Code of Professional Conduct of the

South African Institute of Chartered Accountants

including Independence Standards
2023 Edition
This gratis electronic version is proudly prepared and supplied by LexisNexis
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 1

Code of Professional Conduct of the

South African Institute of Chartered Accountants
including Independence Standards
2023 Edition

Status of the Code

This document contains the SAICA Code of Professional Conduct (“the Code”), 2023 Edition.
The Board of the South African Institute of Chartered Accountants (“SAICA”) has adopted the
International Code of Ethics for Professional accountants (including International Independ-
ence Standards) as released by the International Ethics Standards Board for Accountants’
(IESBA) in 2018 in its entirety. SAICA is a member of the International Federation of Account-
ants (IFAC) and has adopted the International Code of Ethics for Professional accountants with
the permission of IFAC but has however included additional guidance to assist in the local
application of certain requirements applicable to all SAICA members and associates.
The Code is applicable to all SAICA members and associates as defined in the SAICA Con-
stitution. A contravention of, or failure to comply with any requirements of the Code, may be
regarded as a Punishable Conduct or misconduct in terms of sections 4.1.5, 4.1.7, 4.2.5, 5.1.5,
5.2.2, 6.1.5, 6.1.8 and 6.2.2 of Appendix 4 of the SAICA By-laws and as such may be investi-
gated and if appropriate the member or associate may be found guilty and may be liable for
penalties as described in the By-laws.
Sections 4.3 and 5.1.12 of the By-laws state that Punishable Conduct on the part of a trainee
accountant shall include any conduct which would amount to Punishable Conduct had it been
perpetrated by a Member, Associate General Accountant or Accounting Technician. Annexure 3,
item 2.4 of the SAICA training regulations requires that trainee accountants should at all times
keep the affairs of the training office and its clients confidential and not breach any codes of
professional conduct, disciplinary rules or by-laws that apply to the profession of a CA(SA) or
an AGA(SA) and, if applicable, a Registered Auditor. The Code also conforms to the Independ-
ent Regulatory Board for Auditors (IRBA) Code of Professional Conduct for Registered Audit-
ors. South African amendments to the IESBA Code of Ethics are underlined and in italics in the
Code.

CHANGES OF SUBSTANCE FROM THE 2022 EDITION

The SAICA Code of Professional Conduct
This document replaces the 2022 edition of the Code of Professional Conduct of the South Afri-
can Institute of Chartered Accountants, and incorporates:
• The revisions relating to the definition of engagement team and group audits.
ET – 2 SAICA Student Handbook 2023/2024

SAICA Code of Professional Conduct (2023 Edition)

CONTENTS
Page
Guide to the Code .................................................................................................................. 2
SAICA Code of Professional Conduct (2023 Edition) ..................................................... 9
Definitions, including Lists of Abbreviations and Standards ............................................... 12
Part 1 – Complying with the Code, Fundamental Principles
and Conceptual Framework................................................................................................... 27
Part 2 – Professional Accountants in Business ..................................................................... 44
Part 3 – Professional Accountants in Public Practice ........................................................... 70
Independence Standards (Parts 4A and 4B) ..................................................................... 106
Part 4A – Independence for Audit and Review Engagements .............................................. 106
Part 4B – Independence for Assurance Engagements other than Audit
and Review Engagements ..................................................................................................... 190
Effective Dates ...................................................................................................................... 218

GUIDE TO THE CODE

(This Guide is a non-authoritative aid to using the Code.)

Purpose of the Code

1. The SAICA Code of Professional Conduct (including Independence Standards) (“the
Code”) sets out fundamental principles of ethics for professional accountants, reflecting
the profession’s recognition of its public interest responsibility. These principles establish
the standard of behaviour expected of a professional accountant. The fundamental prin-
ciples are: integrity, objectivity, professional competence and due care, confidentiality,
and professional behaviour.
2. The Code provides a conceptual framework that professional accountants are to apply in
order to identify, evaluate and address threats to compliance with the fundamental prin-
ciples. The Code sets out requirements and application material on various topics to help
professional accountants apply the conceptual framework to those topics.
3. In the case of audits, reviews and other assurance engagements, the Code sets out Inde-
pendence Standards, established by the application of the conceptual framework to
threats to independence in relation to these engagements.

How the Code is Structured

4. The Code contains the following material:
• Definitions, which contain defined terms (together with additional explanations where
appropriate) and described terms which have a specific meaning in certain parts of the
Code. For example, as noted in the Definitions, in Part 4A, the term “audit engage-
ment” applies equally to both audit and review engagements. The Definitions also in-
clude lists of abbreviations that are used in the Code and other standards to which the
Code refers.
• Part 1 – Complying with the Code, Fundamental Principles and Conceptual Frame-
work, which includes the fundamental principles and the conceptual framework and is
applicable to all professional accountants.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 3

• Part 2 – Professional accountants in Business, which sets out additional material that
applies to professional accountants in business when performing professional activi-
ties. Professional accountants in business include professional accountants employed,
engaged or contracted in an executive or non-executive capacity in, for example:
o Commerce, industry or service.
o The public sector.
o Education.
o The not-for-profit sector.
o Regulatory or professional bodies.
Part 2 is also applicable to individuals who are professional accountants in public
practice when performing professional activities pursuant to their relationship with
the firm, whether as a contractor, employee or owner.
• Part 3 – Professional accountants in Public Practice, which sets out additional mate-
rial that applies to professional accountants in public practice when providing profes-
sional services.
• Part 4 – Independence Standards, which sets out additional material that applies to
professional accountants in public practice when providing assurance services, as fol-
lows:
o Part 4A – Independence for Audit and Review Engagements, which applies when
performing audit or review engagements.
o Part 4B – Independence for Assurance Engagements Other than Audit and Review
Engagements, which applies when performing assurance engagements that are not
audit or review engagements.
5. The Code contains sections which address specific topics. Some sections contain subsec-
tions dealing with specific aspects of those topics. Each section of the Code is structured,
where appropriate, as follows:
• Introduction – sets out the subject matter addressed within the section, and introduces
the requirements and application material in the context of the conceptual framework.
Introductory material contains information, including an explanation of terms used,
which is important to the understanding and application of each Part and its sections.
• Requirements – establish general and specific obligations with respect to the subject
matter addressed.
• Application material – provides context, explanations, suggestions for actions or
matters to consider, illustrations and other guidance to assist in complying with the
requirements.

How to Use the Code

The Fundamental Principles, Independence and Conceptual Framework
6. The Code requires professional accountants to comply with the fundamental principles of
ethics. The Code also requires them to apply the conceptual framework to identify, evalu-
ate and address threats to compliance with the fundamental principles. Applying the con-
ceptual framework requires exercising professional judgement, remaining alert for new
information and to changes in facts and circumstances, and using the reasonable and in-
formed third party test.
7. The conceptual framework recognises that the existence of conditions, policies and pro-
cedures established by the profession, legislation, regulation, the firm, or the employing
organisation might impact the identification of threats. Those conditions, policies and
ET – 4 SAICA Student Handbook 2023/2024

procedures might also be a relevant factor in the professional accountant’s evaluation of

whether a threat is at an acceptable level. When threats are not at an acceptable level, the
conceptual framework requires the professional accountant to address those threats.
Applying safeguards is one way that threats might be addressed. Safeguards are actions
individually or in combination that the professional accountant takes that effectively re-
duce threats to an acceptable level.
8. In addition, the Code requires professional accountants to be independent when perform-
ing audit, review and other assurance engagements. The conceptual framework applies in
the same way to identifying, evaluating and addressing threats to independence as to
threats to compliance with the fundamental principles.
9. Complying with the Code requires knowing, understanding and applying:
• All of the relevant provisions of a particular section in the context of Part 1, together
with the additional material set out in Sections 200, 300, 400, 500, 600, 800 and 900,
as applicable.
• All of the relevant provisions of a particular section, for example, applying the pro-
visions that are set out under the subheadings titled “General” and “All Audit Clients”
together with additional specific provisions, including those set out under the sub-
headings titled “Audit Clients that are not Public Interest Entities” or “Audit Clients
that are Public Interest Entities.”
• All of the relevant provisions set out in a particular section together with any add-
itional provisions set out in any relevant subsection.

