practices in
connection with the audit of the SEC Restricted Entity;
(b) The acquisition of the Financial Interest was an unavoidable consequence

of participating in the employer’s compensation or benefit programs; and
(c) The Financial Interest, other than unexercised employee stock options, is
disposed of as soon as practicable, but no later than 30 days after the
Immediate Family Member has the right to dispose of the Financial Interest.
2.25 In the case of a stock option in an SEC Restricted Entity that is received by an
Immediate Family Member of a Partner or Professional Staff referred to in
paragraph 2.24(a), the individual shall take the following action as soon as
practicable, but no later than 30 days after the date the option is exercisable:
(a) Exercise the option and immediately sell the resulting Financial Interest; or
(b) If the exercise price is greater than the market value of the Financial
Interest, forfeit the stock option.
2.26 The Director of Independence shall be consulted if it is anticipated that an

Immediate Family Member of a Covered Person will receive a Financial Interest
in an SEC Restricted Entity, or an Immediate Family Member of an individual who
will become a Covered Person has an existing Financial Interest in an SEC
Restricted Entity, that results from an unavoidable consequence of participating
in an employer’s compensation or benefit programs.
2.27 A Partner or Professional Staff shall not become a Covered Person with respect
to an SEC Restricted Entity, if any of that individual’s Immediate Family
Members, in connection with their employment, participates in a retirement,
savings, compensation, or similar plan that is an SEC Restricted Entity or is
sponsored by an SEC Restricted Entity unless:
(a) The Partner or Professional Staff would be a Covered Person only by reason
of either providing Non-Assurance Services to the SEC Restricted Entity or
being a Partner in the Office in which the Audit Engagement Partner
primarily practices in connection with the audit of the SEC Restricted Entity;
and
(b) The program is normally offered to all employees of similar positions.
Financial Interests Received Unintentionally
2.28 If DTTL, a Member Firm, or a Partner or Professional Staff or any of that

individual’s Immediate Family Members, received a Direct Financial Interest or a
Material Indirect Financial Interest in a Restricted Entity by way of an
inheritance, gift or as a result of a merger or in similar circumstances, and such
interest would not otherwise be permitted under this Section 1420, then:
(a) If the interest is received by DTTL, a Member Firm, an Audit Team member
or any of that individual’s Immediate Family Members, the Financial
Interest shall be disposed of immediately, or enough of an Indirect
33
Financial Interest shall be disposed of so that the remaining interest is no
longer Material; or
(b) (i) If the interest is received by an individual who is not an Audit Team
member, or by any of that individual’s Immediate Family Members, the
Financial Interest shall be disposed of as soon as possible, generally
within 30 days, or enough of an Indirect Financial Interest shall be
disposed of so that the remaining interest is no longer Material.
(ii) Pending the disposal of the Financial Interest, when necessary the
Member Firm shall address the threat created.
2.29 If an Audit Team member or any of that individual’s Immediate Family Members
receives a Direct or Material Indirect Financial Interest that would be prohibited
under this Section 1420 by way of inheritance, gift, or as a result of a merger or
similar unplanned scenario, the Audit Team member shall inform the Director of
Independence and the Lead Client Service Partner.
2.30 When informed of a Financial Interest received in circumstances as described in

paragraph 2.29, the Lead Client Service Partner shall:
(a) Evaluate and address the self-interest threat created; and
(b) Consider discussing the matter with the Audit Committee or Others Charged
with Governance of the Restricted Entity.
Additional Requirements for SEC Restricted Entities—Inheritance, Gifts

and Other Unsolicited Receipt of Financial Interests
2.31 If DTTL, a Member Firm or an individual receives an unsolicited Direct or Material

Indirect Financial Interest in an SEC Restricted Entity that would be prohibited
under this chapter, for example through an unsolicited gift or inheritance, the
Financial Interest shall be disposed of as soon as practicable, but no later than
30 days after having knowledge of and the right to dispose of the Financial
Interest.
Retirement Benefit Plans of DTTL or a Member Firm
2.32 Notwithstanding paragraphs 2.6 and 2.16, a retirement benefit plan of DTTL or a
Member Firm may hold a Direct or Material Indirect Financial Interest in a
Restricted Entity, however, the Member Firm shall consult the Director of
Independence to evaluate and address the self-interest threat that might be
created.
Additional Requirements for SEC Restricted Entities—Retirement Benefit

Plans of DTTL or a Member Firm
2.33 A pension, retirement, investment or similar plan of DTTL or a Member Firm shall
not have a Direct or Material Indirect Financial Interest in an SEC Restricted
Entity.
Financial Interests Held as Trustee or Executor of a Trust or Estate
2.34 When not prohibited from acting as trustee or executor under DPM 1920,
Professional Services Trustee and Executor Appointments, paragraph 2.6 shall
also apply to a Financial Interest in a Restricted Entity held in a trust or estate
for which DTTL, a Member Firm, an individual or that individual’s Immediate
Family Member acts as trustee or executor, unless:
34
(a) The trustee or executor is not a beneficiary of the trust or estate;
(b) The interest held by the trust or estate in the Restricted Entity is not
Material to the trust or estate;
(c) The trust or estate is not able to exercise significant influence over the
Restricted Entity; and
(d) The trustee or executor cannot significantly influence any investment

decision involving a Financial Interest in the Restricted Entity.
2.35 If DTTL, a Member Firm, a Partner or Professional Staff or the individual’s

Immediate Family Member is named the trustee or executor of a trust or estate
by another party, in order to act in that role the conditions in paragraph 2.34
shall be satisfied. Any prohibited Financial Interest shall be disposed of in
accordance with the requirements in paragraph 2.28.
Additional Requirements for SEC Restricted Entities—Trusts and Estates
2.36 DTTL, a Member Firm, a Covered Person with respect to an SEC Restricted Entity
and the Immediate Family Members of such Covered Persons shall not serve as a
trustee of a trust, or executor of an estate, that holds a Financial Interest in such
SEC Restricted Entity if:
(a) DTTL, the Member Firm or the individual has authority to make investment
decisions for the trust or estate;
(b) The trust or estate has a Financial Interest representing more than 10
percent of the SEC Restricted Entity’s outstanding equity securities or other
ownership interests; or
(c) The value of the trust's or estate's Financial Interest in the SEC Restricted
Entity exceeds 10 percent of the total assets of the trust or estate.
This prohibition on a Member Firm acting as a trustee or executor of an estate or

trust that holds a Financial Interest in an SEC Restricted Entity also applies to
Engagements to provide such Professional Services where, in the particular
jurisdiction, the named trustee is an individual (i.e., a Partner or Professional
Staff member).
2.37 If DTTL, a Member Firm, a Covered Person or that individual’s Immediate Family
Member is named the trustee or executor of a trust or estate by another party, in
order to act in that role the conditions in paragraph 2.36 shall be satisfied. Any
prohibited Financial Interest in an SEC Restricted Entity shall be disposed of in
accordance with the requirements in paragraph 2.31.
Financial Interests in Common with a Restricted Entity
2.38 DTTL, a Member Firm, an Audit Team member, or any of that individual’s
Immediate Family Members, shall not hold a Financial Interest in an entity when
a Restricted Entity also has a Financial Interest in the entity, if:
(a) The Financial Interest is Material to DTTL, the Member Firm, the Audit Team
member and that individual’s Immediate Family Member and the Restricted
Entity, as applicable; and
(b) The Restricted Entity can exercise significant influence over the entity.
35
2.39 Before an individual who has a Financial Interest described in paragraph 2.38
can become an Audit Team member, the individual or that individual’s Immediate
Family Member shall either:
(a) Dispose of the interest; or
(b) Dispose of enough of the interest so that the remaining interest is no longer
Material.
2.40 A self-interest, familiarity or intimidation threat might be created if DTTL, a Member Firm
or an Audit Team member, or any of that individual’s Immediate Family Members, has a
Financial Interest in an entity when a Director, Officer or controlling owner of the
Restricted Entity is also known to have a Financial Interest in that entity.
2.41 Factors that are relevant in evaluating the level of such threats include:
 The role the individual on the Audit Team.
 Whether ownership of the entity is closely or widely held. An entity would generally
be considered to be closely held when there are fewer than 10 investors in total.
 Whether the interest allows the investor to control or significantly influence the
entity.
 The materiality of the Financial Interest.
2.42 An example of an action that might eliminate such a self-interest, familiarity or

intimidation threat is removing the Audit Team member with the Financial Interest from
the Audit Team.
2.43 An example of an action that might be a Safeguard to address such a self-interest threat is
having an Appropriate Reviewer review the work of the Audit Team member.
Additional Requirements for SEC Restricted Entities— Financial Interests

in Common with a Restricted Entity
2.44 DTTL, a Member Firm or a Covered Person with respect to an SEC Restricted
Entity or any of that individual’s Immediate Family Members shall not have any
Material investment in an entity if:
(a) The SEC Restricted Entity has the ability to exercise significant influence
over the entity; or
(b) The entity is controlled by:
(i) A Director or Officer of the SEC Restricted Entity, or a person that has
significant influence over the SEC Restricted Entity; and
(ii) DTTL, the Member Firm, the Covered Person or such individual’s
Immediate Family Member.
2.45 Even when not prohibited by paragraph 2.44, DTTL or a Member Firm shall not
have a closely held investment in an entity when an SEC Restricted Entity or a
person associated with an SEC Restricted Entity in a decision-making capacity at
the Entity Under Audit, such as a Director, Officer or Beneficial Owner with
Significant Influence, also has such investment. An investment in an entity would
generally be considered to be closely held when there are fewer than 10
36
investors in total and five or fewer investors control 50% or more of the voting
shares of the entity.
Close Family Members
2.46 A self-interest threat might be created if an Audit Team member knows that a Close
Family Member has a Direct Financial Interest or Material Indirect Financial Interest in a
Restricted Entity. In such a case, an individual shall not provide Professional
Services to a Restricted Entity unless the Director of Independence is consulted
to evaluate and address the self-interest threat created.
2.47 Factors that are relevant in evaluating the level of such threat include:
 The nature of the relationship between the Audit Team member and the Close
Family Member.
 Whether the Financial Interest is a Direct Financial Interest or an Indirect Financial

Interest.
 The materiality of the Financial Interest to the Close Family Member.
2.48 Examples of actions that might eliminate such a self-interest threat include:
 Having the Close Family Member dispose, as soon as practicable, of all of the
Financial Interest or dispose of enough of an Indirect Financial Interest so that the
remaining interest is no longer Material.
 Removing the individual from the Audit Team.
Additional Requirements for SEC Restricted Entities—Financial Interests

of Close Family Members
2.50 A Close Family Member of a Covered Person with respect to an SEC Restricted
Entity, or any group of such individuals, shall not have beneficial ownership of
more than five percent of an SEC Restricted Entity’s equity securities.
2.51 A Close Family Member of a Partner shall not control an SEC Restricted Entity
(regardless whether the Partner is a Covered Person with respect to that SEC
Restricted Entity).
2.52 A Partner or Professional Staff member shall not participate in an Audit

Engagement for an SEC Restricted Entity if the individual has knowledge that a
Close Family Member has a Financial Interest in such SEC Restricted Entity that is
Material to the Close Family Member.
Other Personal Relationships
2.53 A self-interest threat might be created if an Audit Team member knows that a Financial
Interest in the Restricted Entity is held by individuals such as:
 Partners and Professional Staff, apart from those who are specifically not permitted
to hold such Financial Interests by paragraphs 2.6 or 2.7, or their Immediate Family
Members.
37
 Individuals with a close personal relationship with an Audit Team Member.
2.54 Factors that are relevant in evaluating the level of such a threat include:
 The Member Firm’s organizational, operating and reporting structure.
 The nature of the relationship between the individual and the Audit Team member.
2.55 An example of an action that might eliminate such a self-interest threat is removing the
Audit Team member with the personal relationship from the Audit Team.
2.56 Examples of actions that might be Safeguards to address such a self-interest threat
include:
 Excluding the Audit Team member from any significant decision-making concerning
the Audit Engagement.
 Having an Appropriate Reviewer review the work of the Audit Team member.
Loans and Guarantees
Loans and Guarantees with a Restricted Entity
2.57 DTTL, a Member Firm, an Audit Team member or any of that individual’s
Immediate Family Members shall not make or guarantee a loan to a Restricted
Entity unless the loan or guarantee is not Material to:
(a) DTTL, the Member Firm or the individual making the loan or guarantee, as
applicable; and
(b) The Restricted Entity.
Loans and Guarantees with a Restricted Entity that is a Bank or Similar

Institution
Immediate Family Members shall not accept a loan, or a guarantee of a loan,
from a Restricted Entity that is a bank or similar institution unless the loan or
guarantee is made under normal lending procedures, terms and conditions.
Examples of loans include mortgages, bank overdrafts, car loans, and credit card
balances.
2.59 Even if DTTL or a Member Firm receives a loan from a Restricted Entity that is a bank or
similar institution under normal lending procedures, terms and conditions, the loan might
create a self-interest threat if it is Material to the Restricted Entity or to DTTL or the
Member Firm receiving the loan, as applicable.
2.60 An example of an action that might be a safeguard to address such a self-interest threat is
having the work reviewed by an Appropriate Reviewer, who is not an Audit Team member,
from a Member Firm or Geography Firm that is not a beneficiary of the loan.
Loans and Guarantees with a Restricted Entity that is not a Bank or

Similar Institution
Immediate Family Members shall not accept a loan from, or have a borrowing
38
guaranteed by, a Restricted Entity that is not a bank or similar institution, unless
the loan or guarantee is not Material to:
(a) DTTL, the Member Firm or the individual receiving the loan or guarantee, as
applicable; and
(b) The Restricted Entity.
Loans and Guarantees to or from a Restricted Entity Involving DTTL or a

Member Firm
2.62 Even when a loan or guarantee is not prohibited by paragraphs 2.57, 2.58 or
2.61, DTTL or a Member Firm shall consult with the DTTL Senior Managing
Director – Global Independence, DTTL Senior Managing Director - Global
Regulatory and the DTTL Chief Operating Officer prior to:
(a) Entering into a lending relationship with a Restricted Entity; or
(b) Accepting an audit engagement that would result in an entity with which
DTTL or a Member Firm has a lending relationship becoming a Restricted
Entity.
Additional Requirements for SEC Restricted Entities—Loans and

Guarantees
2.63 DTTL, a Member Firm or Covered Persons with respect to an SEC Restricted Entity
or Immediate Family Members of such Covered Persons shall not have a loan
(including a margin loan), or guarantee of a loan, to or from:
(a) The SEC Restricted Entity;
(b) A Director or Officer of the SEC Restricted Entity who has the ability to
affect decision-making at the Entity Under Audit3; or
(c) A Beneficial Owner with Significant Influence over the Entity Under Audit,
or any entity controlling such owner.
2.64 As an exception to paragraph 2.63, the following loans are permitted when
obtained from a financial institution under its normal lending procedures, terms
and requirements, and all terms are kept current at all times:
(a) Car loans or leases secured by the car;
(b) Loans fully secured by the cash surrender value of an insurance policy;
(c) Loans fully secured by cash deposits at the same financial institution;
(d) Mortgage loans secured by the borrower’s primary residence provided the
loans were obtained before the individual became a Covered Person with
respect to that SEC Restricted Entity and the terms do not change other
than in a manner contemplated in the original loan agreements;
3
“Entity under audit” refers to the entity whose Financial Statements or other information is
being audited, as opposed to the “Audit Client” which, by definition, includes Affiliates of the
Audit Client.
39
(e) Student loans provided the loans were obtained before the individual
became a Covered Person with respect to that SEC Restricted Entity; or
(f) Consumer loans where the aggregate outstanding balance is reduced to

US$10,000, or equivalent, or less after payment of the most recent monthly
statement by the due date or within any available grace period. Consumer
loan is a type of financing that is routinely obtained in the normal course of business
for personal consumption and has periodic payment due date. Examples include
credit card debt, retail installment loans, cell phone installment plans and home
improvement loans that are not secured by a mortgage on a primary residence.
2.65 For purposes of paragraph 2.63 only:
(a) If the Audit Client that is subject to SEC independence rules is a fund, the
term SEC Restricted Entity excludes any fund that is an Affiliate of the Audit
Client (e.g., a “sister fund”); and
(b) As used in paragraph 2.65(a), the term “fund” means:
(i) An investment company or an entity that would be an investment

company but for the exclusions provided by Section 3(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)); or
(ii) A commodity pool as defined in Section 1a(10) of the U.S. Commodity

Exchange Act, as amended [(7 U.S.C. 1-1a(10)], that is not an
investment company or an entity that would be an investment
company but for the exclusions provided by Section 3(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)).
Accounts with Financial Institutions
Immediate Family Members shall not have deposits or Securities Accounts with a
Restricted Entity that is a bank, broker or similar financial institution unless the
deposit or account is held under normal commercial terms.
2.67 An account with a financial institution might include additional products that would be
separately subject to the policies in this Section 1420. For example, a bank account might
also include an overdraft facility that would be subject to the policies for loans. A
Securities Account might have an overnight sweep into a mutual fund that would be
subject to the policies for Financial Interest. DTTL, a Member Firm, a Partner or
Professional staff shall be aware of all Financial Interests and other financial
relationships resulting from an account with a financial institution and follow the
related policies for such Financial Interest or financial relationship.
2.68 DTTL, a Member Firm, a Partner, Professional Staff member or any of that
individual’s Immediate Family Members shall not have an account with a
financial institution, investment adviser or another service provider that has
discretionary authority to execute transactions that are attributable to them,
unless it can be ensured that any resulting Financial Interests or other financial
relationships are permissible under this Section 1420.
Additional Requirements for SEC Restricted Entities—Bank Accounts
2.69 Individuals who are Covered Persons with respect to an SEC Restricted Entity
and Immediate Family Members of such Covered Persons shall not have any
savings, checking, or similar accounts, or deposit (e.g., certificates of deposit,
40
fixed deposit, term deposit, time deposit, etc.) at a bank, savings and loan, or
similar institution that is an SEC Restricted Entity, unless the balance in the
account is at all times fully insured by the U.S. Federal Deposit Insurance
Corporation or a non-U.S. equivalent. Accordingly, such Covered Persons shall
understand whether there is deposit insurance in their jurisdiction, and if so,
how deposit insurance is applied, and to ensure any balances are fully insured at
all times. Deposit insurance systems vary greatly across jurisdictions. For example, in
some jurisdictions deposits that are maintained in foreign currencies are not insured.
Other jurisdictions have a relatively low limit of insurance on account balances. Due to the
complexities of deposit insurance systems and the relatively low limits of insurance that
exist in many jurisdictions, Partners and Covered Persons are highly discouraged from
having such accounts with an SEC Restricted Entity. All Partners, as well as those
Client-Facing Managers who are Covered Persons with respect to an SEC
Restricted Entity, shall be subject to additional annual independence monitoring
processes if that individual or their Immediate Family Members have a savings,
checking, or similar account, or deposit at an SEC Restricted Entity.
2.70 DTTL or a Member Firm may have savings, checking, or similar accounts at a
financial institution that is an SEC Restricted Entity, provided the likelihood of
the institution experiencing financial difficulties is remote. If such accounts
exist, DTTL or the Member Firm shall consult with the DTTL Senior Managing
Director–Global Independence.
Additional Requirements for SEC Restricted Entities—Securities Accounts
2.71 DTTL, a Member Firm, individuals who are Covered Persons with respect to an
SEC Restricted Entity and Immediate Family Members of such Covered Persons
shall not have a Securities Account maintained with an SEC Restricted Entity if:
(a) The account includes any asset other than cash or securities within the
meaning of “security” provided in the U.S. Securities Investor Protection
Act of 1970 (SIPA);
(b) The value of assets in the account exceeds the amount that is subject to a
Securities Investor Protection Corporation advance, for those accounts,
under Section 9 of SIPA; or
(c) The account is a non-U.S. account not subject to SIPA protection and the
value of assets in the account exceeds the amount insured or protected by a
program similar to SIPA. Accordingly, such Covered Persons shall
understand whether there is such insurance or protection in their
jurisdiction, and if so, how the insurance or protection is applied and to
ensure the value of the assets in the Securities Account is fully insured at
all times. For example, in some jurisdictions certain securities are protected by
insurance while other securities are not. Other jurisdictions have relatively low
limits of insurance on Securities Accounts. Due to the complexities of insurance
systems and the relatively low limits of insurance that exist in many jurisdictions,
Partners and Covered Persons and their Immediate Family Members are highly
discouraged from having Securities Accounts with an SEC Restricted Entity. The
Director of Independence shall be consulted if there is any doubt whether a
Securities Account may be maintained.
All Partners, as well as those Client-Facing Managers who are Covered Persons
with respect to an SEC Restricted Entity, shall be subject to additional annual
independence monitoring processes if that individual or their Immediate Family
Members have a Securities Account at an SEC Restricted Entity.
41
Additional Requirements for SEC Restricted Entities—Other Accounts
2.72 DTTL, a Member Firm and Covered Persons with respect to an SEC Restricted
Entity or Immediate Family Members of such Covered Persons shall not have a
futures account, commodity account, or similar account maintained with a
futures commission merchant that is an SEC Restricted Entity.
2.73 A Partner shall be subject to additional annual independence monitoring

processes if that individual or any of their Immediate Family Members has a
futures account, commodity account, or similar account maintained with a
futures commission merchant that is an SEC Restricted Entity to ensure such
individual is not a Covered Person with respect to the SEC Restricted Entity.
Additional Requirements for Payments to Accounts at SEC Restricted

Entities
2.74 DTTL and a Member Firm shall not make deposits (e.g., regular or periodic
distributions, expense reimbursements, etc.) into a Partner’s account at an SEC
Restricted Entity.
Insurance Products
2.75 DTTL, a Member Firm, an Audit Team member, or any of that individual’s
Immediate Family Members shall not have insurance products with such
Restricted Entity unless they are under normal commercial terms and the
requirements of paragraph 4.6 of this Section 1420 are satisfied. This policy
covers all insurance, including, for example, individual term life, health, disability, and
property and casualty (including auto) insurance.
2.76 Certain insurance products might have an investment element. DTTL, a Member Firm, a
Partner or Professional Staff shall be aware of any Financial Interest resulting
from an insurance product and follow the related policies for such Financial
Interest.
Additional Requirements for SEC Restricted Entities—Insurance Products
2.77 Covered Persons with respect to an SEC Restricted Entity and the Immediate
Family Members of such Covered Persons shall not obtain an individual insurance
policy from an SEC Restricted Entity. An individual may retain an insurance policy
as long as:
(a) It was obtained before the individual became a Covered Person with
respect to that SEC Restricted Entity;
(b) No significant changes to the policy are made by the individual after
becoming a Covered Person; and
(c) The likelihood of the SEC Restricted Entity becoming insolvent is remote.
If an individual believes they may be permitted to retain a policy, the Director of

Independence shall be consulted.
Surety Bonds and Similar Products
2.78 DTTL or a Member Firm might enter into contracts that require the provision of a surety
bond (also known as a performance bond, default bond, surety guarantee, etc.) to provide
protection against default or non-performance under the contract. These are more
42
commonly used where a Member Firm acts as a contractor on a government project.
DTTL and a Member Firm shall not obtain a surety bond or similar product from a
Restricted Entity unless the arrangement is under normal commercial terms.
Additional Requirement for SEC Restricted Entities—Surety Bonds and

Similar Products
2.79 DTTL and a Member Firm shall not obtain a surety bond or similar product from
an SEC Restricted Entity.
Additional Requirements for New SEC Audit Clients—Financial Interests and

Other Financial Relationships
2.80 In the case of a new Audit Client where the audit would be conducted pursuant
to SEC independence rules, independence would not be impaired if DTTL or a
Member Firm, or a Covered Person or Immediate or Close Family Member of such
individual held a Financial Interest in or had another financial relationship with
an SEC Restricted Entity that would be prohibited under this chapter, as long as:
(a) No Member Firm audited the Client’s Financial Statements for the
immediate preceding fiscal year; and
(b) The Financial Interest or other financial relationship that would be

prohibited is disposed of or terminated before the earlier of:
(i) Signing the initial engagement letter or other agreement to provide

audit services; or
(ii) Commencing any audit procedures, including planning the audit of the
Client’s Financial Statements.
Global Independence Monitoring System
2.81 DTTL and Member Firms shall:
(a) Report in GIMS within 10 business days:
(i) Publicly available Direct Financial Interests and Material Indirect

Financial Interests held by DTTL or a Member Firm, or in a pension or
other benefit plan sponsored by DTTL or a Member Firm;
(ii) Securities Accounts, regardless of whether the accounts currently hold

cash or securities;
(iii) Any other information required by DTTL independence policies or the

independence policies of the applicable Member Firm;
(b) Reflect disposals of Financial Interests and closures of Securities Accounts

in GIMS within a timely period; and
(c) Address any system-generated exceptions or other messages on a timely

basis.
2.82 A Partner, a Client-Facing Manager and any other individual specified by the
DTTL Senior Managing Director – Global Independence or by the Director of
Independence shall:
43
(a) Report in GIMS within 10 business days:
(i) Publicly available Direct Financial Interests and Material Indirect

Financial Interests held by them or their Immediate Family Members.
A Financial Interest is considered publicly available if it might be purchased by
the general public, regardless whether it is listed or traded on a public stock or
other exchange. Financial Interests held in pension plans sponsored by DTTL
or a Member Firm are not required to be reported in GIMS unless the Director
of Independence requires their inclusion;
(ii) Securities Accounts, including those of their Immediate Family

Members, regardless of whether the accounts currently hold cash or
securities;
(iii) Any other information required by DTTL independence policies or the

independence policies of the applicable Member Firm;
(b) Reflect disposals of Financial Interests and closures of Securities Accounts

in GIMS within a timely period; and
(c) Address any system generated exceptions or other messages on a timely

basis.
2.83 The trade date is relevant in determining when the required 10 day reporting period
begins.
Outside Investors in Member Firms
2.84 A Member Firm (including an Associated Entity of a Member Firm) might not be wholly
owned and might have outside investors that are not Member Firms or current Partners.
The Director of Independence shall evaluate and address the threats created
when a Restricted Entity or its management is an investor in the Member Firm.
Additional Requirements for SEC Restricted Entities – Outside Investors
2.85 An SEC Restricted Entity or a Director or Officer of an SEC Restricted Entity shall
not have an investment in a Member Firm, such as stocks, bonds, notes, options
or other securities, or agree to make such an investment in the future.
44
1420—Independence
Chapter 3 - Employment and Other Relationships with Restricted

Entities
Introduction
3.2 The policies in this chapter cover employment by or association with a Restricted Entity.
Although most of the policies in this chapter cover Audit Team members, some apply to
Covered Persons (particularly those policies that apply to SEC Restricted Entities), and
certain other policies cover all Partners and Professional Staff or Key Audit Partners.
Accordingly, it is important to understand who the particular policy applies to when
evaluating any former, proposed or current employment relationship with a Restricted
Entity.
Serving as a Director or Officer of a Restricted Entity
3.3 Serving as a Director or Officer of a Restricted Entity creates self-review and self-interest
threats.
3.4 A Partner or employee of DTTL or a Member Firm shall not serve as a Director or
Officer of a Restricted Entity.
Service as Company Secretary
3.5 The position of company secretary has different implications in different jurisdictions. The
duties might range from administrative duties, such as personnel management and the
maintenance of company records and registers, to duties as diverse as ensuring that the
company complies with regulations or providing advice on corporate governance matters.
Usually, this position is seen to imply a close association with the entity. Therefore, a
threat is created if a Partner or employee of DTTL or a Member Firm serves as company
secretary for a Restricted Entity.
3.6 A Partner or employee of DTTL or a Member Firm shall not serve as company
secretary for a Restricted Entity, unless:
(a) This practice is specifically permitted under Local Laws, professional rules
or practice;
(b) Management makes all relevant decisions; and
(c) The duties and activities are limited to those of a routine and administrative
nature, such as preparing minutes and maintaining statutory returns.
Prior to accepting the position of company secretary for a Restricted Entity, a

Partner or employee of DTTL or a Member Firm shall obtain approval from the
Lead Client Service Partner and the Director of Independence.
45
Additional Requirements for SEC Restricted Entities—Service as Company
Secretary
3.7 A Partner or employee of DTTL or a Member Firm shall not serve as the company
secretary for an SEC Restricted Entity. For the policy on the provision of corporate
secretarial services to SEC Restricted Entities, see paragraph 6.191.
Employment by, or Activities Involving, a Restricted Entity
Employment and Activities of Current Partners and Professional Staff
3.8 Employment with a Restricted Entity might create a familiarity, self-review or self-interest
threat.
3.9 A current Partner or Professional Staff member shall not be employed by a

Restricted Entity without holding prior discussions with the Director of
Independence. Under no circumstances may the individual be an Audit Team
member.
3.10 A Partner or Professional Staff member shall not provide a Non-Assurance

Service in their personal time that would be prohibited to be performed by a
Member Firm under Chapter 6 of this Section 1420.
Additional Requirements for SEC Restricted Entities—Employment and

Activities of Current Partners and Professional Staff
3.11 A current Partner or Professional Staff member shall not:
(a) Be employed, either permanently or temporarily, by an SEC Restricted

Entity (See also paragraph 6.35);
(b) Act as a promoter, underwriter, or voting trustee for an SEC Restricted

Entity;
(c) Act as a trustee for any pension or profit sharing trust of an SEC Restricted
Entity; or
(d) Serve as a member of a supervisory body (e.g., collegio sindicale in Italy,

comisario in Mexico, syndic in Argentina) for an SEC Restricted Entity (see
also paragraph 6.209).
Employment of Former Partners and Professional Staff by a Restricted

Entity
3.12 A familiarity or intimidation threat might be created if any of the following individuals have
been an Audit Team member or a Partner of a Member Firm:
 A Director or Officer of the Restricted Entity.
 An employee in a position to exert significant influence over the preparation of the
Client’s accounting records or the Financial Statements on which the Member Firm
will Express an Opinion.
3.13 A Member Firm shall ensure that no significant connection remains between
DTTL or a Member Firm and:
(a) A former Partner who has joined a Restricted Entity; or
46
(b) A former Audit Team member who has joined a Restricted Entity,
if either has joined the Restricted Entity as:
(i) A Director or Officer; or
(ii) An employee in a position to exert significant influence over the preparation

of the Restricted Entity’s accounting records or the Financial Statements on
which the Member Firm will Express an Opinion.
A significant connection remains between DTTL or a Member Firm and the

individual, unless:
(a) The individual is not entitled to any benefits or payments from DTTL or a
Member Firm that are not made in accordance with fixed pre-determined
arrangements;
(b) Any amount owed to the individual is not Material to DTTL or a Member
Firm; and
(c) The individual does not continue to participate or appear to participate in

DTTL’s or a Member Firm’s business or professional activities.
3.14 Even if the requirements of paragraph 3.13 are met, a familiarity or intimidation threat
might still be created.
3.15 A familiarity or intimidation threat might also be created if a former Partner of a Member
Firm has previously joined an entity as a Director or Officer or an employee in a position to
exert significant influence over the preparation of the entity’s accounting records or the
Financial Statements on which the Member Firm will Express an Opinion and the entity
subsequently becomes a Restricted Entity.
 The position the individual has taken at the Restricted Entity.
 Any involvement the individual will have with the Audit Team.
 The length of time since the individual was an Audit Team member or Partner of a
Member Firm.
 The former position of the individual within the Audit Team or Member Firm. An
example is whether the individual was responsible for maintaining regular contact
with the management of the Restricted Entity or the Audit Committee or Others
Charged with Governance.
3.17 Examples of actions that might be Safeguards to address such familiarity or intimidation
threats include:
 Modifying the audit plan.
 Assigning to the Audit Team Partners or Professional Staff who have sufficient
experience relative to the individual who has joined the Restricted Entity.
 Having an Appropriate Reviewer review the work of the former Audit Team member.
47
3.18 In the case where a former Partner or an Audit Team member joins a Restricted
Entity, the Lead Client Service Partner shall consult with the Director of
Independence and the Professional Practice Director. The Director of Independence
will evaluate and address the threats to independence whereas the Professional Practice
Director will consider the risks of having a former Audit Team member join a Restricted
Entity.
3.19 When a former Partner joins a Restricted Entity and has significant interaction
with the Audit Team, the Member Firm shall assign members to the Audit Team
who have the appropriate stature and objectivity to effectively deal with the
former Partner and their work. The Lead Client Service Partner shall consider
such assignment in consultation with the Director of Independence and the
Professional Practice Director. When a former Audit Team member who was not
a Partner joins a Restricted Entity, the Lead Client Service Partner shall consider
whether the Audit Team members can deal effectively with the former
Professional Staff member and maintain the appropriate level of professional
skepticism.
Additional Requirements for Public Interest Restricted Entities—Key

Audit Partners
3.20 If an individual who was a Key Audit Partner with respect to a Public Interest
Restricted Entity joins that Public Interest Restricted Entity as:
(a) A Director or Officer; or
(b) An employee in a position to exert significant influence over the preparation

of the Public Interest Restricted Entity’s accounting records or the Financial
Statements on which the Member Firm will Express an Opinion,
independence is impaired unless, subsequent to the individual ceasing to be a

Key Audit Partner:
(i) The Public Interest Restricted Entity has issued audited Financial
Statements covering a period of not less than twelve months; and
(ii) The Partner was not an Audit Team member with respect to the audit of
those Financial Statements.
Additional Requirements for Public Interest Restricted Entities—

Managing Partner of the Member Firm
3.21 If an individual who was the Managing Partner of the Member Firm that signs the
audit report for a Public Interest Restricted Entity joins that Public Interest
Restricted Entity as:

of that Public Interest Restricted Entity’s accounting records or the
Financial Statements on which the Member Firm will Express an Opinion,
Independence is impaired, unless twelve months have passed since the

individual was the Managing Partner of the Member Firm.
48
Additional Requirements for Public Interest Restricted Entities—Other
Leaders
3.22 A familiarity or intimidation threat might be created if another leader, such as the CEO of
DTTL or the Audit & Assurance Business Leader, Audit & Assurance Risk Leader, or
Professional Practice Director of the Member Firm that signs the audit report for a Public
Interest Restricted Entity joins that Public Interest Restricted Entity as:
(b) An employee in a position to exert significant influence over the preparation of that
Public Interest Restricted Entity’s accounting records or the Financial Statements on
In such case, the Lead Client Service Partner, in consultation with the Director of
Independence, shall evaluate and address threats created.
 The position the individual has taken at the Public Interest Restricted Entity.
 Any involvement the individual will have with the Audit Team.
 The length of time since the individual was in a leadership role or Partner of the
Member Firm.
3.24 Examples of actions that might be Safeguards to address such threats include:
 Modifying the audit plan.
 Assigning to the Audit Team Partners or Professional Staff members who have
sufficient experience relative to the individual who has joined the Public Interest
Restricted Entity.
Additional Requirements for Public Interest Restricted Entities Other

than SEC Restricted Entities—Business Combinations
3.25 As an exception to paragraphs 3.20 or 3.21 independence is not impaired if the

circumstances set out in those paragraphs arise as a result of a business
combination and:
(a) The position was not taken in contemplation of the business combination;
(b) Any benefits or payments due to the former Partner from DTTL or a Member
Firm have been settled in full, unless made in accordance with fixed pre-
determined arrangements and any amount owed to the Partner is not
Material to DTTL or the Member Firm, as applicable;
(c) The former Partner does not continue to participate or appear to participate
in DTTL’s or a Member Firm’s business or professional activities; and
(d) The Member Firm discusses the former Partner’s position with the Public
Interest Restricted Entity with the Audit Committee or Others Charged with
Governance.
49
Additional Requirements for SEC Restricted Entities—Employment and
Roles of Former Partners and Professional Staff by an SEC Restricted
Entity
3.26 If a former Partner or Professional Staff member is in an Accounting Role or

Financial Reporting Oversight Role at an SEC Restricted Entity, including through
employment, as a service provider or in an appointed role, independence is
impaired, unless the former Partner or Professional Staff member:
(a) Does not influence the operations or financial policies of DTTL or a Member
Firm;
(b) Has no capital balances in any Member Firm; and
(c) Has no financial arrangement with DTTL or any Member Firm other than one
providing for regular payment of a fixed monetary amount, which is not
dependent on the revenues, profits, or earnings of any Member Firm:
(i) Pursuant to a fully funded retirement plan or irrevocable trust whose

assets are not accessible to DTTL or the Member Firm until all benefit
obligations have been met but are subject to claims of DTTL or the
Member Firm’s creditors in bankruptcy or insolvency; or
(ii) In the case of a former Professional Staff member who was not a
Partner in a Member Firm and has been disassociated from DTTL or
the Member Firm for more than five years and the financial
arrangement is not Material to such individual.
(d) Does not participate or appear to participate in, and is not associated with
DTTL or the Member Firm, whether or not compensated for such
participation or association, once employment or association with the SEC
Restricted Entity begins. An appearance of participation results from such actions
as:
 The individual provides consultancy services to DTTL or a Member Firm.
 The Member Firm provides the individual with an office and related amenities
(for example, an email account, access to DTTL or the Member Firm’s intranet,
secretarial and telephone services).
 The individual’s name is included in the office directory of DTTL or a Member

Firm.
 The individual’s name is included as a member of DTTL or the Member Firm in

other membership lists of business, professional, or civic organizations, unless
the individual is clearly designated as retired.
3.27 In addition to the requirements in 3.26, a former Partner with capital balances in
a Member Firm, shall also comply with the requirements of paragraphs 3.10 and
3.11 with respect to SEC Restricted Entities.
3.28 Where not prohibited by law, the Director of Independence shall make the Lead
Client Service Partner aware of any known instances where a former Partner or
Professional Staff has accepted employment at an SEC Restricted Entity and
confirm the requirements of paragraph 3.26, as applicable, are met.
50
3.29 If a former Partner or Professional Staff member is in a Financial Reporting
Oversight Role at an SEC Issuer Audit Client (except a Registered Investment
Company Audit Client which is subject to the requirements of paragraph 3.30),
independence is impaired, unless such individual was not an SEC Restricted
Entity Audit Team member for that Audit Client during the one year period
preceding the date that audit procedures commenced for the fiscal period that
included the date of initial employment by the SEC Issuer. Audit procedures are
deemed to have commenced for the current Engagement Period on the day after
the prior year’s annual report is filed with the SEC. In other words, the “cooling
off” period ends when the Member Firm has completed one annual audit
subsequent to when the individual was an SEC Restricted Entity Audit Team
member and such annual report is filed with the SEC. The following are not
considered to be SEC Restricted Entity Audit Team members who are subject to
this policy:
(a) Individuals, other than the Lead Client Service Partner and the Engagement
Quality Control Reviewer, who provided ten or fewer hours of audit, review
or attest services during such period;
(b) Individuals employed by the SEC Issuer Audit Client as a result of a

business combination between the Audit Client and the employing entity,
provided employment was not in contemplation of the business
combination and the Audit Committee of the successor SEC Issuer Audit
Client is aware of the prior employment relationship; and
(c) Individuals employed by the SEC Issuer Audit Client due to an emergency or
other unusual situation if the Audit Committee determines that the
relationship is in the interest of investors.
3.30 If a former Partner or Professional Staff member is in a Financial Reporting

Oversight Role related to the operations and financial reporting of a Registered
Investment Company Audit Client at either:
(a) A Registered Investment Company Audit Client; or
(b) An entity in the same Investment Company Complex
independence is impaired unless such individual was not a member of the SEC
Restricted Entity Audit Team for a Registered Investment Company Audit Client
or another Registered Investment Company in the Investment Company Complex
during the one year period preceding the date that audit procedures commenced
that included the date of initial employment by the Registered Investment
Company Audit Client or an entity in the Investment Company Complex. Audit
procedures are deemed to have commenced the day following the filing of the
Registered Investment Company Audit Client’s periodic annual report with the
SEC. In other words, the “cooling off” period ends when the Member Firm has
completed one annual audit subsequent to when the individual was a member of
the SEC Restricted Entity Audit Team and such annual report is filed with the
SEC. The following are not considered to be SEC Restricted Entity Audit Team
members who are subject to this policy:
(i) Individuals, other than the Lead Client Service Partner and the
Engagement Quality Control Reviewer, who provided ten or fewer
hours of audit, review or attest services during such period;
(ii) Individuals employed by the Registered Investment Company Audit

Client or any entity in the Investment Company Complex as a result of
a business combination between a Registered Investment Company or
51
any entity in the Investment Company Complex that is an Audit Client
and the employing entity, provided employment was not in
contemplation of the business combination and the Audit Committee
of the Registered Investment Company Audit Client is aware of the
prior employment relationship; and
(iii) Individuals employed by the Registered Investment Company Audit

Client or any entity in the Investment Company Complex due to an
emergency or other unusual situation if the Audit Committee
determines that the relationship is in the interest of investors.
3.31 When a Partner or Professional Staff member accepts employment with an SEC
Restricted Entity in a position in which the individual:
(a) Has primary responsibility for significant accounting functions that support
material components of the Financial Statements;
(b) Has primary responsibility for the preparation of the Financial Statements;
or
(c) Is in a Financial Reporting Oversight Role
regardless of whether the individual has provided or has been in a position to

influence Professional Services to the SEC Restricted Entity, the Member Firm
shall:
(i) Consider whether it is appropriate or necessary to modify the audit

plan or procedures for the Engagement to adjust for the risk that audit
effectiveness could be reduced by the individual’s knowledge of the
Member Firm’s audit approach and methodology;
(ii) Determine whether the Engagement Team for the Audit has the
appropriate experience and stature to deal effectively with the former
Partner or Professional Staff member and their work when that person
will have significant interaction with the attest Engagement Team; and
(iii) Review the subsequent Audit Engagement to determine whether the

Engagement Team members maintained the appropriate level of
skepticism when evaluating the representations and work of the
former Partner or Professional Staff, when the person joins the
position within one year of disassociating from a Member Firm and has
significant interaction with the audit Engagement Team. The review
should be performed by an individual in the Member Firm with
appropriate stature, expertise, and objectivity and should be tailored
based on the position that the person assumed at the Client, the
position they held at the Member Firm, the nature of the Services they
provided to the Client, and other relevant facts and circumstances.
Appropriate actions, as deemed necessary, should be taken based on
the results of the review.
The procedures adopted will depend on several factors, including whether the former
Partner or Professional Staff served as a member of the audit Engagement Team, the
positions they held at the Member Firm and has accepted at the Client, the length of time
that has elapsed since the individual left the firm, and the circumstances of their
departure.
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Employment Discussions with a Restricted Entity
3.32 A self-interest threat is created when an Audit Team member participates in the Audit
Engagement while knowing, or having reason to believe, that the Audit Team member will,
or might, join a Restricted Entity at some time in the future.
3.33 An example of an action that might be a Safeguard to address the self-interest threat that
is created when an Audit Team member participates in the Audit Engagement while
knowing, or having reason to believe, that they will, or might, join a Restricted Entity at
some time in the future, is having an Appropriate Reviewer review any significant
judgments made by that individual while on the Audit Team.
3.34 An Audit Team member shall notify the Lead Client Service Partner or Director of
Independence when entering employment negotiations with a Restricted Entity
and the individual shall be removed from the Audit Team.
Additional Requirements for SEC Restricted Entities—Employment

