Applies to members in public practice.

Part B of the Code describes how the conceptual framework described in Part A applies to members in public practice.

Members in public practice may face a number of circumstances that threaten compliance with the fundamental principles. For example, when a firm has undue dependence on total fees from a client a self-interest threat will be created.

Section 200 provides examples of threats that may be created in public practice and the relevant safeguards that may be applied to eliminate the threats or reduce them to an acceptable level.

Members in public practice 

Professional appointment

Section: 210

This section includes the obligations members in public practice have in accepting a client, accepting an engagement or in changes in professional appointment. Also see our Client relationship guide (PDF)

Conflicts of interest

Section: 220

Conflicts of interest create threats to compliance with a number of fundamental principles, such as objectivity, confidentiality and professional behaviour. Conflicts of interest may arise by business interests or relationships with clients or third parties.

If conflicts of interest are identified, members in public practice are required to apply appropriate safeguards to eliminate them or reduce them to an acceptable level.

When a conflict of interest creates a threat that cannot be eliminated or reduced to an acceptable level, the member must not accept, or must resign from, the conflicting engagement.

Second opinions

Section: 230

Requests for second opinions on the application of standards or principles by an entity who is not an existing client may create threats to compliance with such fundamental
principles as professional competence and due care. A member in public practice must evaluate the significance of any threats and apply safeguards when necessary to eliminate them or reduce them to an acceptable level.

Fees and other types of remuneration

Section: 240

A member in public practice must evaluate any threats to compliance with the fundamental principles that may arise from the level of fees quoted to clients and apply safeguards to eliminate the threat or reduce it to an acceptable level. A self-interest threat may be created, for example, if the quoted fee is so low that it makes it difficult to perform the engagement in accordance with applicable standards.

Contingent fees* and referral fees and commissions used for non-assurance engagements may create threats to compliance with fundamental principles, such as objectivity.

This section requires members in public practice to inform clients in writing of any referral fee or commission received, who it is received from and how it has been calculated.

No such fees or commissions can be accepted for assurance engagements because there is no available safeguard that can reduce the threat to independence to an acceptable level.

*APESB has prohibited the use of contingent fees in certain circumstances, described in the following APESB Standards: APES 215 Forensic Accounting Services; APES 225 Valuation Services; APES 330 Insolvency Services; APES 345 Reporting on Prospective Financial Information Prepared in Connection with a Disclosure Document; and APES 350 Participation by members in Public Practice in Due Diligence Committees in connection with a Public Document.

Marketing professional services

Section: 250

Marketing (including advertising) of professional services may create threats to compliance with the fundamental principles. Members in public practice must ensure that when they market their professional services they do not bring the profession into disrepute.

Gifts and hospitality

Section: 260

Members in public practice or their families may be offered gifts or hospitality from clients that may create threats to compliance with the fundamental principles. A selfinterest threat may be created for example when a gift from a client is accepted. The nature, value and intent of the offer will affect the existence and significance of the threat.

If a reasonable and informed third party, weighing all the specific facts and circumstances, would consider the offer trivial and inconsequential, then it can be concluded that any threat to compliance with the fundamental principles is at an acceptable level.

A member in public practice must evaluate the significance of any threats and apply safeguards when necessary to eliminate the threats or reduce them to an acceptable level. When the threats cannot be eliminated or reduced to an acceptable level through the application of safeguards, a member in public practice must not accept such an offer.

Custody of client assets

Section: 270

A member in public practice must not assume custody of any client assets unless permitted to do so by law because it creates threats to compliance with the fundamental principles. Assuming custody of client assets may, for example, create a self-interest threat to professional behaviour and objectivity.

Objectivity – all services

Section: 280

When providing any professional service, a member in public practice must determine whether there are any threats to compliance with the fundamental principle of objectivity resulting from having interests in, or relationships with, a client or its directors, officers or employees. For example, a familiarity threat to objectivity may be created from a family or close personal or business relationship.

Independence

Sections: 290 and 291

Sections 290 and 291 of the Code address independence requirements for audit, review and other assurance engagements.

Independence is fundamental to compliance with the principles of integrity and objectivity. Any threats to independence must be evaluated by members in practice and appropriate safeguards applied to eliminate the threats or reduce them to an acceptable level. If safeguards cannot eliminate or reduce the threat to an acceptable level, the member in public practice shall decline or terminate the relevant engagement. Independence comprises of:

Independence of mind
The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgement, thereby allowing an individual to act with integrity and exercise objectivity and professional scepticism.

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, weighing all the specific facts and circumstances, that a firm’s, or a member of the audit team’s, integrity, objectivity or professional scepticism has been compromised.

A member in public practice who provides an assurance service shall be of independent mind and independent in appearance of the assurance client.

In addition, members in public practice must ensure that they refer to the Corporations Act 2001 and other relevant legislation to determine additional independence obligations.

CPA Australia, together with the Institute of Chartered Accountants in Australia and the Institute of Public Accountants (the Joint Accounting Bodies), publish the Independence guide (PDF). This guide provides examples of the application of the conceptual approach set out in sections 290 and 291 of the Code to independence issues.

Independence – audit and review engagements

Section: 290

Section 290 addresses independence requirements for audit and review engagements which are assurance engagements where a member in public practice expresses a conclusion on historical financial information.

Independence – other assurance engagements

Section: 291

Section 291 addresses independence requirements for assurance engagements that are not audit or review engagements of historical financial information, referred in the Code as Other Assurance Engagements.