Requirements and Application Material

10. Requirements and application material are to be read and applied with the objective of
complying with the fundamental principles, applying the conceptual framework and,
when performing audit, review and other assurance engagements, being independent.
Requirements
11. Requirements are designated with the letter “R”, are numbered in bold and, in most
cases, include the word “shall.” The word “shall” in the Code imposes an obligation on a
professional accountant or firm to comply with the specific provision in which “shall”
has been used.
12. In some situations, the Code provides a specific exception to a requirement. In such a
situation, the provision is designated with the letter “R” but uses “may” or conditional
wording.
13. When the word “may” is used in the Code, it denotes permission to take a particular
action in certain circumstances, including as an exception to a requirement. It is not used
to denote possibility.
14. When the word “might” is used in the Code, it denotes the possibility of a matter arising,
an event occurring or a course of action being taken. The term does not ascribe any par-
ticular 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 particu-
lar matter, event or course of action.
Application Material
15. In addition to requirements, the Code contains application material that provides context
relevant to a proper understanding of the Code. In particular, the application material is
intended to help a professional accountant to understand how to apply the conceptual
framework to a particular set of circumstances and to understand and comply with a
specific requirement. While such application material does not of itself impose a re-
quirement, consideration of the material is necessary to the proper application of the
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 5

requirements of the Code, including application of the conceptual framework. Appli-

cation material is designated with the letter “A”.
16. Where application material includes lists of examples, these lists are not intended to be
exhaustive.

APPENDIX TO THE GUIDE TO THE CODE (INCLUDING SOUTH AFRICAN

ADAPTATIONS AND AMENDMENTS)
17. This Appendix to this Guide provides an overview of the Code.
South African Adaptations and Amendments
18. South African adaptations and amendments to the IESBA International Code of Ethics for
Professional Accountants are underlined and in italics.
19. South African adaptions include the following:
• A change to the name of the Code;
• A change in the definition of professional accountants to include SAICA members and
associates;
• Additional sub-headings for clarity;
• Additional words to certain paragraphs; and
• Strikethrough of IESBA Code paragraphs that have not been adopted in South Africa.
20. South African amendments, which are more substantive than adaptations, and require a
change to the numbering system, are represented as follows:
• South African requirements and application material will include a reference to
“SA”, e.g. R115.3 SA or 350.8 A1 SA;
• Paragraphs inserted between two consecutively numbered paragraphs will include an
“a” in the paragraph number, e.g. R400.8a SA; and
• Paragraphs that are not South African paragraphs but that have been amended to re-
flect a change in status (e.g. from application material to a requirement) will also in-
clude a reference to “SA”, e.g. application paragraph changed to a requirement,
350.4 A1 to R350.4a SA.
21. South African laws and regulations may impose requirements that regulate the conduct of
professional accountants and their clients. These requirements may be in addition to the
content of the Code, or are more restrictive than the Code. A list of such laws and regu-
lations is not provided in this Code, but a proper identification, understanding and appli-
cation of such matters, is necessary.
22. South African amendments (excluding definitions) are listed below:
Paragraph Number Detail
Subsection 113 – Professional Competence and Due Care
R113.4 SA South African requirement
Subsection 115 – Professional Behaviour
Multiple Firms and Assisted Holding Out
R115.3 SA South African requirement
R115.4 SA South African requirement

continued
ET – 6 SAICA Student Handbook 2023/2024

Paragraph Number Detail

Signing Conventions for Reports
R115.5 SA South African requirement
R115.6 SA South African requirement
Use of Electronic Signatures
115.7 A1 SA South African application material
115.7 A2 SA South African application material
115.7 A3 SA South African application material
115.7 A4 SA South African application material
115.7 A5 SA South African application material
R115.8 SA South African requirement
115.9 A1 SA South African application material
115.9 A2 SA South African application material
115.10 A1 SA South African application material
115.11 A1 SA South African application material
115.11 A2 SA South African application material
Section 120 – The Conceptual Framework
R120.9a SA 120.9 A2 (which is an application paragraph in the IESBA Code of Ethics)
has been elevated into a South African requirement R120.9a SA.
Section 320 – Professional Appointments
R320.6a SA South African requirement
R320.7a SA South African requirement
Section 321 – Second Opinions
321.3 A4 SA South African application material
R321.3a SA South African requirement
321.3a A1 SA South African application material
R321.3b SA South African requirement
R321.5 SA South African requirement
321.5 A1 SA South African application material
Section 330 – Fees and Other Types of Remuneration
R330.4 SA South African requirement
Section 350 – Custody of Client Assets
R350.4a SA 350.4 A1 (which is an application paragraph in the IESBA Code of Ethics)
has been elevated to a South African requirement R350.4a SA
R350.6 SA South African requirement
R350.7 SA South African requirement
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 7

Paragraph Number Detail

R350.8 SA South African requirement
350.8 A1 SA South African application material
R350.9 SA South African requirement
Section 400 – Applying the Conceptual Framework to Independence for Audit and Review
Engagements
R400.13a SA South African requirement
R400.13b SA South African requirement
R400.13c SA South African requirement
 T–8
ET SAIICA Studdent Haandbbook 20023//20224

DEFINITIONS, INCLUDING LIST OF ABBREVIATIONS AND STANDARDS

(ALL PROFESSIONAL ACCOUNTANTS)

PART 1
COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND
CONCEPTUAL FRAMEWORK
(ALL PROFESSIONAL ACCOUNTANTS – SECTIONS 100 TO 199)

PART 2 PART 3
PROFESSIONAL ACCOUNTANTS IN PROFESSIONAL ACCOUNTANTS IN
BUSINESS PUBLIC PRACTICE
(SECTIONS 200 TO 299) (SECTIONS 300 TO 399)
(PART 2 IS ALSO APPLICABLE TO INDIVIDUAL
PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE
WHEN PERFORMING PROFESSIONAL ACTIVITIES
PURSUANT TO THEIR RELATIONSHIP
WITH THE FIRM)
INDEPENDENCE STANDARDS
(PARTS 4A AND 4B)
PART 4A – INDEPENDENCE FOR AUDIT AND
REVIEW ENGAGEMENTS
(SECTIONS 400 TO 899)
PART 4B – INDEPENDENCE FOR ASSURANCE
ENGAGEMENTS OTHER THAN
AUDIT AND REVIEW ENGAGEMENTS
(SECTIONS 900 TO 999)
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 9

SAICA Code of Professional Conduct (2023 Edition)

CONTENTS
Page
Definitions, including Lists of Abbreviations and Standards ............................................... 12
Lists of Abbreviations and Standards referred to in the Code .............................................. 26
Part 1 – Complying with the Code, Fundamental Principles and
Conceptual Framework....................................................................................................... 27
Section 100 ............................................................................................................................ 27
Complying with the Code ................................................................................................ 27
Section 110 ............................................................................................................................ 29
The Fundamental Principles ............................................................................................ 29
Subsection 111 – Integrity ............................................................................................... 30
Subsection 112 – Objectivity ........................................................................................... 30
Subsection 113 – Professional Competence and Due Care ............................................. 31
Subsection 114 – Confidentiality..................................................................................... 31
Subsection 115 – Professional Behaviour ....................................................................... 33
Section 120 ............................................................................................................................ 36
The Conceptual Framework ............................................................................................ 36
Part 2 – Professional Accountants in Business ................................................................. 44
Section 200 ............................................................................................................................ 44
Applying the Conceptual Framework – Professional Accountants in Business.............. 44
Section 210 ............................................................................................................................ 47
Conflicts of Interest ......................................................................................................... 47
Section 220 ............................................................................................................................ 49
Preparation and Presentation of Information ................................................................... 49
Section 230 ............................................................................................................................ 53
Acting with Sufficient Expertise ..................................................................................... 53
Section 240 ............................................................................................................................ 54
Financial Interests, Compensation and Incentives Linked to Financial Reporting
and Decision Making ....................................................................................................... 54
Section 250 ............................................................................................................................ 55
Inducements, Including Gifts and Hospitality ................................................................. 55
Section 260 ............................................................................................................................ 59
Responding to Non-Compliance with Laws and Regulations ......................................... 59
Section 270 ............................................................................................................................ 67
Pressure to Breach the Fundamental Principles .............................................................. 67
Part 3 – Professional Accountants in Public Practice ...................................................... 70
Section 300 ............................................................................................................................ 70
Applying the Conceptual Framework – Professional Accountants in Public Practice .... 70
Section 310 ............................................................................................................................ 75
Conflicts of Interest ......................................................................................................... 75
Section 320 ............................................................................................................................ 79
Professional Appointments .............................................................................................. 79
Section 321 ............................................................................................................................ 82
Second Opinions .............................................................................................................. 82
ET – 10 SAICA Student Handbook 2023/2024