Discussions with an SEC Restricted Entity
3.35 A Partner or Covered Person who will seek or discuss potential employment with,
or is offered employment by, an SEC Restricted Entity, shall:
(a) Promptly notify the Lead Client Service Partner or Director of

Independence; and
(b) Immediately cease providing services to such SEC Restricted Entity, if

applicable.
Any work performed by the individual shall be reviewed or re-performed, as

appropriate. The individual shall not resume providing services to the SEC
Restricted Entity until employment is no longer being sought or the employment
offer is rejected.
3.36 A Partner or Professional Staff shall promptly advise the Director of

Independence when accepting employment in an Accounting Role or Financial
Reporting Oversight Role with an SEC Restricted Entity in order to ensure that
any applicable cooling-off requirements are met and benefits or payments due to
the Partner or Professional Staff member are settled in full as required before
the date of initial employment with the SEC Restricted Entity. An individual shall
consult with the Director of Independence and/or the Lead Client Service Partner
to determine if a position is an Accounting Role or Financial Reporting Oversight
Role. Where not prohibited by law, the Director of Independence shall make the
Lead Client Service Partner aware of any known instances where a current
Partner or Professional Staff has accepted future employment at an SEC
Restricted Entity and confirm the requirements of paragraph 3.26, as applicable,
are met.
3.37 When a Covered Person becomes aware that a member of the Engagement Team
with respect to the audit of an SEC Restricted Entity or an individual in the Chain
of Command is considering employment or association with that SEC Restricted
Entity, the Covered Person shall notify the Lead Client Service Partner or the
Director of Independence.
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Recent Service with a Restricted Entity
3.38 If an Audit Team member has recently served as a Director or Officer, or employee of the
Restricted Entity, a self-interest, self-review or familiarity threat might be created.
Service During Period Covered by the Audit Report
3.39 The Audit Team shall not include a Partner or Professional Staff who, during the
period covered by the audit report:
(a) Had served as a Director or Officer of a Restricted Entity; or
(b) Was an employee in a position to exert significant influence over the

preparation of the accounting records or the Financial Statements on which
the Member Firm will Express an Opinion.
Service Prior to Period Covered by the Audit Report
3.40 A self-interest, self-review or familiarity threat might be created if, before the period
covered by the audit report, an Audit Team member:
(a) Had served as a Director or Officer of a Restricted Entity; or
(b) Was an employee in a position to exert significant influence over the preparation of
the accounting records or the Financial Statements on which the Member Firm will
Express an Opinion.
For example, a threat would be created if a decision made or work performed by the
individual in the prior period, while employed by the Restricted Entity, is to be evaluated in
the current period as part of the current Audit Engagement. The significance of the
threat shall be evaluated by the Lead Client Service Partner, in consultation with
the Director of Independence where appropriate.
 The position the Partner or Professional Staff member held with the Restricted
Entity.
 The length of time since the Partner or Professional Staff member left the Restricted
Entity.
 The role of Audit Team member.
3.42 An example of an action that might be a Safeguard to address such self-interest, self-
review or familiarity threat is having an Appropriate Reviewer review the work performed
by the Audit Team member.
Additional Requirements for SEC Restricted Entities—Former Employees

of Restricted Entities
3.43 A Partner or Professional Staff who was formerly:
(a) A Director or Officer of an SEC Restricted Entity;
(b) Employed by an SEC Restricted Entity; or
54
(c) Associated with an SEC Restricted Entity as a promoter, an underwriter, a
voting trustee, or a trustee for the SEC Restricted Entity’s pension or profit
sharing trust
shall not participate in, or be in a position to influence, the audit of the Financial
Statements of the SEC Restricted Entity covering any period during which the
individual was employed by or associated with that SEC Restricted Entity.
3.44 Individuals referred to in paragraph 3.43 shall not become a Covered Person with
respect to that SEC Restricted Entity unless that individual first disassociates
from the SEC Restricted Entity by:
(a) Terminating any relationships with the SEC Restricted Entity described
above;
(b) Disposing of any Direct or Material Indirect Financial Interest in the SEC
Restricted Entity;
(c) Collecting or repaying any loans to or from the SEC Restricted Entity, except
for loans specifically permitted or grandfathered under paragraph 2.64 of
this Section 1420.
(d) Ceasing to participate in all employee benefit plans sponsored by the SEC
Restricted Entity, unless the SEC Restricted Entity is legally required to
allow the individual to participate in the plan and the individual pays 100
percent of the cost of participation on a current basis; and
(e) Liquidating or transferring all vested benefits in the SEC Restricted Entity‘s
defined benefit plans, defined contribution plans, deferred compensation
plans, and other similar arrangements at the earliest date permitted under
the plan. However, liquidation or transfer is not required if a
penalty significant to the benefits is imposed upon liquidation or transfer.
Family and Personal Relationships
3.45 A self-interest, familiarity or intimidation threat might be created by family and personal
relationships between an Audit Team member and a Director, Officer, or depending on
their role, certain employees of the Restricted Entity.
 The individual’s responsibilities on the Audit Team.
 The role of the family member or other individual within the Restricted Entity and
the closeness of the relationship.
Immediate Family Members
3.47 A Partner or Professional Staff shall consult with the Director of Independence
prior to providing any services to a Restricted Entity where an Immediate Family
Member is employed. The purpose of the consultation is to determine if providing
services would be permissible under this Section 1420 (e.g., the role of the Immediate
Family Member, the role of the individual providing services, any Financial Interests in the
Restricted Entity, etc.).
3.48 A Partner or Professional Staff shall not participate as an Audit Team member
when any of that individual’s Immediate Family Members:
55
(a) Is a Director or Officer of the Restricted Entity;
(b) Is an employee in a position to exert significant influence over the

preparation of the Restricted Entity’s accounting records or the Financial
Statements on which the Member Firm will Express an Opinion; or
(c) Was in such a position during any period covered by the Engagement or the
Financial Statements.
3.49 A self-interest, familiarity or intimidation threat is created when an Immediate Family

Member of an Audit Team member is an employee in a position to exert significant
influence over the Client’s financial position, financial performance or cash flows. In such
case, the Lead Client Service Partner, in consultation with the Director of
Independence and/or the Professional Practice Director, shall evaluate and
address the threats created.
 The position held by the Immediate Family Member.
 The role of the Audit Team member.

intimidation threat is removing the Partner or Professional Staff member from the Audit
Team.
3.52 An example of an action that might be a Safeguard to address such a self-interest,

familiarity or intimidation threat is structuring the responsibilities of the Audit Team so
that the Audit Team member does not deal with matters that are within the responsibility
of the Immediate Family Member.
Additional Requirements for SEC Restricted Entities – Immediate Family

Members
3.53 Independence is impaired if an Immediate Family Member of a Partner or

Professional Staff member who is a Covered Person with respect to an SEC
Restricted Entity is in an Accounting Role or Financial Reporting Oversight Role
at the SEC Restricted Entity, including through employment, as a service provider
or in an appointed role, or was in such a role during any period covered by an
audit for which the Partner or Professional Staff member is a Covered Person
with respect to that SEC Restricted Entity.
3.54 If an individual hired by a Member Firm has an Immediate Family Member in an

Accounting Role or Financial Reporting Oversight Role at an SEC Restricted
Entity, the Director of Independence shall be consulted and consideration shall
be given to discussing the matter with the Audit Committee.
Close Family Members
3.55 An Audit Team member shall consult with the Lead Client Service Partner or the
Director of Independence when a Close Family Member is:
(a) A Director or Officer of the Restricted Entity; or

56
3.56 Factors that are relevant in evaluating the level of a self-interest, familiarity or
intimidation threat created by such a relationship include:
 The nature of the relationship between the Audit Team member and the Close
Family Member.
 The position held by the Close Family Member.

Team.

of the Close Family Member.
Additional Requirements for SEC Restricted Entities – Close Family

Members
3.59 Independence is impaired if a Close Family Member of a Partner or Professional

Staff member who is a Covered Person with respect to an SEC Restricted Entity is
in an Accounting Role or Financial Reporting Oversight Role at the SEC Restricted
Entity, including through employment, as a service provider or in an appointed
role, or was in such a role during any period covered by an audit for which the
Partner or Professional Staff member is a Covered Person with respect to that
3.60 If an individual hired by a Member Firm has a Close Family Member in an

Accounting Role or Financial Reporting Oversight Role at an SEC Restricted
Entity, the Director of Independence shall be consulted and consideration shall
be given to discussing the matter with the Audit Committee.
Other Close Relationships of an Audit Team Member
Director of Independence if the Audit Team member has a close relationship with
an individual who is not an Immediate Family Member or Close Family Member,
but who is:
(a) A Director or Officer of a Restricted Entity; or

intimidation threat created by such a relationship include:
 The nature of the relationship between the individual and the Audit Team member.
 The position the individual holds with the Restricted Entity.
57
Team.

of the individual with whom the Audit Team member has a close relationship.
Relationships of Partners, Professional Staff and Others Employed by

DTTL or a Member Firm
3.65 A Partner, Professional Staff member or other employee of DTTL or a Member

Firm shall consult with the Lead Client Service Partner or the Director of
Independence if such individual is aware of a personal or family relationship
between:
(a) A Partner or employee of DTTL or a Member Firm who is not an Audit Team
member; and
(b) A Director or Officer of the Restricted Entity or an employee of the

Restricted Entity in a position to exert significant influence over the
preparation of the Restricted Entity’s accounting records or the Financial
Statements on which the Member Firm will Express an Opinion.
intimidation threat created by such relationship include:
 The nature of the relationship between the Partner, Professional Staff member or
other employee of DTTL or the Member Firm and the Director, Officer or employee of
the Restricted Entity.
 The degree of interaction of the Partner or employee of DTTL or the Member Firm
with the Audit Team.
 The position of the Partner, Professional Staff member or other employee of DTTL or
the Member Firm.
 The position the individual holds with the Restricted Entity.
3.67 Examples of actions that might be Safeguards to address such self-interest, familiarity or
intimidation threats include:
 Structuring the responsibilities of the Partner, Professional Staff member or other

employee of DTTL or the Member Firm to reduce any potential influence over the
Audit Engagement.
 Having an Appropriate Reviewer review the relevant audit work performed.
3.68 A Partner, Professional Staff member or other employee of DTTL or a Member

Firm shall consult promptly with the Lead Client Service Partner or the Director
of Independence when the individual becomes aware of a change in the
employment status of Immediate or Close Family Members or individuals with
whom the Partner, Professional Staff member or other employee of DTTL or the
Member Firm has a close personal relationship resulting in a relationship with
the Restricted Entity described in paragraphs 3.47 to 3.64.
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Temporary Personnel Assignments
3.69 The loan of personnel to a Restricted Entity might create a self-review, advocacy or
familiarity threat.
3.70 Partners shall not act temporarily as a Director, Officer, or employee of a

Restricted Entity.
3.71 DTTL or a Member Firm shall not loan Professional Staff to a Restricted Entity
unless:
(a) Such assistance is provided only for a short period of time (generally less
than 3 months);
(b) The Professional Staff are not involved in providing Non-Assurance Services
that would not be permitted under this Section 1420; and
(c) The Professional Staff do not assume management responsibilities and the
Restricted Entity is responsible for directing and supervising the activities
of the Professional Staff.
3.72 Examples of actions that might be Safeguards to address threats created by the loan of
personnel by DTTL or a Member Firm to a Restricted Entity include:
 Conducting an additional review of the work performed by the loaned Professional

Staff might address a self-review threat.
 Not including the loaned Professional Staff as an Audit Team member might address
a familiarity or advocacy threat.
 Not giving the loaned Professional Staff audit responsibility for any function or
activity that the Professional Staff performed during the loaned personnel
assignment might address a self-review threat.
3.73 When familiarity and advocacy threats are created by the loan of personnel by DTTL or a
Member Firm to a Restricted Entity, such that DTTL or a Member Firm becomes too closely
aligned with the views or interests of management, Safeguards are often not available.
Additional Requirements for SEC Restricted Entities—Temporary

Personnel Assignments
3.74 A Partner or Professional Staff shall not act temporarily as a Director, Officer, or
employee of an SEC Restricted Entity.
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1420—Independence
Chapter 4 - Business Relationships with Restricted Entities
Introduction
4.2 This chapter covers policies on business relationships with Restricted Entities or their
management, or in the case of an SEC Restricted Entity also with persons4 associated with
the SEC Restricted Entity in a decision-making capacity at the Entity Under Audit. An SEC
Restricted Entity’s Directors and Officers that have the ability to affect decision-making at
the Entity Under Audit and Beneficial Owners with Significant Influence5 over the Entity
Under Audit are considered to be persons associated with an SEC Restricted Entity in a
decision-making capacity at the Entity Under Audit. A business relationship with an
individual or an entity can arise from a commercial relationship, a common financial
interest or other interactions or relationships in the marketplace. For purposes of this
chapter, business relationships do not include a Member Firm providing Professional
Services.
4.3 DTTL, Member Firms, Partners and Professional Staff might seek to establish and maintain
a business relationship with another party. Such business relationships will typically fall
into one of the following categories:
 Vendor Business Relationships
 Marketplace Business Relationships
 Other Relationships in the Marketplace
Vendor Business Relationships
4.4 A vendor business relationship is a relationship in which DTTL, a Member Firm, a Partner or
Professional Staff procures another party’s products or services for internal, or personal, use
or consumption. A vendor business relationship does not generally create an impression
(e.g., through communications or co-branding) that the parties are in business together or
are working together in the marketplace. Examples include the leasing, licensing, or
procurement of:
 Office space.
 Computers or other hardware.
 System or application software.
 Cloud storage.
 Hotel rooms and other space for meetings and conferences.
4
For purposes of this chapter, “persons” includes both individuals and entities.
5
For purposes of this chapter, when applying the policies with respect to a Beneficial Owner with
Significant Influence consider any entities controlled by such owner, any entities that control such owner
and any entities that are under common control with such owner in the assessment.
60
 Travel-related items, such as airfares and car rentals.
 Insurance coverage for DTTL and Member Firms (also see Chapter 2 of this Section
1420).
 Office supplies.
 Assistance in the development or maintenance of a software application provided the

application is used:
(a) Purely for internal purposes; or
(b) By a Member Firm when providing services to one or more Clients, but the
Client has no access to the application or such access is ancillary to the
delivery of Professional Services (e.g., as a means of collecting
information/data from the Client to allow the Member Firm to provide the
service) and the vendor does not interact in any way with the Client or solve
Client specific issues.
 Certain other Professional Services if used for internal purposes such as legal
services, trustee services, investment advisory services, recruitment of Member Firm
employees.
4.5 When products and services are procured by a Member Firm in connection with
the delivery of Professional Services for a particular Client, the policies and
guidance relating to marketplace business relationships shall be considered.
4.6 DTTL, a Member Firm or an Audit Team member shall not have a vendor business
relationship with a Restricted Entity or its management unless all of the
following conditions are met:
(a) The relationship is as a consumer in the ordinary course of business of the

Restricted Entity’s or its management’s products or services. A relationship is
considered that of “a consumer” when the products or services are acquired for
personal, or internal, use or consumption. If the relationship is not as a consumer in
the ordinary course of business, refer to the policies on marketplace business
relationships;
(b) The relationship and its terms, conditions, pricing, and other requirements
are similar to those that other customers in similar circumstances receive
from the Restricted Entity or its management;
(c) The relationship does not cause the consumer to become a major customer
of the Restricted Entity or its management where the amounts involved are
Material, either individually or in the aggregate. to any of the parties or the
relationship is significant; and
(d) There is no agreement, either written or oral, that the continuation or

extension of Professional Services to the Restricted Entity is dependent on
the relationship with the Restricted Entity or its management.
4.7 DTTL, a Member Firm or an Audit Team member shall not obtain a purchase
discount from a Restricted Entity if such a discount is not widely available to
others. In certain cases, discounts are permitted if the discount being offered is part of
the same discount program offered by the Restricted Entity to its other customers under
61
similar conditions (e.g., a fleet plan for the purchase of automobiles, or generally available
volume discounts). Generally, all other discount arrangements with a Restricted Entity are
prohibited, including purchases at a discount available only to the Restricted Entity’s
employees (e.g., purchases from an “employee store”) or equivalent opportunities.
Additional Requirements for Data Set Purchases
4.8 A Member Firm might purchase data sets from another party as a consumer in the
ordinary course of business. In some cases, the data sets might be used as part of a
market offering.
4.9 A Member Firm shall not purchase data sets from a Restricted Entity unless the
applicable policies for a vendor business relationship are satisfied.
4.10 If a Member Firm purchases data sets from another party for use in connection
with a market offering, the following conditions shall be met in order for the
relationship to be considered a vendor business relationship:
(a) The data set is purchased for a fixed price (e.g., the purchase price is not a
contingent fee or a percentage or share of the revenue from the Member
Firm’s market offering, including commissions, royalties or fees based on
the number of end users of the market offering);
(b) The Member Firm performs a value-added process or procedure to the data
set prior to providing a deliverable to the Client such that the dataset is not
passed straight through to the Member Firm’s Client;
(c) Only Deloitte personnel has access to and use of the data in connection with
performing certain analyses and it is not provided to Clients for their
analysis and manipulation at their own discretion;
(d) The Member Firm is not publicly associated with the other party in
connection with the data set purchase. As such, the Member Firm does not
promote the use of or endorse the other party, including by referring to the
other party, co-branding or referencing the source of the data (e.g.,
“powered by” the other party). The Member Firm is not prohibited from
factually referencing the source of data; and
(e) The Member Firm does not collaborate with the other party regarding the
development or marketing of a broad market offering or with respect to any
services for a particular Client.
If any of the above conditions are not met, the relationship shall be considered a
marketplace business relationship and shall be subject to the applicable policies
in this Chapter 4.
Additional Requirements for SEC Restricted Entities — Vendor Business

Relationships
4.11 DTTL, a Member Firm or a Covered Person shall not have a vendor business
relationship with an SEC Restricted Entity or a person associated with an SEC
Restricted Entity in a decision-making capacity at the Entity Under Audit, such as
a Director, Officer or Beneficial Owner with Significant Influence, unless the
requirements of paragraphs 4.6 through 4.10 are satisfied.
4.12 DTTL or a Member Firm shall not engage an SEC Restricted Entity to act as a
trustee or investment adviser in connection with the management of its benefit
plans or other investments. This prohibition does not include using an SEC Restricted
62
Entity as an administrator of a firm’s pension plan as long as such activities are solely
administrative in nature.
4.13 DTTL or a Member Firm shall not engage an SEC Restricted Entity to act as an
underwriter, broker-dealer, market-maker, promoter or analyst with respect to
securities or debt issued by DTTL or a Member Firm, as applicable.
Additional Requirements for SEC Restricted Entities — Leasing

Arrangements
4.14 In the case where the SEC Restricted Entity, or a person associated with an SEC
a Director, Officer or Beneficial Owner with Significant Influence, is in the leasing
business, DTTL, a Member Firm or a Covered Person shall not lease real estate
from that entity or individual unless the requirements of paragraph 4.6 are
satisfied. The percentage of the space leased with respect to the total overall space that
the SEC Restricted Entity or individual has available for leasing may be viewed as a
relevant factor in evaluating the materiality of the space to be leased.
4.15 In the case where the SEC Restricted Entity, or a person associated with an SEC
a Director, Officer or Beneficial Owner with Significant Influence, is not in the
leasing business, DTTL, a Member Firm or a Covered Person shall not lease real
estate from that entity or individual unless:
(a) The lease is not Material to any of the parties;
(b) The lease represents less than 25 percent of the space available for lease in
the particular building; and
(c) There is no agreement, either written or oral, that the continuation or

extension of Professional Services to the SEC Restricted Entity is dependent
on the relationship with the SEC Restricted Entity or with a person
associated with an SEC Restricted Entity in a decision-making capacity at
the Entity Under Audit, such as a Director, Officer or Beneficial Owner with
Significant Influence.
4.16 DTTL, a Member Firm or a Covered Person shall not lease real estate to an SEC
Restricted Entity or a person associated with an SEC Restricted Entity in a
decision-making capacity at the Entity Under Audit, such as a Director, Officer or
Beneficial Owner with Significant Influence, unless the lease is not Material to
any of the parties.
4.17 Factors that might be relevant in evaluating the materiality of the rental include:
 The lease rentals from the SEC Restricted Entity or a person associated with an SEC
Restricted Entity in a decision-making capacity at the Entity Under Audit, such as a
Director, Officer or Beneficial Owner with Significant Influence, as compared to the
total fees earned in the Member Firm office located in the building concerned.
 The total lease rentals from all Clients as compared to the Member Firm’s total fees
earned.
 The lease rentals from a particular SEC Restricted Entity as compared to the audit
fee paid by that Client for the same period.
63
 Whether space to be leased to an SEC Restricted Entity will be occupied by the
executive office of that Client
 Whether there are other tenants in the building being leased.
Marketplace Business Relationships
4.18 A marketplace business relationship is a relationship entered into for the purpose of
serving one or more Clients or to establish eminence in the marketplace. Examples
include:
 Alliance Relationship – In an alliance relationship, the participating parties are

associated with each other publicly and work together in connection with the offering
of their respective products and services to the public. Alliance relationships include
all types of joint marketing and sales efforts, and might be accompanied by solutions
development centers, press releases, and other activities that are conducted jointly
in the names of both participating parties. Generally, the products, services and
technologies of the participating parties are complementary, or possibly jointly
developed, and yield a repeatable solution or benefit.
 Teaming Relationship – A teaming relationship is specific to a particular Client

service opportunity and supports joint sales activities for that opportunity. This type
of relationship might also include a Member Firm participating as a member of a
consortium.
 Prime/Subcontractor Relationship – A prime/subcontractor relationship calls for one

of the parties to the relationship to act as the prime contractor, with the other party
or parties, acting as subcontractor(s) in connection with the delivery of Professional
Services to a third party. This includes subcontractor to subcontractor agreements
even when a party is not directly contracting with a Member Firm.
 Commission or Referral Fee Relationship – A commission or referral fee relationship

is any arrangement that calls for one party to receive from another party a referral
fee, a commission, or compensation that is based on the sale of a product or
service. Such payment might be a percentage of a sale or might be based on the
achievement of target levels for such sale.
 Reseller Relationship – A reseller relationship is one in which one party purchases a

product from another with the expectation of reselling it to a third party. A reseller
relationship will often involve the payment of commissions or other compensation
based on the sales of the product being resold.
 Joint proposal – A joint proposal relationship is specific to a particular Client service

opportunity where two parties submit a single joint proposal to a common potential
Client regardless of whether the parties will have separate contracts with the Client.
 Investment Relationship – An investment relationship is established if a party agrees

to obtain an interest in another party. This interest might (1) be executed
immediately or at some future time, (2) take many forms, such as equity, a loan, a
participation in a joint venture, or an option to invest in stock or another financial
instrument; or (3) occur as the result of the transfer of cash or other resources or as
consideration for the delivery of Professional Services.
 Co-developed Solution – A co-developed solution is created when parties work

together to build, enhance, or transition to another platform a solution that will be
64
marketed and licensed or sold as a commercial offering to third parties, either jointly
or by either of the respective parties who collaborated on such solution.
 Co-publishing Arrangement – A relationship where two or more parties agree to

collaborate on the publication of an article, book or other material. For guidance on
publishing arrangements see paragraphs 4.70 to 4.74.
Additional guidance regarding impermissible and generally permissible activities in the

marketplace can be found in Appendix H.
4.19 A marketplace business relationship with a Restricted Entity or its management might
create a self-interest or intimidation threat.
4.20 Before entering into or renewing a marketplace business relationship with any
individual or entity, DTTL or a Member Firm shall determine whether the
proposed party to the marketplace business relationship is a Restricted Entity or,
in the case of an individual, is a member of management at the Restricted Entity.
This determination shall include performing the conflict check procedures set out
in DPM 1430 on all relevant parties associated with the prospective business
relationship.
4.21 In addition to the requirement in paragraph 4.20, when entering into a

marketplace business relationship which would result in provision of Professional
Services to a third party (e.g., acting as subcontractor to a prime contractor), a
Member Firm shall identify whether the third party to which the Professional
Service will be delivered is a Restricted Entity or its management and apply the
policies in Chapter 6 to the third party.
4.22 A marketplace business relationship between DTTL or a Member Firm and an unrelated
entity to jointly provide a service or develop a product does not in itself make the entity
an Associated Entity. Factors relevant in evaluating whether a marketplace business
relationship would result in the other party being considered an Associated Entity include:
 Existence of a joint investment.
 The other party being dependent on the business relationship for its viability.
 Participation in the management or governance of the entity.
 Exclusivity arrangements.
Refer to Appendix M for guidance on when an entity is to be considered an Associated

Entity of DTTL or a Member Firm and as such would be required to comply with all of the
policies in this Section 1420.
4.23 DTTL, a Member Firm or an Audit Team member shall not have a marketplace
business relationship with a Restricted Entity or its management (including an
entity controlled by a member of management) unless any financial interest
resulting from the relationship is not Material and the relationship is insignificant
to the Restricted Entity or its management and DTTL, the Member Firm or the
Audit Team member, as applicable.
Additional Requirements for SEC Restricted Entities—Marketplace

Business Relationships
4.24 DTTL, a Member Firm or a Covered Person shall not have a direct or Material
indirect marketplace business relationship with an SEC Restricted Entity or with
65
a person associated with an SEC Restricted Entity in a decision-making capacity
at the Entity Under Audit, such as a Director, Officer or Beneficial Owner with
Interactions with Other Service Providers on a Client Project
4.25 When a Member Firm provides Professional Services to a Client and another service
provider is also participating in the same project, a marketplace business relationship
might be established between a Member Firm and the service provider even when a
Member Firm and the service provider are each engaged under separate contracts.
4.26 Existence of any of the following factors would generally create a direct marketplace
business relationship between a Member Firm and another service provider that would be
subject to the applicable policies in this Chapter 4:
 There is a contractual linkage between the fees or incentives due to either party.
 The parties have joint liability for performance, work products, or outcomes.
 The parties have joint work product(s) or deliverables(s). A joint work product or
deliverable exists when, either through contractual requirements and/or Client
expectations, there is no differentiation or separation of the responsibilities for
development, completion, and/or provision of the work product or deliverable
between the parties.
 One party oversees, supervises, directs, evaluates, manages, monitors or otherwise

has responsibility or accountability for the other party’s personnel, products, or
services, or is otherwise involved in the decision-making relating to products and
services provided by the other party.
4.27 A Member Firm shall be mindful of independence in appearance when

participating in the project for a Client that also involves a Restricted Entity. In
order to ensure that a threat to independence in appearance is not created, the
Member Firm shall follow the requirements and guidance included in Appendix H.
Additional Requirements for SEC Restricted Entities - Interactions with

Other Service Providers on a Client Project
4.28 When participating in the same project for the Client, a Member Firm shall be
mindful of independence in appearance and ensure that an indirect marketplace
business relationship is not created with another service provider that is an SEC
Restricted Entity or a person associated with an SEC Restricted Entity in a
Beneficial Owner with Significant Influence. In order to ensure that an indirect
marketplace relationship is not created, the Member Firm shall follow the
requirements and guidance included in Appendix H.
Evaluation of Materiality and Significance of a Marketplace Business

Relationship
4.29 When assessing materiality of a proposed marketplace business relationship with

a Restricted Entity or its management, a Member Firm shall consider whether the
proposed relationship is Material to any of the parties based on the assets and
revenues, as applicable, that are expected to be generated from the relationship.
If other marketplace business relationship(s) have previously been entered into
with the Restricted Entity or its management, the aggregate materiality of all
existing and proposed marketplace business relationships shall be considered.
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4.30 When considering the significance of a marketplace business relationship with a
Restricted Entity or its management, DTTL, a Member Firm or an Audit Team
member, as applicable, shall consider qualitative factors that could be indicators
of the importance of the relationship to either party.
4.31 Factors that are relevant in evaluating the significance of the relationship include whether
the relationship:
 Helps either party to establish presence in a new market segment.
 Enables one of the parties to be awarded an engagement that would not be possible
without the other party.
 Is key to delivery of services in a particular industry.
 Is of a recurring or ongoing nature.
 Might create appearance issues, for example through extensive promotion in the
marketplace or includes co-branding.
 Could negatively impact the existing Client relationship with the other party if the
business relationship is not successful.
 Includes exclusivity requirements on either party in working with other competitors

in the marketplace in a certain industry or with respect to a particular service
offering.
 Creates significant legal obligations between the parties that extend beyond the
period of the relationship.
Commission or Referral Fee Relationships
4.32 A self-interest threat is created if a Member Firm pays or receives a referral fee or receives
a commission relating to a Restricted Entity.
4.33 Examples of actions that might be Safeguards to address such self-interest threat include:
 Disclosing to the Restricted Entity any referral fees or commission arrangements

paid to or received from a third party for recommending services or products;
 Obtaining advance agreement from the Restricted Entity for commission

arrangements in connection with the sale by another party of goods or services to
Additional Requirements for SEC Restricted Entities - Commission or

Referral Fee Relationships
4.34 DTTL or a Member Firm shall not provide any service or product to an SEC
Restricted Entity for a commission or receive a commission, directly or indirectly,
from an SEC Restricted Entity.
Reseller Relationships
4.35 A Member Firm shall not resell a product of a Restricted Entity or its
management, or that of another provider which is in essence a rebranded version
of such product, or vice versa, unless any financial interest resulting from the
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reseller arrangement is not Material and the relationship is insignificant to the
Member Firm and the Restricted Entity or its management.
4.36 A Member Firm shall not enter into a reseller arrangement with another entity to
resell the Member Firm’s products to third parties, unless the Member Firm has
adequate quality controls in place to identify any third parties that are Restricted
Entities and to ensure that they are subject to the applicable policies in this
Section 1420.
Additional Requirements for SEC Restricted Entities - Reseller

Relationships
4.37 A Member Firm shall not resell an SEC Restricted Entity’s product or software
application, or that of another provider which is in essence a rebranded version
of an SEC Restricted Entity’s product or software application, or vice versa. The
requirements in this paragraph also apply to reseller arrangements between a
Member Firm and persons associated with an SEC Restricted Entity in a decision-
making capacity at the Entity Under Audit, such as the Directors, Officers and
Beneficial Owners with Significant Influence.
4.38 There might be limited situations where, as an explicit and non-negotiable condition of
providing Professional Services to a Client, a Member Firm is required to also resell an SEC
Restricted Entity’s product, or a product of a person associated with the SEC Restricted
Entity in a decision-making capacity at the Entity Under Audit, such as a Director, Officers
or Beneficial Owner with Significant Influence to the Client for use in that specific
Engagement. In these cases, a Member Firm may acquire and resell an SEC Restricted
Entity’s product provided that there is no economic benefit derived by the Member Firm,
such as a mark-up on the price at which the Member Firm acquired the product, as a
consequence of the transaction. Prior to agreeing to any such transaction, the
Member Firm shall:
(a) Document the factors giving rise to the conclusion that the resale is a non-
negotiable condition of providing the Professional Service; and
(b) Obtain approval from the Lead Client Service Partner of the SEC Restricted
Entity to resell the SEC Restricted Entity’s product in such circumstances.
The Lead Client Service Partner shall consider whether the transaction
would require a disclosure in the PCAOB Rule 3526 written communication.
4.39 There might be situations where a Member Firm resells a third party’s products and the
sale is not in connection with a broader Engagement for a Client. A Member Firm shall
not resell a third party’s product to an SEC Restricted Entity unless the sale is in
connection with an Engagement to provide permissible Professional Services to
the SEC Restricted Entity.
Joint Proposals
4.40 There might be instances when a Member Firm and a Restricted Entity wish to submit a
joint proposal to a common potential Client, even when there will not be a direct
contractual relationship between the Member Firm and Restricted Entity. Before a
Member Firm agrees to submit a joint proposal with a Restricted Entity to a
potential Client, the threats to independence shall be evaluated and addressed.
Additional Requirements for SEC Restricted Entities – Joint Proposals
4.41 When submitting proposals to a common potential Client, a Member Firm shall
present a separate and independent proposal from that of an SEC Restricted
Entity. Such requirements also relate to persons associated with an SEC
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the Directors, Officers and Beneficial Owners with Significant Influence. However,
the proposals may cross-reference one another for the purpose of establishing that work is
planned to proceed in an orderly fashion.
4.42 If a Member Firm is explicitly requested by a Client to submit a proposal together

with that of an SEC Restricted Entity, or that of a person associated with an SEC
a Director, Officer or Beneficial Owner with Significant Influence, separate and
independent proposal documents may be delivered together, and are not
considered a joint proposal, if the following requirements are met:
(a) The proposal documents of the Member Firm and the SEC Restricted Entity
are physically separate;
(b) The proposal documents of the Member Firm and the SEC Restricted Entity
include a disclaimer (see Appendix H for sample language) stating that
even though the proposals are delivered together, they are separate and
one may be accepted separately without the other; and
(c) The proposal documents of the Member Firm and the SEC Restricted Entity
do not use the words "partner" or "alliance," nor give the impression that
an SEC Restricted Entity and the Member Firm have formed an exclusive
team that limits the Client’s selection options.
4.43 If a Member Firm and an SEC Restricted Entity, or a person associated with an SEC
Restricted Entity in a decision-making capacity at the Entity Under Audit, such as a
Director, Officer or Beneficial Owner with Significant Influence, are each subcontractors to
a third-party prime contractor, the prime contractor may include the Member Firm and the
SEC Restricted Entity in its proposal to the Client that will be accepted or rejected in total,
provided that the Member Firm and the SEC Restricted Entity had no influence over each
other’s selection by the prime contractor and there are no other indicators of a
marketplace business relationship or an indirect marketplace business relationship
between the Member Firm and the SEC Restricted Entity.
Investment Relationships
4.44 A marketplace business relationship might involve a formal, ongoing relationship that
includes an agreement between parties to invest in an entity or actively participate in the
management, oversight or voting of that entity. For instances where parties coincidentally
invest in a common entity without an oral or written agreement to do so, refer to
paragraphs 2.38 through 2.45 in this Section 1420.
Immediate Family Members, shall not have a marketplace business relationship
involving the holding of an interest in a closely held entity (generally fewer than
10 investors in total) when a Restricted Entity or a Director or Officer of the
Restricted Entity, or any group thereof, also holds an interest in that entity,
unless:
(a) The marketplace business relationship is insignificant to DTTL, the Member

Firm, or the individual, as applicable, and the Restricted Entity;
(b) The financial interest held is not Material 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.
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Additional Requirements for SEC Restricted Entities – Investments
4.46 DTTL, a Member Firm or a Covered Person with respect to an SEC Restricted
Entity or any of that individual’s Immediate Family Members shall not enter into
an investment relationship with an SEC Restricted Entity or with a person
associated with an SEC Restricted Entity in a decision-making capacity at the
Entity Under Audit, such as a Director, Officer or Beneficial Owner with
Co-developed Solution
4.47 A co-developed solution is created when parties work together to build a solution that will
be marketed and licensed or sold (either jointly or individually by the respective parties)
as a commercial offering to third parties. Such an arrangement might arise when:
 A Member Firm and the other party enter into an agreement that is specifically
structured to create such a solution and each party will continue to have a role
and/or interest in the success of that solution in the future (e.g., through ownership,
revenue sharing, co-branding, etc.).
 A Client engages a Member Firm to assist it with a commercial solution and elements
of the Engagement result in the creation of a co-developed solution. Such services
might include the Member Firm helping to define requirements, assisting in the
development or implementation of a part of the technology, licensing existing
intellectual property of a Member Firm to be embedded in the solution, supporting
the operation of the offering, etc.
DTTL or a Member Firm’s development of a commercial offering using a Restricted Entity’s

product that is widely available to its customers would not be considered to be a co-
developed solution as long as the protocols in Appendix H and paragraph 4.6 are met.
4.48 A Member Firm shall assess whether an arrangement to develop technology with
another party or as part of an Engagement for a Client results in a co-developed
solution. All co-developed solutions are considered to be marketplace business
relationships between the parties involved and shall be subject to the policies in
this Chapter 4.
4.49 When a Client engages a Member Firm to assist it with developing technology that will be
used to provide services to, or be licensed or sold to its customers to the extent that the
Engagement results in a co-developed solution, the use of the technology by the Client’s
customers would be attributable to the Member Firm. Factors that are relevant to the
assessment of whether a Member Firm’s engagement by a Client would result in a co-
developed solution include, but are not limited to whether:
 The Member Firm’s contribution is significant to the development of the solution or

its functionality.
 The Member Firm and Client share ownership of the solution.
 The Member Firm provides ongoing maintenance or upgrades to the solution or is

involved in the ongoing operation of the solution. This would not, however, include
the Member Firm providing certain enhancements or upgrades to the overall solution
as long as such enhancements are not addressing the needs of a specific customer
of the Client.
 The Member Firm directly interacts with the Client’s customers.
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 The Member Firm and Client expect to co-brand or co-market the solution in the
future.
 The Member Firm is compensated based on sales to customers of the Client.

