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.