Page
Section 325 ............................................................................................................................ 84
Objectivity of an Engagement Quality Reviewer and other Appropriate Reviewers ...... 84
Section 330 ............................................................................................................................ 85
Fees and other Types of Remuneration ........................................................................... 85
Section 340 ............................................................................................................................ 87
Inducements, including Gifts and Hospitality ................................................................. 87
Section 350 ............................................................................................................................ 92
Custody of Client Assets.................................................................................................. 92
Section 360 ............................................................................................................................ 94
Responding to Non-Compliance with Laws and Regulations ......................................... 94
Independence Standards (Parts 4A and 4B) ..................................................................... 106
Part 4A – Independence for Audit and Review Engagements ........................................ 106
Section 400 ............................................................................................................................ 106
Applying the Conceptual Framework to Independence for Audit
and Review Engagements ................................................................................................ 106
Section 405 ............................................................................................................................ 120
Group Audits .................................................................................................................... 120
Section 410 ............................................................................................................................ 127
Fees .................................................................................................................................. 127
Section 411 ............................................................................................................................ 137
Compensation and Evaluation Policies ........................................................................... 137
Section 420 ............................................................................................................................ 137
Gifts and Hospitality ........................................................................................................ 137
Section 430 ............................................................................................................................ 138
Actual or Threatened Litigation....................................................................................... 138
Section 510 ............................................................................................................................ 139
Financial Interests ............................................................................................................ 139
Section 511 ............................................................................................................................ 142
Loans and Guarantees ...................................................................................................... 142
Section 520 ............................................................................................................................ 143
Business Relationships .................................................................................................... 143
Section 521 ............................................................................................................................ 145
Family and Personal Relationships.................................................................................. 145
Section 522 ............................................................................................................................ 147
Recent service with an Audit Client ................................................................................ 147
Section 523 ............................................................................................................................ 148
Serving as a Director or Officer of an Audit Client ......................................................... 148
Section 524 ............................................................................................................................ 149
Employment with an Audit Client ................................................................................... 149
Section 525 ............................................................................................................................ 151
Temporary Personnel Assignments.................................................................................. 151
Section 540 ............................................................................................................................ 152
Long Association of Personnel (including Partner Rotation) with an Audit Client ........ 152
Section 600 ............................................................................................................................ 157
Provision of Non-Assurance Services to an Audit Client ............................................... 157
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 11

Page
Subsection 601 – Accounting and Bookkeeping Services............................................... 164
Subsection 602 – Administrative Services ...................................................................... 167
Subsection 603 – Valuation Services ............................................................................... 167
Subsection 604 – Tax Services ........................................................................................ 169
Subsection 605 – Internal Audit Services ........................................................................ 175
Subsection 606 – Information Technology Systems Services ......................................... 178
Subsection 607 – Litigation Support Services ................................................................. 180
Subsection 608 – Legal Services ..................................................................................... 182
Subsection 609 – Recruiting Services ............................................................................. 184
Subsection 610 – Corporate Finance Services ................................................................ 186
Section 800 ............................................................................................................................ 187
Reports on Special Purpose Financial Statements that include a Restriction on Use
and Distribution (Audit and Review Engagements) ........................................................ 187
Part 4B – Independence for Assurance Engagements other than Audit and
Review Engagements ........................................................................................................... 190
Section 900 ............................................................................................................................ 190
Applying the Conceptual Framework to Independence for Assurance Engagements
other than Audit and Review Engagements ..................................................................... 190
Section 905 ............................................................................................................................ 197
Fees .................................................................................................................................. 197
Section 906 ............................................................................................................................ 200
Gifts and Hospitality ........................................................................................................ 200
Section 907 ............................................................................................................................ 200
Actual or Threatened Litigation....................................................................................... 200
Section 910 ............................................................................................................................ 201
Financial Interests ............................................................................................................ 201
Section 911 ............................................................................................................................ 203
Loans and Guarantees ...................................................................................................... 203
Section 920 ............................................................................................................................ 205
Business Relationships .................................................................................................... 205
Section 921 ............................................................................................................................ 206
Family and Personal Relationships.................................................................................. 206
Section 922 ............................................................................................................................ 208
Recent Service with an Assurance Client ........................................................................ 208
Section 923 ............................................................................................................................ 209
Serving as a Director or Officer of an Assurance Client ................................................. 209
Section 924 ............................................................................................................................ 210
Employment with an Assurance Client ........................................................................... 210
Section 940 ............................................................................................................................ 211
Long Association of Personnel with an Assurance Client ............................................... 211
Section 950 ............................................................................................................................ 213
Provision of Non-Assurance Services to Assurance Clients ........................................... 213
Section 990 ............................................................................................................................ 216
Reports that Include a Restriction on Use and Distribution
(Assurance Engagements other than Audit and Review Engagements) .......................... 216
Effective Dates ...................................................................................................................... 218
ET – 12 SAICA Student Handbook 2023/2024

DEFINITIONS, INCLUDING LISTS OF ABBREVIATIONS

AND STANDARDS
In the SAICA Code of Professional Conduct, the singular shall be construed as including the
plural as well as the reverse, and the terms below have the following meanings assigned to them.
In this Definitions section, explanations of defined terms are shown in regular font; italics are
used for explanations of described terms which have a specific meaning in certain parts of the
Code or for additional explanations of defined terms. References are also provided to terms
described in the Code.
Acceptable level A level at which a professional accountant using the reasonable and
informed third party test would likely conclude that the professional
accountant complies with the fundamental principles.
Accredited A status granted by the IRBA to a professional body that meets and
Professional Body continues to meet the prescribed accreditation standards.
“Accreditation” means the status afforded to a professional body in
accordance with Part 1 of Chapter III [of the Act], which status may
be granted in full or in part”1.
“Professional body” means a body of, or representing:
(a) registered auditors and registered candidate auditors; or
(b) accountants, registered auditors and registered candidate
auditors”.2
Act The Auditing Profession Act No. 26 of 2005, as amended.
Advanced electronic An advanced electronic signature, as defined in the Electronic Com-
signatures munications and Transactions Act, 2002 (No. 25 of 2002), is “an
electronic signature which results from a process which has been
accredited by the Authority as provided for in section 37”.
Advertising The communication to the public of information as to the services or
skills provided by professional accountants in public practice with a
view to procuring professional business.
Appropriate reviewer An appropriate reviewer is a professional with the necessary know-
ledge, 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.
This term is described in paragraph 300.8 A4.
Assisted holding out Assisting an individual to contravene Sections 41(1) and/or 41(2) of
the Act
Associate A person who has been admitted and registered as an associate general
accountant (AGA) with the Institute and therefore entitled to use the
designation “Associate General Accountant” or “Associate General
Accountant (South Africa)” or the initials “AGA(SA)” or a person
who has been admitted and registered as an associate (AT) with the
Institute and therefore entitled to use the designation of Fellow
Member of Association of Accounting Technician or the initials
“FMAAT(SA)” or Member of Association of Accounting Technicians
or the initials “MAAT(SA)” or Public Sector Member of Association
of Accounting Technician or the initials “PSMAAT(SA)”.
________________________

1 Section 1 v “accreditation”.
2 Section 1 v “professional body”.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 13