Volume based pricing should be carefully evaluated to determine whether the
Member Firm receives future income that is directly derived from fees paid by the
Client’s customers (e.g., commissions, royalties, etc.).
The permissibility of providing the services to the Client that is a Restricted Entity would
also be subject to the policies in Chapter 6, regardless of whether the Engagement results
in a co-developed solution.
4.50 If an agreement with another party or an Engagement by a Client results in a co-

developed solution, the Member Firm shall have adequate quality controls in
place to identify the ultimate users of such solution and ensure any users that
are Restricted Entities are subject to the applicable policies in this Section 1420.
Additional Requirements for SEC Restricted Entities – Development or

Maintenance of Commercial Offerings
4.51 DTTL or a Member Firm shall not engage an SEC Restricted Entity or a person
associated with an SEC Restricted Entity in a decision-making capacity at the
Entity Under Audit, such as a Director, Officer or Beneficial Owner with
Significant Influence, to provide assistance in developing or maintaining a
commercial offering or market solution that will be licensed by DTTL or a Member
Firm to one or more Clients, regardless of whether such offering or solution is
considered to be a co-developed solution. Similarly, a Member Firm shall not
assist an SEC Restricted Entity with the design, implementation or maintenance
of a commercial offering or market solution.
Business Relationships of Immediate Family Members
4.52 A vendor business relationship between a Restricted Entity and an Immediate Family
Member of an Audit Team member 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
relationships might be of such a nature or magnitude that they create a self-interest
threat.
4.53 A self-interest or intimidation threat might be created if there is a marketplace business

relationship between a Restricted Entity or its management and an Immediate Family
Member of an Audit Team member.
Director of Independence if an Immediate Family Member has a business
relationship with a Restricted Entity or its management that is Material or
significant to the Immediate Family Member.
4.55 Examples of actions that might eliminate such self-interest or intimidation threats include:
 Eliminating or reducing the magnitude of the transaction.
 Removing the individual from the Audit Team.
4.56 The policies that relate to a marketplace business relationship that involves an investment
relationship by an Immediate Family Member can be found in paragraphs 4.45 to 4.46.
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Other Relationships in the Marketplace
4.57 DTTL and Member Firms shall be mindful of independence in appearance when
interacting with Restricted Entities in the marketplace and shall avoid
circumstances which could lead a reasonable and informed third party to
conclude that the interests of DTTL or a Member Firm and the Restricted Entity
are so aligned that a Member Firm’s independence has been impaired.
4.58 Examples of such marketplace interactions include:
 Sponsorship Relationships – A sponsorship relationship is one in which one party

pays a fee or a contribution in kind to another party to be a “sponsor” or “supporter”
of an event, or a series of events, produced or hosted by such other party. These
sponsorship events might involve one or more co-sponsors. A sponsorship
relationship involves a greater degree of involvement than the mere attendance or
participation in an event.
 Membership Relationships – A membership relationship is one in which DTTL, a

Member Firm, a Partner or Professional Staff pays a fee to a third party to be a
“member” of their organization or group and is granted certain benefits in exchange
for membership.
 Publishing Arrangements – A publishing relationship is one where two or more

parties publish an article, book or other material.
 Speaking Engagements – A speaking engagement is one in which an individual

speaks at an event hosted by another party, regardless of whether a fee is paid to
the speaker.
Sponsorship Relationships
4.59 A sponsorship relationship involving DTTL or a Member Firm and a Restricted Entity,
whether the parties are event organizers, sponsors or co-sponsors might imply a close
association between DTTL or the Member Firm and the Restricted Entity and might create
a self-interest or advocacy threat.
Events Organized by a Restricted Entity or where a Restricted Entity is a

Co-Sponsor of the Event
4.60 Factors that are relevant in evaluating the level of a self-interest or advocacy threat in
case of an event organized by a Restricted Entity or where a Restricted Entity is a co-
sponsor of an event include:
 The nature of the event (for example, a charitable, educational or industry event
versus an event to promote the sale of the services or products of the Member Firm
or the Restricted Entity).
 The number of overall co-sponsors as well as the number of co-sponsors at the level
sponsored by DTTL or the Member Firm (for example, platinum, silver, etc.) and any
sub-events sponsored (for example breakfasts or specific sessions).
 The location and presentation of the Deloitte logo together with the logo of a
Restricted Entity on marketing materials and event webpages.
4.61 In the case when the event organizer is a Restricted Entity, in addition to
considering the factors included in paragraph 4.60, the conditions of paragraph
4.6 of this Section 1420 shall be satisfied.
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4.62 DTTL or a Member Firm shall obtain approval from the Lead Client Service
Partner of the Restricted Entity for a sponsorship relationship when:
(a) The organizer of the event is a Restricted Entity;
(b) A Restricted Entity is a co-sponsor of the event and there are fewer than
five co-sponsors in total; or
(c) A Restricted Entity is a co-sponsor at the same level as DTTL or the Member
Firm, and there are fewer than five co-sponsors at that level.
The Lead Client Service Partner shall also consider whether to discuss the
relationship with the Restricted Entity’s Audit Committee or Others Charged with
Governance.
DTTL or Member Firm Organized Events
4.63 DTTL or a Member Firm shall not have a Restricted Entity sponsor an event
organized by DTTL or the Member Firm unless:
(a) The relationship is not Material or significant to DTTL or the Member Firm or
the Restricted Entity;
(b) The level of threats created is evaluated considering factors outlined in

paragraph 4.60; and
(c) Approval is obtained from the Lead Client Service Partner of the Restricted
Entity who shall also consider whether to discuss the relationship with the
Restricted Entity’s Audit Committee or Others Charged with Governance.
Additional Requirements for SEC Restricted Entities – DTTL or Member

Firm Organized Events
4.64 DTTL or a Member Firm shall not have an SEC Restricted Entity sponsor an event
that is organized by DTTL or a Member Firm.
Membership Relationships
4.65 If DTTL, a Member Firm, an Audit Team member or a Covered Person (in the case
of an SEC Restricted Entity) becomes a member of an organization that is a
Restricted Entity, the requirements of paragraph 4.6 of this Section 1420 shall be
satisfied.4.66 When DTTL, a Member Firm, an Audit Team member or a Covered Person
(in the case of an SEC Restricted Entity) is a member of an organization that is a
Restricted Entity, or where a Restricted Entity is also a member, the membership might
imply a close association between the parties and might create a self-interest or advocacy
threat.
 The number of members of the organization.
 The purpose of the membership, including whether such purpose involves:
o Lobbying for the interests of a Restricted Entity or the industry in which a

Restricted Entity participates.
o Promoting or endorsing a Member Firm or a Restricted Entity.
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o Promoting or endorsing services or products of a Member Firm or a Restricted
Entity.
 Characteristics of the membership relationship that might indicate a teaming,

alliance or other type of marketplace business relationship.
 The membership providing rights such as voting or other management roles or

responsibilities with respect to a Restricted Entity.
4.68 In the event any activities with other members of the organization have the
characteristics of a marketplace business relationship with such members, the
related policies of this chapter shall be applied accordingly.
4.69 DTTL or a Member Firm shall obtain approval from the Lead Client Service
Partner of the Restricted Entity for a membership relationship when:
(a) The membership organization is a Restricted Entity; or
(b) A Restricted Entity is a member of the organization and:
(i) DTTL or a Member Firm or the Restricted Entity will have a

governance role for the organization; or
(ii) There are fewer than five members either in total or at the same
membership level as DTTL or the Member Firm.
The Lead Client Service Partner shall also consider whether to discuss the
relationship with the Restricted Entity’s Audit Committee or Others Charged with
Governance.
Publishing Arrangements
4.70 When DTTL, a Member Firm, a Partner or employee of DTTL or a Member Firm, as
applicable, work together with a Restricted Entity or its management to publish an article,
book or other material, it might imply a close association between DTTL or the Member
Firm and the Restricted Entity or its management and might create a self-interest or
advocacy threat.
4.71 When DTTL, a Member Firm, a Partner or employee of DTTL or a Member Firm
uses the services of another party which is in the publishing business to publish
an article, book, or other material authored by DTTL, the Member Firm or the
individual, as applicable, the relationship would not be considered a co-
publishing arrangement and shall be subject to the vendor business relationship
policies in this Chapter 4.
4.72 When DTTL, a Member Firm, a Partner or employee of DTTL or a Member Firm
agrees with another party to collaborate on the publication of an article, book or
other material, the relationship would be considered a co-publishing
arrangement and shall be subject to the marketplace business relationship
policies in this Chapter 4
4.73 Even when the parties have not agreed with one another to collaborate on a publication, a
threat to independence in appearance might be created if DTTL or a Member Firm and a
Restricted Entity, or individuals representing DTTL, the Member Firm or the Restricted
Entity, as applicable, are contributors to the same article, book or other material and the
parties might be viewed as having entered into a co-publishing arrangement. Factors that
are relevant in evaluating whether such an appearance is created include:
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 The subject matter of the materials and whether the content is educational in nature
and does not include a sales or marketing focus or endorsement of Deloitte, the
Restricted Entity or their respective services or products.
 The overall number and composition of contributors to the publication (i.e., the
number of Restricted Entities or individuals representing Restricted Entities
compared to the total number of contributors).
 The presentation of the Deloitte logo with the logo of the Restricted Entity.
If a threat to independence in appearance is created, participation in the

publication shall be treated as a co-publishing arrangement and shall be subject
to marketplace business relationship policies in this Chapter 4.
Additional Requirements for SEC Restricted Entities – Publishing

Arrangements
4.74 DTTL, a Member Firm or a Covered Person shall not have a co-publishing
arrangement with an SEC Restricted Entity or a person associated with an SEC
a Director, Officer or Beneficial Owner with Significant Influence.
Speaking Engagements
4.75 A speaking engagement involving, a Partner or employee of DTTL or a Member Firm, and
an individual representing a Restricted Entity, whether speaking at an event organized by
the other party or participating on a panel with one another, regardless of whether a fee is
paid, might imply a close association between DTTL or the Member Firm and the
Restricted Entity or its management and might create a self-interest or advocacy threat.
 The nature of the event and whether the topic of the speaking engagement is
educational in nature and does not include a sales or marketing focus or
endorsement of the Restricted Entity or its products;
 Whether the Partner or employee of DTTL or a Member Firm would be speaking or

presenting jointly with a representative of a Restricted Entity;
 The number and composition of other speakers;
 The presentation of the Deloitte logo with the logo of Restricted Entities;
 If a fee is received for the participation in the arrangement.
4.77 Before entering into a speaking arrangement with an individual representing a

Restricted Entity, DTTL or a Member Firm shall obtain approval from the Lead
Client Service Partner who shall also consider whether to discuss the relationship
with the Restricted Entity’s Audit Committee or Others Charged with Governance.
Additional Requirements for SEC Restricted Entities – Speaking

Engagements
4.78 Paragraphs 4.75 through 4.77 also apply to speaking arrangements involving individuals
associated with an SEC Restricted Entity in a decision-making capacity at the Entity Under
Audit, such as the Directors, Officers and Beneficial Owners with Significant Influence.
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4.79 When organizing an event, DTTL or a Member Firm shall not:
(a) Pay a fee for speaking to an individual who is a person associated with an
SEC Restricted Entity in a decision-making capacity at the Entity Under
Audit, such as a Director, Officer or Beneficial Owner with Significant
Influence or who is employed by such entity. An exception to this prohibition is
a case where an individual is regularly paid by organizations for such speaking
activities such that the arrangement is considered the ordinary course of business
for the individual and the requirements under paragraph 4.6 are met; or
(b) Invite an individual who is a person associated with an SEC Restricted

Entity in a decision-making capacity at the Entity Under Audit, such as a
Director, Officer or Beneficial Owner with Significant Influence or who is
employed by such entity, to speak, whether paid or unpaid, if the event is
sales focused.
4.80 When an event is organized by an SEC Restricted Entity, a Partner or employee of

DTTL or a Member Firm shall not:
(a) Accept a fee from an SEC Restricted Entity for speaking at an event; or
(b) Accept the invitation to be a speaker at the event if it is sales or marketing

focused.
Internal Consultants to DTTL and Member Firms
4.81 DTTL or a Member Firm might seek to engage an individual who is not an employee to
serve in an internal consultancy role to DTTL or a Member Firm, for example providing
advice in a particular area to a Member Firm.
4.82 The policies found in Appendix L shall be followed when applying this Section
1420 to individuals who are serving as an independent non-executive director or
similar role for DTTL or a Member Firm.
4.83 DTTL or a Member Firm shall not engage a member of management of a

Restricted Entity if they are likely to be perceived by outsiders as a
representative, spokesperson or employee of DTTL or a Member Firm. Any
exceptions shall be approved by the Director of Independence.
4.84 Contractual agreements to engage individuals shall specify the applicable

independence requirements per paragraph 1.74 and require that DTTL or a
Member Firm is made aware of any new assignments, such as new employment
or an appointment as a Director or Officer that the individual is planning to
accept or any investments that would make the individual a Beneficial Owner
with Significant Influence, so that potential independence implications are
assessed. DTTL or a Member Firm shall obtain confirmation that the individual
has complied and will continue to comply with the requirements.
Additional Requirements for SEC Restricted Entities—Internal

Consultants
4.85 DTTL or a Member Firm shall not engage a person associated with an SEC
a Director, Officer or Beneficial Owner with Significant Influence, to serve in an
internal consultancy role. Any exceptions shall be approved by the Director of
Independence. Under no circumstances shall the individual be engaged in any
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capacity in which they are likely to be perceived by outsiders as a representative,
spokesperson or employee of DTTL or a Member Firm.
Accepting and Monitoring Business Relationships
4.86 DTTL and Member Firms shall implement processes to ensure that any business
relationship with a Restricted Entity or its management, or in the case of an SEC
Restricted Entity, also with a person associated with an SEC Restricted Entity in a
Beneficial Owner with Significant Influence, does not impair independence with
respect to that Restricted Entity.
4.87 Before entering into a marketplace business relationship, DTTL or a Member Firm
shall be alert to whether the nature of the business relationship would result in
the other party being considered an Associated Entity. When the proposed
relationship required significant analysis and it was concluded that an Associated
Entity was not created, the Member Firm shall document the rationale for the
conclusion. If an Associated Entity is created, such entity shall be subject to all
requirements of this Section 1420.
4.88 DTTL and Member Firms shall document the conclusion that a business
relationship described in paragraph 4.86 is permissible under this chapter.
4.89 For marketplace business relationships, DTTL and Member Firms’ processes must
include the following:
 Determining, before entering into or renewing a marketplace business

relationship, whether the proposed relationship is with a Restricted Entity
or its management in order to determine the permissibility of the
relationship or in the case of a proposed relationship with a party that is an
SEC Restricted Entity or a person associated with an SEC Restricted Entity in
a decision-making capacity at the Entity Under Audit, such as a Director,
Officer or Beneficial Owner with Significant Influence, ensuring DTTL or a
Member Firm does not enter into such a relationship.
 Obtaining the approval from the Lead Client Service Partner and where
appropriate, consulting with the Director of Independence. The Lead Client
Service Partner shall be aware of the independence requirements within the
group and shall consult with Audit Engagement Partners for any Audit
Clients that are subject to additional independence requirements to confirm
the permissibility of the proposed marketplace business relationship.
 Monitoring existing marketplace business relationships for purposes of

evaluating whether the relationship continues to be permissible under this
chapter, for example when an existing business relationship party becomes
subject to the independence requirements under this Section 1420. DTTL
and Member Firms shall ensure that any change in circumstances that could
result in the relationships becoming impermissible is recognized and
assessed.
 Having appropriate independence language in all marketplace business

relationship agreements, including a requirement for the business
relationship party to inform DTTL or the Member Firm about changes in the
shareholder structure, relevant interests, employment relationships, and
officer and directorships, as applicable, as well as exit clauses allowing
termination of the contract as required under the applicable independence
requirements in the event that the business relationship ceases to be
77
permissible under such requirements . Any exceptions to the above shall
be approved by the Director of Independence.
1420—Independence
Chapter 5 - Audit Services to Restricted Entities
General Provisions
5.1 DTTL and Member Firms shall be independent of the Restricted Entities of all
Member Firms, unless otherwise stated in this Section 1420.
5.2 Before accepting an initial Audit Engagement, a Member Firm shall determine
whether the independence policies included in this Section 1420, as well as any
other applicable independence standards, can be satisfied with respect to this
potential Audit Engagement. To reach this determination the Member Firm
proposing on an Audit Engagement shall perform conflict check procedures in
accordance with DPM 1430, Potential Conflicts to identify relationships that exist
with the potential Audit Client. The Member Firm shall evaluate any identified
relationships to assess whether they comply with the provisions of this Section
1420 and if not, whether the respective relationship shall be ended or the Audit
Engagement declined.
5.3 Before a Member Firm accepts an Engagement to provide audit services to a

Client, the Member Firm shall obtain approval from the Lead Client Service
Partner.
5.4 The Lead Client Service Partner shall be responsible for:
(a) Establishing the process to be used by Audit Engagement Teams for

obtaining LCSP approval to provide audit services to a Restricted Entity
(e.g., the SRM application); and
(b) Obtaining approval from the Audit Client’s Audit Committee or other
approvals, where required.
Entities Requiring Independence
Affiliates of Audit Clients
5.5 References to a Restricted Entity in this Section 1420 include an Audit Client’s
Affiliates, as defined, based on the type of Audit Client and the applicable
independence requirements. The Affiliates of a non-Listed Entity include those
entities over which the Audit Client has direct or indirect control. However, when
the Audit Team for a non-Listed Entity knows or has reason to believe, that a
relationship or circumstance involving any other entity that would qualify as an
Affiliate if the Audit Client was a Listed Entity, is relevant to the evaluation of the
Member Firm’s independence from that Audit Client, the Audit Team shall include
that entity when identifying, evaluating and addressing threats to independence.
5.6 When determining which independence requirements apply to an Audit Client, it is

important that the Member Firm understand whether there might be changes in
circumstances in the future that would affect the population of Affiliates or result in the
Audit Client being subject to additional independence restrictions. For example,
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discussions with an Audit Client about its intentions to file a registration statement with
the SEC in the future (e.g., in connection with an initial public offering) will enable the
Member Firm to ensure the SEC and PCAOB independence rules are considered and
applied as required in advance of such a filing.
Additional Requirements for SEC Restricted Entities—Entities under

Common Control with an Entity under Audit which are not Affiliates
5.7 As required by the SEC’s general standard of independence described in paragraphs 1.19
and 1.20, all relevant circumstances need to be considered when determining whether a
Member Firm is independent. When a Member Firm performs an audit pursuant to the SEC
independence standards, relationships with and services provided to an entity that is
under common control with the Entity Under Audit but that is not an Affiliate (i.e., one or
both entities are not Material to the controlling entity) could raise independence concerns
due to the nature, extent, relative importance or other relevant aspects of the service or
relationship.
5.8 A Member Firm shall apply the general standard of independence referred to in
paragraphs 1.19 and 1.20 to consider relationships with or services provided to
an entity that is under common control with the Entity Under Audit but that is not
an Affiliate, in particular the impact of relationships and services that would be
impermissible if the entity was an SEC Restricted Entity.
5.9 In complying with paragraph 5.8, the Member Firm shall consider the
relationships and services that are known or should be known to the Member
Firm due to the nature, extent, relative importance or other relevant aspects of
the service or relationship.
Public Interest Entities
5.10 Some of the policies set out in this Section 1420 contain additional provisions that reflect
the extent of public interest in certain Restricted Entities. For the purpose of this
Section 1420, a Public Interest Restricted Entity is an Audit Client that is:
(a) A Listed Entity;
(b) An entity:
(i) Defined by regulation or legislation as a Public Interest Entity; or
(ii) For which the audit is required by regulation or legislation to be

conducted in compliance with the same independence requirements
that apply to the audit of Listed Entities. Such regulation might be
promulgated by any relevant regulator, including an audit regulator;
or
(c) An Affiliate of such an Audit Client.
Member Firms are encouraged to treat additional entities, or certain categories of entities,
as Public Interest Entities because they have a large number and wide range of
stakeholders. Factors to be considered include:
 The nature of the business, such as the holding of assets in a fiduciary capacity for a
large number of stakeholders. Examples might include financial institutions, such as
banks and insurance companies, and pension funds.
 Size.
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 Number of employees.
Changes in Affiliates
5.11 An entity might become an Affiliate of an Audit Client because of various circumstances
(e.g., changes to significant influence and/or materiality, newly created entities, mergers
and acquisitions). A threat to independence might be created by previous or current
interests or relationships between DTTL or a Member Firm and such an Affiliate and might
impact the Member Firm’s ability to continue an Audit Engagement.
5.12 The Audit Team shall be alert to potential changes in the Affiliates of an Audit
Client. Upon becoming aware that an entity will become an Affiliate of an Audit
Client, the Member Firm shall:
(a) In accordance with Sections 1420 and 1430, identify and evaluate previous
and current interests and relationships with the entity that, taking into
account any actions taken to address the threat, might affect the Member
Firm’s independence and therefore its ability to continue that Audit
Engagement after the entity becomes an Affiliate;
(b) Take steps to end any interests or relationships that are not permitted
under this Section 1420 by the date the entity becomes an Affiliate; and
(c) Reflect all changes in Affiliates in the Deloitte Entity Search and Compliance
system (DESC) timely.
Affiliates Resulting from a Merger or Acquisition
5.13 In some circumstances involving a new Affiliate resulting from a merger or acquisition, it
might not be reasonably possible to end an interest or relationship creating the threat by
the effective date of the merger or acquisition. This might be because the Member Firm
provides a Non-Assurance Service to the Affiliate, which the entity is not able to transition
in an orderly manner to another provider by that date.
5.14 As an exception to paragraph 5.12(b), if the interest or relationship cannot

reasonably be ended by the effective date of the merger or acquisition, the
Member Firm shall:
(a) Evaluate the threat that is created by the interest or relationship; and
(b) Discuss with the Audit Committee or Others Charged with Governance the
reasons why the interest or relationship cannot reasonably be ended by the
effective date and the evaluation of the level of the threat.
5.15 Factors that are relevant in evaluating the level of a threat created by mergers and
acquisitions when there are interests and relationships that cannot reasonably be ended
include:
 The nature and significance of the interest or relationship.
 The nature and significance of the Affiliate relationship (for example, whether the
Affiliate is a subsidiary or parent).
 The length of time until the interest or relationship can reasonably be ended.
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5.16 If, following the discussion set out in paragraph 5.14(b) the Audit Committee or
Others Charged with Governance request the Member Firm to continue as the
auditor, the Member Firm shall do so only if:
(a) The interest or relationship will be ended as soon as reasonably possible

but no later than six months after the effective date of the merger or
acquisition;
(b) Any Partner or Professional Staff member who has such an interest or
relationship, including one that has arisen through performing a Non-
Assurance Service that would not be permitted under this Section 1420, will
not be a member of the Engagement Team for the audit or the Engagement
Quality Control Reviewer; and
(c) Transitional measures will be applied, as necessary, and discussed with the
Audit Committee or Others Charged with Governance.
5.17 Examples of such transitional measures include:
 Having a Professional Accountant review the audit or non-assurance work as

appropriate.
 Having a Partner, who is not a member of the Member Firm expressing the opinion
on the Financial Statements, perform a review that is equivalent to an Engagement
Quality Control Review.
 Engaging another firm to evaluate the results of the Non-Assurance Service or

having another firm re-perform the Non-Assurance Service to the extent necessary
to enable the other firm to take responsibility for the service.
5.18 The Member Firm might have completed a significant amount of work on the
audit prior to the effective date of the merger or acquisition and might be able to
complete the remaining audit procedures within a short period of time. In such
circumstances, if the Audit Committee or Others Charged with Governance
request the Member Firm to complete the audit while continuing with an interest
or relationship identified in paragraph 5.12(a), the Member Firm shall only do so
if it:
(a) Has evaluated the level of the threat and discussed the results with the
Audit Committee or Others Charged with Governance;
(b) Complies with the requirements of paragraph 5.14(b) and 5.16(c); and
(c) Ceases to be the auditor no later than the date that the audit report is
issued.
5.19 Even if all the requirements of paragraphs 5.14 to 5.18 could be met, the Member
Firm shall determine whether the circumstances identified in paragraphs 5.11
and 5.13 create a threat that cannot be addressed such that objectivity would be
compromised. If so, the Member Firm shall cease to be the auditor.
5.20 The Member Firm shall document:
(a) Any interests or relationships identified in paragraph 5.12(a) that will not
be ended by the effective date of the merger or acquisition and the reasons
why they will not be ended;
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(b) The transitional measures applied;
(c) The results of the discussion with the Audit Committee or Others Charged
with Governance; and
(d) The reasons why the previous and current interests and relationships do
not create a threat such that objectivity would be compromised.
Additional Requirements for SEC Restricted Entities—Affiliates Resulting

from a Merger or Acquisition
5.21 There might be instances where an existing service or relationship will no longer be
permissible as a result of a merger or acquisition transaction involving an SEC Restricted
Entity. Under paragraph 5.12, a Member Firm is expected to identify these services and
relationships and take steps to complete, terminate or transition them to another service
provider before the effective date of the transaction. In some cases, transitioning the
services or relationships before the effective date of the transaction might not be possible
without causing significant disruption to the SEC Restricted Entity and additional time is
required to transition the services or relationships in an orderly manner.
5.22 The LCSP shall consult with the Director of Independence when services or
relationships are expected to continue after the effective date of a merger or
acquisition transaction involving an SEC Restricted Entity and will become
impermissible after such date.
5.23 A Member Firm's independence will not be impaired when an SEC Restricted
Entity engages in a merger or acquisition and it is not possible to transition an
impermissible service or relationship before the transaction closes without
causing significant disruption to the SEC Restricted Entity, provided that:
(a) The impermissible services or relationships are identified prior to the

effective date of the transaction;
(b) The nature, extent, relative importance, or other aspect of the

impermissible services or relationships do not impair the Member Firm’s
objectivity and impartiality. For example, a Member Firm providing a Non-
Assurance Service that impacts a significant amount of the acquired business and
would be subject to audit procedures would most likely affect the Member Firm’s
independence under the SEC’s general standard of independence described in
paragraphs 1.19 and 1.20;
(c) The Member Firm is in compliance with the applicable independence

standards related to such services or relationships when the services or
relationships originated and throughout the period in which the applicable
independence standards apply;
(d) The Member Firm has or will address such services or relationships
promptly under the relevant circumstances; and
(e) The Member Firm has as part of its quality control system procedures and
controls that:
(i) Monitor the SEC Restricted Entity’s merger and acquisition activity to
provide timely notice of a merger or acquisition; and
(ii) Allow for prompt identification of such services or relationships after

initial notification of a potential merger or acquisition that may trigger
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independence violations, but before the effective date of the
transaction.
The Member Firm shall consider including these matters in the PCAOB 3526
written communication to the Audit Committee as described in paragraph 5.47.
When the matter is not included in the PCAOB 3526 written communication, the
Member Firm shall document in the working papers why a third party would not
consider the relationship to reasonably bear on the Member Firm’s
independence.
5.24 Under no circumstances shall the impermissible services or relationships

continue for more than 6 months after the effective date of the transaction.
5.25 In the event any of the requirements of paragraphs 5.23 or 5.24 are not met, the
impermissible relationship or service would be considered a breach of the
independence requirements and shall be subject to paragraphs 5.102 to 5.117.
5.26 Any permissible services that will continue after the effective date of the merger
or acquisition shall be subject to the applicable Audit Committee pre-approval
requirements.
Updating the Deloitte Entity Search and Compliance System
5.27 The Audit Engagement Partner shall ensure that the Audit Client and any other
information as defined in Appendix G is included in the DESC System prior to
independence requirements commencing. If an Audit Engagement Partner for a
particular Audit Client does not have the ultimate responsibility for maintaining
the DESC information for the larger corporate entity tree, the Audit Engagement
Partner shall provide the DESC Responsible Party with the information for their
Audit Client that needs to be reflected in DESC.
Period During which Independence is Required
5.28 Independence from the Restricted Entity shall be maintained during both:
(a) The Engagement Period; and
(b) The period covered by the Financial Statements.
5.29 The Engagement Period starts when the Audit Team begins to perform the audit, including
audit planning activities which also comprises shadowing the incumbent auditor. The
Engagement Period ends when the audit report is issued. When the Engagement is of a
recurring nature, it ends at the later of the notification by either party that the
professional relationship has ended or the issuance of the final audit report.
5.30 If an entity becomes a Restricted Entity during or after the period covered by the
Financial Statements on which the Member Firm will Express an Opinion, the
Member Firm shall determine whether any threats to independence are created
by:
 Financial, employment or business relationships with the Restricted Entity

during or after the period covered by the Financial Statements but before
accepting the Audit Engagement; or
 Previous services provided to the Restricted Entity by a Member Firm.
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5.31 Threats to independence are created if a Non-Assurance Service was provided to a
Restricted Entity during, or after the period covered by the Financial Statements, but
before the Audit Team begins to perform the audit, and the service would not be permitted
during the Engagement Period.
 Using Partners and Professional Staff who are not Audit Team members to perform
the service.
 Having an Appropriate Reviewer review the audit and non-assurance work as

appropriate.
 Engaging another firm outside of the network to evaluate the results of the Non-
Assurance Service or having another firm outside of the network re-perform the
Non-Assurance Service to the extent necessary to enable the other firm to take
responsibility for the service.
Additional Requirements for SEC Restricted Entities—Period During

which Independence is Required
5.33 In the case of SEC Restricted Entities, the policies included in this Section 1420
apply during the Audit and Professional Engagement Period. This would also
include an existing Audit Client that will be newly subject to SEC independence
rules (e.g., as a result of an initial public offering). Therefore, a Member Firm
shall assess all interests and relationships during the entire Audit and
Professional Engagement Period and consult with DTTL Senior Managing Director
– Global Independence prior to accepting a new audit Engagement that will be
subject to SEC independence requirements if any exceptions to this Section 1420
are identified.
Additional Requirements for SEC Restricted Entities—Audit of Prior-

Period Financial Statements Following a Change in Auditor
5.34 A Client might be required to restate prior-period Financial Statements and such Financial
Statements will need to be re-audited. Common causes of restatement include the
reporting of discontinued operations, retrospective application of a change in accounting
principle, correction of an error in prior-period Financial Statements, and changes in
segment reporting. When there has been a change in auditor, either the successor or
predecessor auditor is required to audit the restated Financial Statements.
5.35 When a Member Firm is the predecessor auditor and is requested to audit prior
periods when it had been the independent auditor, the Member Firm must be
independent under the policies in this Section 1420 from the beginning of the
new professional Engagement Period until the audit report on the restated
Financial Statements is issued. The Member Firm shall perform conflict check
procedures in accordance with DPM 1430, Potential Conflicts to identify current
relationships and assess whether they comply with the provisions of this Section
1420. Prior to the beginning of the new professional Engagement Period the
Member Firm shall ensure that:
(a) All impermissible relationships (e.g., services, business relationships,

financial relationships, employment relationships) are terminated or
addressed, as applicable;
(b) All impermissible Financial Interests are disposed; and
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(c) Approval from the Audit Committee is obtained for any continuing
permissible services.
5.36 When a Member Firm is the successor auditor and is requested to audit a prior
period when another firm was the auditor, the Member Firm may only do so if it
was independent under the policies in this Section 1420 during such prior period.
The Member Firm shall perform conflict check procedures in accordance with
DPM 1430, Potential Conflicts to identify the relationships in the period being
audited and determine whether the Member Firm was independent during such
period.
Additional Requirements for SEC Restricted Entities—Re-Issuing a

Previously Issued Audit Report or Currently Dated Consents
5.37 A Member Firm might be requested to reissue its audit report or consent to its use after
the Audit and Professional Engagement Period has ended (e.g., in a subsequent filing with
the SEC). In order to do so, the Member Firm will generally make inquiries of successor
auditors, read subsequent Financial Statements and board minutes, and perform other
procedures necessary to assess the effect of subsequently discovered facts on the
Financial Statements covered by the previously issued report.
5.38 A Member Firm may reissue the audit report or consent to its use after the Audit
and Professional Engagement Period has ended, even if the Member Firm is
currently not independent, as long as the Member Firm was independent when
the report was initially issued and no additional audit procedures are performed
(i.e., the audit opinion is not dual dated or updated with a current date).
Audit Committee Pre-approval of Audit Services for SEC Issuer Audit Clients
and Registered Investment Company Audit Clients
5.39 If a Member Firm audits an SEC Issuer or Registered Investment Company, the
Member Firm shall obtain pre-approval from the Audit Committee (or the entire
board of directors if no Audit Committee exists) for all audit services to be
provided to the SEC Issuer Audit Client or Registered Investment Company Audit
Client, as well as the consolidated subsidiaries, prior to any Member Firm being
engaged to render, and prior to commencement of, such audit services. The
policy and specific requirements for such pre-approval are found in DTTL PCAOB AAM
30600-1I, Independence Communications with Audit Committees, Including Audit
Committee Pre-approval of Audit and Permissible Nonaudit Services.
5.40 A Member Firm might audit a subsidiary of an SEC Issuer or Registered Investment
Company which is audited by a firm that is not a Member Firm. The Audit Committee of
an SEC Issuer or Registered Investment Company is required under the U.S. listing
requirements to approve all audit services provided to the company, whether provided by
the principal auditor or other firms. Therefore, the Audit Committee’s approval
requirements apply to all statutory auditors even if such an auditor is from a different firm
than the principal auditor. When a Member Firm is the auditor of a subsidiary but the SEC
Issuer or Registered Investment Company is audited by a firm from another network, the
Member Firm may consider discussing the approval requirements for the audit with
management of the subsidiary, so that management can provide the Audit Committee with
the necessary information to meet its responsibilities. However, Non-Assurance Services
provided by a firm that is different from the principal auditor are not required to be pre-
approved by the Audit Committee.
Audit Committee Communications

5.41 Even when not required by the Code, applicable professional standards, laws or
regulations, regular communication is encouraged between a Member Firm and the Audit
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Committee or Others Charged with Governance of the Client regarding relationships and
other matters that might, in the Member Firm’s opinion, reasonably bear on independence.
Such communication enables the Audit Committee or Others Charged with Governance to:
(a) Consider the Member Firm’s judgments in identifying and evaluating threats;
(b) Consider how threats have been addressed including the appropriateness of
Safeguards when they are available and capable of being applied; and
(c) Take appropriate action.
Such an approach can be particularly helpful with respect to intimidation and familiarity
threats.
5.42 When communicating with the Audit Committee or Others Charged with
Governance in accordance with this Section 1420, a Member Firm shall determine
the appropriate individual(s) within the entity's governance structure with whom
to communicate. If the Member Firm communicates with a subgroup of the Audit
Committee or Others Charged with Governance, the Member Firm shall determine
whether communication with all of the Audit Committee or Others Charged with
Governance is also necessary so that they are adequately informed.
5.43 If a Member Firm communicates with individuals who have management
responsibilities as well as governance responsibilities, the Member Firm shall be
satisfied that communication with those individuals adequately informs all of
those in a governance role with whom the Member Firm would otherwise
communicate.
5.44 In some circumstances, all of the Audit Committee or Others Charged with Governance are
involved in managing the entity, for example, a small business where a single owner
manages the entity and no one else has a governance role. In these cases, if matters are
communicated to individual(s) with management responsibilities, and those individual(s)
also have governance responsibilities, the Member Firm has satisfied the requirement to
communicate with the Audit Committee or Others Charged with Governance.
Additional Requirements for Audit Clients that are Listed Entities other
than SEC Restricted Entities—Communications with Audit Committees
5.45 In accordance with ISA 260, Communication with Those Charged with
Governance, in the case of an Audit Client that is a Listed Entity, the Member
Firm shall communicate in writing with the Audit Committee or Others Charged
with Governance:
(a) All relationships and other matters between DTTL or a Member Firm and an
Audit Client, that, in the Member Firm’s professional judgement, might
reasonably be thought to bear on independence; and
(b) The related Safeguards that have been applied to eliminate identified
threats to independence or reduce them to an Acceptable Level.
Specific requirements for such communications are found in DTTL AAM 30600-1,
Communicate With Those Charged With Governance.
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Additional Requirements for Audits Performed Pursuant to PCAOB
Standards
Initial Communications with the Audit Committee under PCAOB Rule

3526
5.46 In accordance with PCAOB Rule 3526, Communication with Audit Committees
Concerning Independence, before accepting an initial Audit Engagement to be
performed pursuant to the standards of the PCAOB, the Member Firm shall:
(a) Describe, in writing, to the Audit Committee all the relationships between
DTTL and Member Firms and the potential Audit Client or persons in
Financial Reporting Oversight Roles at the potential Audit Client that, as of
the date of the communication, may reasonably be thought to bear on
independence (herein referred to as the “initial PCAOB Rule 3526 written
communication”).
(b) Discuss with the Audit Committee of the potential Audit Client the potential
effects of the relationships on independence as described in the initial
PCAOB Rule 3526 written communication, should the Member Firm be
appointed as the entity’s auditor.
(c) Document in the working papers the substance of the discussions with the
Audit Committee of the potential Audit Client.
Specific requirements on such communications are found in DTTL PCAOB AAM 30600-1,
Communications with Audit Committees, and DTTL PCAOB AAM 30600-1I, Independence
Communications with Audit Committees, Including Audit Committee Pre-approval of Audit
and Permissible Nonaudit Services.
Periodic Communication with the Audit Committee under PCAOB Rule

3526
5.47 In accordance with PCAOB Rule 3526, a Member Firm that is the principal auditor
of an SEC Issuer Audit Client or certain non-Issuers that are audited pursuant to
the standards of the PCAOB (e.g., broker-dealers registered with the SEC) shall
at least annually:
 Describe, in writing, to the Audit Committee of the Audit Client all relationships
between DTTL and Member Firms and the Audit Client or persons in
Financial Reporting Oversight Roles at the Audit Client, that, as of the date
of the communication, may reasonably be thought to bear on independence
(herein referred to as the “PCAOB 3526 written communication”);
 Discuss with the Audit Committee the potential effects of the relationships
described in the annual PCAOB 3526 written communication on the
independence of the Member Firm;
 Affirm to the Audit Committee, in writing, that as of the date of the

communication, the Member Firm is independent in compliance with PCAOB
Rule 3520; and
 Document the substance of the Member Firm’s discussion with the Audit
Committee.
Specific requirements on such communications are found in DTTL PCAOB AAM 30600-1,
Communications with Audit Committees, and DTTL PCAOB AAM 30600-1I, Independence
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Communications with Audit Committees, Including Audit Committee Pre-approval of Audit
and Permissible Nonaudit Services.
Fees
5.48 The nature and level of fees or other types of remuneration might create a self-interest or
intimidation threat.
Relative Size of Fees
5.49 When the total fees generated from a Restricted Entity by the Member Firm expressing the
opinion on the Financial Statements represent a large proportion of the total fees of that
Member Firm, the dependence on that Restricted Entity and concern about losing the
Restricted Entity as a Client create a self-interest or intimidation threat.
 The operating structure of the Member Firm.
 Whether the Member Firm is well established or new.
 The significance of the Client qualitatively and/or quantitatively to the Member Firm.
5.51 An example of an action that might be a Safeguard to address such a self-interest or

intimidation threat is increasing the Client base in the Member Firm to reduce dependence
on the Restricted Entity.
5.52 A self-interest or intimidation threat is also created when the fees generated by a Member
Firm from a Restricted Entity represent a large proportion of the revenue of one Partner or
one Office of the Member Firm.
 The significance of the Restricted Entity qualitatively and/or quantitatively to the

Partner or Office.
 The extent to which the compensation of the Partner, or the Partners in the Office, is
dependent upon the fees generated from the Restricted Entity.
5.54 Generally, the quality control policies contained in this Section 1420 reduce the level of
the threat from depending on the fees from a particular Restricted Entity to an Acceptable
Level, but actions that might be Safeguards to further address such self-interest or
 Increasing the Client base of the Partner or the Office to reduce dependence on the
Restricted Entity.
 Having an Appropriate Reviewer who did not take part in the Audit Engagement
review the work.
Additional Requirements for Public Interest Restricted Entities—Relative

Size of Fees
5.55 If for two consecutive years, the total fees from a Public Interest Restricted
Entity represent more than 15% of the total fees received by a Member Firm
expressing the opinion on the Financial Statements of the Client, the Member
Firm shall:
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(a) Disclose to the Audit Committee or Others Charged with Governance of the
Public Interest Restricted Entity the fact that the total of fees represents
more than 15% of the total fees received by the Member Firm; and
(b) Discuss whether either of the following actions might be a Safeguard to
address the threat created by the total fees received by the Member Firm
from the Public Interest Restricted Entity, and if so, apply it:
(i) Prior to the audit opinion being issued on the second year’s Financial
Statements, a Partner, who is not a Partner in the Member Firm
expressing the opinion on the Financial Statements, performs an
Engagement Quality Control Review of that Engagement; or a
professional body performs a review of that Engagement that is
equivalent to an Engagement Quality Control Review (“a pre-issuance
review”); or
(ii) After the audit opinion on the second year’s Financial Statements has
been issued, and before the audit opinion being issued on the third
year’s Financial Statements, a Partner, who is not a Partner in the
Member Firm expressing the opinion on the Financial Statements, or a
professional body performs a review of the second year’s audit that is
equivalent to an Engagement Quality Control Review (“a post-issuance
review”).
5.56 When the total fees described in paragraph 5.55 significantly exceed 15%, the
Lead Client Service Partner, in consultation with the Director of Independence
shall determine whether the level of the threat is such that a post-issuance
review would not reduce the threat to an Acceptable Level. If so, the Member
Firm shall have a pre-issuance review performed.
5.57 If the fees described in paragraph 5.55 continue to exceed 15%, the Member
Firm shall each year:
(a) Disclose to and discuss with the Audit Committee or Others Charged with
Governance the matters set out in paragraph 5.55; and
(b) Comply with paragraphs 5.55(b) and 5.56.
Contingent Fees
5.58 A Member Firm shall not charge directly or indirectly a Contingent Fee for an
Audit Engagement. See paragraphs 6.24 to 6.28 for Contingent Fee arrangements with
a Restricted Entity to provide Non-Assurance Services.
Overdue Fees
5.59 When a significant part of fees due from a Restricted Entity remains unpaid for a
long time, a Member Firm shall determine:
(a) Whether the overdue fees might be equivalent to a loan to the Restricted
Entity; and
(b) Whether it is appropriate for the Member Firm to be re-appointed or

continue the Audit Engagement.
5.60 A self-interest threat might be created if a significant part of fees is not paid before the
audit report for the following year is issued. It is generally expected that a Member Firm
will require payment of such fees before such audit report is issued. The policies set out in
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Chapter 2 of this Section 1420 with respect to loans and guarantees might also apply to
situations where such unpaid fees exist.
include:
 Obtaining partial payment of overdue fees.
 Having an Appropriate Reviewer who did not take part in the Audit Engagement
review the work performed.
Additional Requirements for SEC Restricted Entities—Overdue Fees
5.62 A Member Firm shall not issue an audit report to an SEC Restricted Entity if fees
for Professional Services provided more than one year prior to the date of the
audit report remain unpaid.
5.63 Prior year audit and other unpaid fees owed by an SEC Restricted Entity shall be
paid before a current Audit Engagement is commenced if the audit report is to be
filed under the U.S. Securities Act of 1933 (e.g., registration statements). If the
audit report will only be included in an annual report filed with the SEC, the audit
can be started if the SEC Restricted Entity makes a definite commitment to pay
the prior year fees before the current year’s audit report is issued. Obtaining
such a commitment only permits the audit to be performed, however, the audit
report cannot be issued until unpaid fees for Professional Services provided more
than one year prior to the date of the audit report are paid.
Legal Protection Clauses
5.64 With respect to Audit Engagements, a Member Firm may generally seek indemnification
from any legal liability or costs incurred as a result of misrepresentations by management.
(See paragraphs 6.30 and 6.31 for the policies on the use of Legal Protection Clauses in
engagement letters to provide Non-Assurance Services).
Additional Requirements for SEC Restricted Entities—Legal Protection