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 An engagement in which a professional accountant in public practice
engagement aims to obtain sufficient appropriate evidence in order to express a
conclusion designed to enhance the degree of confidence of the in-
tended 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 Assur-
ance Framework provides a general description of assurance engage-
ments to which International Standards on Auditing (ISAs), Inter-
national Standards on Review Engagements (ISREs) and International
Standards on Assurance Engagements (ISAEs) apply.)
In Part 4B, the term ‘assurance engagement’ addresses assurance
engagements other than audit engagements or review engagements.
Assurance team (a) All members of the engagement team for the assurance
engagement;
(b) All others within, or engaged by, the firm who can directly influ-
ence 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 per-
formance of the assurance engagement;
(ii) Those who provide consultation regarding technical or in-
dustry specific issues, transactions or events for the assur-
ance engagement; and
(iii) Those who perform an engagement quality review, or a re-
view consistent with the objective of an engagement quality
review, for the engagement.
Attestation engagement An assurance engagement in which a party other than the registered
auditor in public practice measures or evaluates the underlying subject
matter against the criteria.
A party other than the registered auditor also often presents the result-
ing subject matter information in a report or statement. In some cases,
however, the subject matter information may be presented by the regis-
tered auditor in the assurance report. In an attestation engagement, the
registered auditor’s conclusion addresses whether the subject matter
information is free from material misstatement.
The registered auditor’s conclusion may be phrased in terms of:
(i) The underlying subject matter and the applicable criteria;
(ii) The subject matter information and the applicable criteria; or
(iii) A statement made by the appropriate party.
Audit In Part 4A, the term “audit” applies equally to “review”.
Audit client An entity in respect of which a firm conducts an audit engagement.
When the client is a listed entity, audit client will always include its
related entities. When the audit client is not a listed entity, audit client
ET – 14 SAICA Student Handbook 2023/2024

includes those related entities over which the client has direct or in-
direct control. (See also paragraph R400.20.)
In Part 4A, the term “audit client” applies equally to “review client.”
In the case of a group audit, see the definition of group audit client.
Audit engagement A reasonable assurance engagement in which a professional account-
ant in public practice expresses an opinion whether financial state-
ments 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 applicable financial reporting framework, such as an engage-
ment conducted in accordance with International Standards on Audit-
ing. This includes a Statutory Audit, which is an audit required by
legislation or other regulation.
In Part 4A, the term “audit engagement” applies equally to “review
engagement.”
Audit report In Part 4A, the term “audit report” applies equally to “review
report”.
Audit team (a) All members of the engagement team for the audit engagement;
(b) All others within, or engaged by, the firm who can directly influ-
ence the outcome of the audit engagement, including:
(i) Those who recommend the compensation of, or who provide
direct supervisory, management or other oversight of the en-
gagement partner in connection with the performance of the
audit engagement, including those at all successively senior
levels above the engagement partner through to the indi-
vidual who is the firm’s Senior or Managing Partner (Chief
Executive or equivalent);
(ii) Those who provide consultation regarding technical or
industry-specific issues, transactions or events for the
engagement; and
(iii) Those who perform an engagement quality review, or a re-
view consistent with the objective of an engagement quality
review, for the engagement; and
(c) Any other individuals within a network firm who can directly influ-
ence the outcome of the audit engagement.
In Part 4A, the term “audit team” applies equally to “review team”.
In the case of a group audit, see the definition of group audit team.
Chartered Means a chartered accountant registered as such with the Institute
Accountant and therefore entitled to use the designation “Chartered Accountant”,
“Geoktrooieerde Rekenmeester”, Chartered Accountant (South
Africa)”, “Geoktrooieerde Rekenmeester (Suid-Afrika)”, “Chartered
Accountant (SA)” OR “Geoktrooieerde Rekenmeester (SA)”, or the
initials “CA”, “GR”, “CA(SA)” or “GR(SA)”.
Client account A bank account which is used solely for the banking of clients’ monies.
Client monies Any monies, including documents of title to money such as bills of
exchange and promissory notes, as well as documents of title that can
be converted into money such as bearer bonds, received by a regis-
tered auditor to be held or paid out on the instruction of the person
from whom or on whose behalf they are received.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 15

Close family A parent, child or sibling who is not an immediate family member.
Component An entity, business unit, function or business activity, or some com-
bination thereof, determined by the group auditor for purposes of
planning and performing audit procedures in a group audit.
Component audit client A component in respect of which a group auditor firm or component
auditor firm performs audit work for purposes of a group audit.
When a component is:
(a) A legal entity, the component audit client is the entity and any
related entities over which the entity has direct or indirect
control; or
(b) A business unit, function or business activity (or some combin-
ation thereof), the component audit client is the legal entity or
entities to which the business unit belongs or in which the
function or business activity is being performed.
Component auditor firm A firm performing audit work related to a component for purposes of
a group audit
Conceptual framework This term is described in Section 120.
Contingent fee A fee calculated on a predetermined basis relating to the outcome of
a transaction or the result of the services performed by the firm. A
fee that is established by a court or other public authority is not a
contingent fee.
Cooling-off period This term is described in paragraph R540.5 for the purposes of para-
graphs R540.11 to R540.19.
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.
Direct engagement An assurance engagement in which the registered auditor in public
practice measures or evaluates the underlying subject matter against
the applicable criteria and the registered auditor presents the resulting
subject matter information as part of, or accompanying, the assurance
report. In a direct engagement, the registered auditor’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.
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.
Eligible audit This term is described in paragraph 800.2 for the purposes of Section
engagement 800.
Eligible assurance This term is described in paragraph 990.2 for the purposes of Section
engagement 990.
ET – 16 SAICA Student Handbook 2023/2024

Engagement partner The partner or other person in the firm who is responsible for the
engagement and its performance, and for the report that is issued on
behalf of the firm, and who, where required, has the appropriate
authority from a professional, legal or regulatory body.
Engagement period The engagement period starts when the audit team begins to perform
(Audit and Review the audit. The engagement period ends when the audit report is
Engagements) issued. When the engagement is of a recurring nature, it ends at the
later of the notification by either party that the professional relation-
ship has ended or the issuance of the final audit report.
Engagement period The engagement period starts when the assurance team begins to
(Assurance Engagements perform assurance services with respect to the particular engagement.
Other than Audit and The engagement period ends when the assurance report is issued.
Review Engagements) 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.
Engagement quality An objective evaluation of the significant judgements made by the
review engagement team and the conclusions reached thereon, performed by
the engagement quality reviewer and completed on or before the date
of the engagement report.
Engagement quality A partner, other individual in the firm, or an external individual,
reviewer appointed by the firm to perform the engagement quality review.
Engagement team All partners and staff performing the engagement, and any other in-
dividuals who perform procedures on the engagement, excluding
external experts and internal auditors who provide direct assistance
on the engagement.
In Part 4A, the term “engagement team” refers to individuals per-
forming audit or review procedures on the audit or review engage-
ment, respectively. This term is further described in paragraph 400.9.
ISA 220 (Revised) provides further guidance on the definition of
engagement team in the context of an audit of financial statements.
ISA 620 defines an auditor’s expert as an individual or organization
possessing expertise in a field other than accounting or auditing,
whose work in that field is used by the auditor to assist the auditor in
obtaining sufficient appropriate audit evidence. ISA 620 deals with
the auditor’s responsibilities relating to the work of such experts. ISA
610 (Revised 2013) deals with the auditor’s responsibilities if using
the work of internal auditors, including using internal auditors to
provide direct assistance on the audit engagement.
In Part 4B, the term “engagement team” refers to individuals per-
forming assurance procedures on the assurance engagement.
Existing accountant A professional accountant in public practice currently holding an audit
appointment or carrying out accounting, tax, consulting or similar
professional services for a client.
External expert An individual (who is not a partner or a member of the professional
staff, including temporary staff, of the firm or a network firm) or
organisation possessing skills, knowledge and experience in a field
other than accounting or auditing, whose work in that field is used to
assist the professional accountant in obtaining sufficient appropriate
evidence.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 17

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 statements A structured representation of historical financial information, in-
cluding 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 state-
ment 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 In the case of a single entity, the financial statements of that entity. In
on which the firm will the case of consolidated financial statements, also referred to as
express an opinion group financial statements, the consolidated financial statements.
Firm (a) A partnership, company or sole proprietor referred to in section
383 of the Act;
(b) An entity that controls such parties in (a), through ownership,
management or other means; and
(c) An entity controlled by such parties in (a), through ownership,
management or other means.
Paragraphs 400.4 and 900.3 explain how the word “firm” is used to
address the responsibility of professional accountants and firms for
compliance with Parts 4A and 4B, respectively.
Fundamental principles This term is described in paragraph 110.1 A1.Each of the fundamen-
tal principles is, in turn, described in the following paragraphs:
Integrity R111.1
Objectivity R112.1
Professional competence and due care R113.1
Confidentiality R114.1
Professional behaviour R115.1
Group A reporting entity for which group financial statements are prepared.
Group audit The audit of group financial statements.
Group audit client The entity on whose group financial statements the group auditor
firm conducts an audit engagement. When the entity is a listed entity,
group audit client will always include its related entities and any
other components at which audit work is performed. When the entity
is not a listed entity, group audit client includes related entities over
which such entity has direct or indirect control and any other com-
ponents at which audit work is performed.
See also paragraph R400.20.

________________________

3 Section 1 v “firm”.
ET – 18 SAICA Student Handbook 2023/2024

Group auditor firm The firm that expresses the opinion on the group financial statements.
Group audit team (a) All members of the engagement team for the group audit, in-
cluding individuals within, or engaged by, component auditor
firms who perform audit procedures related to components for
purposes of the group audit;
(b) All others within, or engaged by, the group auditor firm who can
directly influence the outcome of the group audit, including:
(i) Those who recommend the compensation of, or who pro-
vide direct supervisory, management or other oversight of
the group engagement partner in connection with the per-
formance of the group audit, including those at all success-
ively senior levels above the group engagement partner
through to the individual who is the firm’s Senior or
Managing Partner (Chief Executive or equivalent);
(ii) Those who provide consultation regarding technical or
industry-specific issues, transactions or events for the group
audit; and
(iii) Those who perform an engagement quality review, or a
review consistent with the objective of an engagement
quality review, for the group audit;
(c) Any other individuals within a network firm of the group auditor
firm’s network who can directly influence the outcome of the
group audit; and
(d) Any other individuals within a component auditor firm outside
the group auditor firm’s network who can directly influence the
outcome of the group audit.
Group engagement The engagement partner who is responsible for the group audit.
partner
Group financial Financial statements that include the financial information of more
statements than one entity or business unit through a consolidation process.
Historical financial Information expressed in financial terms in relation to a particular
information entity, derived primarily from that entity’s accounting system, about
economic events occurring in past time periods or about economic
conditions or circumstances at points in time in the past.
Immediate family A spouse (or equivalent) or dependent.
Independence Independence comprises:
(a) 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.
(b) Independence in appearance – the avoidance of facts and circum-
stances that are so significant that a reasonable and informed
third party would be likely to conclude that a firm’s, or an audit
or assurance team member’s, integrity, objectivity or professional
scepticism has been compromised.
As set out in paragraphs 400.5 and 900.4, references to an individual
or firm being “independent” mean that the individual or firm has
complied with Parts 4A and 4B, as applicable.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 19

Indirect financial interest A financial interest beneficially owned through a collective invest-
ment vehicle, estate, trust or other intermediary over which the indi-
vidual or entity has no control or ability to influence investment
decisions.
Inducement An object, situation, or action that is used as a means to influence
another individual’s behaviour, but not necessarily with the intent to
improperly influence that individual’s behaviour.
Inducements can range from minor acts of hospitality between
business colleagues (for professional accountants in business), or
between professional accountants and existing or prospective clients,
to acts that result in non-compliance with laws and regulations. An
inducement can take many different forms, for example:
y Gifts.
y Hospitality.
y Entertainment.
y Political or charitable donations.
y Appeals to friendship and loyalty.
y Employment or other commercial opportunities.
y Preferential treatment, rights or privileges.
Institute The South African Institute of Chartered Accountants (SAICA)
Key audit partner The engagement partner, the individual responsible for the engage-
ment quality review, and other audit partners, if any, on the engage-
ment team who make key decisions or judgements on significant
matters with respect to the audit of the financial statements on which
the 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, engagement partners for certain compon-
ents in a group audit such as significant subsidiaries or divisions.
Listed entity An entity whose shares, stock or debt are quoted or listed on a recog-
nised stock exchange, or are marketed under the regulations of a rec-
ognised stock exchange or other equivalent body.
May This term is used in the Code to denote permission to take a par-
ticular action in certain circumstances, including as an exception to
a requirement. It is not used to denote possibility.
Might This term is used in the Code to denote 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.
Network A larger structure:
(a) That is aimed at co-operation; and
(b) That is clearly aimed at profit or cost sharing or shares common
ownership, control or management, common quality manage-
ment policies and procedures, common business strategy, the use
of a common brand-name, or a significant part of professional
resources.
ET – 20 SAICA Student Handbook 2023/2024

Network firm A firm or entity that belongs to a network.

For further information, see paragraphs 400.50 A1 to 400.54 A1.
Non-compliance with Non-compliance with laws and regulations (“non-compliance”) com-
laws and regulations prises acts of omission or commission, intentional or unintentional,
(Professional accountants which are contrary to the prevailing laws or regulations committed
in Business) by the following parties:
(a) The professional accountant’s employing organisation;
(b) Those charged with governance of the employing organisation;
(c) Management of the employing organisation; or
(d) Other individuals working for or under the direction of the em-
ploying organisation.
This term is described in paragraph 260.5 A1.
Non-compliance with Non-compliance with laws and regulations (“non-compliance”) com-
laws and regulations prises acts of omission or commission, intentional or unintentional,
(Professional accountants which are contrary to the prevailing laws or regulations committed
in Public Practice) by the following parties:
(a) A client;
(b) Those charged with governance of a client;
(c) Management of a client; or
(d) Other individuals working for or under the direction of a client.
This term is described in paragraph 360.5 A1.
Office A distinct sub-group, whether organised on geographical or practice
lines.
Ordinary electronic An electronic signature, as defined in the Electronic Communications
signatures and Transactions Act, 2002 (No. 25 of 2002), is “data attached to,
incorporated in, or logically associated with other data and which is
intended by the user to serve as a signature”.
Predecessor accountant A professional accountant in public practice who most recently held
an audit appointment or carried out accounting, tax, consulting or
similar professional services for a client, where there is no existing
accountant.
Professional accountant A generic term in this Code to refer to a chartered accountant [see
Chartered Accountant] or an associate [see Associate] as required
by the context of its use in a requirement or application material of
this Code, and taking into account that this Code is applicable to all
chartered accountants and associates in terms of the SAICA By-laws.
In Part 1, the term “professional accountant” refers to individual
professional accountants in business and to professional accountants
in public practice and their firms.
In Part 2, the term “professional accountant” refers to professional
accountants in business.
In Parts 3, 4A and 4B, the term “professional accountant” refers to
professional accountants in public practice and their firms.
Professional accountant A professional accountant working in areas such as commerce, in-
in business dustry, service, the public sector, education, the not-for-profit sector,
or in regulatory or professional bodies, who might be an employee,
contractor, partner, director (executive or non-executive), owner-
manager or volunteer.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 21

Professional accountant A professional accountant, irrespective of functional classification (for

in public practice example, audit, tax or consulting) in a firm that provides professional
services.
The term “professional accountant in public practice” is also used to
refer to a firm of professional accountants in public practice.
Professional activity An activity requiring accountancy or related skills undertaken by a
professional accountant, including:
y auditing, review, other assurance and related services;
y accounting;
y tax;
y management consulting; and
y financial management.
Professional judgement Professional judgement 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 activities, and the interests and relation-
ships involved.
This term is described in paragraph 120.5 A4.
Professional services Professional activities performed for clients. These include but are
not limited to the following:
(a) Audit, review, other assurance and related services:
(i) Financial statement audits and reviews, other assurance
and related services such as regulatory reporting, sustain-
ability, compliance and performance reporting; and
(ii) Preparation of financial statements in accordance with
recognised financial reporting standards and applicable
statutes;
(b) Accounting services:
(i) Preparation of accounting records;
(c) Company statutory services;
(d) Taxation services:
(i) Tax return preparation and submission;
(ii) Tax calculations for the purpose of preparing accounting
entries;
(iii) Tax planning and other tax advisory services; and
(iv) Assistance in the resolution of tax disputes;
(e) Management consulting and advisory services:
(i) Accounting advisory and financial management advisory
services; accounting support, conversion services for new
and revised accounting standards, financial modelling and
project management;
(ii) Business performance services; business effectiveness,
people and change management, operational and business
finance;
ET – 22 SAICA Student Handbook 2023/2024