Clauses
5.65 A Member Firm shall not include Legal Protection Clauses in an engagement
letter with an SEC Restricted Entity to provide audit or assurance services if the
Member Firm’s report related to such services is included or incorporated by
reference in, or used as a basis for, a report filed with the SEC or where SEC
independence rules are being followed in connection with that Engagement (e.g.,
audits to satisfy the Custody Rule, audits of broker-dealers performed under PCAOB
auditing standards). If there is any doubt concerning the permissibility of a Legal
Protection Clause, the Director of Independence shall be consulted.
5.66 A Member Firm’s indemnification of an SEC Restricted Entity in connection with an audit or
assurance service might result in a mutuality of interest between a Member Firm and the
SEC Restricted Entity. There are limited circumstances (e.g., data loss, bodily harm) under
which such Legal Protection Clauses are appropriate in engagement letters for audit or
assurance services for an SEC Restricted Entity. The Director of Independence shall
be consulted if a Client seeks to have a Member Firm provide it with legal
protection in an engagement letter for an Audit Engagement or an Assurance
Engagement that is performed under SEC independence rules.
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Clauses for Component Auditors of a PCAOB Group Audit
5.67 When a Component Auditor obtains an engagement letter from the Component in
connection with its audit work to support a Group Audit that is subject to PCAOB
and SEC independence rules (PCAOB Group Audit), that engagement letter shall
not include Legal Protection Clauses. This prohibition applies regardless of
whether the Group Auditor is a Member Firm or is from another network.
However, in the case where a Component Auditor is also the statutory auditor of
the Component, the local statutory Audit Engagement letter with the Component
may include Legal Protection Clauses (either contractual or provided under law)
as long as the Legal Protection Clause only relates to the local statutory Audit
Engagement and the statutory Audit Engagement is a separate Engagement from
the audit work performed by the Component Auditor for the PCAOB Group Audit.
5.68 Factors which might indicate that the audit work performed by the Component Auditor in
support of the PCAOB Group Audit is separate from the local statutory Audit Engagement
include:
 The local statutory Financial Statements are prepared on a different basis of

accounting from the PCAOB Group Financial Statements.
 The audit procedures are based on different standards (local or international auditing
standards vs. PCAOB auditing standards).
 The local statutory Audit Engagement does not include an opinion on controls, and
therefore the control testing is different.
 Audit materiality for the PCAOB Group Audit and local statutory Audit Engagement
are not the same.
 The PCAOB Group Audit and local statutory Audit Engagement are conducted at
different times.
 Accounts that are in scope for the PCAOB Group Audit are not the same as those for
the local statutory Audit Engagement.
 The identified audit risks and planning vary for the PCAOB Group Audit and local
statutory Audit Engagement.
5.69 The statutory Audit Engagement letter may include Legal Protection Clauses if it
is reasonable to conclude that the work performed by the Component Auditor in
support of the PCAOB Group Audit and the local statutory Audit Engagement are
separate Engagements and the following conditions are met:
(a) The Audit Team for the Group Audit does not rely on the statutory Financial
Statements in the current or future year’s audit procedures as support for
the PCAOB Group Audit; and
(b) Complete and separate engagement files are maintained for the local
statutory Audit Engagement and the audit work performed by the
Component Auditor in support of the PCAOB Group Audit and such files are
separately archived.
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Additional Requirements for SEC Restricted Entities—Foreign Private
Issuers Where Legal Protection Is Provided Under Local Law
5.70 In some non-US jurisdictions the statutory auditor’s liability is limited under
local law. If a Member Firm in such a jurisdiction undertakes both the local
statutory Audit Engagement and the PCAOB Audit Engagement for an SEC
Restricted Entity that is a foreign private issuer, the existence of such a
limitation on liability would not impair independence subject to the following
protocols:
(a) The PCAOB Audit Engagement letter does not include Legal Protection
Clauses;
(b) The Audit Team documents in the PCAOB Audit Engagement planning files
their understanding that while legal protection may exist for local statutory
purposes, such protections would not be recognized by a court in the United
States; and
(c) Complete and separate engagement files are maintained for the local
statutory Audit Engagement and the PCAOB Audit Engagement and such
files are separately archived).
5.71 Factors that illustrate potential differences between a PCAOB Audit Engagement and a
local statutory Audit Engagement and might support the conclusion that the PCAOB Audit
Engagement and the local statutory Audit Engagement are in fact two different
Engagements include:
 The audit procedures are based on different standards (local or international auditing
standards vs. PCAOB auditing standards).
 The local statutory Audit Engagement does not include an opinion on controls, and
therefore the control testing is different.
 The PCAOB Audit Engagement and local statutory Audit Engagement are conducted
at different times.
 Accounts that are in scope for the PCAOB Audit Engagement are not the same as
those for the local statutory Audit Engagement.
 The identified audit risks and planning vary for the PCAOB Audit Engagement and
local statutory Audit Engagement.
Actual or Threatened Litigation
5.72 When litigation with a Restricted Entity occurs, or appears likely, self-interest and
intimidation threats are created.
5.73 The relationship between Client management and the Audit Team members must be
characterized by complete candor and full disclosure regarding all aspects of a Client’s
operations. Adversarial positions might result from actual or threatened litigation between
a Restricted Entity and DTTL, a Member Firm or an Audit Team member. Such adversarial
positions might affect management’s willingness to make complete disclosures and create
self-interest and intimidation threats.
5.74 If there is litigation, or litigation appears likely, between a Member Firm or a

member of the Audit Team and a Restricted Entity, the Lead Client Service
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Partner, in consultation with the Director of Independence, shall identify,
evaluate and address the potential threats to independence.
 The materiality of the litigation.
 Whether the litigation relates to a prior Audit Engagement.
5.76 If the litigation involves an Audit Team member, an example of an action that might
eliminate such self-interest and intimidation threats is removing that individual from the
Audit Team.
5.77 An example of an action that might be a Safeguard to address such self-interest and
intimidation threats is to have an Appropriate Reviewer review the work performed.
Additional Requirements for SEC Restricted Entities—Litigation
5.78 In general, litigation impairs independence whenever it might be expected to

alter substantially the normal relationship between the SEC Restricted Entity and
DTTL or a Member Firm. The relationship must be characterized by complete candor and
full communication between the SEC Restricted Entity and Member Firms regarding all
aspects of the SEC Restricted Entity’s business operations. Moreover, there must be an
absence of bias on the part of Member Firms.
5.79 Independence is deemed impaired as a result of litigation or threatened litigation

between an SEC Restricted Entity and DTTL or a Member Firm with respect to
audit or assurance services provided to that SEC Restricted Entity by the Member
Firm. It is presumed that in such cases the Member Firm and the SEC Restricted Entity’s
management are placed in an adversarial position.
5.80 If there is a strong probability that litigation will be brought against DTTL or a
Member Firm, such likelihood might also impair independence. In these
situations, the Director of Independence shall be consulted.
5.81 When litigation involves others, such as shareholders or other third-party suits, or does
not involve a Member Firm’s audit work, independence is not necessarily impaired. In all
such cases, the facts and circumstances must be evaluated to determine whether the
relationship between the Member Firm and the SEC Restricted Entity is affected by the
litigation. The Director of Independence shall be consulted when litigation or an
expressed intention to commence litigation involving a Member Firm exists.
Former Employees of Restricted Entities
5.82 For policies covering former employees of a Restricted Entity becoming an Audit Team
member, see paragraphs 3.38 to 3.44
Long Association with Restricted Entities
5.83 When a Partner or Professional Staff is involved in an Audit Engagement over a long period
of time, familiarity and self-interest threats might be created. Policies around long
association with Restricted Entities as well as Partner rotation requirements for Partners
who participate on Audit Engagements of Public Interest Entities and those Partners who
participate in an audit, review, or attestation engagement of an SEC Issuer Audit Client
are found in DPM 3430 Long Association of Partners and Professional Staff on Audit and
Assurance Engagements.
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Evaluation and Compensation Policies
5.84 A Member Firm’s evaluation or compensation policies might create a self-interest threat.
5.85 A Member Firm shall not evaluate or compensate an audit Partner (including
through bonuses or other direct financial incentives) based on that Partner’s
success in selling products or services to any Client where they participate in the
audit.
5.86 This requirement does not preclude the following:
 Normal profit-sharing arrangements between Partners of a Member Firm.
 Compensating audit Partners for selling audit, review or assurance services to a

Client where they participate in the audit.
 Compensating audit Partners for selling either audit or non-audit services to a Client
where they do not participate in the audit.
5.87 When an Audit Team member who is not a Partner is evaluated on or compensated for
selling Non-Assurance Services to that Audit Client, the level of the self-interest threat will
depend on:
(a) What proportion of the compensation or evaluation is based on the sale of such
services;
(b) The role of the individual on the Audit Team; and
(c) Whether the sale of such Non-Assurance Services influences promotion decisions.
 Revising the compensation plan or evaluation process for that individual.
 Removing that individual from the Audit Team.
Additional Requirements for SEC Restricted Entities—Evaluation and

Compensation
5.90 A Lead Client Service Partner or Advisory Partner for an SEC Restricted Entity
who is outside the audit function but participates in the Audit Engagement, shall
not be evaluated on or earn or receive compensation, bonuses or other direct
financial incentives for selling products or services, other than audit, review or
assurance services, to the Audit Client.
Gifts and Hospitality
5.91 Offering and accepting gifts and hospitality from a Restricted Entity or its management
might create a self-interest, familiarity or intimidation threat.
5.92 DTTL, a Member Firm or an Audit Team member shall not offer or accept gifts or
hospitality to or from a Restricted Entity or its management unless the value is
trivial and inconsequential. Whether a gift or entertainment is appropriate
depends on what is reasonable and customary in the particular jurisdiction, its
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nature and frequency, and any local independence requirements and Member
Firm policies. Additionally, the Client’s policies on accepting gifts from the
auditor shall be considered. If there are any questions regarding the offering or
receiving of a gift or hospitality to or from a Restricted Entity or its management,
the Director of Independence shall be consulted.
5.93 Taking part in excessive entertainment with a Restricted Entity might result in close
personal relationships with personnel at the Client. When a close personal relationship is
created, such relationship would need to be assessed in accordance with paragraphs 3.61
through 3.64 in this Section 1420.
5.94 Factors relevant in the determination of what would be considered excessive

entertainment include:
 The number of Clients invited to an event.

 The composition of Audit and non-Audit Clients.
 The total cost of the entertainment, including travel costs, event tickets, meals,
gifts, etc.
 The frequency of entertaining the Audit Client and the cumulative cost including as
compared to other clients.
 Whether business is conducted or discussed during the event.
5.95 DPM 1550, Anti-Corruption, and the DTTL and Member Firm ethical codes also apply to
gifts and hospitality involving a Restricted Entity and its management. Failure to comply
with such policies might also create a threat to independence.
Additional Requirements for SEC Restricted Entities—Gifts and

Hospitality
5.96 In case of an SEC Restricted Entity, paragraphs 5.91 through 5.95 also apply to
gifts and hospitality to or from a person associated with an SEC Restricted Entity
in a decision-making capacity at the Entity Under Audit, such as a Director,
Officer or Beneficial Owner with Significant Influence.
Group Audits
Serving as Group Auditor
5.97 There might be instances where a Member Firm serves as a Group Auditor and wishes to
rely on the audit work of a Component Auditor. A Member Firm that is the Group
Auditor shall include in the referral instructions to the Component Auditor the
independence requirements that are relevant for the Component Auditor and the
obligation to report to the Group Auditor any instances of non-compliance with
these requirements. Additional information is included in the Group Audit Referral
Instructions.
5.98 The Member Firm that is a Group Auditor shall obtain the Component Auditor’s
confirmation of its compliance with the specified independence requirements.
The Director of Independence shall be consulted in the event the Component
Auditor does not provide the required independence confirmation or reports any
instances of non-compliance with the independence requirements.
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Serving as Component Auditor
5.99 A Member Firm might serve as a Component Auditor for the Financial Statements of a
Component (e.g., a subsidiary, investee, etc.) that is included in the Group Financial
Statements where the Group Auditor is not a Member Firm. In such cases, the Member
Firm might be requested to provide a confirmation or acknowledgement to the Group
Auditor that it has complied with the independence requirements specified in the referral
instructions. An Audit Team shall understand the independence requirements
before providing a confirmation or acknowledgement of its independence to the
Group Auditor and consult with the Director of Independence if there are any
questions regarding the implications of providing such a confirmation or
acknowledgement.
5.100 A Member Firm may confirm that the Member Firm is independent of the Component Audit
Client and its Affiliates under applicable independence standards for that Audit Client.
However, a Member Firm shall consult with the Director of Independence before
confirming its independence with respect to a parent or investor of the Audit
Client because such confirmation is rarely required.
5.101 When a Member Firm is asked to confirm independence under standards that
would result in additional restrictions and/or additional Affiliates (e.g., under
SEC independence rules), the Member Firm shall do so only when such
independence requirements are met. All entities for which independence is
required shall be included in the DESC system as a Restricted Entity (see
paragraph 5.27).
Breach of Applicable Independence Requirements
5.102 As noted in paragraph 1.2, the policies included in this Section 1420 are primarily based
on the independence requirements in the IESBA Code. The Code provides that if there is a
breach of a provision of the Code, certain steps are required to be taken, as described
below. For purposes of this Section 1420, independence requirements applicable to a
particular Audit Engagement (herein referred to as “other applicable independence
requirement”) include those in the Code as well as statutory, regulatory or requirements
imposed by professional bodies.
5.103 When a Member Firm concludes that a breach of this Section 1420 has occurred,
the Director of Independence shall be consulted to determine whether the breach
is of a more stringent policy included in this Section 1420 or is a breach of the
Code or other applicable independence requirement. Where the breach is of a
more stringent requirement in this Section 1420 but not a breach of the Code or
other applicable independence requirement, the actions specified in paragraph
5.104 below are not required to be taken; however, consideration shall be given
to the actions necessary to address the breach of a provision of this Section
1420.
5.104 If a Member Firm concludes that a breach of a requirement of the Code or other
applicable independence requirement has occurred, the Member Firm shall:
(a) End, suspend or eliminate the interest or relationship that created the
breach and address the consequences of the breach;
(b) Consider whether any legal or regulatory requirements apply to the breach
and, if so:
(i) Comply with those requirements; and
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(ii) Consider reporting the breach to a professional or regulatory body or
oversight authority if such reporting is common practice or expected
in the relevant jurisdiction;
(c) Promptly communicate the breach to:
(i) The Lead Client Service Partner;
(ii) The Audit Engagement Partner;
(iii) The Director of Independence of the Member Firm where the breach
occurred;
(iv) The Director of Independence of the Member Firm that will report the
breach to the Audit Committee or Others Charged with Governance, if
different than (iii);
(v) Those subject to the independence policies in this Section 1420 who
need to take appropriate action to end, suspend or eliminate the
interest or relationship that created the breach; and
(vi) The DTTL Senior Managing Director– Global Independence;
(d) Evaluate the significance of the breach and its impact on the Member Firm’s
objectivity and ability to issue an audit report; and
(e) Depending upon the significance of the breach, determine:
(i) Whether to end the Audit Engagement; or
(ii) Whether it is possible to take action that satisfactorily addresses the

consequences of the breach and whether such action can be taken and
is appropriate in the circumstances.
In making this determination, the Member Firm shall exercise professional

judgment and take into account whether a reasonable and informed third party,
would be likely to conclude that the Member Firm's objectivity would be
compromised, and therefore, the Member Firm would be unable to issue an audit
report.
applicable independence requirement has occurred, the Lead Client Service
Partner shall determine if there are other Audit Clients within the Group that are
impacted by the breach and promptly communicate the matter to the applicable
Audit Engagement Partner so the requirements as stated in this chapter can be
met.
5.106 A breach of a provision of this Section 1420 might occur despite DTTL and the Member
Firms having policies and procedures designed to provide reasonable assurance that
independence is maintained. It might be necessary to end the Audit Engagement because
of the breach.
5.107 The significance and impact of a breach on the Member Firm’s objectivity and ability to
issue an audit report will depend on factors such as:
 The nature and duration of the breach.
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 The number and nature of any previous breaches with respect to the current Audit
Engagement.
 Whether an Audit Team member had knowledge of the interest or relationship that
created the breach.
 Whether the individual who created the breach is an Audit Team member or another
individual for whom there are independence requirements.
 If the breach relates to an Audit Team member, the role of that individual.
 If the breach was created by providing a Professional Service, the impact of that
service, if any, on the accounting records or the amounts recorded in the Financial
 The extent of the self-interest, advocacy, intimidation or other threats created by

the breach.
5.108 Depending upon the significance of the breach, examples of actions that the Member Firm
might consider to address the breach satisfactorily include:
 Removing the relevant individual from the Audit Team.
 Using different individuals to conduct an additional review of the affected audit work
or to re-perform that work to the extent necessary.
 Recommending that the Restricted Entity engage another firm to review or re-
perform the affected audit work to the extent necessary.
 If the breach relates to a Non-Assurance Service that affects the accounting records
or an amount recorded in the Financial Statements, engaging another firm to
evaluate the results of the Non-Assurance Service or having another firm re-perform
the Non-Assurance Service to the extent necessary to enable the other firm to take
responsibility for the service.
5.109 If the Member Firm determines that action cannot be taken to address the
consequences of the breach satisfactorily, the Member Firm shall inform the
Audit Committee or Others Charged with Governance as soon as possible and
take the steps necessary to end the Audit Engagement in compliance with any
applicable legal or regulatory requirements. Where ending the Engagement is not
permitted by laws or regulations, the Member Firm shall comply with any
reporting or disclosure requirements.
5.110 If the Member Firm determines that action can be taken to address the
consequences of the breach satisfactorily, the Member Firm shall discuss with
the Audit Committee or Others Charged with Governance:
(a) The significance of the breach, including its nature and duration;
(b) How the breach occurred and how it was identified;
(c) The action proposed or taken and why the action will satisfactorily address
the consequences of the breach and enable the Member Firm to issue an
audit report;
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(d) The conclusion that, in the Member Firm’s professional judgment,
objectivity has not been compromised and the rationale for that conclusion;
and
(e) Any steps proposed or taken by the Member Firm to reduce or avoid the risk
of further breaches occurring.
Such discussion shall take place as soon as possible unless alternative timing is
specified by the Audit Committee or Others Charged with Governance for
reporting less significant breaches.
Communication of Breaches to Those Charged with Governance
5.111 The Member Firm shall communicate in writing to the Audit Committee or Others
Charged with Governance:
(a) All matters discussed in accordance with paragraph 5.110 and obtain the
concurrence of the Audit Committee or Others Charged with Governance
that action can be, or has been, taken to satisfactorily address the
consequences of the breach; and
(b) A description of:
(i) The Member Firm’s policies and procedures relevant to the breach
designed to provide it with reasonable assurance that independence is
maintained; and
(ii) Any steps that the Member Firm has taken, or proposes to take, to
reduce or avoid the risk of further breaches occurring.
5.112 If the Audit Committee or Others Charged with Governance do not concur that
the action proposed by the Member Firm in accordance with paragraph 5.104(e)
(ii) satisfactorily addresses the consequences of the breach, the Member Firm
shall take the steps necessary to end the Audit Engagement in accordance with
paragraph 5.109.
Breaches Before the Previous Audit Report Was Issued
5.113 If the breach occurred prior to the issuance of the previous audit report, the
Member Firm shall comply with the provisions of this Section 1420 in evaluating
the significance of the breach and its impact on the Member Firm’s objectivity
and its ability to issue an audit report in the current period.
5.114 The Member Firm shall also:
(a) Consider the impact of the breach, if any, on the Member Firm’s objectivity
in relation to any previously issued audit reports, and the possibility of
withdrawing such audit reports; and
(b) Discuss the matter with the Audit Committee or Others Charged with
Governance.
Documentation
5.115 In complying with the requirements in paragraphs 5.103 to 5.114, the Member
Firm shall document:
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(a) The breach;
(b) The actions taken;
(c) The key decisions made;
(d) All the matters discussed with the Audit Committee or Others Charged with
Governance; and
(e) Any discussions with a professional or regulatory body or oversight

authority.
5.116 If the Member Firm continues with the Audit Engagement, it shall document:
(a) The conclusion that, in the Member Firm’s professional judgment,

objectivity has not been compromised; and
(b) The rationale for why the action taken satisfactorily addressed the
consequences of the breach so that the Member Firm could issue an audit
report.
Additional Requirements for Audits Conducted Pursuant to PCAOB

Standards – Communication of Breaches to Those Charged with
Governance
5.117 If more than one breach is identified with respect to an Audit Client, the Member
Firm shall also discuss with the Audit Committee or Others Charged with
Governance and communicate in writing why, notwithstanding all of the
breaches taken together, the Member Firm concluded that:
(a) The Member Firm's objectivity and impartiality with respect to all issues
encompassed within the Audit Engagement were not impaired; and
(b) A reasonable and informed third party with knowledge of all relevant facts
and circumstances would conclude that the Member Firm was capable of
exercising objective and impartial judgment on all issues encompassed
within the Audit Engagement.
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1420—Independence
Chapter 6 - Non-Assurance Services to Restricted Entities
General Policies
6.1 Member Firms might provide a range of Non-Assurance Services to their Audit Clients,
consistent with their skills and expertise. Providing Non-Assurance Services to Audit
Clients might create threats to compliance with the fundamental principles of objectivity
and integrity and threats to independence.
6.2 New business practices, the evolution of financial markets and changes in information
technology, are among the developments that make it impossible to draw up an all-
inclusive list of Non-Assurance Services that might be provided to a Restricted Entity. As a
result, this chapter does not include an exhaustive list of all Non-Assurance Services that
might be provided to an Audit Client.
6.3 When specific guidance on a particular Non-Assurance Service is not included in

this chapter, a Member Firm shall apply the conceptual framework discussed in
Chapter 1 of this Section 1420 when evaluating the particular circumstances.
6.4 Before a Member Firm accepts an Engagement to provide a Non-Assurance

Service to a Restricted Entity, the Member Firm shall determine whether
providing such a service might create a threat to independence.
Evaluating Threats
6.5 Factors that are relevant in evaluating the level of threats created by providing a Non-
Assurance Service to a Restricted Entity include:
 The nature, scope and purpose of the service.
 The degree of reliance that will be placed on the outcome of the service as part of
the audit.
 The legal and regulatory environment in which the service is provided.
 Whether the outcome of the service will affect matters reflected in the Financial
Statements on which the Member Firm will Express an Opinion, and, if so:
o The extent to which the outcome of the service will have a Material effect on
the Financial Statements.
o The degree of subjectivity involved in determining the appropriate amounts or

treatment for those matters reflected in the Financial Statements.
 The level of expertise of the Restricted Entity’s management and employees with
respect to the type of service provided.
 The extent of the Restricted Entity’s involvement in determining significant matters

of judgment.
 The nature and extent of the impact of the service, if any, on the systems that
generate information that forms a significant part of the Restricted Entity’s:
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o Accounting records or Financial Statements on which the Member Firm will
Express an Opinion.
o Internal Controls over financial reporting.
 Whether the Restricted Entity is a Public Interest Entity. For example, providing a
Non-Assurance Service to a Public Interest Restricted Entity might be perceived to
result in a higher level of a threat.
6.6 Subsections in this chapter include examples of additional factors that are relevant in
evaluating the level of threats created by providing the Non-Assurance Services set out in
those subsections.
Multiple Non-Assurance Services Provided to the Same Audit Client
6.7 Member Firms might provide multiple Non-Assurance Services to an Audit Client. In these
circumstances the consideration of the combined effect of threats created by providing
those services is relevant to the Member Firm’s evaluation of threats.
Addressing Threats
6.8 Subsections in this chapter include examples of actions, including Safeguards, that might
address threats to independence created by providing those Non-Assurance Services when
threats are not at an Acceptable Level. Those examples are not exhaustive.
6.9 Some of the subsections include requirements that expressly prohibit a Member Firm from
providing certain services to an Audit Client in certain circumstances because the threats
created cannot be addressed by applying Safeguards.
6.10 In relation to providing Non-Assurance Services to Audit Clients, Safeguards are actions,
individually or in combination, that the Member Firm takes that effectively reduce threats
to independence to an Acceptable Level. In some situations, when a threat is created by
providing a Non-Assurance Service to an Audit Client, Safeguards might not be available.
In such situations, the application of the conceptual framework set out in Chapter 1
requires a Member Firm to decline or end the Non-Assurance Service or the Audit
Engagement.
Approval Process
6.11 Before accepting an Engagement to provide Non-Assurance Services, the

Engagement Partner shall follow the procedures described in DPM 1430,
Potential Conflicts to determine whether the Client requesting the Professional
Service is subject to the policies applicable to Restricted Entities, as described in
this Section 1420. If the potential Client is a Restricted Entity, the Engagement
Partner shall assess the permissibility of providing such Non-Assurance Services
under this Section 1420 before requesting approval from the Lead Client Service
Partner to provide such service to a Restricted Entity.
6.12 In addition to the requirements in paragraph 6.11, the Engagement Partner shall
determine whether a potential Engagement or business relationship would result
in indirectly providing a Professional Service to a Restricted Entity. A Member
Firm shall not provide a Professional Service to a Restricted Entity through a
third party that the Member Firm is not permitted to provide directly to such
Restricted Entity. Arrangements that might result in the indirect provision of a
Professional Service include the Member Firm acting as a subcontractor to a prime
contractor, a Member Firm being engaged by one entity within a corporate group on behalf
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of other entities within the group, a Member Firm being engaged by a law firm on behalf of
its client, etc.
6.13 An Engagement Partner shall obtain approval from the Lead Client Service
Partner for all Engagements to provide Non-Assurance Services to a Restricted
Entity in advance of accepting such Engagements. For Restricted Entities
included in the DESC system, a service request shall be submitted and approved
through the SRM application.
6.14 Before approving a request to provide a Non-Assurance Service to a Restricted

Entity, the Lead Client Service Partner shall:
(a) Ensure that requests for LCSP approval to provide Non-Assurance Services
to a Restricted Entity that is included in the DESC system are processed in
the SRM application;
(b) Evaluate the permissibility of Non–Assurance services that an Engagement

Team requests to provide to a Restricted Entity. This evaluation includes:
 Determining whether the services are expressly prohibited under

Chapter 6;
 Applying the conceptual frameworks as set out in Chapter 1 of this

Section 1420 to identify, evaluate and address any threat created by
providing such services. In evaluating the level of any threat created
by a particular Non-Assurance Service, the Lead Client Service Partner
shall also consider any threat that the Audit Team has reason to
believe is created by providing other related Non-Assurance Services;
 In the case of an SEC Restricted Entity, determining whether a Non-

Assurance Service that is not expressly addressed under Chapter 6
satisfies the general standard of independence as described in
paragraphs 1.19 and 1.20; and;
 Documenting the assessment, as required.
(c) Consult with and coordinate the approvals from any Audit Engagement
Partners for Audit Clients that may be impacted by the services, as
applicable, to determine the permissibility of the services if such Audit
Clients are subject to additional independence requirements (e.g., an Audit
Client that is defined as a Public Interest Entity in the European Union). In
these cases, the Audit Engagement Partner shall make the Lead Client
Service Partner aware of any additional independence requirements
applicable to that Audit Client so the proper coordination can be arranged
when approvals are requested; and
(d) When concluded that the Non-Assurance Service would not impair
independence, obtain approval from the Audit Client’s Audit Committee or
other approvals, where required.
6.15 In any case where an uncertainty exists whether a Non-Assurance Service to be

performed for a Restricted Entity would impair independence, the Director of
Independence shall be consulted. If it is determined the service would impair
independence, the policies included in DPM 1510, Engagement Acceptance and
Risk Classification, shall be followed to determine whether to accept the
Engagement or resign from the Audit or Assurance Engagement.
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Non-Assurance Services after the Final Year of the Audit
6.16 After a Member Firm is advised that it will not be reappointed as auditor, but prior to the
end of the Engagement Period, a Member Firm may identify an opportunity to provide
Professional Services to the Audit Client that will be delivered after the Engagement Period
has ended. Submitting a proposal or agreeing to be engaged during the Engagement
Period to provide Non-Assurance Services to an Audit Client if the services are prohibited
under this chapter might create a self-interest threat even if the services are to be
delivered after such period has ended and the Client is no longer a Restricted Entity.
6.17 Before proposing or agreeing to be engaged during the Engagement Period to

provide a Non-Assurance Service to a Restricted Entity that would be prohibited
under this chapter, even if such service is to be delivered after the Engagement
Period has ended, a Member Firm shall evaluate the threat created and consult
with the Director of Independence.
Additional requirements for SEC Restricted Entities – Non-Assurance

Services after the Final Year of the Audit
6.18 A Member Firm shall not submit a proposal or agree to be engaged during the
Audit and Professional Engagement Period to provide Non-Assurance Services to
an SEC Restricted Entity if the services are prohibited under this chapter, even if
the services are to be delivered after the Audit and Professional Engagement
Period has ended and the Client is no longer an SEC Restricted Entity.
Providing Non-Assurance Services to a Restricted Entity that Later

Becomes a Public Interest Restricted Entity
6.19 A Non-Assurance Service provided, either currently or previously, by a Member

Firm to a Restricted Entity impairs the Member Firm’s independence when the
Restricted Entity becomes a Public Interest Restricted Entity unless:
(a) The previous Non-Assurance Service complies with the provisions of this
chapter that relate to Restricted Entities that are not Public Interest
Restricted Entities;
(b) Non-Assurance Services currently in progress that are not permitted under
this chapter for Public Interest Restricted Entities are ended before, or as
soon as practicable after, the Restricted Entity becomes a Public Interest
Restricted Entity; and
(c) The Member Firm addresses threats that are created that are not at an
Acceptable Level.
Additional Requirements for SEC Restricted Entities – Providing Non-

Assurance Services to a Restricted Entity that Later Becomes an SEC
Restricted Entity
6.20 The exception provided in paragraph 6.19 does not apply to SEC Restricted
Entities (see paragraph 5.33).
Audit Committee Pre-approval of Services for SEC Issuer Audit Clients

and Registered Investment Company Audit Clients
6.21 If a Member Firm audits an SEC Issuer or Registered Investment Company, the
Member Firm shall obtain pre-approval from the Audit Committee (or the entire
board of directors if no Audit Committee exists) for the following:
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(a) All Professional Services to be provided to the SEC Issuer Audit Client or
Registered Investment Company Audit Client, as well as the consolidated
subsidiaries, prior to any Member Firm being engaged to render, and prior
to commencement of, such audit or non-audit services;
(b) In the case of a Registered Investment Company Audit Client, Non-

Assurance Services provided to the Registered Investment Company Audit
Client’s investment adviser and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing
services to the Registered Investment Company Audit Client and where the
Engagement relates directly to the operations and financial reporting of the
Registered Investment Company Audit Client.
6.22 The policy and specific requirements for pre-approval of Professional Services to SEC
Issuer Audit Clients and Registered Investment Company Audit Clients are found in DTTL
PCAOB AAM 30600-1I, Independence Communications with Audit Committees,
Including Audit Committee Pre-approval of Audit and Permissible Nonaudit Services. Such
policy also contains specific pre-approval requirements for the following types of services:
(a) Tax services (in accordance with PCAOB Rule 3524, Audit Committee Pre-Approval
of Certain Tax Services); and
(b) Services related to internal control over financial reporting (in accordance with
PCAOB Rule 3525, Audit Committee Pre-Approval of Non-Audit Services Related to
Internal Control Over Financial Reporting).
6.23 In some situations, an SEC Issuer Audit Client might have one or more wholly-owned
subsidiaries that are also SEC Issuer Audit Clients and the Audit Committee of the parent
company might function as the Audit Committee of those subsidiaries for purposes of
satisfying the pre-approval requirements. In such a case, the Lead Client Service
Partner shall understand and follow the pre-approval policies and procedures of
all relevant SEC Issuer Audit Clients.
Fee Arrangements
Contingent Fees
6.24 A Member Firm shall not charge directly or indirectly a Contingent Fee for a Non-
Assurance Service provided to a Restricted Entity if:
(a) The fee is charged by the Member Firm Expressing the Opinion on the
Financial Statements and the fee is Material or expected to be Material to
that Member Firm;
(b) The fee is charged by a Member Firm that participates in a significant part
of the audit and the fee is Material or expected to be Material to that
Member Firm; or
(c) The outcome of the Non-Assurance Service, and therefore the amount of
the fee, is dependent on a future or contemporary judgment related to the
audit of a Material amount in the Financial Statements.
6.25 Even if a Contingent Fee arrangement is not precluded when providing a Non-Assurance
Service to a Restricted Entity, a self-interest threat might still be created.
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 The range of possible fee amounts.
 Whether an appropriate authority determines the outcome on which the Contingent

Fee depends.
 Disclosure to intended users of the work performed by the Member Firm and the
basis of remuneration.
 The nature of the service.
 The effect of the event or transaction on the Financial Statements.
6.27 Examples of actions that might be Safeguards to address such self-interest threat include:
 Having an Appropriate Reviewer who was not involved in performing the Non-
Assurance Service review the work performed by the Member Firm.
 Obtaining an advance written agreement with the Client on the basis of the
remuneration.
Additional Requirements for SEC Restricted Entities—Contingent Fees
6.28 A Member Firm shall not provide any service or product to an SEC Restricted
Entity for a Contingent Fee, or receive directly or indirectly a Contingent Fee from
an SEC Restricted Entity during the Audit and Professional Engagement Period. A
fee is not regarded as being “contingent” if it is fixed by courts or other public authorities
and is not dependent on a finding or result.
Commissions
6.29 For the policies related to Commissions involving a Restricted Entity, see paragraphs 4.32
to 4.34.
Legal Protection Clauses
6.30 With respect to Non-Assurance Engagements, a Member Firm may generally seek
indemnification from any legal liability or costs incurred.

Clauses
6.31 With respect to most Non-Assurance Services, Member Firms may seek
indemnification from an SEC Restricted Entity from any legal liability or costs
incurred. Therefore, Legal Protection Clauses may be included in the engagement
letter to provide Non-Assurance Services unless our report or deliverable is
included or incorporated by reference in a filing with the SEC, or is used as a
basis for a report to be filed with the SEC. If there is any doubt concerning the
permissibility of a Legal Protection Clause, the Director of Independence shall be
consulted.
Termination Clauses
6.32 Varying circumstances can result in independence restrictions becoming applicable for a
Client that did not apply when a Member Firm originally entered into an arrangement to
provide services to the Client. Such circumstances might include, but are not limited to,
Client mergers and acquisitions, a Member Firm’s acquisition of another entity that is
providing services to a Restricted Entity, the decision of a private Audit Client to offer
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securities on a US stock exchange which results in it becoming an SEC Restricted Entity, a
change in auditor independence professional requirements, etc.
6.33 Engagement letters for the provision of Non-Assurance Services with all Clients,
including those that are not currently Restricted Entities, shall contain a clause
that permits a Member Firm to terminate the agreement as required under the
applicable independence requirements in the event the services are not
permissible under such requirements. Any exceptions to this policy shall be
approved by the Director of Independence.
Temporary Personnel Assignments
6.34 For the policies on the lending of staff to a Restricted Entity, see paragraphs 3.69 to 3.74.
Additional Requirements for SEC Restricted Entities—Temporary

Personnel Assignments
6.35 Partners and Professional Staff shall not act temporarily as a Director, Officer, or
employee of an SEC Restricted Entity.
Restrictions on Non-Assurance Services
Not Subject to Audit Exception
6.36 As an exception to the requirements in this chapter, a Member Firm may assume
management responsibilities or provide certain Non-Assurance Services that
would otherwise be prohibited to the following Affiliates of the Audit Client on
whose Financial Statements the Member Firm will Express an Opinion:
(a) An entity that has direct or indirect control over the Audit Client;
(b) An entity with a Direct Financial Interest in the Audit Client if that entity
has significant influence over the Client and the interest in the Client is
Material to such entity; or
(c) An entity that is under common control with the Audit Client
provided that all of the following conditions are met:
(i) A Member Firm does not Express an Opinion on the Financial Statements of
the Affiliate;
(ii) A Member Firm does not assume a management responsibility, directly or

indirectly, for the entity on whose Financial Statements the Member Firm
will Express an Opinion;
(iii) The services do not create a self-review threat because the results of the
services will not be subject to audit procedures; and
(iv) The Member Firm addresses other threats created by providing such
services that are not at an Acceptable Level.
Additional Requirements for SEC Restricted Entities—Not Subject to

Audit Exception
6.37 Certain services are prohibited under this chapter unless it is reasonable to conclude that
the results of these services will not be subject to audit procedures during an audit of the
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SEC Restricted Entity’s Financial Statements. It is presumed that the results of any such
services are subject to audit procedures, although this presumption may be rebutted. It
would generally be reasonable to conclude that the results of the Non-Assurance Services
would not be subject to audit procedures during an audit of the SEC Restricted Entity’s
Financial Statements, if the Non-Assurance Services are provided to a Client which:
(a) Is an upstream Affiliate of the Audit Client or an Affiliate that is under common
control with the Audit Client but is not itself audited by any Member Firm; and
(b) Has financial and business operations which are autonomous from those of the Audit
Client.
6.38 A Member Firm shall not rely upon the “not subject to audit” exception in order
to provide prohibited services to any downstream Affiliates of an Audit Client
that is subject to SEC independence requirements. For example, the fact that a
Professional Service would be provided to a subsidiary that is not Material to the Audit
Client cannot be used as the basis to overcome the presumption that services will be
subject to audit procedures.
6.39 The Lead Client Service Partner or Director of Independence shall be consulted
when an Engagement Team seeks to provide services to an SEC Restricted Entity
on the basis that the services are not subject to audit procedures during the
audit of the SEC Restricted Entity’s Financial Statements.
6.40 Notwithstanding the exception in paragraph 6.36, a Member Firm shall not
perform the following for an SEC Restricted Entity:
(a) Activities that would be considered a management responsibility or

function;
(b) Human resource, corporate finance (including broker-dealer, investment

adviser, or investment banking services), legal, litigation support or expert
services; or
(c) Services of any type for a Contingent Fee.
Management Responsibilities
6.41 A Member Firm shall not assume a management responsibility for a Restricted
Entity.
6.42 Management responsibilities involve controlling, leading and directing an entity, including
making decisions regarding the acquisition, deployment and control of human, financial,
technological, physical and intangible resources.
6.43 Providing a Non-Assurance Service to a Restricted Entity creates self-review and self-
interest threats if the Member Firm assumes a management responsibility when
performing the service. Assuming a management responsibility also creates a familiarity
threat and might create an advocacy threat because the Member Firm becomes too closely
aligned with the views and interests of management.
6.44 Determining whether an activity is a management responsibility depends on the

circumstances and requires the exercise of professional judgment. Examples of activities
that would be considered a management responsibility include:
 Setting policies and strategic direction.
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 Hiring or dismissing employees.
 Directing and taking responsibility for the actions of employees in relation to the
employees’ work for the Restricted Entity.
 Authorizing transactions.
 Controlling or managing bank accounts or investments.
 Deciding which recommendations of a Member Firm or other third parties to

implement.
 Reporting to the Audit Committee or Others Charged with Governance on behalf of

management.
 Taking responsibility for:
o The preparation and fair presentation of the Financial Statements in accordance

with the applicable financial reporting framework
o Designing, implementing, monitoring or maintaining internal controls.
6.45 Paragraph 6.41 prohibits a Member Firm from assuming a management responsibility.
Managed services involve performing a set of business processes or activities, some of
which might be routine or mechanical, on an outsourced and ongoing basis. When
performing a managed service, a Member Firm assumes a management responsibility for
a Client in which it makes decisions on behalf of the Client’s management and/or takes
responsibility for operating, monitoring or maintaining the Client’s internal controls. A
Member Firm shall evaluate any proposed service to a Restricted Entity that is to
be provided on an outsourced and ongoing basis, whether as a standalone
service or as a part of a broader engagement, to assess whether it constitutes a
managed service and is therefore impermissible. The Director of Independence
shall be consulted if there is any doubt whether a service is a managed service.
6.46 Subject to compliance with paragraph 6.47, providing advice and recommendations to
assist management of a Restricted Entity in discharging its responsibilities is not assuming
a management responsibility.
6.47 To avoid assuming a management responsibility when providing any Non-

Assurance Service to a Restricted Entity, a Member Firm shall be satisfied that
Client management makes all judgments and decisions that are the proper
responsibility of management. This includes ensuring that the Client’s
management:
(a) Designates an individual who possesses suitable skill, knowledge and

experience to be responsible at all times for the Client’s decisions and to
oversee the services. Such an individual, preferably within senior
management, would understand:
(i) The objectives, nature and results of the services; and
(ii) The respective Client and Member Firm responsibilities.
However, the individual is not required to possess the expertise to perform

or re-perform the services.
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(b) Provides oversight of the services and evaluates the adequacy of the results
of the service performed for the Client’s purpose; and
(c) Accepts responsibility for the actions, if any, to be taken arising from the
results of the services.
6.48 The Client’s understanding of its responsibilities as described in paragraph 6.47

shall be documented in writing (e.g., in the engagement letter or general terms of
business).
Additional Requirements for SEC Restricted Entities—Management

Responsibilities
6.49 A Member Firm, a Partner or Professional Staff shall not act, temporarily or
permanently, as a Director, Officer or employee of an SEC Restricted Entity, or
perform any decision-making, supervisory, or ongoing monitoring function for an
6.50 Examples of activities that are considered management responsibilities or

functions and shall not be performed by a Member Firm for an SEC Restricted
Entity include:
 Having the authority to authorize, execute, or consummate a transaction, or

otherwise exercise authority on behalf of an SEC Restricted Entity (e.g.,
negotiating a transaction).
 Preparing source documents or originating data, in electronic or other form,

evidencing the occurrence of a transaction. For this purpose, a source
document is any document upon which evidence of an accounting
transaction is initially recorded (e.g., a purchase order, payroll time record,
or customer order). Source documents are often followed by the creation of
additional records and reports, which do not, however, qualify as initial
recordings.
 Having custody of an SEC Restricted Entity’s assets, including making

payments on the Client’s behalf.
 Supervising an SEC Restricted Entity’s employees in the performance of

their normal recurring activities.
 Determining which recommendations should be implemented or prioritized.
 Reporting to the SEC Restricted Entity’s board of directors or similar

governing body on behalf of such Client’s management.
 Accepting responsibility for the management of a Client's project, including

acting as the project manager (PMO) or assuming a project management
role for an SEC Restricted Entity. The prohibition also applies to providing
advisory services to the SEC Restricted Entity’s PMO unless such advisory
services:
(a) Are provided in the context of a larger related permissible Non-

Assurance Services Engagement, or
(b) Solely relate to the Client’s initial establishment of its PMO and there
are no ongoing PMO advisory services after such establishment is
complete.
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 Hosting an SEC Restricted Entity’s information system or any of the
system’s components, including the related data, software and programs
(see paragraph 6.121).
 Acting as a trustee for:
(a) An SEC Restricted Entity;
(b) A pension or similar plan that is sponsored by an SEC Restricted

Entity; or
(c) A trust established by an SEC Restricted Entity.
 Serving as an SEC Restricted Entity’s stock transfer or escrow agent,

registrar, corporate secretary, general counsel, or its equivalent.
 Providing a managed service for an SEC Restricted Entity.
 Establishing or maintaining internal controls, including performing ongoing

monitoring activities for an SEC Restricted Entity. Prohibited monitoring
activities include performing any procedures designed to assess the quality
of internal control performance over time such as ongoing evaluations, and
regular management and supervisory activities.
 Signing, submitting or filing governmental forms, registrations or other

regulatory filings as an agent for, or on behalf of, an SEC Restricted Entity,
except as specifically permitted for certain tax related forms.
 Completing standard governmental forms and license applications (e.g.,

certificates, articles of incorporation, official notices, reservation of name).
6.51 When engaged to provide a Non-Assurance Service to an SEC Restricted Entity, a

Member Firm shall document in writing (e.g., in the engagement letter or general
terms of business) that the Client acknowledged its sole responsibility for:
(a) Making all management decisions, performing all management functions,

and assuming all management responsibilities;
(b) Designating a competent management member to oversee the service;
(c) Evaluating the adequacy and results of the service;
(d) Accepting responsibility for the results of the service; and
(e) Establishing and maintaining internal controls, including monitoring

ongoing activities.
Administrative Services
6.52 Providing administrative services to a Restricted Entity does not usually create a threat to
independence.
6.53 Administrative services involve assisting Clients with their routine or mechanical tasks
within the normal course of operations. Such services require little to no professional
judgment and are clerical in nature.
6.54 Examples of administrative services include:
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 Word processing services.
 Preparing administrative or statutory forms for Client approval.
 Submitting such forms as instructed by the Client.
 Monitoring statutory filing dates, and advising an Audit Client of those dates.
Additional Requirements for SEC Restricted Entities—Administrative

Services
6.55 The SEC rules do not specifically refer to “administrative services” but some of the
examples of services listed in paragraph 6.54 would be prohibited under the policies
applicable to SEC Restricted Entities if they entail performing management, decision-
making, supervisory, or ongoing monitoring functions for an SEC Restricted Entity. For
example, submitting any forms, other than tax related forms, on behalf of the SEC
Restricted Entity to a regulatory body would be considered a management function.
6.56 A Member Firm shall evaluate any services provided to an SEC Restricted Entity
that are administrative in nature to assess whether they include any
management, decision-making, supervisory, or ongoing monitoring functions or
acting as employee.
Accounting and Bookkeeping Services
General Requirements for Restricted Entities—Accounting and