(iii) Internal audit; risk and compliance services, review and

monitoring of internal controls, risk management, com-
pliance services, corporate governance and audit commit-
tee advisory services;
(iv) Corporate finance service; mergers and acquisitions, valu-
ations, infrastructure financing, debt and capital markets,
due diligence reviews, transaction services and designated
advisor services;
(v) Corporate recovery services; liquidation and insolvency
administration, curator bonis, administration of deceased
estates, judicial management and trusteeships;
(vi) Financial risk management services; actuarial services,
banking and risk advisory, regulatory and compliance
services, and technical accounting;
(vii) Information technology (IT) advisory; security, privacy and
continuity, enterprise resource planning; information
system audit services, IT project advisory, governance and
performance; and
(viii) Forensic services; dispute advisory and resolution, ethics
and integrity monitoring, fraud risk management, intel-
lectual property and other investigations and regulatory
compliance.
Proposed accountant A professional accountant in public practice who is considering
accepting an audit appointment or an engagement to perform
accounting, tax, consulting or similar professional services for a
prospective client (or in some cases, an existing client).
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, or
(c) Other entities as set out in paragraphs R400.8a SA and R400.8b
SA.
Reasonable and The reasonable and informed third party test is a consideration by
informed third party the professional accountant about whether the same conclusions
Reasonable and would likely be reached by another party. Such consideration is made
informed third party test from the perspective of a reasonable and informed third party, who
weighs all the relevant facts and circumstances that the accountant
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 accountant’s conclusions in an impartial
manner.
These terms are described in paragraph R120.5 A6.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 23

Registered auditor An individual or firm registered as an auditor with the Regulatory

Board4.
This term, when used in the Code, includes a registered candidate
auditor in so far as it is applicable, as required by the context of its
use in a requirement or application material of this Code, and con-
sidering this Code, as applicable.
Registered Candidate Means an individual who has obtained a registered auditor desig-
Auditor nation from an accredited professional body, who is registered as a
candidate auditor with the Regulatory Board and who is serving
under the supervision of a registered auditor5.
Regulatory Board The Independent Regulatory Board for Auditors established by Sec-
tion 3 of the Act6.
Related entity An entity that has any of the following relationships with the client:
(a) An entity that has direct or indirect control over the client if the
client is material to such entity;
(b) An entity with a direct financial interest in the client if that entity
has significant influence over the client and the interest in the
client is material to such entity;
(c) An entity over which the client has direct or indirect control;
(d) An entity in which the client, or an entity related to the client
under (c) above, has a direct financial interest that gives it sig-
nificant influence over such entity and the interest is material to
the client and its related entity in (c); and
(e) An entity which is under common control with the client (a “sister
entity”) if the sister entity and the client are both material to the
entity that controls both the client and sister entity.
Responsible party In an assurance engagement, the party responsible for the underlying
subject matter.
Review client An entity in respect of which a firm conducts a review engagement.
Review engagement An assurance engagement, conducted in accordance with International
Standards on Review Engagements or equivalent, in which a pro-
fessional accountant in public practice 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
professional accountant’s attention that causes the professional
accountant to believe that the financial statements are not prepared, in
all material respects, in accordance with an applicable financial
reporting framework.

________________________

4 Section 1 v. “registered auditor”.

5 Section 1 v “registered candidate auditor”.
6 Section 1 v “Regulatory Board”.
ET – 24 SAICA Student Handbook 2023/2024

Review team (a) All members of the engagement team for the review engagement;
and
(b) All others within, or engaged by the firm who can directly influ-
ence the outcome of the review engagement, including:
(i) Those who recommend the compensation of, or who pro-
vide direct supervisory, management or other oversight of
the engagement partner in connection with the performance
of the review engagement, including those at all success-
ively senior levels above the engagement partner through to
the individual who is the firm’s Senior or Managing Partner
(Chief Executive or equivalent);
(ii) Those who provide consultation regarding technical or in-
dustry specific issues, transactions or events for the engage-
ment; and
(iii) Those who perform an engagement quality review, or a
review consistent with the objective of an engagement
quality review for the engagement; and
(c) Any other individuals within a network firm who can directly
influence the outcome of the review engagement.
Safeguards Safeguards are actions, individually or in combination, that the pro-
fessional accountant takes that effectively reduce threats to com-
pliance with the fundamental principles to an acceptable level.
This term is described in paragraph 120.10 A2.
Senior professional Senior professional accountants in business are directors, officers or
accountant in business senior employees able to exert significant influence over, and make
decisions regarding, the acquisition, deployment and control of the
employing organisation’s human, financial, technological, physical
and intangible resources.
This term is described in paragraph 260.11 A1.
Special purpose financial Financial statements prepared in accordance with a financial reporting
statements framework designed to meet the financial information needs of
specified users.
Subject matter The outcome of the measurement or evaluation of the underlying sub-
information ject matter against the criteria, i.e., the information that results from
applying the criteria to the underlying subject matter.
Substantial harm This term is described in paragraphs 260.5 A3 and 360.5 A3.
Those charged with The person(s) or organisation(s) (for example, a corporate trustee)
governance with responsibility for overseeing the strategic direction of the entity
and obligations related to the accountability of the entity. This in-
cludes overseeing the financial reporting process. For some entities in
some jurisdictions, those charged with governance might include
management personnel, for example, executive members of a govern-
ance board of a private or public sector entity, or an owner-manager.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 25

Threats This term is described in paragraph 120.6 A3 and includes the fol-
lowing categories:
Self interest 120.6 A3(a)
Self-review 120.6 A3(b)
Advocacy 120.6 A3(c)
Familiarity 120.6 A3(d)
Intimidation 120.6 A3(e)
Time-on period This term is described in paragraph R540.5.
Underlying subject matter The phenomenon that is measured or evaluated by applying criteria.
ET – 26 SAICA Student Handbook 2023/2024

LISTS OF ABBREVIATIONS AND STANDARDS

REFERRED TO IN THE CODE
LIST OF ABBREVIATIONS
Abbreviation Explanation
Assurance Framework International Framework for Assurance Engagements
CoCo Chartered Professional Accountants of Canada Criteria of Control
COSO Committee of Sponsoring Organisations of the Treadway Commission
IAASB International Auditing and Assurance Standards Board
IESBA International Ethics Standards Board for Accountants
IFAC International Federation of Accountants
ISAs International Standards on Auditing
ISAEs International Standards on Assurance Engagements
ISQMs International Standards on Quality Management
ISREs International Standards on Review Engagements

LIST OF STANDARDS OR CODES REFERRED TO IN THE CODE

Standard Full Title
IESBA Code IESBA International Code of Ethics for Professional accountants (including
International Independence Standards)
ISA 320 Materiality in Planning and Performing an Audit
ISA 600 (Revised) Special Considerations – Audits of Group Financial Statements (Including the
Work of Component Auditors)
ISA 610 (Revised 2013) Using the Work of Internal Auditors
ISA 620 Using the Work of an Auditor’s Expert
ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial
Information
ISQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial State-
ments, or Other Assurance or Related Services Engagements
ISQM 2 Engagement Quality Reviews
ISRE 2400 (Revised) Engagements to Review Historical Financial Statements
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 27

Page
PART 1 – COMPLYING WITH THE CODE, FUNDAMENTAL PRINCIPLES AND
CONCEPTUAL FRAMEWORK
Section 100 Complying with the Code ............................................................................... 27
Section 110 The Fundamental Principles ........................................................................... 29
Subsection 111 – Integrity ............................................................................................... 30
Subsection 112 – Objectivity ........................................................................................... 30
Subsection 113 – Professional Competence and Due Care ............................................. 31
Subsection 114 – Confidentiality .................................................................................... 31
Subsection 115 – Professional Behaviour ....................................................................... 33
Section 120 The Conceptual Framework ........................................................................... 36