Bookkeeping Services
6.57 Providing accounting and bookkeeping services to a Restricted Entity might create a self-
review threat.
6.58 Accounting and bookkeeping services comprise a broad range of services including:
 Preparing accounting records and Financial Statements
 Recording transactions
 Payroll services.
6.59 Management is responsible for the preparation and fair presentation of the Financial
Statements in accordance with the applicable financial reporting framework. These
responsibilities include:
 Determining accounting policies and the accounting treatment in accordance with

those policies.
 Preparing or changing source documents or originating data, in electronic or other

form, evidencing the occurrence of a transaction. Examples include:
o Purchase orders.
o Payroll time records.
o Customer orders.
 Originating or changing journal entries.
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 Determining or approving the account classifications of transactions.
6.60 The audit process necessitates dialogue between the Member Firm and management of
the Restricted Entity, which might involve:
 Applying accounting standards or policies and Financial Statement disclosure

requirements.
 Assessing the appropriateness of financial and accounting control and the methods
used in determining the stated amounts of assets and liabilities.
 Proposing adjusting journal entries.
These activities are considered to be a normal part of the audit process and do not usually
create threats as long as the Client is responsible for making decisions in the preparation
of the accounting records and Financial Statements.
6.61 Similarly, a Restricted Entity might request technical assistance on matters such as
resolving account reconciliation problems or analyzing and accumulating information for
regulatory reporting. In addition, a Restricted Entity might request technical advice on
accounting issues such as the conversion of existing Financial Statements from one
financial reporting framework to another. Examples include:
 Complying with group accounting policies.
 Transitioning to a different financial reporting framework such as International

Financial Reporting Standards.
Such services do not usually create threats provided the Member Firm does not assume a
management responsibility for the Restricted Entity.
Accounting and Bookkeeping Services that are Routine and Mechanical
6.62 Accounting and bookkeeping services that are routine and mechanical in nature require
little or no professional judgment. Some examples of these services are:
 Preparing payroll calculations or reports based on data originated by the Restricted

Entity for approval and payment by the Restricted Entity.
 Recording recurring transactions for which amounts are easily determinable from
source documents or originating data, such as a utility bill where the Restricted
Entity has determined or approved the appropriate account classification.
 Calculating depreciation on fixed assets when the Restricted Entity determines the
accounting policy and estimates of useful life and residual values.
 Posting transactions coded by the Restricted Entity to the general ledger.
 Posting entries approved by the Restricted Entity to the trial balance.
 Preparing Financial Statements based on information in the trial balance approved

by the Restricted Entity and preparing related notes based on records approved by
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Requirements for Restricted Entities other than Public Interest
Restricted Entities and SEC Restricted Entities—Accounting and
6.63 A Member Firm shall not provide to a Restricted Entity that is not a Public
Interest Restricted Entity accounting and bookkeeping services including
preparing Financial Statements on which the Member Firm will Express an
Opinion or financial information which forms the basis of such Financial
Statements, unless:
(a) The services are of a routine or mechanical nature; and
(b) The Member Firm addresses any threats that are created by providing such
services that are not at an Acceptable Level.
6.64 Examples of actions that might be Safeguards to address a self-review threat created
when providing accounting and bookkeeping services of a routine and mechanical nature
to a Restricted Entity include:
the service.
 Having an Appropriate Reviewer who was not involved in providing the service
review the audit work or service performed.
Additional Requirements for Public Interest Restricted Entities other

than SEC Restricted Entities—Accounting and Bookkeeping Services
6.65 A Member Firm shall not provide to a Public Interest Restricted Entity accounting
and bookkeeping services including preparing Financial Statements on which the
Member Firm will Express an Opinion or financial information which forms the
basis of such Financial Statements.
6.66 As an exception to paragraph 6.65, a Member Firm may provide accounting and
bookkeeping services of a routine or mechanical nature for divisions or Affiliates
of a Public Interest Restricted Entity if the personnel providing the services are
not Audit Team members and:
(a) The divisions or Affiliates for which the service is provided are collectively
not Material to the Financial Statements on which the Member Firm will
Express an Opinion; or
(b) The service relates to matters that are collectively not Material to the
Financial Statements of the division or Affiliate.
Additional Requirements for SEC Restricted Entities—Accounting and

6.67 A Member Firm shall not provide to an SEC Restricted Entity any bookkeeping or
other services related to accounting records or Financial Statements of the SEC
Restricted Entity unless it is reasonable to conclude that the results of such
services will not be subject to audit procedures during an audit of the SEC
Restricted Entity’s Financial Statements, including:
 Maintaining or preparing the SEC Restricted Entity’s accounting records.
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 Preparing the SEC Restricted Entity’s Financial Statements that are filed
with the SEC or that form the basis of Financial Statements filed with the
SEC.
 Providing word processing services (e.g., typing, assembling, printing,

binding, etc.) for the SEC Restricted Entity’s Financial Statements that are
filed with the SEC or that form the basis of Financial Statements filed with
the SEC.
 Preparing or originating source data underlying the SEC Restricted Entity’s

 Providing services related to coding of financial data for Extensible

Business Reporting Language (XBRL) purposes for any data to be included
or incorporated by reference in, or used as a basis for a report filed with the
SEC.
 Providing language translation services where the translation is to be

included or incorporated by reference in, or used as a basis for a report filed
with the SEC.
 Services related to forecasts as described in paragraph 6.134.
6.68 A Member Firm shall not participate, either manually or through the use of
computer hardware or software, in the initial recording, maintaining, or
processing of any of the basic accounting records or in preparing the Financial
Statements of an SEC Restricted Entity. This specifically includes, but is not
limited to, the general ledger and any subsidiary systems, such as payroll, sales,
or fixed assets.
6.69 Statutory Financial Statements might be used to support subsequent audit work on
Financial Statements filed with the SEC or might be filed by an SEC Restricted Entity with
the SEC in a 6-K filing without the Member Firm’s knowledge. In such cases, the statutory
Financial Statements would form the basis of Financial Statements that are filed with the
SEC. A Member Firm may perform preparation work on statutory Financial
Statements of an SEC Restricted Entity provided that all of the following
conditions are met:
(a) The services are not otherwise prohibited under paragraphs 6.63 through
6.66;
(b) The work is to be completed after the consolidated Financial Statements are
filed with the SEC;
(c) The SEC Restricted Entity confirms that the statutory Financial Statements
will not be filed with the SEC;
(d) The Member Firm does not submit the statutory Financial Statements on
behalf of the SEC Restricted Entity, either manually or electronically, to a
regulatory or other body, with the exception of submitting the Financial
Statements to the tax authorities in connection with a permissible tax
compliance Engagement or when required to do so under law or regulation
in the applicable jurisdiction in connection with the Member Firm’s role as
auditor of the statutory Financial Statements; and
(e) The Lead Client Service Partner of the SEC Restricted Entity confirms that
the statutory Financial Statements will not be used or relied on in
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connection with any subsequent interim or annual audit work on any
Financial Statements filed with the SEC.
6.70 The prohibition on accounting and bookkeeping services exists unless it is reasonable to
conclude that the results of such services will not be subject to audit procedures during an
audit of the SEC Restricted Entity’s Financial Statements. It is presumed that the results of
any such services are subject to audit procedures, although this presumption may be
rebutted. (Refer to paragraphs 6.36 to 6.40.)
Tax Services
General Provisions
6.71 Providing tax services to a Restricted Entity might create a self-review or advocacy threat.
6.72 Tax services comprise a broad range of services, including activities such as:
 Tax return preparation.
 Tax calculations for the purpose of preparing the accounting entries.
 Tax planning and other tax advisory services.
 Tax services involving valuations.
 Assistance in the resolution of tax disputes.
While tax services provided by a Member Firm to a Restricted Entity are addressed
separately in this chapter under each of these broad headings; in practice, the activities
involved in providing tax services are often interrelated.
6.73 Factors that are relevant in evaluating the level of threats created by providing any tax
service to a Restricted Entity include:
 The particular characteristics of the Engagement.
 The level of tax expertise of the Restricted Entity’s employees.
 The system by which the tax authorities assess and administer the tax in question
and the role of the Member Firm in that process.
 The complexity of the relevant tax regime and the degree of judgment necessary in
applying it.
Tax Return Preparation Services

6.74 Providing tax return preparation services does not usually create a threat.
6.75 Tax return preparation services involve:
 Assisting Clients with their tax reporting obligations by drafting and compiling
information, including the amount of tax due (usually on standardized forms)
required to be submitted to the applicable tax authorities.
 Advising on the tax return treatment of past transactions and responding on behalf
of the Audit Client to the tax authorities’ requests for additional information and
analysis (for example, providing explanations of and technical support for the
approach being taken).
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6.76 Tax return preparation services are usually based on historical information and principally
involve analysis and presentation of such historical information under existing tax law,
including precedents and established practice. Further, the tax returns are subject to
whatever review or approval process the tax authority considers appropriate.
Additional Requirements for SEC Restricted Entities—Tax Compliance

Services
6.77 A Member Firm may provide tax compliance services to an SEC Restricted Entity.
Tax Calculations for the Purpose of Preparing Accounting Entries
6.78 Preparing calculations of current and deferred tax liabilities (or assets) for a Restricted
Entity for the purpose of preparing accounting entries that will be subsequently audited by
a Member Firm creates a self-review threat.
6.79 In addition to paragraph 6.73, a factor that is relevant in evaluating the level of the threat
when preparing such calculations for a Restricted Entity is whether the calculation might
have a Material effect on the Financial Statements on which the Member Firm will Express
an Opinion.

Restricted Entities and SEC Restricted Entities—Tax Calculations for the
Purpose of Preparing the Accounting Entries
6.80 Examples of actions that might be Safeguards to address such self-review threat when the
Restricted Entity is not a Public Interest Restricted Entity include:
the service.
review the audit work or service performed.

than SEC Restricted Entities—Tax Calculations for the Purpose of
Preparing Accounting Entries
6.81 A Member Firm shall not prepare tax calculations of current and deferred tax
liabilities (or assets) for a Public Interest Restricted Entity for the purpose of
preparing accounting entries that are Material to the Financial Statements on
6.82 The examples of actions that might be Safeguards in paragraph 6.80 to address a self-
review threat are also applicable when preparing tax calculations of current and deferred
tax liabilities (or assets) to a Public Interest Restricted Entity that are not Material to the
Financial Statements on which the Member Firm will Express an Opinion.
Additional Requirements for SEC Restricted Entities—Tax Calculations for

the Purpose of Preparing Accounting Entries
6.83 A Member Firm shall not serve as the primary source of an SEC Restricted
Entity’s computations relating to accruals and provisions for income taxes or
design, implement, or provide a model or system developed by a Member Firm
that gathers or produces information that accumulates into the SEC Restricted
Entity’s Financial Statement disclosures. Appendix F1 includes additional guidance for
related services. The prohibition exists unless it is reasonable to conclude that the results
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of such services will not be subject to audit procedures during an audit of the SEC
Restricted Entity’s Financial Statements. It is presumed that the results of any such
services are subject to audit procedures, although this presumption may be rebutted.
(Refer to paragraphs 6.36 to 6.40.)
Tax Planning and Other Tax Advisory Services
6.84 Providing tax planning and other tax advisory services might create a self-review or
advocacy threat.
6.85 Tax planning or other tax advisory services comprise a broad range of services, such as
advising the Client how to structure its affairs in a tax efficient manner or advising on the
application of a new tax law or regulation.
6.86 In addition to paragraph 6.73, factors that are relevant in evaluating the level of self-
review or advocacy threats created by providing tax planning and other advisory services
to Restricted Entities include:
 The degree of subjectivity involved in determining the appropriate treatment for the tax
advice in the Financial Statements.
 Whether the tax treatment is supported by a private ruling or has otherwise been
cleared by the tax authority before the preparation of the Financial Statements.
For example, whether the advice provided as a result of the tax planning and other
tax advisory services:
o Is clearly supported by a tax authority or other precedent.
o Is an established practice.
o Has a basis in tax law that is likely to prevail.
 The extent to which the outcome of the tax advice will have a Material effect on the
 Whether the effectiveness of the tax advice depends on the accounting treatment or
presentation in the Financial Statements and there is doubt as to the
appropriateness of the accounting treatment or presentation under the relevant
financial reporting framework.
 Using Partners and Professional Staff who are not Audit Team members to perform the
service might address self-review or advocacy threats.
 Having an Appropriate Reviewer, who was not involved in providing the service, review
the audit work or service performed might address a self-review threat.
 Obtaining pre-clearance from the tax authorities might address self-review or advocacy
threats.
6.88 A Member Firm shall not provide tax planning and other tax advisory services to
a Restricted Entity when the effectiveness of the tax advice depends on a
particular accounting treatment or presentation in the Financial Statements and:
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(a) The Audit Team has reasonable doubt as to the appropriateness of the
related accounting treatment or presentation under the relevant financial
reporting framework; and
(b) The outcome or consequences of the tax advice will have a Material effect
on the Financial Statements on which the Member Firm will Express an
Opinion.
Tax Services Involving Valuations
6.89 Providing tax valuation services to a Restricted Entity might create a self-review or
advocacy threat.
6.90 A Member Firm might also perform a tax valuation to assist a Restricted Entity with its tax
reporting obligations or for tax planning purposes where the result of the valuation will
have a direct effect on the Financial Statements. In such situations the provisions included
in paragraphs 6.123 to 6.136 relating to valuation services apply.
6.91 A Member Firm might perform a valuation for tax purposes only where the result of the
valuation will not have a direct effect on the Financial Statements (that is, the Financial
Statements are only affected through accounting entries related to tax). This would not
usually create threats if the effect on the Financial Statements is not Material or the
valuation is subject to external review by a tax authority or similar regulatory authority.
6.92 If the valuation that is performed for tax purposes is not subject to an external review and
the effect is Material to the Financial Statements, in addition to paragraph 6.73, the
following factors are relevant in evaluating the level of self-review or advocacy threats
created by providing those services to a Restricted Entity:
 The extent to which the valuation methodology is supported by tax law or

regulation, other precedent or established practice.
 The degree of subjectivity inherent in the valuation.
 The reliability and extent of the underlying data.
6.93 Examples of actions that might be Safeguards to address threats include:
the service might address self-review or advocacy threats.
 Having an Appropriate Reviewer, who was not involved in providing the service,
review the audit work or service performed might address a self-review threat.
 Obtaining pre-clearance from the tax authorities might address self-review or

advocacy threats.
Additional Requirements for SEC Restricted Entities – Tax Services

Involving Valuations
6.94 For the policies related to tax services involving valuations for SEC Restricted Entities see
paragraphs 6.131 to 6.136.
Assistance in the Resolution of Tax Disputes
6.95 Providing assistance in the resolution of tax disputes to a Restricted Entity might create a
self-review or advocacy threat.
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6.96 A tax dispute might reach a point when the tax authorities have notified a Restricted Entity
that arguments on a particular issue have been rejected and either the tax authority or
the Restricted Entity refers the matter for determination in a formal proceeding, for
example, before a public tribunal or court.
6.97 In addition to paragraph 6.73, factors that are relevant in evaluating the level of self-
review or advocacy threats created by assisting a Restricted Entity in the resolution of tax
disputes include:
 The role management plays in the resolution of the dispute.
 The extent to which the outcome of the dispute will have a Material effect on the
 Whether the advice that was provided is the subject of the tax dispute.
 The extent to which the matter is supported by tax law or regulation, other
precedent, or established practice.
 Whether the proceedings are conducted in public.
 Having an Appropriate Reviewer who was not involved in providing the service,
review the audit work or the service performed might address a self-review threat.
Resolution of Tax Matters Involving Acting as an Advocate
6.99 A Member Firm shall not provide tax services that involve assisting in the
resolution of tax disputes to a Restricted Entity if:
(a) The services involve acting as an advocate for the Restricted Entity before a
public tribunal or court in the resolution of a tax matter; and
(b) The amounts involved are Material to the Financial Statements on which the
Member Firm will Express an Opinion.
6.100 Paragraph 6.99 does not preclude a Member Firm from having a continuing advisory role
in relation to the matter that is being heard before a public tribunal or court, for example:
 Responding to specific requests for information.
 Providing factual accounts or testimony about the work performed.
 Assisting the Restricted Entity in analyzing the tax issues related to the matter.
6.101 What constitutes a “public tribunal or court” depends on how tax proceedings are heard in
the particular jurisdiction.
Additional Requirements for SEC Restricted Entities—Assistance in the

Resolution of Tax Disputes
6.102 A Member Firm shall not represent an SEC Restricted Entity with respect to a tax
matter in a forum designated to resolve tax disputes if:
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(a) The forum has the indicia of a court;
(b) A representative of the taxpayer appearing before the forum is required to

be an attorney; or
(c) The forum meets all of the following three criteria:
(i) The forum’s proceedings are open to the public or a transcript of the
proceedings is available to the public;
(ii) The forum is the final trier of fact so that any appeal is based on the
factual record developed at the forum; and
(iii) The forum may issue decisions that apply the law to the facts and that
serve as precedents for subsequent cases involving different
taxpayers with similar facts.
Detailed guidance, including a Summary of Prohibited/Permitted Tax Forums, is included

at Appendix I.
Additional Requirements for Restricted Entities Subject to PCAOB Rules—

Tax Planning and Other Tax Advisory Services to an SEC Restricted Entity
6.103 In accordance with PCAOB Rule 3522, Tax Transactions, Member Firms should
not provide to an SEC Restricted Entity that is subject to the rules of the PCAOB
any service related to marketing, planning, or opining in favor of the tax
treatment of, a transaction that:
 Is a Confidential Transaction; or
 Was initially recommended, directly or indirectly, by a Member Firm and a

significant purpose of which is tax avoidance, unless the proposed tax
treatment is at least more likely than not to be allowable under applicable
tax laws.
A Member Firm is considered to indirectly recommend a transaction when another Member

Firm or another tax advisor, with which the Member Firm has a formal agreement or other
arrangement related to the promotion of such transactions, recommends engaging in the
transaction.
Additional Requirements for Restricted Entities Subject to PCAOB Rules—

Tax Services to an Individual in a Financial Reporting Oversight Role
6.104 In accordance with PCAOB Rule 3523, Tax Services for Persons in Financial
Reporting Oversight Roles, when auditing an SEC Issuer Audit Client or a
Registered Investment Company Audit Client, a Member Firm shall not provide
any tax service to a person in a Financial Reporting Oversight Role at an SEC
Restricted Entity, or an Immediate Family Member of such person, unless:
(a) The person is in a Financial Reporting Oversight Role at the SEC Restricted
Entity only because they serve as a member of the board of directors or
similar management or governing body of the SEC Restricted Entity;
(b) The person is in a Financial Reporting Oversight Role at the SEC Restricted
Entity only because of the person’s relationship to an Affiliate of the SEC
Restricted Entity being audited:
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(i) Whose Financial Statements are not Material to the consolidated
Financial Statements of the SEC Restricted Entity being audited; or
(ii) Whose Financial Statements are audited by an auditor other than a

Member Firm; or
(c) The person was not in a Financial Reporting Oversight Role at the SEC
Restricted Entity before a hiring, promotion, or other change in employment
event and the tax services are:
(i) Provided pursuant to an engagement in process before the hiring,

promotion, or other change in employment event; and
(ii) Completed on or before 180 days after the hiring or promotion event.
6.105 In the case of an Audit Engagement for an SEC Issuer Audit Client whose Financial
Statements for the first time will be required to be audited pursuant to the standards of
the Public Company Accounting Oversight Board (PCAOB), the provision of tax services
prohibited under paragraph 6.104 does not impair independence provided such services
were performed before the earlier of the date that the Member Firm (1) signed an initial
engagement letter or other agreement to perform an audit pursuant to the standards of
the PCAOB, or (2) began procedures to do so.
Tax Services Resulting in Joint Liability
6.106 The provision of certain tax services for a Client, such as acting as a tax agent or a fiscal
representative, might result in the Member Firm being jointly liable for the Client’s tax
obligations. Having such joint liability with a Restricted Entity might create a self-interest
threat.
6.107 A factor that is relevant in evaluating the level of threat created by having a joint liability
with a Restricted Entity is the materiality of the liability to the Member Firm or the
Restricted Entity.
6.108 An example of an action that might be a Safeguard to address such self-interest threat is
the Restricted Entity obtaining a bank guarantee in favor of the Member Firm for an
amount that would cover any tax liability of the Restricted Entity that might be incurred as
a result of the Engagement.
Additional Requirements for SEC Restricted Entities – Tax Services

Resulting in Joint Liability
6.109 A Member Firm shall not provide a tax service to an SEC Restricted Entity when
such Engagement results in joint liability between the Member Firm and the SEC
Restricted Entity for the Client’s tax obligations.
Information Technology Systems Services
General Provisions
6.110 Providing information technology (IT) systems services to a Restricted Entity might create
a self-review threat.
6.111 Services related to IT systems include the design or implementation of hardware or

software systems. The IT systems might:
(a) Aggregate source data;
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(b) Form part of the internal control over financial reporting; or
(c) Generate information that affects the accounting records or Financial Statements,
including related disclosures.
However, the IT systems might also involve matters that are unrelated to the Audit
Client’s accounting records or the internal control over financial reporting or Financial
Statements.
Providing the following IT systems services to a Restricted Entity does not usually create a
threat as long as the Member Firm does not assume a management responsibility:
(a) Designing or implementing IT systems that are unrelated to internal control over
financial reporting;
(b) Designing or implementing IT systems that do not generate information forming a

significant part of the accounting records or Financial Statements;
(c) Implementing “off-the-shelf” accounting or financial information reporting software

that was not developed by a Member Firm, if the customization required to meet the
Restricted Entity’s needs is not significant; and
(d) Evaluating and making recommendations with respect to an IT system designed,

implemented or operated by another service provider or the Restricted Entity.
6.113 When providing IT systems services to a Restricted Entity, a Member Firm shall
be satisfied that:
(a) The Restricted Entity acknowledges its responsibility for establishing and
monitoring a system of internal controls;
(b) The Restricted Entity assigns the responsibility to make all management
decisions with respect to the design and implementation of the hardware or
software system to a competent employee, preferably within senior
management;
(c) The Restricted Entity makes all management decisions with respect to the
design and implementation process;
(d) The Restricted Entity evaluates the adequacy and results of the design and
implementation of the system; and
(e) The Restricted Entity is responsible for operating the system (hardware or
software) and for the data it uses or generates.
6.114 Factors that are relevant in evaluating the level of a self-review threat created by
providing IT systems services to a Restricted Entity include:
 The nature of IT systems and the extent to which they impact or interact with the
Client’s accounting records or Financial Statements.
 The degree of reliance that will be placed on the particular IT systems as part of the
audit.
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6.115 An example of an action that might be a Safeguard to address such a self-review threat is
using Partners and Professional Staff who are not Audit Team members to perform the
service.

than SEC Restricted Entities—Information Technology Systems Services
6.116 A Member Firm shall not provide IT systems services to a Public Interest
Restricted Entity if the services involve designing or implementing IT systems
that:
(a) Form a significant part of the internal control over financial reporting; or
(b) Generate information that is significant to the Client’s accounting records or

Additional Requirements for SEC Restricted Entities—Information

Technology Systems Services
6.117 A Member Firm shall not provide to an SEC Restricted Entity any service
involving:
(a) Directly or indirectly operating, or supervising the operation of, the SEC
Restricted Entity’s information system or managing such entity’s local area
network; or
(b) Designing or implementing a hardware or software system that aggregates

source data underlying the Financial Statements or generates information
that is significant to the SEC Restricted Entity’s Financial Statements or
other financial information systems taken as a whole. For example, an
electronic spreadsheet developed by a Member Firm and provided to an SEC
Restricted Entity might be considered a financial information system depending on
its functionality.
6.118 The prohibition in paragraph 6.117 applies to all financial information systems
design and implementation services for an SEC Restricted Entity, unless it is
reasonable to conclude that the results of such services will not be subject to
audit procedures during an audit of the SEC Restricted Entity’s Financial
Statements. There is a rebuttable presumption that the services are subject to
audit procedures. (Refer to paragraphs 6.36 to 6.40.)
6.119 Considering that information systems are generally highly integrated, there is a rebuttable
presumption that the design and implementation of any information system of an SEC
Restricted Entity is subject to the prohibition in paragraph 6.117. If a Member Firm is
contemplating the provision of a service to an SEC Restricted Entity under the
assumption that the relevant information system is not a system that is subject
to the prohibitions in paragraph 6.117, the Director of Independence shall be
consulted prior to submitting a proposal on such Engagement.
6.120 A Member Firm may provide services involving designing or implementing

hardware or software systems that are unrelated to the SEC Restricted Entity’s
Financial Statements or accounting records provided that such systems:
(a) Are not integrated with the SEC Restricted Entity’s Financial Statements or
accounting records;
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(b) Do not provide information that will be used in the SEC Restricted Entity’s
Financial Statements or accounting records; and
(c) Are not used by the SEC Restricted Entity for purposes of internal control or
risk management.
6.121 Notwithstanding paragraphs 6.118 and 6.120, a Member Firm shall not host an
SEC Restricted Entity’s information system or any of its components, including
the related data and programs. This prohibition includes hosting such system on a
Member Firm’s servers or on a third party’s servers that have been contracted by a
Member Firm.
6.122 A Member Firm may evaluate the internal controls of a system as it is being designed,
implemented or operated as part of an Assurance Engagement or advisory Engagement,
and make recommendations on internal control matters in conjunction with the design and
installation of a system by another service provider.
Appraisal and Valuation Services
General Provisions
6.123 Providing valuation services to a Restricted Entity might create a self-review or advocacy
threat.
6.124 A valuation comprises the making of assumptions with regard to future developments, the
application of appropriate methodologies and techniques, and the combination of both in
order to compute a certain value, or range of values, for an asset, a liability or for a
business as a whole.
6.125 If a Member Firm is requested to perform a valuation to assist a Restricted Entity with its
tax reporting obligations or for tax planning purposes and the results of the valuation will
not have a direct effect on the Restricted Entity’s Financial Statements, the provisions of
paragraphs 6.89 to 6.93, relating to such services, apply.
6.126 Factors that are relevant in evaluating the level of self-review or advocacy threats created
by providing valuation services to a Restricted Entity include:
 The use and purpose of the valuation report.
 Whether the valuation report will be made public.
 The extent of the Restricted Entity’s involvement in determining and approving the
valuation methodology and other significant matters of judgment.
 The degree of subjectivity inherent in the item for valuations involving standard or
established methodologies.
 Whether the valuation will have a Material effect on the Financial Statements.
 The extent and clarity of the disclosures related to the valuation in the Financial
Statements.
 The degree of dependence on future events of a nature that might create significant
volatility inherent in the amounts involved.
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 Using Partners or Professional Staff who are not Audit Team members to perform

Restricted Entities and SEC Restricted Entities—Appraisal and Valuation
Services
6.128 A Member Firm shall not provide a valuation service to a Restricted Entity that is
not a Public Interest Restricted Entity if:
(a) The valuation involves a significant degree of subjectivity; and
(b) The valuation will have a Material effect on the Financial Statements on
6.129 Certain valuations do not involve a significant degree of subjectivity. This is likely the case
when the underlying assumptions are either established by law or regulation, or are widely
accepted and when the techniques and methodologies to be used are based on generally
accepted standards or prescribed by law or regulation. In such circumstances, the results
of a valuation performed by two or more parties are not likely to be materially different.

than SEC Restricted Entities—Valuation Services
6.130 A Member Firm shall not provide a valuation service to a Public Interest
Restricted Entity if the valuation service would have a Material effect,
individually or in the aggregate, on the Financial Statements on which the
Member Firm will Express an Opinion.
Additional Requirements for SEC Restricted Entities—Appraisal and

Valuation Services
6.131 A Member Firm shall not provide any appraisal service, valuation service or any
service involving a fairness opinion or contribution-in-kind report to an SEC
Restricted Entity, or where the subject matter of such Engagement is an SEC
Restricted Entity, unless it is reasonable to conclude that the results of such
service will not be subject to audit procedures during an audit of the SEC
Restricted Entity’s Financial Statements. There is a rebuttable presumption that
the services are subject to audit procedures. (Refer to paragraphs 6.36 to 6.40.)
6.132 In some countries, the laws or regulations may require a company’s auditor to render a
contribution-in-kind report in connection with certain transactions. If a Member Firm is
required to provide a contribution-in-kind report to an SEC Restricted Entity, the
Member Firm shall consult with the Director of Independence prior to accepting
such Engagement.
6.133 If a Member Firm is requested by a non-Restricted Entity (the “Buyer”) to

provide appraisal or valuation services related to the Buyer’s purchase price
allocation in connection with a potential acquisition where the intended target
entity is an SEC Restricted Entity (the “Target”), the Member Firm may provide
the service as long as:
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(a) The Target will not be an Audit Client after the closing of the transaction
and a restatement of the Audit Client’s past Financial Statements, as
reported on by the Member Firm, is not required at a future date;
(b) The appraisal or valuation services do not commence until the acquisition
price has been set or agreed to by the parties to the transaction and
accordingly the services are not used by the Buyer’s management in its
determination or negotiation of the acquisition price of the Target.
(c) The services will not result in any “push down” accounting to the Target
prior to the Member Firm’s dismissal as auditor. That is, the Buyer may not
in any way, and must agree not to, record the transaction in the books and
records of the Target until after the Member Firm’s dismissal as auditor;
and
(d) The engagement letter with the Buyer should include the following
conditions:
(i) The Target will not be given access to the valuation or appraisal report
or any deliverables developed in providing those services prior to the
date the Member Firm is formally dismissed as auditor;
(ii) No value estimates will be provided to the Target prior to the Member
Firm’s dismissal as auditor. The Member Firm or Buyer will not, in any
way, communicate to the Target the results of or any conclusions
reached in providing the valuation or appraisal services prior to the
Member Firm’s formal dismissal as auditor;
(iii) The valuation or appraisal Engagement Team will inform the Audit
Team of any information obtained or generated in providing the
services that the Engagement Team deems, in its sole discretion, the
Audit Team should be made aware of (e.g., if the valuation
conclusions, even on a preliminary basis, suggest potential
impairment, the Audit Team will be made aware of that possibility);
(iv) The valuation or appraisal Engagement Team will only be able to

obtain the Target’s confidential information from the Buyer’s
representatives and will not be able to obtain such information from
the Target or the Audit Team serving the Target;
(v) The Buyer’s management will be solely responsible for making all
management decisions and performing all management functions
relating to the valuation or appraisal services;
(vi) The only external auditor reviewing the results of the valuation or
appraisal services will be the Buyer’s external auditor.
The Member Firm Director of Independence shall be consulted in these instances

to ensure these protocols are met.
6.134 A Member Firm shall not provide services related to valuation models or
forecasts to an SEC Restricted Entity if such services involve:
(a) Formulating assumptions;
(b) Creating, designing, or developing a model (whether electronic or manual);
127
(c) Gathering information or processing data to be used in any financial model
or forecast; or
(d) Providing a skeleton or shell model or forecast to an SEC Restricted Entity
unless it is reasonable to conclude that the results of such service will not be
subject to audit procedures during an audit of the SEC Restricted Entity’s
Financial Statements. There is a rebuttable presumption that the services are
subject to audit procedures. (Refer to paragraphs 6.36 to 6.40)
6.135 A Member Firm may provide appraisal or valuation services to an SEC Restricted Entity if
such services are for non-financial reporting purposes. Examples of appraisal or valuation
services for non-financial reporting purposes include transfer pricing studies, cost
segregation studies, and other tax-only valuations when the results of the valuation
services will not be subject to audit procedures during the audit of the SEC Restricted
Entity’s Financial Statements. The service is considered to be for non-financial purposes, if
the appraisal or valuation is performed on a basis and methodology that is unique and
prescribed by the applicable tax code of the relevant jurisdiction, and have no potential
alternative or "dual" use (e.g., the valuation is performed on a basis and methodology
other than fair market value).
6.136 A Member Firm may use its own valuation specialist in connection with the audit to review
the work done by the SEC Restricted Entity or a third party specialist engaged by the SEC
Restricted Entity provided that the technical expertise used in determining the amounts
recorded in the Financial Statements is provided by the SEC Restricted Entity or the third
party specialist.
Actuarial Services
General Provisions
6.137 Providing actuarial services to a Restricted Entity might create a self-review or advocacy
threat.
6.138 Factors that are relevant in evaluating the level or self-review or advocacy threats created
by providing actuarial services to a Restricted Entity include:
 The use and purpose of the actuarial service.
 Whether the results of actuarial service will be made public.
 The extent of the Restricted Entity’s involvement in determining and approving the
methodologies used and other significant matters of judgment.
 The degree of subjectivity inherent in the item for actuarial service involving
standard or established methodologies.
 Whether the actuarial service will have a Material effect on the Financial Statements.
 The extent and clarity of the disclosures in the Financial Statements.
 The degree of dependence on future events of a nature which could create

significant volatility inherent in the amounts involved.
128
 Having an Appropriate Reviewer who was not involved in providing the actuarial
service review the audit work or service performed might address a self-review
threat.

Restricted Entities and SEC Restricted Entities— Actuarial Services
6.140 A Member Firm shall not provide actuarial services to a Restricted Entity if:
(a) The actuarial service involves a significant degree of subjectivity; and
(b) The actuarial service will have a Material effect on the Financial Statements
on which the Member Firm will Express an Opinion.
6.141 Certain actuarial services do not involve a significant degree of subjectivity. This is likely
the case when the underlying assumptions are either established by law or regulation, or
are widely accepted and when the techniques and methodologies to be used are based on
generally accepted standards or prescribed by law or regulation. In such circumstances,
the results of an actuarial service performed by two or more parties are not likely to be
materially different.

than SEC Restricted Entities—Actuarial Services
6.142 A Member Firm shall not provide an actuarial service to a Public Interest
Restricted Entity if the actuarial service would have a Material effect, individually
or in the aggregate, on the Financial Statements on which the Member Firm will
Express an Opinion.
Additional Requirements for SEC Restricted Entities—Actuarial Services
6.143 A Member Firm shall not provide to an SEC Restricted Entity any actuarially-
oriented advisory service involving the determination of amounts recorded in the
Financial Statements and related accounts, unless it is reasonable to conclude
that the results of such service will not be subject to audit procedures during an
audit of the SEC Restricted Entity’s Financial Statements. There is a rebuttable
presumption that the services are subject to audit procedures. (Refer to
paragraphs 6.36 to 6.40.)
6.144 Notwithstanding paragraph 6.143, a Member Firm may assist an SEC Restricted Entity in
understanding the methods, models, assumptions, and inputs used in computing an
amount.
6.145 A Member Firm may use its actuarial specialists in conducting the audit of the SEC
Restricted Entity, provided the SEC Restricted Entity uses its own actuaries or third-party
actuaries to provide its actuarial capabilities.
Internal Audit Services
General Provisions
6.146 Providing internal audit services to a Restricted Entity might create a self-review threat.
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6.147 Internal audit services involve assisting the Restricted Entity in the performance of its
internal audit activities. Internal audit activities might include:
 Monitoring of internal control – reviewing controls, monitoring their operation and

recommending improvements to them.
 Examining financial and operating information by:
o Reviewing the means used to identify, measure, classify and report financial
and operating information.
o Inquiring specifically into individual items including detailed testing of

transactions, balances and procedures.
 Reviewing the economy, efficiency and effectiveness of operating activities including

non-financial activities of an entity.
 Reviewing compliance with:
o Laws, regulations and other external requirements.
o Management policies, directives and other internal requirements.
6.148 The scope and objectives of internal audit activities vary widely and depend on the size
and structure of the entity and the requirements of management and the Audit Committee
or Others Charged with Governance.
6.149 When providing an internal audit service to a Restricted Entity, the Member Firm
shall be satisfied that:
(a) The Restricted Entity designates an appropriate and competent resource,

preferably within senior management, to:
(i) Be responsible at all times for internal audit activities; and
(ii) Acknowledge responsibility for designing, implementing, monitoring

and maintaining internal control.
(b) The Restricted Entity’s management or the Audit Committee or Others

Charged with Governance reviews, assesses and approves the scope, risk
and frequency of the internal audit services;
(c) The Restricted Entity’s management evaluates the adequacy of the internal
audit services and the findings resulting from their performance;
(d) The Restricted Entity’s management evaluates and determines which

recommendations resulting from internal audit services to implement and
manages the implementation process; and
(e) The Restricted Entity’s management reports to the Audit Committee or

Others Charged with Governance the significant findings and
recommendations resulting from the internal audit services.
Performing a significant part of a Restricted Entity’s internal audit activities increases the
possibility that a Member Firm providing internal audit services will assume a management
responsibility.
130
6.151 Examples of internal audit services that involve assuming management responsibilities
include:
 Setting internal audit policies or the strategic direction of internal audit activities.
 Directing and taking responsibility for the actions of the Restricted Entity’s internal
audit employees.
 Deciding which recommendations resulting from internal audit activities to

implement.
 Reporting the results of the internal audit activities to the Audit Committee or Others
Charged with Governance on behalf of management.
 Performing procedures that form part of the internal control, such as reviewing and
approving changes to employee data access privileges.
 Taking responsibility for designing, implementing, monitoring and maintaining

internal control.
 Performing outsourced internal audit services, comprising all or a substantial portion

of the internal audit function, where a Member Firm is responsible for determining
the scope of the internal audit work; and might have responsibility for one or more
of the matters noted above.
6.152 When a Member Firm uses the work of an internal audit function in an Audit Engagement,
ISAs require the performance of procedures to evaluate the adequacy of that work.
Similarly, when a Member Firm accepts an Engagement to provide internal audit services
to a Restricted Entity, the results of those services might be used in conducting the
external audit. This creates a self-review threat because it is possible that the Audit Team
will use the results of the internal audit service for purposes of the Audit Engagement
without:
(a) Appropriately evaluating those results; or
(b) Exercising the same level of professional skepticism as would be exercised when the
internal audit work is performed by individuals who are not members of the Member
Firm.
6.153 Factors that are relevant in evaluating the level of such a self-review threat include:
 The materiality of the related Financial Statement amounts.
 The risk of misstatement of the assertions related to those Financial Statement

amounts.
 The degree of reliance that the Audit Team will place on the work of the internal audit
service, including in the course of an external audit.
6.154 An example of an action that might be a Safeguard to address such a self-review threat is
using Partners and Professional Staff who are not Audit Team members to perform the
service.
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than SEC Restricted Entities—Internal Audit Services
6.155 A Member Firm shall not provide internal audit services to a Public Interest
Restricted Entity, if the services relate to:
(a) A significant part of the internal controls over financial reporting;
(b) Financial accounting systems that generate information that is, individually
or in the aggregate, Material to the Restricted Entity’s accounting records or
Financial Statements on which the Member Firm will Express an Opinion; or
(c) Amounts or disclosures that are, individually or in the aggregate, Material

to the Financial Statements on which the Member Firm will Express an
Opinion.
Additional Requirements for SEC Restricted Entities—Internal Audit

Services
6.156 A Member Firm shall not provide any internal audit service that has been
outsourced by an SEC Restricted Entity if the service relates to such entity’s
internal accounting controls, financial systems or Financial Statements. This
policy applies to all internal audit outsourcing/co-sourcing services for an SEC
Restricted Entity, unless it is reasonable to conclude that the results of these
services will not be subject to audit procedures during an audit of the SEC
Restricted Entity’s Financial Statements. There is a rebuttable presumption that
the services are subject to audit procedures. (Refer to paragraphs 6.36 to 6.40.)
6.157 The assessment of controls, including obtaining an understanding, testing of the

operations and making recommendations for improvement, is an integral part of an audit
of the Financial Statements. However, a Member Firm shall not design or implement
internal accounting and risk management controls for an SEC Restricted Entity
unless it is reasonable to conclude that the results of these services will not be
subject to audit procedures during an audit of the SEC Restricted Entity’s
Financial Statements. There is a rebuttable presumption that the services are
subject to audit procedures. (Refer to paragraphs 6.36 to 6.40.)
6.158 A Member Firm may provide the following services to an SEC Restricted Entity:
 Evaluating such entity’s internal controls and making recommendations for

improvements to the controls during the conduct of the audit in accordance with
generally accepted auditing standards or when providing assurance services related
to internal controls.
 Performing nonrecurring evaluations of discrete items or other programs that are not
in substance the outsourcing of the internal audit function. For example, the Member
Firm may perform agreed-upon procedures Engagements related to the SEC
Restricted Entity’s internal controls since management takes responsibility for the
scope and assertions in those Engagements.
 Performing nonrecurring operational internal audits unrelated to the internal

accounting controls, financial systems, or Financial Statements.
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Recruiting and Human Resource Services
General Provisions
6.159 Providing recruiting services to a Restricted Entity might create a self-interest, familiarity
or intimidation threat.
6.160 Recruiting services might include activities such as:
 Developing a job description.
 Developing a process for identifying and selecting potential candidates.
 Searching for or seeking out candidates.
 Screening potential candidates for the role by:
o Reviewing the professional qualifications or competence of applicants and

determining their suitability for the position.
o Undertaking reference checks of prospective candidates.
o Interviewing and selecting suitable candidates and advising on candidates’

competence.
 Determining employment terms and negotiating details, such as salary, hours and
other compensation.
Providing the following services does not usually create a threat as long as the Member
Firm does not assume a management responsibility:
 Reviewing the professional qualifications of a number of applicants and providing

advice on their suitability for the position.
 Interviewing candidates and advising on a candidate’s competence for financial

accounting, administrative or control positions.
6.162 When a Member Firm provides recruiting services to a Restricted Entity, the
Member Firm shall be satisfied that:
(a) The Client assigns the responsibility to make all management decisions with
respect to hiring the candidate for the position to a competent employee,
preferably within senior management; and
(b) The Client makes all management decision with respect to the hiring
process, including:
 Determining the suitability of prospective candidates and selecting

suitable candidates for the position
 Determining employment terms and negotiating details such as salary,

hours and other compensation.
6.163 Factors that are relevant in evaluating the level of self-interest, familiarity and intimidation
threats created by providing recruiting services to a Restricted Entity include:
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 The nature of the requested assistance.
 The role of the individual to be recruited.
 Any conflicts of interest or relationships that might exist between the candidates and
the Member Firm providing the advice or service.

familiarity or intimidation threat is using Partners and Professional Staff who are not Audit
Team members to perform the service.
6.165 When providing recruiting services to a Restricted Entity, the Member Firm shall
not act as negotiator on the Restricted Entity’s behalf.
6.166 A Member Firm shall not provide a recruiting service to a Restricted Entity if the
service relates to:
(a) Searching for or seeking out candidates; or
(b) Undertaking reference checks of prospective candidates
with respect to the following positions:
(i) A Director or Officer of the entity; or

(ii) A member of senior management in a position to exert significant
influence over the preparation of the Client’s accounting records or the
Financial Statements on which the Member Firm will Express an
Opinion.
Additional Requirements for SEC Restricted Entities—Recruiting and

Human Resources Services
6.167 A Member Firm shall not provide any of the following services to an SEC
Restricted Entity:
(a) Searching for or seeking out prospective candidates for managerial,

executive or director positions;
(b) Engaging in psychological testing or other formal testing or evaluation

programs;
(c) Undertaking reference checks of prospective candidates for an executive or