PART 1 – COMPLYING WITH THE CODE, FUNDAMENTAL

PRINCIPLES AND CONCEPTUAL FRAMEWORK
Section 100
Complying with the Code
General
100.1 A distinguishing mark of the accountancy profession is its acceptance of the respon-
sibility to act in the public interest.
100.2 Confidence in the profession is a reason why businesses, governments and other
organisations involve professional accountants in a broad range of areas, including
assurance and other professional activities. Professional accountants understand and
acknowledge that such confidence is based on the skills and values that professional
accountants bring to the professional activities they undertake, including:
(a) Adherence to ethical principles and professional standards;
(b) Use of business acumen;
(c) Application of expertise on technical and other matters; and
(d) Exercise of professional judgement.
The application of these skills and values enables professional accountants to provide
advice or other output that meets the purpose for which it was provided, and which
can be relied upon by the intended users of such output.
100.3 The Code sets out high-quality standards of ethical behaviour expected of professional
accountants.
100.4 The Code establishes five fundamental principles to be complied with by all pro-
fessional accountants. It also includes a conceptual framework that sets out the
approach to be taken to identify, evaluate and address threats to compliance with
those fundamental principles and, for audits and other assurance engagements, threats
to independence. The Code also applies the fundamental principles and the conceptual
framework to a range of facts and circumstances that professional accountants might
encounter.
ET – 28 SAICA Student Handbook 2023/2024

Requirements and Application Material

100.5 A1 The requirements in the Code, designated with the letter “R,” impose obligations.
100.5 A2 Application material, designated with the letter “A,” provides context, explan-
ations, suggestions for actions or matters to consider, illustrations and other guid-
ance relevant to a proper understanding of the Code. In particular, the application
material is intended to help a professional accountant to understand how to apply
the conceptual framework to a particular set of circumstances and to understand
and comply with a specific requirement. While such application material does not
of itself impose a requirement, consideration of the material is necessary to the
proper application of the requirements of the Code, including application of the
conceptual framework.
R100.6 A professional accountant shall comply with the Code.
100.6 A1 Upholding the fundamental principles and compliance with the specific require-
ments of the Code enable professional accountants to meet their responsibility to
act in the public interest.
100.6 A2 Complying with the Code includes giving appropriate regard to the aim and intent
of the specific requirements.
100.6 A3 Compliance with the requirements of the Code does not mean that professional
accountants will have always met their responsibility to act in the public interest.
There might be unusual or exceptional circumstances in which a professional
accountant believes that complying with a requirement or requirements of the
Code might not be in the public interest or would lead to a disproportionate out-
come. In those circumstances, the professional accountant is encouraged to consult
with an appropriate body such as a professional or regulatory body.
100.6 A4 In acting in the public interest, a professional accountant considers not only the
preferences or requirements of an individual client or employing organisation, but
also the interests of other stakeholders when performing professional activities.
R100.7 If there are circumstances where laws or regulations preclude a professional
accountant from complying with certain parts of the Code, those laws and regu-
lations prevail, and the professional accountant shall comply with all other parts of
the Code.
100.7 A1 The principle of professional behaviour requires a professional accountant to com-
ply with relevant laws and regulations. Some jurisdictions might have provisions
that differ from or go beyond those set out in the Code. Professional accountants
in those jurisdictions need to be aware of those differences and comply with the
more stringent provisions unless prohibited by law or regulation.
Breaches of the Code
R100.8 Paragraphs R400.80 to R400.89 and R900.50 to R900.55 address a breach of
Independence Standards. A professional accountant who identifies a breach of any
other provision of the Code shall evaluate the significance of the breach and its
impact on the professional accountant’s ability to comply with the fundamental
principles. The professional accountant shall also:
(a) Take whatever actions might be available, as soon as possible, to address the
consequences of the breach satisfactorily; and
(b) Determine whether to report the breach to the relevant parties.
100.8 A1 Relevant parties to whom such a breach might be reported include those who
might have been affected by it, a professional or regulatory body or an oversight
authority.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 29

Section 110
The Fundamental Principles
General
110.1 A1 There are five fundamental principles of ethics for professional accountants:
(a) Integrity – to be straightforward and honest in all professional and business
relationships.
(b) Objectivity – to exercise professional or business judgement without being
compromised by:
(i) Bias;
(ii) Conflict of interest; or
(iii) Undue influence of, or undue reliance on, individuals, organisations,
technology or other factors.
(c) Professional Competence and Due Care – to:
(i) Attain and maintain professional knowledge and skill at the level
required to ensure that a client or employing organisation receives
competent professional service, based on current technical and pro-
fessional standards and relevant legislation; and
(ii) Act diligently and in accordance with applicable technical and pro-
fessional standards.
(d) Confidentiality – to respect the confidentiality of information acquired as a
result of professional and business relationships.
(e) Professional Behaviour – to:
(i) Comply with relevant laws and regulations;
(ii) Behave in a manner consistent with the profession’s responsibility to
act in the public interest in all professional activities and business re-
lationships; and
(iii) Avoid any conduct that the professional accountant knows or should
know might discredit the profession.
R110.2 A professional accountant shall comply with each of the fundamental principles.
110.2 A1 The fundamental principles of ethics establish the standard of behaviour expected
of a professional accountant. The conceptual framework establishes the approach
which a professional accountant is required to apply to assist in complying with
those fundamental principles. Subsections 111 to 115 set out requirements and ap-
plication material related to each of the fundamental principles.
110.2 A2 A professional accountant might face a situation in which complying with one
fundamental principle conflicts with complying with one or more other fundamen-
tal principles. In such a situation, the professional accountant might consider con-
sulting, on an anonymous basis if necessary, with:
• Others within the firm or employing organisation.
• Those charged with governance.
• A professional body.
• A regulatory body.
• Legal counsel.
ET – 30 SAICA Student Handbook 2023/2024

However, such consultation does not relieve the professional accountant from the
responsibility to exercise professional judgement to resolve the conflict or, if
necessary, and unless prohibited by law or regulation, disassociate from the matter
creating the conflict.
110.2 A3 The professional accountant is encouraged to document the substance of the issue,
the details of any discussions, the decisions made and the rationale for those de-
cisions.

Subsection 111 – Integrity

R111.1 A professional accountant shall comply with the principle of integrity, which
requires an accountant to be straightforward and honest in all professional and
business relationships.
111.1 A1 Integrity involves fair dealing, truthfulness and having the strength of character to
act appropriately, even when facing pressure to do otherwise or when doing so
might create potential adverse personal or organisational consequences.
111.1 A2 Acting appropriately involves:
(a) Standing one’s ground when confronted by dilemmas and difficult situ-
ations; or
(b) Challenging others as and when circumstances warrant, in a manner appro-
priate to the circumstances.
R111.2 A professional accountant shall not knowingly be associated with reports, returns,
communications or other information where the professional accountant believes
that the information:
(a) Contains a materially false or misleading statement;
(b) Contains statements or information provided recklessly; or
(c) Omits or obscures required information where such omission or obscurity
would be misleading.
111.2 A1 If a professional accountant provides a modified report in respect of such a report,
return, communication or other information, the professional accountant is not in
breach of paragraph R111.2.
R111.3 When a professional accountant becomes aware of having been associated with
information described in paragraph R111.2, the professional accountant shall take
steps to be disassociated from that information.

Subsection 112 – Objectivity

R112.1 A professional accountant shall comply with the principle of objectivity, which
requires a professional accountant to exercise professional or business judgement
without being compromised by:
(a) Bias;
(b) Conflict of interest; or
(c) Undue influence of, or undue reliance on, individuals, organisations, tech-
nology or other factors.
R112.2 A professional accountant shall not undertake a professional activity if a circum-
stance or relationship unduly influences the professional accountant’s professional
judgement regarding that activity.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 31

Subsection 113 – Professional Competence and Due Care

R113.1 A professional accountant shall comply with the principle of professional com-
petence and due care, which requires a professional accountant to:
(a) Attain and maintain professional knowledge and skill at the level required to
ensure that a client or employing organisation receives competent pro-
fessional service, based on current technical and professional standards and
relevant legislation; and
(b) Act diligently and in accordance with applicable technical and professional
standards.
113.1 A1 Serving clients and employing organisations with professional competence re-
quires the exercise of sound judgement in applying professional knowledge and
skill when undertaking professional activities.
113.1 A2 Maintaining professional competence requires a continuing awareness and an
understanding of relevant technical, professional and business developments. Con-
tinuing professional development enables a professional accountant to develop
and maintain the capabilities to perform competently within the professional en-
vironment.
113.1 A3 Diligence encompasses the responsibility to act in accordance with the require-
ments of an assignment, carefully, thoroughly and on a timely basis.
R113.2 In complying with the principle of professional competence and due care, a pro-
fessional accountant shall take reasonable steps to ensure that those working in a
professional capacity under the professional accountant’s authority have appropri-
ate training and supervision.
R113.3 Where appropriate, a professional accountant shall make clients, the employing
organisation, or other users of the professional accountant’s professional services
or activities, aware of the limitations inherent in the services or activities.
R113.4 SA A professional accountant shall not undertake or continue with any engagement
that the professional accountant is not competent to perform, unless the profes-
sional accountant obtains advice and assistance which enables the professional
accountant to carry out the engagement satisfactorily.