Director position;
(d) Acting as a negotiator on the SEC Restricted Entity’s behalf, such as

determining position, status or title, compensation, fringe benefits, or other
conditions of employment; or
(e) Recommending or advising the SEC Restricted Entity to hire a specific

candidate for a specific job.
6.168 If requested by an SEC Restricted Entity, a Member Firm may interview candidates and
advise such entity on the candidate’s competence for financial accounting, administrative,
or control positions.
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6.169 Member Firm may forward names of prospective candidates known to someone within the
Member Firm to an SEC Restricted Entity, provided the information:
(a) Is conveyed without a fee; and
(b) Was not obtained as a result of recruitment services performed for another Client.
Corporate Finance Services
6.170 Providing corporate finance services to a Restricted Entity might create a self-review or
advocacy threat.
6.171 Examples of corporate finance services that might create a self-review or advocacy threat
include:
 Assisting an Audit Client in developing corporate strategies.
 Identifying possible targets for the Audit Client to acquire.
 Advising on disposal transactions.
 Assisting finance raising transactions.
 Providing structuring advice.
 Providing advice on the structuring of a corporate finance transaction or on financing

arrangements that will directly affect amounts that will be reported in the Financial
6.172 Factors that are relevant in evaluating the level of such threats created by providing
corporate finance services to a Restricted Entity include:
 The degree of subjectivity involved in determining the appropriate treatment for the
outcome or consequences of the corporate finance advice in the Financial
Statements;
 The extent to which:
o The outcome of the corporate finance advice will directly affect amounts
recorded in the Financial Statements.
o The amounts are Material to the Financial Statements.
 Whether the effectiveness of the corporate finance advice depends on a particular

accounting treatment or presentation in the Financial Statements and there is doubt
as to the appropriateness of the related accounting treatment or presentation under
the relevant financial reporting framework.
the service might address self-review or advocacy threat.
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6.174 A Member Firm shall not provide corporate finance services to a Restricted Entity
that involve promoting, dealing in, or underwriting the Restricted Entity’s shares.
6.175 A Member Firm shall not provide corporate finance advice to a Restricted Entity
where the effectiveness of such advice depends on a particular accounting
treatment or presentation in the Financial Statements on which the Member Firm
will Express an Opinion and:
(a) The Audit Team has reasonable doubt as to the appropriateness of the
related accounting treatment or presentation under the relevant financial
reporting framework; and
(b) The outcome or consequences of the corporate finance advice will have a
Material effect on the Financial Statements on which the Member Firm will
Express an Opinion.
Additional Requirements for SEC Restricted Entities—Corporate Finance,

Investment Advisory or Management, Broker-Dealer, and Investment
Banking Services
6.176 A Member Firm shall not provide any of the following services to an SEC
Restricted Entity:
(a) Acting as a registered or unregistered broker-dealer, promoter or

underwriter on behalf of such SEC Restricted Entity;
(b) Making investment decisions on behalf of such SEC Restricted Entity or

otherwise having discretionary authority over such entity’s investments;
(c) Executing a transaction to buy or sell such SEC Restricted Entity’s

investment;
(d) Having custody of such entity’s assets, including taking temporary

possession of securities purchased by the SEC Restricted Entity;
(e) Giving advice and recommendations on investments and investment

strategies; or
(f) Record keeping or reporting of portfolio balances or the transmission of

investment selections.
Legal Services
6.177 Providing legal services to a Restricted Entity might create a self-review or advocacy
threat.
6.178 Legal services are defined as any service for which the individual providing the service
must either:
(a) Have the required legal training to practice law; or
(b) Be admitted to practice law before the courts of the jurisdiction in which such
services are to be provided.
6.179 Depending on the jurisdiction, legal advisory services might include a wide and diversified
range of service areas including both corporate and commercial services to Restricted
Entities, such as:
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 Contract support.
 Supporting a Restricted Entity in executing a transaction.
 Mergers and acquisitions.
 Supporting and assisting the Restricted Entity’s internal legal department.
 Legal due diligence and restructuring.
6.180 Factors that are relevant in evaluating the level of self-review or advocacy threat created
by providing legal advisory services to a Restricted Entity include:
 The materiality of the specific matter in relation to the Restricted Entity’s Financial
Statements.
 The complexity of the legal matter and the degree of judgment necessary to provide
the service.
the service might address a self-review or advocacy threat.
review the audit work or the service performed might address a self-review threat.
Acting as General Counsel
6.182 A Partner or employee of DTTL or a Member Firm shall not serve as General
Counsel for legal affairs of a Restricted Entity.
6.183 The position of General Counsel is usually a senior management position with broad
responsibility for the legal affairs of a company.
Acting in an Advocacy Role
6.184 A Member Firm shall not act in an advocacy role for a Restricted Entity in
resolving a dispute or litigation when the amounts involved are Material to the
6.185 Examples of actions that might be Safeguards to address a self-review threat created
when acting in an advocacy role for a Restricted Entity when the amounts involved are not
Material to the Financial Statements on which the Member Firm will Express an Opinion
include:
 Using Partners and Professional Staff who are not Audit Team members to perform the
service.
 Having an Appropriate Reviewer who was not involved in providing the services review
the audit work or the service performed.
Acting as Company Secretary
6.186 For the policies on acting as company secretary for a Restricted Entity, see paragraphs 3.5
through 3.7.
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Additional Requirements for SEC Restricted Entities—Legal Services
6.187 In accordance with paragraph 1.20, a Member Firm shall not provide a service to
an SEC Restricted Entity that places the Member Firm in a position of being an
advocate for an SEC Restricted Entity. Litigation services and services that might be
considered lobbying activities are examples of those that would place a Member Firm in a
position of being an advocate for an SEC Restricted Entity.
6.188 A Member Firm shall not provide any service to an SEC Restricted Entity which:
 Under the circumstances and in the jurisdiction in which the service is

provided, could only be provided by someone licensed, admitted, or
otherwise qualified to practice law; or
 Would be considered to be a legal service in the United States.
6.189 In order to avoid the perception that legal services are being provided, DTTL
legal practices shall not provide any services other than permissible tax services
to an SEC Restricted Entity.
6.190 Prior to proposing legal services to an individual who is a Director, Officer or

member of management of an SEC Restricted Entity, a Member Firm shall
consider whether the service would place the Member Firm in a position of being
an advocate for the individual. If the service would result in acting in an
advocacy role, the prohibition in paragraph 6.187 shall apply.
6.191 A Member Firm shall not provide “corporate secretarial services,” such as
preparing corporate minutes and legal and compliance filings, to an SEC
Restricted Entity. While such services might be permitted in jurisdictions outside the
United States, and may be provided by someone who is not licensed, admitted, or
otherwise qualified to practice law, these types of services are customarily viewed as the
equivalent of legal services in the Unites States.
Litigation Support and Expert Services
6.192 Providing certain litigation support services to a Restricted Entity might create a self-
review or advocacy threat.
6.193 Litigation support services might include activities such as:
 Assisting with document management and retrieval.
 Acting as a witness, including an expert witness.
 Calculating estimated damages or other amounts that might become receivable or

payable as the result of litigation or other legal dispute.
6.194 Factors that are relevant in evaluating the level of self-review or advocacy threats created
by providing litigation support services to a Restricted Entity include:
 The legal and regulatory environment in which the service is provided, for example,
whether an expert witness is chosen and appointed by a court.
 The nature and characteristics of the service.
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 The extent to which the outcome of the litigation support service will have a Material
effect on the Financial Statements on which the Member Firm will Express an
Opinion.
6.195 An example of an action that might be a Safeguard to address such a self-review or

advocacy threat is using Partners and Professional Staff who are not Audit Team members
to perform the service.
6.196 If a Member Firm provides a litigation support service to a Restricted Entity and the
service involves estimating damages or other amounts that affect the Financial Statements
on which the Member Firm will Express an Opinion, policies included in paragraphs 6.123
through 6.136 related to valuation services apply.
Additional Requirements for SEC Restricted Entities—Litigation Support

and Expert Services
6.197 A Member Firm shall not provide an expert opinion or other expert service for an
SEC Restricted Entity, or such entity’s legal representative, for the purpose of
advocating the SEC Restricted Entity’s interests in litigation or in a regulatory or
administrative proceeding or investigation. For purposes of this policy, an
investigation is an inquiry by a regulatory body, including its staff.
6.198 A Member Firm may provide factual accounts, including in testimony, of work performed
or explain positions taken or conclusions reached during the performance of any service
provided to the SEC Restricted Entity.
6.199 A Member Firm might be engaged by an SEC Restricted Entity or its legal counsel to
perform internal investigations of the SEC Restricted Entity such as, for example, forensic
or other fact-finding work that results in the issuance of a report to the SEC Restricted
Entity. If after completion of such an Engagement, a proceeding or investigation
is initiated, the Member Firm’s report may be used by the SEC Restricted Entity
and its legal counsel and the Member Firm may provide factual accounts or
testimony about the work performed. However, the Member Firm shall not
provide any additional services that would be prohibited under paragraph 6.197.
6.200 A Member Firm might be engaged by an SEC Restricted Entity, its Audit Committee or the
Audit Committee’s outside counsel to perform an internal investigation or fact-finding
Engagement. If litigation, including alternative dispute resolution, or a regulatory
investigation is considered imminent or commences before the Member Firm has
completed its procedures, the Member Firm shall be permitted to complete the
Engagement if the Member Firm:
(a) Was engaged by the Audit Committee or its outside counsel;
(b) Remains in control of the work; and
(c) Does not become subject to the direction or influence of legal counsel for
the SEC Restricted Entity.
If the Member Firm was not originally engaged by the SEC Restricted Entity’s
Audit Committee or its outside counsel, and litigation, including alternative
dispute resolution, or a regulatory investigation is considered imminent or
commences, the Member Firm shall terminate the Engagement immediately.
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Additional Requirements for SEC Restricted Entities—Provision of Expert
Services when Retained by a Group
6.201 A Member Firm might be engaged to provide expert services by a Client that is not a
single entity, but a group of entities and the group might include one or more SEC
Restricted Entities.
6.202 Notwithstanding the prohibition in paragraph 6.197, a Member Firm shall be

permitted to provide an expert service to a group of entities which includes one
or more SEC Restricted Entities if the SEC Restricted Entity or SEC Restricted
Entities, as applicable, who are members of the group, either individually or in
the aggregate, do not have significant influence over the group.
6.203 An SEC Restricted Entity or SEC Restricted Entities, as applicable, will be deemed to have
significant influence over the group if:
(a) SEC Restricted Entities comprise 20% or more of the total number of group
members or SEC Restricted Entities have 20% or more of the total voting power of
the group if there are disproportionate voting rights;
(b) An SEC Restricted Entity is the “lead” plaintiff or defendant of the group, if
applicable; or
(c) An SEC Restricted Entity is a decision-maker with respect to the selection or

approval of the Member Firm retained by counsel to act as an expert for the group.
Immigration Services
6.204 Immigration services might include a wide and diversified range of services. Depending
on the jurisdiction, certain immigration services might require certain professional
qualifications. Immigration services include:
 Legal services.
 Dispute resolution support.
 Compliance services including preparing forms required under the applicable

immigration laws.
 Consulting or advisory services (e.g., systems design or implementation).
 Preparing forms required under the applicable immigration laws.
6.205 Prior to providing immigration services to a Restricted Entity, a Member Firm

shall evaluate and address the threats created.
Additional Requirements for SEC Restricted Entities – Immigration

Services
6.206 A Member Firm shall not provide immigration services to an SEC Restricted
Entity.
Serving as a Member of a Supervisory Body
6.207 Under the law in certain jurisdictions, particular companies are required to appoint an
individual or group of individuals to serve as a member of a supervisory body (e.g.,
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collegio sindicale in Italy, comisario in Mexico, syndic in Argentina). The supervisory body
is generally separate from the board of directors or management of the company and its
responsibilities under local law may vary considerably from jurisdiction to jurisdiction.
Such responsibilities might include designating temporary replacement directors if there is
not a sufficient number of members on the board of directors, calling ordinary and
extraordinary shareholders’ meetings whenever the company neglects to do so, ratifying
the appointment of the statutory auditor, etc.
6.208 A Member Firm shall evaluate and address the threats created before a Partner
or Professional Staff is appointed to a supervisory body for a Restricted Entity.
Additional Requirements for SEC Restricted Entities – Serving as a

Member of a Supervisory Body
6.209 A Partner or Professional Staff shall not be a member of a supervisory body for
an SEC Restricted Entity.
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1420—Independence
Chapter 7 - Audit Reports with a Restriction on Use and Distribution
Introduction
7.1 Member Firms may be requested to issue an audit report where the intended users have
agreed (1) to modifications to the independence requirements that would normally apply
to Audit Engagements, and (2) the inclusion in the audit report of a restriction on use and
distribution. This situation may arise where there are a limited number of users who are
knowledgeable as to the purpose of the audit report. Provided the conditions specified in
this chapter are satisfied, the independence requirements contained in Chapters 1 – 6 of
this Section 1420 are modified as provided in this chapter. This chapter does not apply
to audits required by law or regulation.
7.2 The independence requirements in Chapters 1 to 6 apply to all Audit Engagements.

However, in certain circumstances involving Audit Engagements where the report includes
a restriction on use and distribution, and provided the conditions described in paragraphs
7.4 are met, the independence requirements in this Section 1420 may be modified as
provided in this chapter.
7.3 This chapter sets out certain modifications to Chapters 1 to 6 which are permitted in
certain circumstances involving audits of special purpose Financial Statements where the
report includes a restriction on use and distribution. In this chapter, an Engagement to
issue a restricted use and distribution report in the circumstances set out in paragraph 7.4
is referred to as an “eligible Audit Engagement.”
General Policies
7.4 When a Member Firm intends to issue a report on an audit of a special purpose
Financial Statements which includes a restriction on use and distribution, the
independence requirements set out in Chapters 1 to 6 of this Section 1420 shall
be eligible for the modifications that are permitted under this chapter, but only
if:
(a) The Member Firm communicates with the intended users of the report
regarding the modified independence requirements that are to be applied in
providing the service; and
(b) The intended users of the report understand the purpose and limitations of
the report and explicitly agree to the application of the modifications.
7.5 The intended users of the report might obtain an understanding of the purpose and
limitations of the report by participating, either directly, or indirectly through a
representative who has authority to act for the intended users, in establishing the nature
and scope of the Engagement. In either case, this participation helps the Member Firm to
communicate with intended users about independence matters, including the
circumstances that are relevant in applying the conceptual framework. It also allows the
Member Firm to obtain the agreement of the intended users to the modified independence
requirements.
7.6 Where the intended users are a class of users who are not specifically
identifiable by name at the time the Engagement terms are established, the
Member Firm shall subsequently make such users aware of the modified
independence requirements agreed to by their representative.
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7.7 For example, where the intended users are a class of users such as lenders in a syndicated
loan arrangement, the Member Firm might describe the modified independence
requirements in an engagement letter to the representative of the lenders. The
representative might then make the Member Firm’s engagement letter available to the
members of the group of lenders to meet the requirement for the Member Firm to make
such users aware of the modified independence requirements agreed to by the
representative.
7.8 When the Member Firm performs an eligible Audit Engagement, any
modifications to the requirements of Chapters 1 to 6 shall be limited to those set
out in this chapter. The Member Firm shall not apply these modifications when an
audit of Financial Statements is required by law or regulation.
7.9 If the Member Firm also issues an audit report that does not include a restriction
on use and distribution for the same Client, the Member Firm shall apply the
provisions of Chapters 1 to 6 to that Audit Engagement.
Public Interest Restricted Entities
7.10 When the Member Firm performs an eligible Audit Engagement, the Member Firm
does not need to apply the independence requirements set out in Chapters 3 to 6
that apply only to Audit Engagements for Public Interest Restricted Entities.
Affiliates
7.11 When the Member Firm performs an eligible Audit Engagement, the provisions in
Chapters 1 to 6 do not need to apply to the Affiliates of an Audit Client. However,
when the Audit Team knows or has reason to believe that a relationship or
circumstance involving an Affiliate of the Client is relevant to the evaluation of
the Member Firm’s independence of the Client, the Audit Team shall include that
Affiliate when identifying, evaluating and addressing threats to independence.
Independence of DTTL and Member Firms
7.12 When the Member Firm performs an eligible Audit Engagement, the specific
requirements regarding DTTL or other Member Firms set out in Chapters 1 to 6
do not need to be applied. However, when the Member Firm knows or has reason
to believe that threats to independence are created by any interests and
relationships of DTTL or another Member Firm, the Member Firm shall evaluate
and address any such threat.
Requirements for SEC Restricted Entities
7.13 A Member Firm shall not apply the provisions of this chapter to SEC Restricted
Entities.
Financial Interests, Loans and Guarantees, Marketplace Business Relationships,

and Family and Personal Relationships
7.14 When the Member Firm performs an eligible Audit Engagement:
(a) The relevant provisions set out in Chapters 2 and 3 need apply only to the
members of the Engagement Team, their Immediate Family Members and,
where applicable, Close Family Members;
(b) The Member Firm shall identify, evaluate and address any threats to
independence created by interests and relationships, as set out in Chapters
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2 and 3 between the Restricted Entity and the following Audit Team
members:
(i) Those who provide consultation regarding technical or industry

specific issues, transactions or events; and
(ii) Those who provide quality control for the Engagement, including those
who perform the Engagement Quality Control Review; and
(c) The Member Firm shall evaluate and address any threats that the
Engagement Team has reason to believe are created by interests and
relationships between the Restricted Entity and others within the Member
Firm who can directly influence the outcome of the Audit Engagement.
7.15 Others within a Member Firm who can directly influence the outcome of the Audit
Engagement include those who recommend the compensation, or who provide direct
supervisory, management or other oversight, of the Audit Engagement Partner in
connection with the performance of the Audit Engagement including those at all
successively senior levels above the Engagement Partner through to the individual who is
the Member Firm’s Managing Partner.
7.16 When a Member Firm performs an eligible Audit Engagement, the Member Firm
shall evaluate and address any threats that the Engagement Team has reason to
believe are created by Financial Interests in the Restricted Entity held by
individuals, as set out in paragraphs 2.6 (c) and (e), 2.21, 2.34, 2.46 and 2.53.
7.17 When a Member Firm performs an eligible Audit Engagement, the Member Firm,
in applying the provisions set out in Chapter 2 to interests of the Member Firm,
shall not hold a Material Direct or a Material Indirect Financial Interest in the
Restricted Entity.
Employment with a Restricted Entity
7.18 When a Member Firm performs an eligible Audit Engagement, the Member Firm
shall evaluate and address any threats created by any employment relationships
as set out in paragraphs 3.8 to 3.31.
Providing Non-Assurance Services
7.19 If a Member Firm performs an eligible Audit Engagement and provides a Non-
Assurance Service to the Restricted Entity, the Member Firm shall comply with
provisions of Chapter 6 as well as provisions set out in paragraphs 5.72 to 5.77,
5.84 to 5.89, and 5.91 to 5.95, subject to paragraphs 7.10 to 7.12.
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1420—Independence
Chapter 8 - Policies Applicable to Assurance Clients
Introduction
8.1 This chapter applies to Assurance Engagements other than Audit Engagements, Review
Engagements or Assurance Engagements where the report is used to satisfy a requirement
of the SEC6. Examples of Engagements subject to the policies in this chapter include:
 Assurance on an entity’s key performance indicators.
 Assurance on an entity’s compliance with law or regulation.
 Assurance on performance criteria, such as value for money, achieved by the public
sector body.
 Assurance on the effectiveness of an entity’s system of internal control.
 Assurance on an entity’s sustainability report
 An audit of specific elements, accounts or items of a Financial Statement.
Policies in Chapter 1 also apply to these Engagements.
8.2 When used in this chapter, the term Member Firm refers to the Member Firm engaged to
perform the Assurance Engagement.
8.3 This chapter describes:
(a) Facts and circumstances, including professional activities, interests and

relationships, that create or might create threats to independence;
(b) Potential actions, including Safeguards, that might be appropriate to address any
such threats; and
(c) Some situations where the threats cannot be eliminated or there can be no
Safeguards to reduce the threats to an Acceptable Level.
8.4 In an Assurance Engagement, the Member Firm aims to obtain sufficient appropriate
evidence in order to express a conclusion designed to enhance the degree of confidence of
the intended users other than the Responsible Party about the Subject Matter Information.
International Standard on Assurance Engagements (ISAE) 3000 (Revised) describes the
elements and objectives of an Assurance Engagement conducted under the Standard and
the International Framework for Assurance Engagements (Assurance Framework) provides
a general description of Assurance Engagements. An Assurance Engagement might either
be an Attestation Engagement or a Direct Engagement.
8.5 In this chapter, the term Assurance Engagement refers to Assurance Engagements other
than Audit Engagements and Review Engagements.
6
If the report is used to satisfy a requirement of the SEC, policies in Chapters 2 to 6 apply.
145
Reports that Include a Restriction on Use and Distribution
8.6 An assurance report might include a restriction on use and distribution. If it does and the
conditions set out in this chapter are met, the independence requirements in this chapter
may be modified as provided in this chapter.
Audit and Review Engagements
8.7 If a Member Firm performs both an Assurance Engagement and an Audit or Review
Engagement for the same Client, the requirements in Chapters 1 to 7 continue to apply to
DTTL, the Member Firms, the Audit Team members and others, as required.
General Policies
8.8 A Member Firm performing an Assurance Engagement shall be independent of

the Assurance Client.
8.9 For the purposes of this chapter, the Assurance Client in an Assurance Engagement is the
Responsible Party and also, in an Attestation Engagement, the party taking responsibility
for the Subject Matter Information (who might be the same as the Responsible Party).
8.10 The roles of the parties involved in an Assurance Engagement might differ and affect the
application of the independence provisions in this chapter. In the majority of Attestation
Engagements, the Responsible Party and the party taking responsibility for the Subject
Matter Information are the same. This includes those circumstances where the Responsible
Party involves another party to measure or evaluate the Underlying Subject Matter against
the criteria (the measurer or evaluator) where the Responsible Party takes the
responsibility for the Subject Matter Information as well as the Underlying Subject Matter.
However, the Responsible Party or the engaging party might appoint another party to
prepare the Subject Matter Information on the basis that this party is to take responsibility
for the Subject Matter Information. In this circumstance, the Responsible Party and the
party responsible for the Subject Matter Information are both Assurance Clients for the
purpose of this chapter.
8.11 In addition to the Responsible Party and, in an Attestation Engagement, the party taking
responsibility for the Subject Matter Information, there might be other parties in relation
to the Engagement. For example, there might be a separate engaging party or a party
who is a measurer or evaluator other than the party taking responsibility for the Subject
Matter Information. In these circumstances, applying the conceptual framework requires
the Member Firm to identify and evaluate threats to the fundamental principles created by
any interests or relationships with such parties, including whether any conflicts of interest
might exist as described in DPM Section 1430.
8.12 A Member Firm shall apply the conceptual framework set out in Chapter 1 to
identify, evaluate and address threats to independence in relation to an
Assurance Engagement.
8.13 Before a Member Firm accepts an Assurance Engagement, the Member Firm shall
obtain approval from the Lead Client Service Partner. For Restricted Entities
included in the DESC system, the service request shall be submitted and
approved through the SRM application.
Multiple Responsible Parties and Parties Taking Responsibility for the

Subject Matter Information
8.14 In some Assurance Engagements, whether an Attestation Engagement or Direct

Engagement, there might be several Responsible Parties or, in an Attestation Engagement,
several parties taking responsibility for the Subject Matter Information. In determining
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whether it is necessary to apply the provisions in this chapter to each individual
Responsible Party or each individual party taking responsibility for the Subject Matter
Information in such Engagements, the Member Firm may take into account certain
matters. These matters include whether an interest or relationship between the Member
Firm, or an Assurance Team member, and a particular Responsible Party or party taking
responsibility for the Subject Matter Information would create a threat to independence
that is not trivial and inconsequential in the context of the Subject Matter Information.
This determination will take into account factors such as:
 The materiality of the Underlying Subject Matter or Subject Matter Information for
which the particular party is responsible in the context of the overall Assurance
Engagement.
 The degree of public interest associated with the Assurance Engagement.
If the Member Firm determines that the threat created by such an interest or relationship
with a particular party would be trivial and inconsequential, it might not be necessary to
apply all of the provisions of this section to that party.
DTTL and other Member Firms
8.15 When a Member Firm knows or has reason to believe that interests and
relationships of DTTL or another Member Firm create a threat to the Member
Firm’s independence, the Member Firm shall evaluate and address any such
threat.
Related Entities
8.16 When the Assurance Team knows or has reason to believe that a relationship or
circumstance involving a related entity of the Assurance Client is relevant to the
evaluation of the Member Firm’s independence from the Client, the Assurance
Team shall include that related entity when identifying, evaluating and
addressing threats to independence. For the purposes of this evaluation, a related
entity is an entity that would qualify as an Affiliate if the Assurance Client was an Audit
Client that is a Listed Entity.
Period during which Independence is Required
8.17 Independence, as required under this chapter, shall be maintained during both:
(a) The Engagement Period; and
(b) The period covered by the Subject Matter Information.
8.18 The Engagement Period starts when the Assurance Team begins to perform assurance
services with respect to the particular Engagement. The Engagement Period ends when
the assurance report is issued. When the Engagement is of a recurring nature, it ends at
the later of the notification by either party that the professional relationship has ended or
the issuance of the final assurance report.
8.19 If an entity becomes an Assurance Client during or after the period covered by
the Subject Matter Information on which the Member Firm will express a
conclusion, the Member Firm shall determine whether any threats to
independence are created by:
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(a) Financial or business relationships with the Assurance Client during or after
the period covered by the Subject Matter Information but before accepting
the Assurance Engagement; or
(b) Previous services provided to the Assurance Client.
8.20 Threats to independence are created if a Non-Assurance Service was provided to

the Assurance Client during, or after the period covered by the Subject Matter
Information, but before the Assurance Team begins to perform assurance
services, and the service would not be permitted during the Engagement Period.
In such circumstances, the Member Firm shall evaluate and address any threat to
independence created by the service. If the threats are not at an Acceptable
Level, the Member Firm shall only accept the Assurance Engagement if the
threats are reduced to an Acceptable Level.
 Using Partners and Professional Staff who are not Assurance Team members to
perform the service.
 Having an Appropriate Reviewer review the assurance and non-assurance work as

appropriate.
8.22 If a Non-Assurance Service that would not be permitted during the Engagement
Period has not been completed and it is not practical to complete or end the
service before the commencement of Professional Services in connection with
the Assurance Engagement, the Member Firm shall only accept the Assurance
Engagement if:
(a) The Member Firm is satisfied that:
(i) The Non-Assurance Service will be completed within a short period of

time; or
(ii) The Client has arrangements in place to transition the service to

another provider within a short period of time;
(b) The Member Firm applies Safeguards when necessary during the service
period; and
(c) The Member Firm discusses the matter with the Audit Committee or Others
Charged with Governance.
General Documentation of Independence for Assurance Engagements
8.23 A Member Firm shall document conclusions regarding compliance with this
chapter, and the substance of any relevant discussions that support these
conclusions. In particular:
(a) When Safeguards are applied to address a threat, the Member Firm shall
document the nature of the threat and Safeguards in place or applied; and
(b) When a threat required significant analysis and the Member Firm concluded
that the threat was already at an Acceptable Level, the Member Firm shall
document the nature of the threat and the rationale for conclusion.
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8.24 Documentation provides evidence of the Member Firm’s judgments in forming conclusions
regarding compliance with this chapter. However, a lack of documentation does not
determine whether a Member Firm considered a particular matter or whether the Member
Firm is independent.
Member Firm and Personal Financial Relationships—Assurance Clients
Financial Interests
8.25 Holding a Financial Interest in an Assurance Client might create a self-interest threat to
independence.
8.26 A Financial Interest might be held directly or indirectly through an intermediary such as a
collective investment vehicle, an estate or a trust. When a beneficial owner has control
over the intermediary or ability to influence its investment decisions, such Financial
Interest is considered to be direct. Conversely, when a beneficial owner has no control
over the intermediary or ability to influence its investment decisions, that Financial
Interest is considered to be indirect.
8.27 Factors that are relevant in evaluating the level of a self-interest threat created by holding
a Financial Interest in an Assurance Client include:
 The role of the individual holding the Financial Interest.
 Whether the Financial Interest is direct or indirect.
 The materiality of the Financial Interest.
8.28 A Direct Financial Interest or a Material Indirect Financial Interest in the

Assurance Client shall not be held by:
 The Member Firm; or
 An Assurance Team member or any of that individual’s Immediate Family

Members.
Financial Interests in an Entity Controlling an Assurance Client
8.29 When an entity has a controlling interest in an Assurance Client and the
Assurance Client is Material to the entity, neither the Member Firm, nor an
Assurance Team member, nor any of that individual’s Immediate Family
Members shall hold a Direct or Material Indirect Financial Interest in that entity.
Financial Interests Held as Trustee
8.30 When not prohibited from acting as trustee or executor under DPM 1920,
Professional Services Trustee and Executor Appointments, paragraph 8.28 shall
also apply to a Financial Interest in an Assurance Client held in a trust or estate
for which a Member Firm, an Assurance Team member or that individual’s
Immediate Family Member acts as a trustee or executor unless:
(a) The trustee or executor is not a beneficiary of the trust or estate;
(b) The interest held by the trust or estate in the Assurance Client is not
Material to the trust or estate;
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(c) The trust or estate is not able to exercise significant influence over the
Assurance Client; and
(d) The trustee or executor cannot significantly influence any investment

decision involving a Financial Interest in the Assurance Client.
Financial Interests Received Unintentionally
8.31 If the Member Firm, an Assurance Team member, or any of that individual’s
Immediate Family Members, receives a Direct Financial Interest or a Material
Indirect Financial Interest in an Assurance Client by way of an inheritance, gift,
as a result of a merger, or in similar circumstances and the interest would not
otherwise be permitted to be held under this chapter, then:
(a) If the interest is received by the Member Firm, the Financial Interest shall
be disposed of immediately, or enough of an Indirect Financial Interest
shall be disposed of so that the remaining interest is no longer Material; or
(b) If the interest is received by an Assurance Team member, or any of that

individual’s Immediate Family Members, the individual who received the
Financial Interest shall immediately dispose of the Financial Interest, or
dispose of enough of an Indirect Financial Interest so that the remaining
interest is no longer Material.
8.32 If a Financial Interest that would be prohibited under this chapter is received by
way of inheritance, gift, or as a result of a merger or similar unplanned scenario:
(a) The Director of Independence and the Lead Client Service Partner shall be
notified;
(b) The actions described in paragraph 8.31 shall be taken as applicable;
(c) The Lead Client Service Partner shall:
(i) Evaluate and address self-review threat created; and
(ii) Consider discussing the matter with the Audit Committee or Others
Charged with Governance of the Assurance Client.
Financial Interests of Close Family Members
8.33 A self-interest threat might be created if an Assurance Team member knows that a Close
Family Member has a Direct Financial Interest or a Material Indirect Financial Interest in
 The nature of the relationship between the Assurance Team member and the Close
Family Member.
 Whether the Financial Interest is direct or indirect.
 The materiality of the Financial Interest to the Close Family Member.
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 Having the Close Family Member dispose, as soon as practicable, of all of the
Financial Interest or dispose of enough of an Indirect Financial Interest so that the
remaining interest is no longer Material.
 Removing the individual from the Assurance Team.
having an Appropriate Reviewer review the work of the Assurance Team member.
Financial Interests of Other Individuals
8.37 A self-interest threat might be created if an Assurance Team member knows that a
Financial Interest is held in the Assurance Client by individuals such as:
 Partners and Professional Staff, apart from those who are specifically not permitted
to hold such Financial Interest by paragraph 8.28, or their Immediate Family
Members.
 Individuals with a close personal relationship with an Assurance Team member.
8.38 An example of an action that might eliminate such a self-interest threat is removing the
Assurance Team member with the personal relationship from the Assurance Team.
include:
 Excluding the Assurance Team member from any significant decision-making

concerning the Assurance Engagement.
 Having an Appropriate Reviewer review the work of the Assurance Team member.
Loans and Guarantees
Loans and Guarantees with an Assurance Client
8.40 A Member Firm, an Assurance Team member, or any of that individual’s

Immediate Family Members shall not make or guarantee a loan to an Assurance
Client unless the loan or guarantee is not Material to both:
(a) The Member Firm or the individual making the loan or guarantee, as
applicable; and
(b) The Assurance Client.
Loans and Guarantees with an Assurance Client that is a Bank or Similar

Institution.

Immediate Family Members shall not accept a loan, or a guarantee of a loan,
from an Assurance Client that is a bank or a similar institution unless the loan or
guarantee is made under normal lending procedures, terms and conditions.
8.42 Examples of loans include mortgages, bank overdrafts, car loans and credit card balances.
8.43 Even if a Member Firm received a loan from an Assurance Client that is a bank or similar
institution under normal lending procedures, terms and conditions, the loan might create a
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self-interest threat if it is Material to such Assurance Client or the Member Firm receiving
the loan.
having the work reviewed by an Appropriate Reviewer, who is not an Assurance Team
member, from a Member Firm that is not a beneficiary of the loan.
Accounts with Financial Institutions

Immediate Family Members shall not have deposits or Securities Accounts with
an Assurance Client that is a bank, broker, or similar institution, unless the
deposit or account is held under normal commercial terms.
Loans and Guarantees with an Assurance Client that is not a Bank or

Similar Institution.
8.46 A Member Firm or an Assurance Team member, or any of that individual’s

Immediate Family Members, shall not accept a loan from, or have a borrowing
guaranteed by, an Assurance Client that is not a bank or similar institution,
unless the loan or guarantee is not Material to both:
(a) The Member Firm, or the individual receiving the loan or guarantee, as
applicable; and
(b) The Assurance Client.
Employment Relationships—Assurance Clients
Service as Director or Officer
8.47 Serving as a Director or Officer of an Assurance Client creates self-review and self-interest
threats.
8.48 A Partner or employee of the Member Firm shall not serve as a Director or Officer
of an Assurance Client.
Service as Company Secretary
8.49 The position of company secretary has different implications in different jurisdictions. The
duties might range from administrative duties (such as personnel management and the
maintenance of company records and registers) to duties as diverse as ensuring that the
company complies with regulations or providing advice on corporate governance matters.
Usually this position is seen to imply a close association with the entity. Therefore, a
threat is created if a Partner or employee of the Member Firm serves as company
secretary for an Assurance Client.
8.50 A Partner or employee of the Member Firm shall not serve as company secretary
for an Assurance Client unless:
(a) This practice is specifically permitted under local law, professional rules or
practice;
(b) Management makes all decisions; and
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(c) The duties and activities performed are limited to those of a routine and
administrative nature, such as preparing minutes and maintaining statutory
returns.
8.51 Prior to accepting the position of company secretary for an Assurance Client, a
Partner or employee of the Member Firm shall obtain approval from the Director
of Independence.
Employment with Assurance Clients
Employment of Current Partners and Professional Staff with an

Assurance Client
8.52 Current Partners and Assurance Team members shall not be employed by an
Assurance Client. Any exceptions shall be approved by the Director of
Independence.
8.53 A Partner or Professional Staff member shall not provide a service in their
personal time that would be prohibited to be performed by a Member Firm under
Chapter 8 of this Section 1420.
Employment of Former Partners and Professional Staff with an

Assurance Client
8.54 A familiarity or intimidation threat might be created if any of the following individuals have
been an Assurance Team member or Partner of the Member Firm:
 A Director or Officer of the Assurance Client.
 An employee in a position to exert significant influence over the Underlying Subject
Matter or, in an Attestation Engagement, an employee who is in a position to exert
significant influence over the Subject Matter Information of the Assurance
Engagement.
8.55 If a former Partner or an Assurance Team member has joined the Assurance
Client as:
(a) As Director or Officer; or
(b) An employee in a position to exert significant influence over the Underlying

Subject Matter or, in an Attestation Engagement, an employee in a position
to exert significant influence over the Subject Matter Information of the
Assurance Engagement,
the individual shall not continue to participate in the Member Firm’s business or
professional activities.
8.56 Even if one of the individuals described in paragraph 8.55 has joined the Assurance Client
in such a position and does not continue to participate in the Member Firm’s business or
professional activities, a familiarity or intimidation threat might still be created.
8.57 A familiarity or intimidation threat might also be created if a former Partner has joined an
entity in one of the positions described in paragraph 8.55 and the entity subsequently
becomes an Assurance Client.
 The position the individual has taken at the Assurance Client.
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 Any involvement the individual will have with the Assurance Team.
 The length of time since the individual was an Assurance Team member or Partner
of the Member Firm.
 The former position of the individual within the Assurance Team or Member Firm. An
example is whether the individual was responsible for maintaining regular contact
with the Client’s management or the Audit Committee or Others Charged with
Governance.
8.59 Examples of actions that might be Safeguards to address such a familiarity or intimidation
threat include:
 Making arrangements such that the individual is not entitled to any benefits or
payments from the Member Firm, unless made in accordance with fixed pre-
determined arrangements.
 Making arrangements such that any amount owed to the individual is not Material to
the Member Firm.
 Modifying the plan for the Assurance Engagement.
 Assigning to the Assurance Team individuals who have sufficient experience relative
to the individual who has joined the Assurance Client.
 Having an Appropriate Reviewer review the work of the former Assurance Team
member.
Employment Discussions with an Assurance Client
8.60 A self-interest threat is created when an Assurance Team member participates in the
Assurance Engagement while knowing that the Assurance Team member will, or might,
join the Assurance Client sometime in the future.
8.61 An Assurance Team member shall notify the Lead Client Service Partner or the
Director of Independence when entering employment negotiations with an
Assurance Client and the individual shall be removed from the Assurance
Engagement.
having an Appropriate Reviewer review any significant judgments made by that Assurance
Team member while on the team.
Recent Service with an Assurance Client
8.63 If an Assurance Team member has recently served as a Director or Officer or employee of
the Assurance Client, a self-interest, self-review or familiarity threat might be created.
Service During the Period Covered by the Assurance Report
8.64 The Assurance Team shall not include a Partner or Professional Staff member
who, during the period covered by the assurance report:
(a) Had served as a Director or Officer of the Assurance Client; or
(b) Was an employee in a position to exert significant influence over the

Underlying Subject Matter or, in an Attestation Engagement, an employee in
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a position to exert significant influence over the Subject Matter Information
of the Assurance Engagement.
Service Prior to the Period Covered by the Assurance Report
8.65 A self-interest, self-review or familiarity threat might be created if, before the period
covered by the assurance report, an Assurance Team member:
(a) Had served as a Director or Officer of the Assurance Client; or
(b) Was an employee in a position to exert significant influence over the Underlying
Subject Matter or, in an Attestation Engagement, an employee in a position to exert
Engagement.
For example, a threat would be created if a decision made or work performed by the
individual in the prior period, while employed by the Assurance Client, is to be evaluated in
the current period as part of the current Assurance Engagement.
 The position the individual held with the Assurance Client.
 The length of time since the individual left the Assurance Client.
 The role of the Assurance Team member.
8.67 An example of an action that might be a Safeguard to address such a self-interest, self-
review or familiarity threat is having an Appropriate Reviewer review the work performed
by the Assurance Team member.
Family and Personal Relationships
8.68 A self-interest, familiarity or intimidation threat might be created by family and personal
relationships between an Assurance Team member and a Director or Officer or, depending
on their role, certain employees of the Assurance Client.
 The individual’s responsibilities on the Assurance Team.
 The role of the family member or other individual within the Assurance Client, and
the closeness of the relationship.
Immediate Family of an Assurance Team Member
8.70 A Partner or Professional Staff member shall not participate as an Assurance

Team member when any of that individual’s Immediate Family Members:
(a) Is a Director or Officer of the Assurance Client;
(b) In an Attestation Engagement, is an employee in a position to exert

Engagement; or
(c) Was in such a position during any period covered by the Engagement or the
Subject Matter Information.
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8.71 A self-interest, familiarity or intimidation threat is created when an Immediate Family
Member of an Assurance Team member is an employee in a position to exert significant
influence over the Underlying Subject Matter of the Assurance Engagement.
 The position held by the Immediate Family Member.

intimidation threat is removing the individual from the Assurance Team.

familiarity or intimidation threat is structuring the responsibilities of the Assurance Team
so that the Assurance Team member does not deal with matters that are within the
responsibility of the Immediate Family Member.
Close Family of an Assurance Team Member
8.75 A self-interest, familiarity or intimidation threat is created when a Close Family Member of
an Assurance Team member is:
(a) A Director or Officer of the Assurance Client; or
(b) An employee in a position to exert significant influence over the Underlying Subject
Matter or, in an Attestation Engagement, an employee in a position to exert
Engagement.
 The nature of the relationship between the Assurance Team member and the Close
Family Member.
 The position held by the Close Family Member.


responsibility of the Close Family Member.
8.79 An Assurance Team member shall consult with the Assurance Engagement
Partner or the Director of Independence if the Assurance Team member has a
Close Family Member who is in a role described in paragraph 8.75.
Other Close Relationships of an Assurance Team Member
8.80 An Assurance Team member shall consult with the Lead Client Service Partner or
the Director of Independence if the Assurance Team member has a close
personal relationship with an individual who is not an Immediate or Close Family
Member, but who is:
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(a) A Director or Officer of the Assurance Client; or
(b) An employee in a position to exert significant influence over the Underlying

Subject Matter or, in Attestation Engagement, an employee in a position to
exert significant influence over the Subject Matter Information of the
intimidation threat created by such relationships include:
 The nature of the relationship between the individual and the Assurance Team
member.
 The position the individual holds with the Assurance Client.


responsibility of the individual with whom the Assurance Team member has a close
relationship.
Relationships of Partners, Professional Staff and Others Employed by the

Member Firm
8.84 A self-interest, familiarity or intimidation threat might be created by a personal or family

relationship between
(a) A Partner or employee of the Member Firm who is not an Assurance Team member;
and
(b) Any of the following individuals at the Assurance Client:
i. A Director or Officer;
ii. An employee in a position to exert significant influence over the Underlying

Subject Matter or, in an Attestation Engagement, an employee in a position to
exert significant influence over the Subject Matter Information of the Assurance
Engagement.
 The nature of the relationship between the Partner or employee of the Member Firm
and the Director or Officer or employee of the Assurance Client.
 The degree of interaction of the Partner or employee of the Member Firm with the
Assurance Team.
 The position of the Partner or employee within the Member Firm.
 The role of the individual within the Assurance Client.
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8.86 Examples of actions that might be Safeguards to address such self-interest, familiarity or
 Structuring the Partner’s or employee’s responsibilities to reduce any potential

influence over the Assurance Engagement.
 Having an Appropriate Reviewer review the relevant assurance work performed.
8.87 A Partner or employee shall consult promptly with the Lead Client Service
Partner or the Director of Independence when changes in the employment status
of Immediate or Close Family Members or individuals with whom the Partner or
employee has a close personal relationship result in a relationship with the
Assurance Client described in paragraphs 8.70 to 8.83.
Business Relationships
8.88 A business relationship with an Assurance Client or its management might create a self-
interest or intimidation threat.
8.89 Examples of business relationships arising from a commercial relationship or common

financial interest include:
 Having a Financial Interest in a joint venture with either the Assurance Client or a
controlling owner, Director or Officer or other individual who performs senior
managerial activities for that Assurance Client.
 Arrangements to combine one or more services or products of the Member Firm with
one or more services or products of the Assurance Client and to market the package
with reference to both parties.
 Distribution or marketing arrangements under which the Member Firm distributes or

markets the Assurance Client’s products or services, or the Assurance Client
distributes or markets the Member Firm’s products or services.
8.90 A Member Firm or an Assurance Team member shall not have a business
relationship with an Assurance Client or its management unless any Financial
Interest is not Material and the business relationship is insignificant to the
Assurance Client or its management and the Member Firm or the Assurance Team
member, as applicable.
8.91 A self-interest or intimidation threat might be created if there is a business relationship

between the Assurance Client or its management and the Immediate Family Member of an
Assurance Team member.
8.92 The purchase of goods and services from an Assurance Client by the Member Firm, or an
Assurance Team member, or any of that individual’s Immediate Family Members does not
usually create a threat to independence if the transaction is in the normal course of
business and at arm’s length. However, such transactions might be of such a nature and
magnitude that they create a self-interest threat.
 Eliminating or reducing the magnitude of the transaction.
 Removing the individual from the Assurance Team.
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Long Association with an Assurance Client
8.94 When a Partner or Professional Staff is involved in an Assurance Engagement of a

recurring nature over a long period of time, familiarity and self-interest threats might be
created. Policies around long association with an Assurance Client are included in DPM
3430, Long Association of Partners and Professional Staff on Audit and Assurance
Engagements.
Fees
8.95 The nature and level of fees or other types of remuneration might create a self-interest or
intimidation threat.
Relative Size of Fees
8.96 When the total fees generated from an Assurance Client by the Member Firm expressing
the conclusion in an Assurance Engagement represent a large proportion of the total fees
of that Member Firm, the dependence on that Client and concern about losing the Client
create a self-interest or intimidation threat.
 The operating structure of the Member Firm.
 Whether the Member Firm is well established or new.
 The significance of the Client qualitatively and/or quantitatively to the Member Firm.
8.98 An example of an action that might be a Safeguard to address such a self-interest or

intimidation threat is increasing the Client base in the Member Firm to reduce dependence
on the Assurance Client.
8.99 A self-interest or intimidation threat is also created when the fees generated by the
Member Firm from an Assurance Client represent a large proportion of the revenue from
an individual Partner’s Clients.
8.100 Examples of actions that might be Safeguards to address such a self-interest or

intimidation threat include:
 Increasing the Client base of the Partner to reduce dependence on the Assurance
Client.
 Having an Appropriate Reviewer who was not an Assurance Team member review
the work.
Contingent Fees
8.101 A Member Firm shall not charge directly or indirectly a Contingent Fee for an
8.102 A Member Firm shall not charge directly or indirectly a Contingent Fee for a Non-
Assurance Service provided to an Assurance Client 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.
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8.103 Paragraphs 8.101 and 8.102 preclude a Member Firm from entering into certain
Contingent Fee arrangements with an Assurance Client. Even if a Contingent Fee
arrangement is not precluded when providing a Non-Assurance Service to an Assurance
Client, a self-interest threat might still be created.
 The range of possible fee amounts.
 Whether an appropriate authority determines the outcome on which the Contingent

Fee depends.
 Disclosure to intended users of the work performed by the Member Firm and the
basis of remuneration.
 The effect of the event or transaction on the Subject Matter Information.
include:
 Having an Appropriate Reviewer who was not involved in performing the Non-
Assurance Service review the relevant assurance work.
 Obtaining an advance written agreement with the Client on the basis of

remuneration.
Overdue Fees
8.106 A self-interest threat might be created if a significant part of fees is not paid before the
assurance report, if any, for the following period is issued. It is generally expected that the
Member Firm will require payment of such fees before any such report is issued. The
requirements set out in paragraphs 8.40 to 8.46 with respect to loans and guarantees
might also apply to situations where such unpaid fees exist.
include:
 Obtaining partial payment of overdue fees.
 Having an Appropriate Reviewer who did not take part in the Assurance Engagement
review the work performed.
8.108 When a significant part of fees due from an Assurance Client remains unpaid for
a long time, the Member Firm shall determine:
(a) Whether the overdue fees might be equivalent to a loan to the Assurance
Client; and
(b) Whether it is appropriate for the Member Firm to be re-appointed or

continue the Assurance Engagement.
Actual or Threatened Litigation
8.109 When litigation with an Assurance Client occurs, or appears likely, self-interest and
intimidation threats are created.
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8.110 The relationship between Client management and Assurance Team members must be
characterized by complete candor and full disclosure regarding all aspects of a Client’s
operations. Adversarial positions might result from actual or threatened litigation between
an Assurance Client and DTTL, the Member Firm or an Assurance Team member. Such
adversarial positions might affect management’s willingness to make complete disclosures
and create self-interest and intimidation threats.
8.111 If there is litigation, or litigation appears likely or is threatened, between a

Member Firm or an Assurance Team member and an Assurance Client, the Lead
Client Service Partner, in consultation with the Director of Independence, shall
identify, evaluate and address the potential threats to independence.
 The materiality of the litigation.
 Whether the litigation relates to a prior Assurance Engagement.
8.113 If the litigation involves an Assurance Team member, an example of an action that might
eliminate such self-interest and intimidation threats is removing that individual from the
Assurance Team.
8.114 An example of an action that might be a Safeguard to address such self-interest and
intimidation threats is having an Appropriate Reviewer review the work performed.
Provision of Non-Assurance Services to Assurance Clients
General Policies
8.115 Member Firms might provide a range of Non-Assurance Services to Assurance Clients,
consistent with their skills and expertise. Providing certain Non-Assurance Services to
Assurance Clients might create threats to compliance with the fundamental principles of
objectivity and integrity and threats to independence.
8.116 Before a Member Firm accepts an Engagement to provide a Non-Assurance

Service to an Assurance Client, the Lead Client Service Partner, in consultation
with the Engagement Partner responsible for the Non-Assurance Service and
Director of Independence, where appropriate, shall determine whether providing
such a service might create a threat to independence.
8.117 New business practices, the evolution of financial markets and changes in information
technology are among the developments that make it impossible to draw up an all-
inclusive list of Non-Assurance services that might be provided to an Assurance Client. As
a result, this chapter does not include an exhaustive listing of all Non-Assurance Services
that might be provided to an Assurance Client.
8.118 When specific guidance on a particular Non-Assurance Service is not included in

this Section 1420, a Member Firm shall apply the conceptual framework
discussed in Chapter 1 of this Section 1420 when evaluating the particular
circumstances.
Evaluating Threats
8.119 Factors that are relevant in evaluating the level of threats created by providing a Non-
Assurance Service to an Assurance Client include:
 The nature, scope and purpose of the service.
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 The degree of reliance that will be placed on the outcome of the service as part of
the Assurance Engagement.
 The legal and regulatory environment in which the service is provided.
 Whether the outcome of the service will affect the Underlying Subject Matter and, in
an Attestation Engagement, matters reflected in the Subject Matter Information of
the Assurance Engagement, and, if so
o The extent to which the outcome of the service will have a Material or
significant effect on the Underlying Subject Matter and, in an Attestation
Engagement, the Subject Matter Information of the Assurance Engagement.
o The extent of the Assurance Client’s involvement in determining significant

matters of judgment.
 The level of expertise of the Client’s management and employees with respect to the
type of service provided.
Multiple Non-Assurance Services Provided to the Same Assurance Client
8.120 A Member Firm might provide multiple Non-Assurance Services to an Assurance Client. In
these circumstances the combined effect of threats created by providing those services is
relevant to the Member Firm’s evaluation of threats.
Addressing Threats
8.121 Chapter 1 includes a description of Safeguards. In relation to providing Non-Assurance

Services to Assurance Clients, Safeguards are actions, individually or in combination, that
the Member Firm takes that effectively reduce threats to independence to an Acceptable
Level. In some situations, when a threat is created by providing a service to an Assurance
Client, Safeguards might not be available. In such situations, the application of the
conceptual framework set out in Chapter 1 requires the Member Firm to decline or end the
Non-Assurance Service or the Assurance Engagement.
Prohibition on Assuming Management Responsibilities
8.122 Management responsibilities involve controlling, leading and directing an entity, including
making decisions regarding the acquisition, deployment and control of human, financial,
technological, physical and intangible resources.
8.123 Providing a Non-Assurance Service to an Assurance Client creates self-review and self-
interest threats if the Member Firm assumes a management responsibility when
performing the service. In relation to providing a service related to the Underlying Subject
Matter and, in an Attestation Engagement, the Subject Matter Information of an Assurance
Engagement provided by the Member Firm, assuming a management responsibility also
creates a familiarity threat and might create an advocacy threat because the Member Firm
becomes too closely aligned with the views and interests of management.
8.124 Determining whether an activity is a management responsibility depends on the

circumstances and requires the exercise of professional judgment. Examples of activities
that would be considered a management responsibility include:
 Setting policies and strategic direction.
 Hiring or dismissing employees.
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 Directing and taking responsibility for the actions of employees in relation to the
employees’ work for the Assurance Client.
 Authorizing transactions.
 Controlling or managing bank accounts or investments.
 Deciding which recommendations of the Member Firm or other third parties to

implement.
 Reporting to the Audit Committee or Others Charged with Governance on behalf of

management.
 Taking responsibility for designing, implementing, monitoring and maintaining

internal control.
8.125 A Member Firm shall not assume a management responsibility related to the
Underlying Subject Matter and, in an Attestation Engagement, the Subject Matter
Information of an Assurance Engagement provided by the Member Firm. If the
Member Firm assumes a management responsibility as part of any other service
provided to the Assurance Client, the Member Firm shall ensure that the
responsibility is not related to the Underlying Subject Matter and, in an
Attestation Engagement, the Subject Matter Information of the Assurance
Engagement provided by the Member Firm.
8.126 Providing advice and recommendations to assist the management of an Assurance Client
in discharging its responsibilities is not assuming a management responsibility.
8.127 To avoid assuming a management responsibility when providing Non-Assurance

Services to an Assurance Client that are related to the Underlying Subject Matter
and, in an Attestation Engagement, the Subject Matter Information of the
Assurance Engagement, the Member Firm shall be satisfied that Client
management makes all related judgments and decisions that are the proper
responsibility of management. This includes ensuring that the Client’s
management:
(a) Designates an individual who possesses suitable skill, knowledge and

experience to be responsible at all times for the Client’s decisions and to
oversee the services. Such an individual, preferably within senior
management, would understand:
(i) The objectives, nature and results of the services; and
(ii) The respective Client and Member Firm responsibilities.
However, the individual is not required to possess the expertise to perform

or re-perform the services;
(b) Provides oversight of the services and evaluates the adequacy of the results
of the service performed for the Client’s purpose; and
(c) Accepts responsibility for the actions, if any, to be taken arising from the
results of the services.
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Other Considerations Related to Providing Specific Non-Assurance
Services
8.128 A self-review threat might be created if, in an Attestation Engagement, the Member Firm
is involved in the preparation of Subject Matter Information which subsequently becomes
the Subject Matter Information of an Assurance Engagement. Examples of Non-Assurance
Services that might create such a self-review threat when providing services related to the
Subject Matter Information of an Assurance Engagement include:
(a) Developing and preparing prospective information and subsequently issuing an

assurance report on this information.
(b) Performing a valuation that is related to or forms part of the Subject Matter
Information of an Assurance Engagement.
Assurance Reports that Include a Restriction on Use and Distribution
8.129 This section sets out certain modifications to this chapter which are permitted in certain
circumstances involving Assurance Engagements where the report includes a restriction on
use and distribution. In this section, an Engagement to issue a restricted use and
distribution assurance report in the circumstances set out in paragraph 8.130 is referred to
as an eligible Assurance Engagement.
8.130 When a Member Firm intends to issue a report on an Assurance Engagement

which includes a restriction on use and distribution, the independence
requirements set out in this chapter shall be eligible for modifications that are
permitted under this chapter, but only if:
(a) The Member Firm communicates with the intended users of the report
regarding the modified independence requirements that are to be applied in
providing the service; and
(b) The intended users of the report understand the purpose, Subject Matter
Information and limitations of the report and explicitly agree to the
application of the modifications.
8.131 The intended users of the report might obtain an understanding of the purpose, Subject
Matter Information, and limitations of the report by participating, either directly, or
indirectly through a representative who has authority to act for the intended users, in
establishing the nature and scope of the Engagement. In either case, this participation
helps the Member Firm to communicate with intended users about independence matters,
including the circumstances that are relevant to applying the conceptual framework. It
also allows the Member Firm to obtain the agreement of the intended users to the
modified independence requirements.
8.132 Where the intended users are a class of users who are not specifically
identifiable by name at the time the Engagement terms are established, the
Member Firm shall subsequently make such users aware of the modified
independence requirements agreed to by their representative.
8.133 For example, where the intended users are a class of users such as lenders in a syndicated
loan arrangement, the Member Firm might describe the modified independence
requirements in an engagement letter to the representative of the lenders. The
representative might then make the Member Firm’s engagement letter available to the
members of the group of lenders to make such users aware of the modified independence
requirements agreed to by the representative.
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8.134 When the Member Firm performs an eligible Assurance Engagement, any
modifications to the requirements of this chapter shall be limited to those
modifications set out in paragraphs 8.136 and 8.138.
8.135 If the Member Firm also issues an assurance report that does not include a
restriction on use and distribution for the same Client, the Member Firm shall
apply the provisions of this chapter to that Assurance Engagement.
Financial Interests, Loans and Guarantees, Business, Family and

Personal Relationships
8.136 When the Member Firm performs an eligible Assurance Engagement:
(a) The relevant provisions set out in paragraphs 8.25 to 8.46 and 8.52 to 8.93
need apply only to the members of the Engagement Team, and their
Immediate and Close Family Members;
(b) The Member Firm shall identify, evaluate and address any threats to
independence created by interests and relationships as set out in
paragraphs 8.25 to 8.46 and 8.52 to 8.93, between the Assurance Client and
the following Assurance Team members:
(i) Those who provide consultation regarding technical or industry

specific issues, transactions or events; and
(ii) Those who provide quality control for the Assurance Engagement,
including those who perform the Engagement Quality Control Review;
and
(c) The Member Firm shall evaluate and address any threats that the
Engagement Team has reason to believe are created by interests and
relationships between the Assurance Client and others within the Member
Firm who can directly influence the outcome of the Assurance Engagement,
as set out in paragraphs 8.25 to 8.46 and 8.52 to 8.93.
8.137 Others within the Member Firm who can directly influence the outcome of the Assurance
Engagement include those who recommend the compensation, or who provide direct
supervisory, management or other oversight, of the Assurance Engagement Partner in
connection with the performance of the Assurance Engagement.
8.138 When the Member Firm provides an eligible Assurance Engagement, the Member
Firm shall not hold a Material direct or a Material Indirect Financial Interest in
Gifts and Hospitality
8.139 Offering and accepting gifts and hospitality to or from an Assurance Client or its
management might create a self-interest, familiarity and intimidation threat.
8.140 A Member Firm or an Assurance Team member shall not offer or accept gifts and
hospitality to or from an Assurance Client or its management unless the value is
trivial and inconsequential.
8.141 Whether a gift or entertainment is appropriate depends on what is reasonable and

customary in the particular jurisdiction, the gift’s nature and frequency, and any local
independence requirements and Member Firm policies. Additionally, the Client’s policies on
accepting gifts from the provider of assurance services shall be considered. If there are
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any questions regarding the offering or receiving of a gift or hospitality to or
from an Assurance Client or its management, the Director of Independence shall
be consulted.
8.142 Taking part in excessive entertainment with an Assurance Client might result in close
personal relationships with personnel at the Client. The determination of what would be
considered excessive entertainment would include the nature, frequency, value, occasion,
etc. surrounding the entertainment. When a close personal relationship is created, such
relationship would need to be assessed in accordance with paragraphs 8.80 through 8.83.
8.143 DPM 1550, Anti-Corruption, and the DTTL and Member Firm ethical codes also apply to
gifts and hospitality involving an Assurance Client and its management. Failure to comply
with such policies might also create a threat to independence
Breach of an Independence Provision for Assurance Engagements
independence requirement applicable to the Assurance Engagement has
occurred, the Member Firm shall:
(a) Promptly report the breach to:
(i) The Lead Client Service Partner
(ii) The Assurance Engagement Partner;
(iii) The Director of Independence; and
(iv) The DTTL Senior Managing Director– Global Independence.
(b) End, suspend or eliminate the interest or relationship that created the
breach;
(c) Evaluate the significance of the breach and its impact on the Member Firm’s
objectivity and ability to issue an assurance report; and
(d) Determine whether action can be taken that satisfactorily addresses the
consequences of the breach.
In making this determination, the Member Firm shall exercise professional

judgment and take into account whether a reasonable and informed third party
would be likely to conclude that the Member Firm’s objectivity would be
compromised, and therefore, the Member Firm would be unable to issue an
assurance report.
8.145 If the Member Firm determines that action cannot be taken to address the
consequences of the breach satisfactorily, the Member Firm shall, as soon as
possible, inform the party that engaged the Member Firm or the Audit Committee
or Others Charged with Governance, as appropriate. The Member Firm shall also
take the steps necessary to end the Assurance Engagement in compliance with
any applicable legal or regulatory requirements relevant to ending the Assurance
Engagement.
8.146 If the Member Firm determines that action can be taken to address the
consequences of the breach satisfactorily, the Member Firm shall discuss the
breach and the action it has taken or proposes to take with the party that
engaged the Member Firm or the Audit Committee or Others Charged with
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Governance, as appropriate. The Member Firm shall discuss the breach and the
proposed action on a timely basis, taking into account the circumstances of the
Engagement and the breach.
8.147 If the party that engaged the Member Firm, the Audit Committee or Others
Charged with Governance, as appropriate, do not concur that the action proposed
by the Member Firm in accordance with paragraph 8.146 satisfactorily addresses
the consequences of the breach, the Member Firm shall take the steps necessary
to end the Assurance Engagement in compliance with any applicable legal or
regulatory requirements relevant to ending the Assurance Engagement.
8.148 In complying with the requirements in paragraphs 8.144 to 8.145, the Member
Firm shall document:
(a) The breach;
(b) The actions taken;
(c) The key decisions made; and
(d) All the matters discussed with the party that engaged the Member Firm or
the Audit Committee or Others Charged with Governance.
8.149 If the Member Firm continues with the Assurance Engagement, it shall
document:
(a) The conclusion that, in the Member Firm’s professional judgment,

objectivity has not been compromised; and
(b) The rationale for why the action taken satisfactorily addressed the
consequences of the breach so that the Member Firm could issue an
assurance report.
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1420—Independence
Chapter 9 - Administration and Quality Controls
Introduction
9.1 This chapter of Section 1420 provides policies and guidance on establishing quality
controls over independence, under the leadership of the Member Firm Director of
Independence. Unless otherwise specified, provisions in this chapter that refer to a
“Member Firm” include a “Geography Firm”.
9.2 DTTL and Member Firms shall have adequate quality controls in place to monitor
compliance with the policies in this Section 1420.
9.3 In order to ensure compliance with the policies in this Section 1420, a Member
Firm shall adequately resource their independence function and internal
independence quality control processes.
9.4 The factors relevant in considering the resources needed within a Member Firm to manage
independence quality control processes include:
 The size, structure, characteristics and growth strategy of the Member Firm.
 The type and complexity of Professional Services it offers.
 The type of Clients it serves.
 The complexity of its legal and regulatory environment.
 The tendency for its Partners and Professional Staff to acquire, maintain, and trade
in Financial Interests and to establish other financial or business relationships.
9.5 The policies in this Section 1420 apply to each entity defined as a Member Firm
including any entity that is considered under Appendix M to be an Associated
Entity of a Member Firm. Accordingly, the requirement to maintain independence
quality controls applies to Member Firms as well as their Associated Entities.
9.6 Information about the independence operating model in the case of a Member Firm
comprised of more than one Geography Firm is included in Appendix O.
9.7 In situations where an entity is jointly owned by more than one Member Firm
legal entity or more than one Geography Firm (e.g., a joint venture, a regional or
global delivery center), the respective Directors of Independence shall determine
the Member Firm or Geography Firm that is responsible for the independence
related activities at the jointly owned entity and be satisfied that the quality
controls ensure compliance with the policies in this Section 1420.
Role and Responsibilities of the Director of Independence
9.8 A Member Firm shall:
(a) Subject to paragraph 9.9, appoint a Partner as a Director of Independence.

This requirement also applies to each Geography Firm within the Member
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Firm unless otherwise approved by the DTTL Senior Managing Director –
Global Independence; and
(b) Internally communicate within the Member Firm the identity of such
individual.
9.9 A Member Firm shall consult with the DTTL Senior Managing Director—Global
Independence prior to appointing:
(a) The Director of Independence of a Member Firm; and
(b) In the case of a Member Firm that comprises more than one geography, the
Director of Independence of a Geography Firm.
9.10 The Director of Independence shall report to the Member Firm’s senior
management such as the Reputation and Risk Leader, the Managing Partner,
senior partner, CEO, or a member of the executive group or executive board and
is responsible for:
(a) Leading all significant independence matters within the Member Firm,
including the design, implementation, operation, monitoring and
maintenance of the Member Firm’s quality controls over independence (see
paragraphs 9.14 to 9.61);
(b) Conducting all consultations relating to independence for the Member Firm
and where required, consulting with the DTTL Senior Managing Director-
Global Independence;
(c) Establishing processes to ensure the entities that are defined in Appendix G
are timely reported to the Global Independence Group for inclusion in the
Deloitte Entity Search and Compliance system;
(d) Overseeing the operation of the Global Independence Monitoring System

within the Member Firm;
(e) Providing an annual update to the Member Firm’s most senior governing
body or an appropriate committee thereof (e.g., Board of Directors, Risk
Committee of the Board of Directors, etc.) about the significant
independence matters that are relevant to the Member Firm (e.g., results of
independence monitoring activities conducted by the Member Firm,
breaches of an independence requirement, internal and external practice
review findings, upcoming changes to independence policies, standards or
regulations, emerging matters, disciplinary matters); and
(f) Informing the DTTL Senior Managing Director–Global Independence where

local standard setters and regulators are proposing or have adopted
standards or regulations that deviate significantly from the independence
policies established by DTTL. This is especially important when such
standards or regulations have, or are expected to have, cross-border
implications.
Quality Controls
9.11 DTTL and its Member Firms, under the leadership of the Directors of Independence,
facilitate compliance with DTTL independence policies as outlined in this Section 1420 by
implementing appropriate quality control processes.
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9.12 The Global Independence Group has developed templates and tools to facilitate the
consistent and effective implementation of quality control processes across the
organization and encourages their use by the Member Firms. These materials include
contract and engagement letter language, work programs and guidance to support
performance of monitoring activities and the analysis and documentation of independence
matters. The tools and templates can be found in the DOI Reference Library which is
available to Directors of Independence and members of independence teams.
9.13 The quality controls over independence include, but are not limited to:
 Consultation Process (see paragraphs 9.14 to 9.18)
 Engagement Acceptance Process (see paragraph 9.19)
 Business Relationship Process (see paragraph 9.20)
 Breach of Applicable Independence Requirements (see paragraphs 9.21 to

9.22)
 Independence Related Regulatory Inspection Findings and Investigations

(see paragraph 9.23)
 Restricted Entities (see paragraph 9.24 to 9.25)
 Deloitte Entity Search and Compliance System (see paragraphs 9.26 to 9.28)
 Service Request Management (SRM) Application (see paragraph 9.29)
 Global Independence Monitoring System (see paragraphs 9.30 to 9.39)
 Confirmation Process (see paragraphs 9.40 to 9.43)
 Independence-Related Learning (see paragraphs 9.44 to 9.47)
 Practice Reviews (see paragraph 9.48)
 Inspection and Testing (see paragraph 9.49)
 Disciplinary Process (see paragraph 9.50)
 Employment by, or Activities Involving, a Restricted Entity (see paragraphs

9.51 to 9.52)
 Member Firm Independence Confirmation (see paragraphs 9.53 and 9.54)
 Independence-Related Communications (see paragraph 9.55)
 Long Association with Restricted Entities (see paragraph 9.56)
 Identification and Monitoring of Associated Entities and Member Firm

Investments (see paragraphs 9.57 to 9.58)
 Outside Investors in Member Firms (see paragraph 9.59)
 Member Firm Transactions (see paragraphs 9.60 and 9.61)
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Consultation Process
9.14 The Director of Independence shall establish and document an independence

consultation process designed to provide reasonable assurance that one or more
individuals having appropriate level of knowledge, competence, objectivity,
authority, and judgment will be available for consultation. The consultation
process, including the number of individuals involved, will depend on the size,
geographic locations, and organizational complexity of the Member Firm.
9.15 To support a consultation process within a Member Firm, the Director of

Independence shall implement appropriate consultation procedures and a
consultation network, which will ordinarily include making Partners and
Professional Staff aware of, and ensuring they have access to, independence
consultation resources.
9.16 The Director of Independence shall consult with:
(a) The Director of Independence of another Member Firm on matters that

relate to independence policies of such other Member Firm; or
(b) The Global Independence Group on matters that relate to DTTL

independence policies or where there is a difference of opinion that has not
been resolved. Differences of opinion shall be resolved in accordance with
DPM 1515, Facilitating The Resolution Of Differences Of Opinion Between
Member Firms Related To Client Relationship Matters and DPM 1650,
Addressing Differences of Opinion.
Member Firms shall follow the conclusion from such a consultation unless further
consultation occurs.
9.17 Some Member Firms may decide to have an independence consultation structure within
the Member Firm that extends beyond the Director of Independence or the independence
function because of their size, geographic locations, or organizational complexity. This
may include, for example, a functional and/or geographic consultation structure.
9.18 Consultations shall be documented. A copy of such documentation shall be

retained in accordance with DPM 3710, Retention of Engagement
Documentation.
Engagement Acceptance Process
(a) Implement processes to ensure that before accepting new Clients and
Engagements, compliance with this Section 1420 is evaluated;
(b) Monitor compliance with such processes; and
(c) Where services are provided to Restricted Entities, monitor compliance with
the applicable requirements of this Section 1420 (e.g., required pre-approvals,
permissibility of the service, evaluating and addressing threats to independence,
completion of required Audit Committee communications, updating DESC timely,
etc.).
(See DPM 1510, Engagement Acceptance and Risk Classification.)
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Business Relationship Process
(a) Implement processes to ensure that any business relationship does not
impair independence with respect to a Restricted Entity; and
(b) Monitor and test compliance with such processes.
Breach of Applicable Independence Requirements
9.21 A Member Firm shall implement processes to ensure that any breach of the
IESBA Code or other applicable independence requirements is addressed as
required under Chapter 5 or Chapter 8, as applicable.
9.22 A Member Firm shall promptly report any violation of SEC or other applicable
national regulatory (e.g., FSA, EU Audit Legislation, etc.) or professional (e.g., AICPA,
ICAEW, CPA Canada, CNCC, etc.) independence rules, or of the IESBA Code to the
DTTL Senior Managing Director–Global Independence.
Independence Related Regulatory Inspection Findings and

Investigations
9.23 A Member Firm shall promptly report all external regulatory inspection findings
and investigations related to independence matters to the DTTL Senior Managing
Director – Global Independence. Matters to be reported include inspection findings on
independence matters related to a specific engagement as well as those related to the
Member Firm’s independence quality controls.
Restricted Entities
9.24 A Member Firm shall provide Partners and employees with access to DESC and
the local list of Restricted Entities, if applicable, that allows individuals to
identify entities that are subject to independence restrictions.
9.25 A Member Firm shall have procedures and controls that:
(a) Monitor a Restricted Entity’s merger and acquisition activity to provide

timely notice of a merger or acquisition; and
(b) Promptly identify services or relationships after initial notification of a

potential merger or acquisition that may trigger independence violations,
but before the effective date of the transaction.
Deloitte Entity Search and Compliance System
9.26 The Global Independence Group is responsible for:
(a) Implementing and operating the Deloitte Entity Search and Compliance System
(DESC);
(b) Collecting from Member Firms information required under Appendix G for inclusion in
DESC; and
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(c) Making the information available to all Member Firms in accordance with the
procedures and criteria put in place by the DTTL Senior Managing Director–Global
Independence.
9.27 A Member Firm shall report to the Global Independence Group all entities that
are required to be included in DESC, in accordance with the policies and
procedures put in place by the DTTL Senior Managing Director–Global
Independence. Appendix G contains the definitions, criteria, expected frequency for
updating this information and business processes to be used for such reporting.
9.28 A Member Firm shall report to the Global Independence Group all changes to
entities that are required to be included in DESC within 10 business days of the
change being communicated to the Director of Independence.
Service Request Management (SRM) Application
9.29 A Member Firm shall require all service requests for non-audit services to be
provided to Restricted Entities that are included in the DESC system to be
submitted and approved through the SRM application and implement processes
to ensure such service requests are addressed on a timely basis. The Global
Independence Group establishes practices and guidelines for Member Firms and their
submitting parties and/or DESC Responsible Parties to timely submit, review and conclude
on a service request.
Global Independence Monitoring System
9.30 The Global Independence Group is responsible for implementing and operating the Global
Independence Monitoring System (GIMS) and making the information available to all
Member Firms in accordance with the procedures and criteria put in place by the DTTL
Senior Managing Director–Global Independence.
9.31 A Member Firm shall implement processes to ensure that:
(a) The entity and security master file data maintained in GIMS related to the
geographies served by the Member Firm remains relevant and accurate;
(b) The entity and security information that is required under another Member
Firm’s local independence policies is included in GIMS as requested by that
Member Firm;
(c) Additions, changes or deletions are made promptly in GIMS;
(d) Those persons with the reporting requirements under paragraph 2.82 are
identified and provided with access to an account in GIMS; and
(e) Compliance with the reporting requirements under paragraphs 2.81 and
2.82 is monitored and any system generated exceptions or other messages
are addressed on a timely basis.
9.32 A Member Firm shall have:
(a) A Financial Institution Data Import Program (FIDIP); or
(b) A GIMS Service Center, if FIDIP is not possible due to legal or practical
constraints.
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9.33 Where the FIDIP is used by a Member Firm to meet the requirement of paragraph
9.32, the FIDIP shall be used to update GIMS for the Financial Interests that are
held in the Securities Accounts of all Partners, Client-Facing Managers and others
specified by the DTTL Senior Managing Director – Global Independence or by the
Director of Independence.
9.34 If a Member Firm has a GIMS Service Center to meet the requirement of
paragraph 9.32, at a minimum, the GIMS Service Center shall make the following
services available to all Partners:
(a) Assisting with determination of permissibility of contemplated Financial

Interests or other financial relationships;
(b) Updating GIMS accounts with any newly acquired investments (including
investments of Immediate Family Members);
(c) Amending and removing existing holdings from GIMS accounts; and
(d) Documenting communications between the GIMS Service Center and the
Partner.
9.35 A Member Firm may use a combination of FIDIP and a GIMS Service Center to meet the
requirement in paragraph 9.32.
9.36 If a Member Firm permits its Partners or their Immediate Family Members to
hold a Financial Interest in a Restricted Entity that is a Collective Investment
Fund in accordance with paragraph 2.7, the Member Firm shall implement a
process to monitor that while the Financial Interest is held by the Partner or
their Immediate Family Member, the Partner does not become:
(a) A Covered Person with respect to the Collective Investment Fund or any of
its Affiliates; or
(b) A member of the Engagement Team with respect to the audit of the
investment adviser or manager of the Collective Investment Fund.
9.37 A Member Firm shall implement a process to:
(a) Monitor on a timely basis all issues identified by GIMS, including but not
limited to, potential exceptions to independence policies, system and data
conflicts and system messages; and
(b) Address the exception with the GIMS user until it is resolved satisfactorily.
9.38 When using GIMS, Member Firms shall comply with any privacy policies or
procedures as defined by DTTL and Local Laws to protect users’ confidential
information.
9.39 The Director of Independence shall consult with the DTTL Senior Managing
Director–Global Independence on constraints on the use of GIMS that arise from
Local Laws.
Confirmation Process
9.40 A Member Firm shall implement a process to obtain an annual confirmation from
all Partners, Professional Staff and all others employed by the Member Firm that
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they have, to the best of their knowledge, complied with the DTTL independence
policies and the independence policies of their Member Firm, and they know of
no issues that could impair independence with respect to any entity where
independence is required.
9.41 In addition to the annual confirmation process in accordance with paragraph

9.40, a Member Firm shall establish a process to obtain a confirmation of
compliance with DTTL independence policies and the independence policies of
their Member Firm from the following individuals:
(a) Newly admitted and newly promoted Partners;
(b) Newly hired employees;
(c) Partners re-locating to a different Office; and
(d) Partners who will be appointed to the Member Firm Board of Directors or
Executive Committee, or in a role deemed to be in the Chain of Command,
prior to being appointed to such a role.
9.42 A Member Firm shall review timely the confirmation responses of its Partners and
employees and address any comments or exceptions reported.
9.43 The forms used to obtain the confirmations referred to in paragraphs 9.40 and
9.41 shall be approved by the DTTL Senior Managing Director–Global
Independence. Alternatively, the Member Firm may choose to use the forms prepared
by the Global Independence Group in the confirmation process.
Independence-Related Learning
9.44 A Member Firm shall provide all Partners, Professional Staff and all others
employed by the Member Firm annual or on-going independence training,
communications and learning opportunities to enable them to understand and
apply the DTTL independence policies and the independence policies of their
Member Firm and shall monitor such individuals’ participation in these learning
programs.
9.45 At a minimum, a Member Firm shall require the following individuals to complete
the mandatory courses listed below (or their equivalent) within 30 days of
hiring, role-change, promotion or admittance to the partnership:
 Independence Awareness:
(a) Newly admitted and newly promoted Partners;
(b) Newly promoted Client-Facing managers; and
(c) Newly hired Professional Staff.
 Business Relationships:
(a) Newly admitted and newly promoted Partners; and
(b) Newly hired and newly promoted managers including those who are
not Client-Facing managers.
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 Financial Interests:
(a) Newly admitted and newly promoted Partners; and
(b) Newly hired and newly promoted Client-Facing managers.
9.46 The DTTL Senior Managing Director–Global Independence and the Global
Independence Group shall provide learning materials to support Member Firms in
meeting their obligations to provide sufficient learning of the DTTL independence
policies. When a learning course is significantly updated, DTTL Senior Managing Director–
Global Independence will notify the Member Firms if the course should be retaken.
Member Firms are encouraged to enhance the learning process by supplementing the
learning materials provided to address Local Laws and professional requirements as
appropriate in the Member Firm.
9.47 A Member Firm shall inform all Partners and Professional Staff and all others
employed by the Member Firms of their responsibility to be aware of the
independence policies appropriate to their roles, responsibilities, and
professional requirements.
Practice Reviews
9.48 The DTTL Senior Managing Director–Global Independence shall implement a

program to monitor Member Firms’ implementation of the quality controls over
independence covered in this chapter. This program may be implemented in
conjunction with the monitoring programs implemented by Global Functions (e.g., the
Assurance Practice Review Manual).
Inspection and Testing
9.49 Member Firms shall implement an annual inspection and testing process, based
on the program established by the DTTL Senior Managing Director–Global
Independence, to monitor compliance with certain DTTL independence policies
(see Appendix J).
Disciplinary Process
9.50 A Member Firm shall implement a disciplinary policy and process based on the
criteria established by the DTTL Senior Managing Director–Global Independence,
to address non-compliance with DTTL independence policies (see Appendix K).
Employment by, or Activities Involving, a Restricted Entity
9.51 DTTL and Member Firms shall have processes to identify and evaluate the
employment relationships, activities and Director and Officer roles of the
following individuals for compliance with Chapter 3 of this Section 1420:
(a) Current Partners and employees;
(b) Former Partners and Professional Staff;
(c) Candidates who are being considered for admittance to a Member Firm
partnership or for employment by DTTL or a Member Firm;
(d) Immediate Family Members and Close Family Members of:
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(i) Current Partners and Professional Staff;
(ii) Candidates who are being considered for admittance to a Member Firm
partnership.
Partner and Employee Contractual Arrangements
9.52 Unless there is conflict with local professional, regulatory, or legal requirements,
Member Firms shall include an explicit clause in their partnership and Retired
Partner agreements and employment contracts requiring individuals to comply
with the DTTL independence policies and the independence policies of the
relevant Member Firm. A Member Firm may consider whether certain matters should be
specifically referenced in such agreements, including, but not limited to, the
acknowledgement that individuals will:
 Use GIMS, as implemented and changed from time to time.
 Waive their rights to privacy in relation to the use of GIMS, insofar as necessary to
allow the system to operate effectively, and to allow inspection and monitoring of
the information entered into it and other information related to financial
relationships not required to be added to GIMS, limited to the extent permitted
and/or required by Local Laws (e.g., privacy laws, employment rights and other
legislation).
 Notify the Member Firm prior to accepting a role or employment at a Restricted

Entity (whether paid or unpaid) that would impair independence.
 Waive their rights to privacy, as required, to allow a reporting process of any

identified breach of the independence provisions.
Member Firm Independence Confirmation
9.53 A Member Firm shall confirm annually by July 31 to the DTTL Senior Managing
Director–Global Independence using the form provided by the Global
Independence Group that to the best of the Member Firm’s knowledge, it is in
compliance with DTTL’s independence policies. The report is to be completed by
the Director of Independence and signed and approved by the Director of
Independence, the Reputation and Risk Leader and the Representative of the
Member Firm.
9.54 If an unqualified confirmation cannot be provided, the report shall identify all
exceptions and other independence issues that result in the Member Firm being
unable to issue an unqualified confirmation of compliance. This may also include a
summary of those issues where parts of this policy are in conflict with Local Laws.
Independence-Related Communications
9.55 Member Firms shall provide regular communications to all Partners, Professional
Staff and all others employed by the Member Firm to strengthen awareness and
understanding of the DTTL independence policies and the independence policies
of their Member Firm. Such communications shall include regular
communications from Member Firm leadership to give prominence to the
independence policies and demonstrate the Member Firm’s commitment to
independence.
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Appendix N includes guidance on relevant communication topics, suggested
communication cycles and information on where to access templates to assist with
communications.
Long Association with Restricted Entities
9.56 A Member Firm shall implement a process for monitoring the rotation
requirements of its audit Partners.
Identification and Monitoring of Associated Entities and Member Firm

Investments
9.57 A Member Firm shall implement a process for identifying entities that are
Associated Entities in accordance with Appendix M and monitoring their
compliance with this Section 1420.
9.58 With the exception of Financial Interests that are passive in nature (e.g.,
investments held in a Member Firm pension plan), Member Firms shall analyze
whether or not a Member Firm investment creates an Associated Entity and
document the conclusion.
Outside Investors in Member Firms
9.59 Where an Associated Entity is not wholly owned by a Member Firm, the process
referred to in paragraph 9.57 shall also include the identification and monitoring
of any outside investors that are not Member Firms or current Partners of a
Member Firm to ensure the relationship is permissible under paragraphs 2.84
and 2.85 of this Section 1420.
Member Firm Transactions
9.60 When acquiring another entity (e.g., through a stock transaction, asset purchase,
talent hire, etc.), a Member Firm shall conduct due diligence to ensure all
interests and relationships of the target are identified and assessed under this
Section 1420 prior to the closing date of the transaction. As required under OM
10, Mergers, Investments, Acquisitions and Divestments, the Director of
Independence shall oversee due diligence as it relates to independence matters.
Such due diligence includes an assessment of services provided by the target and
business, financial and employment relationships of the target and individuals who will
become Partners of the Member Firm, as applicable. The Member Firm shall document
the procedures performed, findings and actions taken.
9.61 When disposing of a business, a Member Firm, in consultation with the Director
of Independence, shall ensure the business is adequately separated such that it
will no longer be considered an Associated Entity of the Member Firm. The
Member Firm shall document the analysis of the separation and the resulting
conclusion. Additional guidance regarding Associated Entities of a Member Firm can be
found in Appendix M.
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Definitions
The words below have been defined as indicated and are capitalized wherever they appear in this
Section 1420:
Acceptable Level: The level at which a Member Firm, using the Reasonable and Informed Third
Party Test, would likely conclude that the Member Firm or an Audit or Assurance Team member
complies with the fundamental principles of integrity and objectivity, and is independent.
Accounting Role: A role, either through employment or as a service provider, in which a person
is in a position to or does exercise more than minimal influence over the contents of the
accounting records or anyone who prepares them. A Financial Reporting Oversight Role is also an
Accounting Role.
Advisory Partner: A Member Firm Partner who has been assigned responsibility for monitoring
and helping to assess the quality of the overall Client relationship with the Lead Client Service
Partner. See Appendix II of DPM 1612, Member Firm Clients and Markets Structure, for guidance
on the roles and responsibilities of an Advisory Partner.
Affiliate:
Affiliate of all Audit Clients: Any entity over which the Audit Client has direct or indirect control is
an Affiliate of the Audit Client. Based on the type of Audit Client, there might be additional
Affiliates as described below. Audit Teams shall also consider whether Local Laws require
additional entities to be treated as Affiliates of the Audit Client and ensure the applicable
independence requirements are met.
Affiliate of an Audit Client that is a Listed Entity: An entity that has any of the following
relationships with the Audit Client:
(a) An entity that has direct or indirect control over the Audit Client if the Audit Client is Material
to such entity;
(b) An entity with a Direct Financial Interest in the Audit Client if that entity has significant
influence over the Audit Client and the interest in the Audit Client is Material to such entity;
(c) An entity over which the Audit Client has direct or indirect control;
(d) An entity in which the Audit Client, or an entity related to the Audit Client under (c) above,
has a Direct Financial Interest that gives it significant influence over such entity and the
interest is Material to the Audit Client and its Affiliate in (c);
(e) An entity which is under common control with the Audit Client (a “sister entity”) if the sister
entity and the Audit Client are both Material to the entity that controls both the Audit Client
and sister entity; and
(f) Any other entity not included in (a) through (e) whose Financial Statements are consolidated
with the Financial Statements of the Restricted Entity.
Affiliate of an Audit Client that is subject to SEC independence rules: An entity that has any of
the following relationships with the Audit Client:
(a) An entity that has direct or indirect control over the Entity Under Audit;
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(b) An entity over which the Entity Under Audit has direct or indirect control;
(c) An entity that is under common control with the Entity Under Audit (a “sister” entity) when
the entity and the Entity Under Audit are each Material to the controlling entity;
(d) An entity that has significant influence over the Entity Under Audit, and the interest in the
Entity Under Audit is Material to such entity;
(e) An entity over which the Entity Under Audit has significant influence, and the interest is
Material to the Entity Under Audit, and all entities over which such entity has control,
regardless of materiality; or
(f) Each entity in the Investment Company Complex when the Entity Under Audit is an
investment company or investment adviser or sponsor.
Control: For purposes of this definition, the following would be indicative of a controlling
relationship:
 Consolidation of the entity.
 Direct or indirect ownership of greater than 50 percent of the equity of an entity.
 Direct or indirect ownership of greater than 50 percent of the outstanding voting shares of
an entity.
 Having the right to appoint more than 50 percent of the board seats for an entity.
 In the case of an Audit Client that is subject to SEC independence rules, a general partner,
managing member, trustee, investment adviser or equivalent that has operational control
over a limited partnership, limited liability corporation, or similar entity shall be presumed to
control the entity, irrespective of the underlying ownership interest.
The power to control might also exist with a lesser percentage of ownership, for example, by
contract, lease, agreement with other stockholders, or by court decree and would also need to be
considered.
Significant Influence: For purposes of this definition, the usual condition for significant influence
over an entity that is not controlled is an ownership interest of 20 percent or more of the voting
stock of an investee. Such influence might be indicated in several ways, including, but not limited
to, the following:
 Accounting for the investee under the equity method of accounting.
 Representation on the board of directors.
 Participation in decision making processes.
 Material transactions between the entities.
 Interchange of managerial personnel.
 Technological dependency.
 Extent of ownership by an investor in relation to the concentration of other shareholders

(substantial or majority ownership of the voting stock of an investee by another shareholder
does not necessarily preclude the ability to exercise significant influence by the investor).
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 Joint control where neither party can unilaterally control the entity and the entity is not
consolidated.
Materiality: For purposes of this definition, quantitative measures to determine if one entity is
Material to another include:
(a) The parent or investor’s carrying amount of investment in and advances to the entity
compared to the parent or investor’s consolidated total assets, or
(b) The parent or investor’s equity in the entity’s income or profit from continuing operations
before income taxes compared to the parent or investor’s consolidated income or profit from
continuing operations before income taxes.
Depending on the circumstances, it might be reasonable to use certain other measures, such as
assets under management, when evaluating whether one entity is Material to another. This
assessment includes considering the nature of the relationship, the governance structure of the
entity, and business and financial relationships between the entities.
Additional matters to consider when determining quantitative materiality include:
 If the parent or investor is a non-Client and its carrying amount of investments in and
advances to the subsidiary or investee is not readily available, the parent’s or investor’s
proportionate share of the subsidiary’s or investee’s total assets is used in the calculation
described above.
 If income from continuing operations before income taxes for the year is clearly not
indicative of the past or expected future amounts of such income, the reference point for
materiality determinations is the average for the preceding three years of income before
income taxes from continuing operations.
When unable to obtain quantitative information to make the assessment of materiality, an entity is
presumed to be Material.
In addition to the quantitative conditions above, qualitative factors (e.g., reference in the parent
or investor’s filings about the importance of a subsidiary or investee) might impact the overall
conclusions with respect to the materiality of a subsidiary or investee to the parent or investor.
Appropriate Reviewer: A professional with the necessary knowledge, skills, experience and
authority to review, in an objective manner, the relevant work performed or service provided.
Such an individual might be a Professional Accountant.
Associated Entity: In relation to DTTL or a Member Firm and solely for purposes of this Section
1420, “Associated Entity” means a firm or entity that is considered to belong to the DTTL network
(see Appendix M). For purposes of this Section 1420, an Associated Entity includes a pension,
retirement, investment or similar plan of DTTL or a Member Firm.
Assurance Client: The Responsible Party and also, in an Attestation Engagement, the party
taking responsibility for the Subject Matter Information (who might be the same as the
Responsible Party).
Assurance Engagement: An engagement with the purpose to obtain sufficient appropriate

evidence in order to express a conclusion designed to enhance the degree of confidence of the
intended users other than the Responsible Party about the Subject Matter Information.
(ISAE 3000 (Revised) describes the elements and objectives of an Assurance Engagement
conducted under that Standard and the Assurance Framework provides a general description of
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Assurance Engagements to which International Standards on Auditing (ISAs), International
Standards on Review Engagements (ISREs), and International Standards on Assurance
Engagements (ISAEs) apply.)
In this Section 1420 the term Assurance Engagement refers to Assurance Engagements that are
not Audit Engagements or Review Engagements.
Assurance Engagement Partner: The Partner or other person in the Firm who is responsible for
the Assurance Engagement and its performance, and for the assurance report that is issued on
behalf of the Member Firm, and who, where required, has the appropriate authority from a
professional, legal or regulatory body.
Assurance Team:
(a) All members of the Engagement Team for the Assurance Engagement;
(b) All others within a Member Firm who can directly influence the outcome of the Assurance
Engagement, including:
(i) Those who recommend the compensation of, or who provide direct supervisory,
management or other oversight of the Assurance Engagement Partner in connection
with the performance of the Assurance Engagement;
(ii) Those who provide consultation regarding technical or industry specific issues,
transactions or events for the Assurance Engagement; and
(iii) Those who provide quality control for the Assurance Engagement, including those who
perform the Engagement Quality Control Review for the Assurance Engagement.
Attestation Engagement: An Assurance Engagement in which a party other than a Member

Firm measures or evaluates the Underlying Subject Matter against the Criteria. A party other than
the Member Firm also often presents the resulting Subject Matter Information in a report or
statement. In some cases, however, the Subject Matter Information may be presented by the
Member Firm in the assurance report. In an Attestation Engagement, the Member Firm’s
conclusion addresses whether the Subject Matter Information is free from material misstatement.
The Member Firm’s conclusion may be phrased in terms of:
(a) The Underlying Subject Matter and the applicable Criteria;
(b) The Subject Matter Information and the applicable Criteria; or
(c) A statement made by the appropriate party.
Audit and Professional Engagement Period: In the case of an Audit Client that is subject to
SEC independence rules, the period includes both:
(a) The period covered by any Financial Statements being audited or reviewed (the “audit
period”); and
(b) The period of the engagement to audit or review the Audit Client’s Financial Statements or
to prepare a report filed with the SEC (the “professional engagement period”):
(i) The professional engagement begins when the Member Firm either signs an initial
engagement letter (or other agreement to review or audit a Client’s Financial
Statements) or begins audit, review, or attest procedures, whichever is earlier; and
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(ii) The professional engagement period ends when the Audit Client or the Member Firm
notifies the SEC that the Client is no longer an Audit Client of the Member Firm or any
other Member Firm.
The Audit and Professional Engagement Period does not include periods ended prior to the first
day of the last fiscal year before the issuer first filed, or was required to file, a registration
statement or report with the SEC, provided there has been full compliance with the applicable
independence standards in all prior periods covered by any registration statement or report filed
with the SEC. This definition of Audit and Professional Engagement Period also applies where a
registrant is undergoing a reverse merger that is in substance similar to an IPO (e.g., a
transaction with a special purpose acquisition company). Additionally, where an issuer withdraws
an initial registration statement, the re-filing of a new registration statement would be considered
the issuer’s first-time filing.
Audit Client: An entity in respect of which a Member Firm conducts an Audit Engagement. When
used in this Section 1420, an Audit Client includes its Affiliates. For purposes of this Section 1420,
the term Audit Client includes Review Client.
Audit Committee: For an audit conducted pursuant to the SEC independence rules, a committee
(or equivalent body) established by and amongst the board of directors of an Audit Client. The
purpose of this committee is overseeing the accounting and financial reporting processes of the
Audit Client and audits of the Financial Statements of the Audit Client. If no such committee exists
with respect to an Audit Client, the entire board of directors of the Audit Client would serve this
role.
Audit Committee or Others Charged with Governance: The person(s) or organization(s) (for
example, a corporate trustee) with responsibility for overseeing the strategic direction of the entity
and obligations related to the accountability of the entity. This includes overseeing the financial
reporting process. Depending on the jurisdiction, the Audit Committee or Others Charged with
Governance might include management personnel, for example, executive members of a
governance board of a private or public sector entity, or an owner-manager.
Audit Engagement: An Engagement in which a Member Firm or Partner expresses an opinion

whether Financial Statements are prepared, in all material respects (or give a true and fair view or
are presented fairly, in all material respects), in accordance with an identified financial reporting
framework, such as an engagement conducted in accordance with International Standards on
Auditing. This includes a statutory audit, which is an audit required by legislation or other
regulation. (For purposes of this Section 1420, the term Audit Engagement includes Review
Engagement.)
Audit Engagement Partner: The Partner or other person in the Member Firm who is responsible
for the Audit Engagement and its performance, and for the auditor’s report that is issued on behalf
of the Member Firm, and who, where required, has the appropriate authority from a professional,
legal or regulatory body. (For purposes of this Section 1420, the term Audit Engagement Partner
includes Review Engagement Partner.)
Audit Team:
(a) All members of the Engagement Team for the Audit Engagement, including the Lead Client
Service Partner, the Audit Engagement Partner, and the Advisory Partner;
(b) All others within a Member Firm who can directly influence the outcome of the Audit
management or other oversight of the Audit Engagement Partner in connection with
the performance of the Audit Engagement including those at all successively senior
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levels above the Audit Engagement Partner through to the individual who is the
Member Firm’s Managing Partner;
transactions or events for the Audit Engagement, including other audit support such as
tax specialists who review the income tax accrual, valuation or actuarial specialists,
etc.; and
(iii) Those who provide quality control for the Audit Engagement, including those who
perform the Engagement Quality Control Review for the Audit Engagement.
(c) All others within the Member Firms who can directly influence the outcome of the Audit
Engagement.
For purposes of this Section 1420, the term Audit Team includes Review Team. See separate
definition of “SEC Restricted Entity Audit Team.”
Beneficial Owner with Significant Influence: An owner of the audit client’s equity securities
(known through reasonable inquiry) with:
(a) A right to some or all of the underlying benefit of ownership including the authority to direct
the voting or the disposition of the interest or to receive the economic benefits of the
ownership of the interest; and
(b) Significant influence over the entity.
Client: An individual or an entity with which a Member Firm has an agreement, whether or not
formalized in an engagement letter, to provide Professional Services.
Client-Facing: An individual who:
(a) Has been, or is expected to be, involved in providing any Professional Services to a Client;
(b) Provides consultation on an organization-wide or practice-wide basis regarding Client

matters, either directly to Clients or to Engagement Team members;
(c) Consults on technical or industry-specific issues, is assigned to technical departments (e.g.,

independence, accounting research, assurance, legal, risk, etc.),
(d) Responds to Client-specific questions from Clients or Engagement Teams (e.g., a call center
supporting a Deloitte solution); or
(e) Is responsible for business development or strategic relationship management, including

those who interact with third parties in the marketplace.
Close Family Member: A parent, child, or sibling who is not an Immediate Family Member. In the
case of SEC Restricted Entities, this term also includes step-parents and step-children, but does not
include a brother-in-law, sister-in-law, father-in-law, or mother-in-law.
Collective Investment Fund: An investment fund or other vehicle that is available to retail
investors and diversifies its investments to spread investment risk. Mutual funds (both open and
closed-end), unit trusts, exchange-traded funds, pension funds and similar investment vehicles
that are available to retail investors and diversified would be considered Collective Investment
Funds. Funds not available to the general public and other specialist funds, such as hedge funds or
non-diversified funds, are not considered Collective Investment Funds. Collective Investment
Funds are designated in the Deloitte Entity Search and Compliance system as “eligible funds.”
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Component: An entity or business activity for which Group or Component management prepares
financial information that should be included in the Group Financial Statements.
Component Auditor: An auditor who, at the request of the Audit Team for a Group Audit,
performs work on financial information related to a Component for the Group Audit.
Confidential Transaction:
(a) A confidential transaction is a transaction that is offered to a taxpayer under conditions of

confidentiality and for which the taxpayer has paid an advisor a fee.
(b) A transaction is considered to be offered to a taxpayer under conditions of confidentiality if

the advisor who is paid the fee places a limitation on disclosure by the taxpayer of the tax
treatment or tax structure of the transaction and the limitation on disclosure protects the
confidentiality of that advisor’s tax strategies. A transaction is treated as confidential even if
the conditions of confidentiality are not legally binding on the taxpayer. A claim that a
transaction is proprietary or exclusive is not treated as a limitation on disclosure if the
advisor confirms to the taxpayer that there is no limitation on disclosure of the tax
treatment or tax structure of the transaction.
(c) For purposes of this definition, a fee includes all fees for a tax strategy or for services for
advice (whether or not tax advice) or for the implementation of a transaction. These fees
include consideration in whatever form paid, whether in cash or in kind, for services to
analyze the transaction (whether or not related to the tax consequences of the transaction),
for services to implement the transaction, for services to document the transaction, and for
services to prepare tax returns to the extent that the fees exceed the fees customary for
return preparation. For purposes of this definition, a taxpayer also is treated as paying fees
to an advisor if the taxpayer knows or should know that the amount it pays will be paid
indirectly to the advisor, such as through a referral fee or fee-sharing arrangement. A fee
does not include amounts paid to a person, including an advisor, in that person’s capacity as
a party to the transaction. For example, a fee does not include reasonable charges for the
use of capital or the sale or use of property.
(d) For purposes of this definition, persons who bear a relationship to each other as described in
section 267(b) or 707(b) of the U.S. Internal Revenue Code will be treated as the same
person.
Contingent Fee: A fee calculated on a predetermined basis relating to the outcome of a

transaction or the result of the services performed by a Member Firm, including an arrangement in
which no fee will be charged unless a specified finding or result is attained. A contingent fee
charged through an intermediary is an example of an indirect contingent fee. For purposes of this
Section 1420, a fee is not regarded as being contingent if the amount is fixed by a court or other
public authority and is not dependent on a finding or result.
Covered Person: With respect to a particular Restricted Entity, any Partner or Professional Staff
in any Member Firm in one or more of the following groups:
(a) The Audit Team for that Restricted Entity;
(b) The Chain of Command, which includes those individuals who:
(i) Supervise or have direct management responsibility for the audit and at all
successively senior levels through the CEO;
(ii) Evaluate the performance or recommend the compensation of the Audit Engagement
Partner; and
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(iii) Provide quality control or other oversight of the audit.
For purposes of this Section 1420, the individuals in DTTL and its Member Firms who are normally
deemed by policy to be in the chain of command are described below.
(i) The Chain of Command with respect to the Restricted Entities of all Member Firms
includes:
 The DTTL Chief Executive Officer.
 Members of the DTTL Global Executive Committee.
 The DTTL Senior Managing Director – Global Audit & Assurance Quality Leader.
 The DTTL Senior Managing Director – Global Audit & Assurance Risk Leader.
 The DTTL Senior Managing Director – Global Regulatory and Public Policy.
 The DTTL Senior Managing Director – Global Regulatory.
 The DTTL Chief Risk Officer.
 The DTTL Senior Managing Director – Global Independence.
 The DTTL General Counsel.
 The DTTL Global Chief Ethics Officer.
 Any other Partner with audit management, risk or quality assurance positions
within DTTL Global Office or who takes part in the evaluation or compensation
process for audit partners for designated Clients.
(ii) The Chain of Command with respect to all of the Restricted Entities of that Member
Firm normally includes:
 The Member Firm’s Managing Partner.
 Members of the Board of Directors and members of the Executive Committee if

such members take an active role in the management of the Assurance practice
of the Member Firm.
 Any other Partners with audit management or quality assurance positions within
the Member Firm (e.g., Member Firm Audit Leaders, Member Firm Professional
Practice Directors with Audit or Accounting responsibilities, Member Firm Audit &
Assurance Risk Leader, Member Firm Reputation and Risk Leader, etc.) or within
a region, where applicable.
 Director of Independence of the Member Firm.
(iii) The Chain of Command with respect to all of the Restricted Entities of a particular
geography normally includes:
 The Managing Partner of that geography.
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 Members of the Board of Directors and members of the Executive Committee, if
such bodies exist, and where members take an active role in the management of
the Assurance practice of the geography.
 Any other Partners with audit management or quality assurance positions within
the geography (e.g., Audit Leaders, Professional Practice Directors with Audit or
Accounting responsibilities, Audit & Assurance Risk Leader, Reputation and Risk
Leader, etc.).
 Individual responsible for the quality controls over independence in that

geography.
(iv) With respect to a particular Restricted Entity, the Chain of Command includes:
 The Managing Partner of the Office in which the Lead Client Service Partner and
the Audit Engagement Partner are assigned.
 Functional, Industry, Group or Department leaders/heads to which the Lead

Client Service Partner and the Audit Engagement Partner are assigned.
 Any Partner or group of Partners who evaluate the performance or recommend

the compensation of the Audit Engagement Partner with respect to the
Restricted Entities for which the evaluated Partner serves as the Audit
Engagement Partner.
 Any Partner who provides quality control or other oversight of certain parts of
the audit (e.g., a non-audit risk leader or functional leader who might be
consulted with respect to a matter within their expertise).
(c) Provides Non-Audit Services – Such persons include all Partners and Professional Staff who
provide non-audit services to the Restricted Entity. Partners and Professional Staff who
provide non-audit services to a Restricted Entity are deemed to be Covered Persons for the
period beginning on the date such services are provided and ending on the date a Member
Firm signs the report on the Financial Statements for the fiscal year during which those
services are provided, or who expects to provide non-audit services to the Audit Client on a
recurring basis.
(d) Partners in the Office – Such persons include those Partners from an Office in which the
Audit Engagement Partner primarily practices in connection with the audit.
Criteria: In an Assurance Engagement, the benchmarks used to measure or evaluate the

Underlying Subject Matter. The “applicable criteria” are the Criteria used for the particular
Engagement.
Deloitte Touche Tohmatsu Limited (DTTL): A UK private company limited by guarantee. For
purposes of this Section 1420, DTTL also includes employee benefit plans sponsored by DTTL.
Dependent: Any person who receives more than half of their support from the relevant Partner
or employee.
DESC Responsible Party: The Partner who is responsible for the accuracy and completeness of
entity information in DESC and for reviewing and approving requests to provide services to such
entities.
Direct Engagement: An Assurance Engagement in which the Member Firm measures or

evaluates the Underlying Subject Matter information as part of, or accompanying, the assurance
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report. In a Direct Engagement, the Member Firm’s conclusion addresses the reported outcome of
the measurement or evaluation of the Underlying Subject Matter against the Criteria.
Direct Financial Interest: A Financial Interest:
(a) Owned directly by and under the control of an individual or entity (including those managed
on a discretionary basis by others); or
(b) Beneficially owned through a collective investment vehicle, estate, trust or other
intermediary over which the individual or entity has control or the ability to influence
investment decisions.
Direct Financial Interest for SEC Restricted Entities: In addition to Direct Financial Interests, those
beneficially owned through an intermediary if:
(a) DTTL, a Member Firm, a Partner, a Professional Staff or an Immediate Family Member of
such Partner or Professional Staff, alone or together with other persons, controls the
intermediary, or supervises or participates in the intermediary’s investment decisions, or
(b) The Financial Interest amounts to 20% or more of the value of the intermediary’s total
investments, unless the intermediary is a diversified management investment company, as
defined by Section 5(b)(1) of the U.S. Investment Company Act of 1940.
Director or Officer: Those charged with the governance of an entity, or acting in an equivalent
capacity, regardless of their title, which might vary from jurisdiction to jurisdiction.
Director of Independence: Individual with a senior role in the Member Firm or Geography Firm
who is responsible for the quality controls over independence within the firm, including
consultations. The Director of Independence may designate individual(s) to assist with required
consultations, notifications and activities that are referenced throughout this Section 1420.
DTTL Senior Managing Director–Global Independence: Individual responsible for the

activities of the Global Independence Group. The DTTL Senior Managing Director–Global
Independence may designate individual(s) to assist with required consultations and activities that
are referenced throughout this Section 1420.
Engagement: An agreement, whether or not formalized in an engagement letter, for a Member

Firm to provide Professional Services to a Client.
Engagement Partner: A Partner of the Member Firm designated by the Member Firm to
coordinate the delivery of Professional Services for a specific Engagement or portion of an
Engagement.
Engagement Period:
(a) In the case of an Audit Engagement, the Engagement Period starts when the Audit Team
begins to perform audit services and ends when the audit report is issued. When the Audit
Engagement is of a recurring nature, the Engagement Period ends at the later of the
notification by either party that the professional relationship has ended or the issuance of
the final audit report. Refer to Audit and Professional Engagement Period for audits
conducted under SEC independence rules.
(b) In the case of a non-audit Assurance Engagement, the Engagement Period starts when the
Assurance Team begins to perform assurance services and ends when the assurance report
is issued. When the Assurance Engagement is of a recurring nature, the Engagement Period
188
ends at the later of the notification by either party that the professional relationship has
ended or the issuance of the final assurance report.
Engagement Quality Control Review: A process designed to provide an objective evaluation,

on or before the report is issued, of the significant judgments the Engagement Team made and
the conclusions it reached in formulating the report.
Engagement Quality Control Reviewer: A Partner, other person in the Member Firm, or a
team made up of such individuals, who are not part of the Engagement Team, with sufficient and
appropriate experience and authority to objectively evaluate the significant judgments the
Engagement Team made and the conclusions it reached in formulating the report.
Engagement Team: All Partners and Professional Staff performing the Engagement, and any
individuals engaged by a Member Firm who perform procedures on the Engagement. This excludes
External Experts engaged by a Member Firm. The term “Engagement Team” also excludes
individuals within the Restricted Entity’s internal audit function who provide direct assistance on an
Audit Engagement when the external auditor complies with the requirements of ISA 610 (Revised
2013), Using the Work of Internal Auditors.
Entity Under Audit: Entity whose Financial Statements or other information is being audited, as
opposed to the Audit Client which, by definition, includes Affiliates.
External Expert: An individual (who is not a Partner or Professional Staff, including temporary
staff, of a Member Firm) or organization possessing skills, knowledge and experience in a field
other than accounting or auditing, whose work in that field is used to assist in obtaining
appropriate evidence.
Financial Interest: An interest in an equity or other security, debenture, loan, or other debt
instrument of an entity, including rights and obligations to acquire such an interest and derivatives
directly related to such interest.
Financial Reporting Oversight Role: A role in which a person is in a position to or does

exercise influence over the contents of the Financial Statements or anyone who prepares them,
such as when the person is a member of the board of directors or similar management or
governing body, chief executive officer, president, chief financial officer, chief operating officer,
general counsel, chief accounting officer, controller, director of internal audit, director of financial
reporting, treasurer, or any equivalent position.
Financial Statements: A structured representation of historical financial information, including

related notes, intended to communicate an entity’s economic resources or obligations at a point in
time or the changes therein for a period of time in accordance with a financial reporting
framework. The related notes ordinarily comprise a summary of significant accounting policies and
other explanatory information. The term can relate to a complete set of financial statements, but
it can also refer to a single financial statement, for example, a balance sheet, or a statement of
revenues and expenses, and related explanatory notes. The term does not refer to specific
elements, accounts or items of a Financial Statement.
Financial Statements on which the Member Firm will Express an Opinion: In the case of a
single entity, the Financial Statements of that entity. In the case of consolidated Financial
Statements, also referred to as Group Financial Statements, the consolidated Financial
Statements.
Geography Firm: A firm that is organized under the rules and standards related to the practice of
public accounting in a particular jurisdiction, including its Associated Entities.
Global Independence Group: A group of DTTL representatives with responsibility for:
189
(a) Establishing global requirements and policy;
(b) Monitoring quality controls for independence;
(c) Developing and maintaining global systems and tools; and
(d) Supporting network practice and awareness.
Group: All the Components whose financial information is included in the Financial Statements of
a Group. A Group always has more than one Component.
Group Audit: The audit of Financial Statements of a Group.
Immediate Family Member: A spouse, spousal equivalent or Dependent.
Indirect Financial Interest: A Financial Interest beneficially owned through a collective

investment vehicle, estate, trust or other intermediary over which the individual or entity has no
control or ability to influence investment decisions.
Investment Company Complex: An investment company complex includes:
(a) An Entity Under Audit that is an:
(i) An investment company; or
(ii) An investment adviser or sponsor;
(b) The investment adviser or sponsor of any investment company identified in (a)(i);
(c) Any entity:
(i) Controlled by or controlling an Entity Under Audit identified in (a), or
(ii) Controlling an investment adviser or sponsor identified in (b).
(iii) Controlled by an investment adviser or sponsor in (b) if:
a. The entity and the Entity Under Audit are each Material to the investment adviser
or sponsor identified in (b); or
b. The entity is engaged in the business of providing administrative, custodian,

underwriting, or transfer agent services to any entity identified in (a) or (b);
(d) Any entity under common control with an Entity Under Audit identified in (a), any
investment adviser or sponsor identified in (b), or any entity identified in (c) if the entity:
(i) Is an investment company or an investment adviser or sponsor, when the entity and
the Entity Under Audit identified in (a) are each Material to the controlling entity; or
(ii) Is engaged in the business of providing administrative, custodian, underwriting, or

transfer agent services to any entity identified in (a) and (b);
(e) Any entity over which an Entity Under Audit identified in (a) has significant influence, unless
the entity is not Material to the Entity Under Audit identified in (a), or any entity that has
significant influence over an Entity Under Audit identified in (a), unless the Entity Under
Audit identified in (a) is not Material to the entity that has significant influence over it; and
190
(f) Any investment company that has an investment adviser or sponsor included in (a) through
(d).
For the purposes of this definition:
An investment company means any investment company or an entity that would be an investment
company but for the exclusions provided by Section 3(c) of the U.S. Investment Company Act of
1940 (15 U.S.C. 80a-3(c)).
An investment adviser does not include a sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser.
A sponsor is an entity that establishes a unit investment trust.
Key Audit Partner: The Audit Engagement Partner, the individual responsible for the
Engagement Quality Control Review, and other audit Partners, if any, on the Engagement Team
who make key decisions or judgments on significant matters with respect to the Audit of the
Financial Statements on which the Member Firm will Express an Opinion. Depending upon the
circumstances and the role of the individuals on the audit, “other audit Partners” might include, for
example, Audit Engagement Partners responsible for significant subsidiaries or divisions. If a Lead
Client Service Partner or Advisory Partner for an Audit Client is outside the audit function, the
Director of Independence and Audit & Assurance Risk Leader shall be consulted to assess the
individual’s role and responsibilities with respect to the audit.
Lead Client Service Partner: A Partner who has been assigned overall responsibility for the
coordination of delivery of all Professional Services to a Client.
Legal Protection Clause: Any agreement of indemnity that seeks to provide the Member Firm
immunity or limitation from liability for the Member Firm’s own negligent acts, whether through
commission or omission, including engagement letter clauses that release, indemnify or hold
harmless the accountant from any liability and costs from knowing misrepresentations by
management.
Listed Entity: An entity whose shares, stock or debt are quoted or listed on a recognized stock
exchange, or are marketed under the regulations of a recognized stock exchange or other
equivalent body.
Local Laws: The laws, regulations, professional rules of conduct, codes of ethics, and similar
codes applicable to Professional Services in a jurisdiction.
Manager or Managerial Employee: A Professional Staff member with day-to-day responsibility

for all significant aspects of providing Professional Services to Clients. These terms usually include
all professionals with the title of “director,” “senior manager,” or “manager,” irrespective of their
functional classification.
Managing Partner: Refers to the most senior executive leader of a Member Firm (whether such
title is Managing Partner, CEO or other similar title) and appointed to oversee the overall
management and operating infrastructure of a Member Firm.
Material:
 When used in this Section 1420, the quantitative threshold for materiality is generally
between 5% and 10% for Restricted Entities, 5% for SEC Restricted Entities and 5% for
individuals. In determining whether an interest is material to an individual, the combined net
worth of the individual and the individual’s immediate family members may be taken into
account.
191
 Chapter 6 refers to materiality in relation to an Audit Client’s Financial Statements. For
Restricted Entities other than SEC Restricted Entities, the concept of materiality in relation to
an audit is addressed in ISA 320, Materiality in Planning and Performing an Audit, and in
relation to a review in ISRE 2400 (Revised), Engagements to Review Historical Financial
Statements. The determination of materiality involves the exercise of professional judgment
and is impacted by both quantitative and qualitative factors. It is also affected by
perceptions of the financial information needs of users.
 Chapter 8 refers to materiality in relation to the Assurance Engagement. The concept of

materiality in relation to an Assurance Client’s Subject Matter Information is addressed in
International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance
Engagements other than Audits or Reviews of Historical Financial Information. The
determination of materiality involves the exercise of professional judgment and is impacted
by both quantitative and qualitative factors. It is also affected by perceptions of the financial
or other information needs of users.
Member Firm:
(a) A firm that is admitted to membership of DTTL pursuant to the Articles and the
Supplemental Regulations of DTTL and which has not ceased to be a member of DTTL; and
(b) Any other firm or entity that is considered to be an Associated Entity of the firm in (a); and
(c) Any employee benefit plans sponsored by the Member Firm.
Non-Assurance Service: A professional service that does not meet the definition of an Audit
Engagement or an Assurance Engagement.
Office: A distinct sub-group within a Member Firm, whether organized along geographical or
practice lines, where the Audit Engagement Partner primarily practices in connection with the
audit of the Audit Client. The Office will generally be the location where the Audit Engagement
Partner is assigned or has physical Office space. When the Audit Engagement Partner is located in
a different Office from that of the other Audit Team members, professional judgment is needed to
determine the Office in which the partner practices in connection with the engagement. The Office
might also constitute a sub-group of those assigned to a particular geographic location where the
Partners and Professional Staff who make up the sub-group generally serve the same Clients,
work on the same matters or work on the same categories of matters. It is also possible that a
Member Firm might have a sub-group that constitutes an Office even though the Partners and
Professional Staff making up that sub-group are assigned to different physical locations.
Partner: A person who is a Partner of a Member Firm or who otherwise has the authority to
represent or commit such firm in the similar manner (e.g., a shareholder, principal or person with
a similar title that serves the function of “Partner” as commonly understood in the DTTL
organization).
Professional Accountant: A member of a member body of the International Federation of

Accountants.
Professional Practice Director: A Partner appointed by the Member Firm to conduct all
consultations relating to accounting and auditing.
Professional Services: Audit, Assurance, Risk Advisory, Financial Advisory, Consulting, Tax,
Legal and any other services ordinarily performed by Member Firms.
Professional Staff: Employees of Member Firms who participate in providing Professional

Services to Clients.
192
Public Interest Entity:
(a) A Listed Entity; or
(b) An entity:
(i) Defined by regulation or legislation as a public interest entity; or
(ii) For which the audit is required by regulation or legislation to be conducted in

compliance with the same independence requirements that apply to the audit of Listed
Entities. Such regulation might be promulgated by any relevant regulator, including an
audit regulator.
Public Interest Restricted Entity: An Audit Client that is a Public Interest Entity and its
Affiliates.
Reasonable and Informed Third Party Test: A consideration by the Member Firm about
whether the same conclusions would likely be reached by another party. Such consideration is
made from the perspective of a reasonable and informed third party, who weighs all the relevant
facts and circumstances that the Member Firm knows, or could reasonably be expected to know,
at the time that the conclusions are made. The reasonable and informed third party would possess
the relevant knowledge and experience to understand and evaluate the appropriateness of the
Member Firm’s conclusions in an impartial manner.
Registered Investment Company: An investment company registered under section 8 of the

U.S. Investment Company Act of 1940.
Registered Investment Company Audit Client: A Registered Investment Company that is an

Audit Client of a Member Firm.
Responsible Party: In an Assurance Engagement, the party responsible for the Underlying
Subject Matter.
Restricted Entity: An entity that is an Audit Client or an Affiliate of an Audit Client for which
independence is required. It might include other entities as required by local independence rules,
Client service agreements, or identified by the Director of Independence or the DTTL Senior
Managing Director – Global Independence.
Retired Partner: A former Partner who is retired from a Member Firm and as such, does not
provide Professional Services to Clients and does not have the authority to represent a Member
Firm in a similar matter.
Review Client: An entity in respect of which a Member Firm conducts a Review Engagement.
(For purposes of this Section 1420, the term Audit Client includes Review Client.)
Review Engagement: An Engagement, conducted in accordance with International Standards on

Review Engagements or equivalent, in which a Member Firm or a Partner expresses a conclusion
on whether, on the basis of the procedures which do not provide all the evidence that would be
required in an audit, anything has come to the Member Firm’s or Partner’s attention that causes
the Member Firm or Partner to believe that the Financial Statements are not prepared in all
material respects, in accordance with the applicable financial reporting framework. (For purposes
of this Section 1420, the term Audit Engagement includes Review Engagement.)
Review Team:
(a) All members of the Engagement Team for the Review Engagement;
193
(b) All others within a Member Firm who can directly influence the outcome of the Review
management or other oversight of the Engagement Partner in connection with the
performance of the Review Engagement including those at all successively senior
levels above the Engagement Partner through to the individual who is the Member
Firm’s Senior or Managing Partner (Chief Executive or equivalent);
transactions or events for the engagement; and
(iii) Those who provide quality control for the engagement, including those who perform
the engagement quality control review for the engagement; and
(c) All others within the Member Firms who can directly influence the outcome of the Review
Engagement.
(For purposes of this Section 1420, the term Audit Team includes Review Team.)
Safeguards: Actions that, taken individually or in combination, effectively reduce threats to

independence to an Acceptable Level.
SEC Issuer: An issuer as defined in section 10A(f) of the Securities Exchange Act of 1934.
SEC Issuer Audit Client: An SEC Issuer that is an Audit Client of a Member Firm.
SEC Restricted Entity: A Restricted Entity that is subject to the independence rules of the SEC.
The following are examples of Audit and Assurance Engagements that are subject to SEC
independence rules:
 The Audit Client files periodic reports with the SEC (e.g., Form 10-K, Form 20-F, Financial
Statements of an equity method investee included in a filing with the SEC under Rule 3-09
of Regulation S-X).
 The Audit Client follows the periodic reporting requirements of the SEC but whose reports
are filed with another regulatory agency (e.g., a bank that files with the US Federal Deposit
Insurance Corporation).
 The Audit Client is required to file Financial Statements with the SEC, such as an investment
fund advisor/sponsor/manager or broker/dealer.
 A Member Firm is a Component Auditor for a Group and the Member Firm represents to the
Group Auditor that it is independent under the independence requirements of the SEC.
 A Member Firm is engaged to perform any of the following to satisfy an investment adviser’s
requirements under Rule 206(4)-2 of the Investment Advisers Act of 1940 (the Custody
Rule):
o An audit of fund Financial Statements that will be distributed by the fund’s adviser to
its clients
o A surprise examination to verify client assets (funds and securities) under the custody
of the investment adviser
o An examination in accordance with the American Institute of Certified Public
Accountants (AICPA) Statement on Standards for Attestation Engagements No. 18,
194
Attestation Standards: Clarification and Recodification, that includes an assessment of
controls that the investment adviser has in place relating to custody of client assets.
 Management of an Audit Client has indicated its intention to file a registration statement
with the SEC (e.g. in connection with an initial public offering) and a Member Firm’s
compliance with the SEC independence rules is required for the current audit period in the
future filing.
SEC Restricted Entity Audit Team: Partners and Professional Staff participating in an audit,
review, attest or assurance work or other services conducted pursuant to the independence
requirements of the SEC, including, but not limited to:
 All Partners and Professional Staff who provide Professional Services (excluding activities
that are clerical in nature) as part of the Audit Engagement, including the Lead Client
Service Partner, the Audit Engagement Partner, and the Advisory Partner;
 All Partners who perform a second level of review to provide additional assurance that the
Financial Statements subject to the audit or review are in conformity with generally accepted
accounting principles and the audit or review and any associated report are in accordance
with generally accepted auditing standards and rules promulgated by the SEC or the Public
Company Accounting Oversight Board (the Engagement Quality Control Reviewer); and
 All Partners and Professional Staff who provide consultation with respect to the Audit
Engagement regarding technical or industry-specific issues, transactions or events, including
other audit support such as tax specialists who review the income tax accrual, valuation or
actuarial specialists, etc.
 All Partners and Professional Staff who provide any audit, review, attest or assurance
services to the Audit Client or its downstream Affiliates.
Securities Account: An account held at an institution (e.g., bank, broker, etc.) in which
securities (e.g., stocks, bonds, derivatives, mutual funds, etc.) can be traded and the institution
has custody of the customer's assets. An institution would be deemed to have custody of the
customer’s securities if it is in possession of the physical securities or, in the case of securities held
in electronic or non-certificated form, the institution has the ultimate responsibility for maintaining
the detailed records indicating the individual is the beneficial owner of those securities.
Special Purpose Financial Statements: Financial Statements prepared in accordance with a

financial reporting framework designed to meet the financial information needs of specified users.
Subject Matter Information: The outcome of the measurement or evaluation of the Underlying
Subject Matter against the Criteria, i.e., the information that results from applying the Criteria to
the Underlying Subject Matter.
Underlying Subject Matter: The phenomenon that is measured or evaluated by applying

Criteria.
195
Appendices
Links to the following appendices are found below.
Appendix A1 Assessment of enterprise application services
Appendix A2 Assessment of human capital services
Appendix A3 Assessment of outsourcing/extended business services
Appendix A4 Assessment of strategy and operations services
Appendix A5 Assessment of technology and integration services
Appendix B1 Assessment of valuation services
Appendix B2 Assessment of dispute; consulting services
Appendix B3 Assessment of reorganizational services
Appendix B4 Assessment of corporate finance services
Appendix C1 Assessment of merger & acquisition ("M&A") and related services
Appendix D1 Assessment of services generally provided to entities in an investment company

complex
Appendix E1 Assessment of the enterprise risk services (ERS) function
Appendix F1 Assessment of Firm Position on Assisting Audit Clients with Tax Provisions and
Related FASB ASC 740 Computations
Appendix F2 Assessment of Tax Compliance and Planning Services and Certain Other Services
Provided by Deloitte Tax and Deloitte Tax & Legal Outside of the U.S.
Appendix G Guidance on Including and Updating Entity Information in DESC
Appendix H Examples of Impermissible and Permissible Marketplace Activities with Restricted

Entities
Appendix I Assisting Restricted Entities before Tax Forums
Appendix J Guidance on Applying Inspection and Testing Policies
Appendix K Expected Member Firm Disciplinary Policy for an Individual's Breach of an

Independence Policy
Appendix L Application of DPM 1420 to Independent Non-executive Directors
Appendix M Guidance on Associated Entity of a Member Firm
Appendix N Guidance on Independence-Related Communications
Appendix O Frequently Asked Questions – Independence Operating Model for Member Firm
Combinations
196

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1420—Independence

 Chapter 1: General Policies

 Chapter 2: Firm and Personal Financial Relationships with Restricted Entities

 Chapter 3: Employment Relationships with Restricted Entities

 Chapter 4: Business Relationships with Restricted Entities

 Chapter 5: Audit Services to Restricted Entities

 Chapter 6: Non-Assurance Services to Restricted Entities

 Chapter 7: Audit Reports with a Restriction on Use and Distribution

 Chapter 8: Policies Applicable to Assurance Clients

 Chapter 9: Administration and Quality Controls

Issued 12 March 2021 and effective 15 June 2021

© 2021 For information, contact Deloitte Touche Tohmatsu Limited.

Chapter 1 – General Policies.........................................................................................10

Complying with the Independence Policies and Procedures....................................................20

Knowing when the Independence Policies Apply...................................................................21

Determining Whether an Entity is a Restricted Entity or an Assurance Client............................22

Prompt Reporting of Financial Interests and Securities Account Information.............................22

Consulting Others as Needed............................................................................................22

Confirming Compliance with Independence Policies..............................................................22

Consequences of Non-compliance with Independence Policies and Procedures..........................23

Chapter 2 - Firm and Personal Financial Relationships with Restricted Entities.............25

Financial Interests Held Through Intermediaries...................................................................26

Financial Interests in an Entity Controlling a Restricted Entity................................................28

Period Deemed to Participate on an Engagement.................................................................28

Alternative Financial Investment Vehicles............................................................................28

Insurance Products with an Investment Component..............................................................28

Employee Compensation and Benefit Plans..........................................................................29

Financial Interests Received Unintentionally........................................................................30

Retirement Benefit Plans of DTTL or a Member Firm.............................................................31

Financial Interests Held as Trustee or Executor of a Trust or Estate........................................31

Financial Interests in Common with a Restricted Entity.........................................................32

Close Family Members......................................................................................................34

Other Personal Relationships.............................................................................................34

Loans and Guarantees with a Restricted Entity.....................................................................35

Chapter 3 - Employment and Other Relationships with Restricted Entities....................42

Service as Company Secretary..........................................................................................42

Employment and Activities of Current Partners and Professional Staff......................................43

Employment of Former Partners and Professional Staff by a Restricted Entity...........................43

Service During Period Covered by the Audit Report...............................................................51

Service Prior to Period Covered by the Audit Report..............................................................51

Additional Requirements for SEC Restricted Entities—Former Employees of Restricted

Immediate Family Members..............................................................................................52

Close Family Members......................................................................................................53

Other Close Relationships of an Audit Team Member.............................................................54

Relationships of Partners, Professional Staff and Others Employed by DTTL or a Member

Chapter 4 - Business Relationships with Restricted Entities..........................................57

Interactions with Other Service Providers on a Client Project.................................................63

Evaluation of Materiality and Significance of a Marketplace Business Relationship.....................63

Commission or Referral Fee Relationships...........................................................................64

Chapter 5 - Audit Services to Restricted Entities...........................................................76

Affiliates of Audit Clients...................................................................................................76

Public Interest Entities.....................................................................................................77

Updating the Deloitte Entity Search and Compliance System..................................................81

Additional Requirements for Audits Performed Pursuant to PCAOB Standards...........................84

Relative Size of Fees........................................................................................................85

Serving as Group Auditor..................................................................................................93

Serving as Component Auditor..........................................................................................93

Communication of Breaches to Those Charged with Governance.............................................96

Breaches Before the Previous Audit Report Was Issued.........................................................97

Chapter 6 - Non-Assurance Services to Restricted Entities............................................99

Approval Process 100

Non-Assurance Services after the Final Year of the Audit.....................................................102

Providing Non-Assurance Services to a Restricted Entity that Later Becomes a Public

Fee Arrangements 103