Subsection 114 – Confidentiality

R114.1 A professional accountant shall comply with the principle of confidentiality, which
requires a professional accountant to respect the confidentiality of information
acquired as a result of professional and business relationships. A professional
accountant shall:
(a) Be alert to the possibility of inadvertent disclosure, including in a social
environment, and particularly to a close business associate or an immediate
or a close family member;
(b) Maintain confidentiality of information within the firm or employing organi-
sation;
(c) Maintain confidentiality of information disclosed by a prospective client or
employing organisation;
(d) Not disclose confidential information acquired as a result of professional and
business relationships outside the firm or employing organisation without
proper and specific authority, unless there is a legal or professional duty or
right to disclose;
ET – 32 SAICA Student Handbook 2023/2024

(e) Not use confidential information acquired as a result of professional and

business relationships for the personal advantage of the professional ac-
countant or for the advantage of a third party;
(f) Not use or disclose any confidential information, either acquired or received
as a result of a professional or business relationship, after that relationship
has ended; and
(g) Take reasonable steps to ensure that personnel under the professional
accountant’s control, and individuals from whom advice and assistance are
obtained, respect the professional accountant’s duty of confidentiality.
114.1 A1 Confidentiality serves the public interest because it facilitates the free flow of
information from the professional accountant’s client or employing organisation to
the professional accountant in the knowledge that the information will not be dis-
closed to a third party. Nevertheless, the following are circumstances where pro-
fessional accountants are or might be required to disclose confidential information
or when such disclosure might be appropriate:
(a) Disclosure is required by law, for example:
(i) Production of documents or other provision of evidence in the course
of legal proceedings; or
(ii) Disclosure to the appropriate public authorities of infringements of
the law that come to light; including disclosures of reportable irregu-
larities reported to the Regulatory Board as required by section 45 of
the Act;
(b) Disclosure is permitted by law and is authorised by the client or the employ-
ing organisation; and
(c) There is a professional duty or right to disclose, when not prohibited by law:
(i) To comply with the quality review of the Regulatory Board or the
Institute;
(ii) To respond to an inquiry or investigation by the Institute, the Regu-
latory Board and any other regulatory body;
(iii) To protect the professional interests of a professional accountant in
legal proceedings; or
(iv) To comply with technical and professional standards, including ethics
requirements.
114.1 A2 In deciding whether to disclose confidential information, factors to consider,
depending on the circumstances, include:
• Whether the interests of any parties, including third parties whose interests
might be affected, could be harmed if the client or employing organisation
consents to the disclosure of information by the professional accountant.
• Whether all the relevant information is known and substantiated, to the extent
practicable. Factors affecting the decision to disclose include:
o Unsubstantiated facts.
o Incomplete information.
o Unsubstantiated conclusions.
• The proposed type of communication, and to whom it is addressed.
• Whether the parties to whom the communication is addressed are appropriate
recipients.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 33

R114.2 A professional accountant shall continue to comply with the principle of confiden-
tiality even after the end of the relationship between the professional accountant
and a client or employing organisation. When changing employment or acquiring
a new client, the professional accountant is entitled to use prior experience but
shall not use or disclose any confidential information acquired or received as a re-
sult of a professional or business relationship.

Subsection 115 – Professional Behaviour

R115.1 A professional accountant shall comply with the principle of professional behav-
iour, which requires a professional accountant to:
(a) Comply with relevant laws and regulations;
(b) Behave in a manner consistent with the profession’s responsibility to act in
the public interest in all professional activities and business relationships; and
(c) Avoid any conduct that the professional accountant knows or should know
might discredit the profession.
A professional accountant shall not knowingly engage in any business, occupation
or activity that impairs or might impair the integrity, objectivity or good reputation
of the profession, and as a result would be incompatible with the fundamental
principles.
115.1 A1 Conduct that might discredit the profession includes conduct that a reasonable and
informed third party would be likely to conclude adversely affects the good repu-
tation of the profession.
R115.2 When undertaking marketing or promotional activities, a professional accountant
shall not bring the profession into disrepute. A professional accountant shall be
honest and truthful and shall not make:
(a) Exaggerated claims for the services offered by, or the qualifications or
experience of, the professional accountant; or
(b) Disparaging references or unsubstantiated comparisons to the work of
others.
115.2 A1 If a professional accountant is in doubt about whether a form of advertising or
marketing is appropriate, the professional accountant is encouraged to consult
with the Institute.
Multiple Firms and Assisted Holding Out
R115.3 SA A professional accountant may be associated with more than one audit firm or a
professional services firm. Such association shall not be misleading or cause con-
fusion, and the professional accountant shall ensure that there is a clear distinc-
tion between the different firms.
R115.4 SA A professional accountant who is associated with an audit firm, or professional
services firm and has professional accountants who are not registered auditors,
shall ensure:
• that those professional accountants do not intentionally or unintentionally
contravene Section 41(1) and /or 41(2) of the Act, or
• that any action of the professional accountant or the firm do not intentionally
or unintentionally assist Section 41(1) and / or 41(2) of the Act to be contra-
vened by those professional accountants who are not registered auditors
ET – 34 SAICA Student Handbook 2023/2024

Signing Convention for Reports

R115.5 SA A professional accountant shall not delegate to any other registered auditor who
is not a partner or fellow director, the power to sign audit, review or other assur-
ance reports, to be signed by the professional accountant responsible for the en-
gagement. However, in specific cases where emergencies of sufficient gravity
arise, this prohibition may be relaxed, provided the full circumstances giving rise
to the need for delegation are reported both to the relevant client and to the Regu-
latory Board or the Institute, and written consent for such delegation is obtained
from the Regulatory Board or the Institute.
R115.6 SA The individual professional accountant responsible for the audit, review or other
assurance engagement shall, when signing any audit, review or other assurance
report or certificate, reflect the following:
(a) the individual professional accountant’s full name;
(b) if not a sole proprietor, the capacity in which they are signing;
(c) their designation underneath their name; and
(d) if not set out on the firm’s letterhead, the name of the professional account-
ant’s firm.
Use of Electronic Signatures
Introduction
115.7 A1 SA A professional accountant might, when signing any audit, review, or other assur-
ance report, make use of an ordinary or advanced electronic signature as an
alternative to a traditional wet-ink signature.
115.7 A2 SA The Electronic Communications and Transactions Act, 2002 (No. 25 of 2002)
(ECT Act), allows for the use of an electronic signature. The main object of the
ECT Act is to enable and facilitate electronic communications and transactions in
the public interest.
115.7 A3 SA The ECT Act allows for the use of ordinary and advanced electronic signatures.
115.7.A4 SA An advanced electronic signature is the more secure form of electronic signatures.
An ordinary electronic signature can take many forms and security features in
these signatures range from no security to security provided by software or other
products that are close to or similar to those of an advanced electronic signature.
115.7.A5 SA Advanced electronic signatures are a specialised type of electronic signature that
result from a process that has been accredited by the South African Accreditation
Authority (SAAA). The SAAA is responsible for the accreditation of authentication
and certification of products and services used in support of advanced electronic
signatures and monitoring of the activities of authentication and certification ser-
vice providers whose products or services have been accredited by the SAAA with-
in the Republic of South Africa.
Requirements and Application Material
R115.8 SA The individual professional accountant responsible for the audit, review or other
assurance engagement shall, when signing any audit, review, or other assurance
report, make use of either:
(a) A wet-ink signature;
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 35

(b) A secure ordinary electronic signature; or

(c) An advanced electronic signature
that is/are the firm’s authorised means of signing any audit, review, or other
assurance report.
115.9 A1 SA The inappropriate use of a signature might create threats to compliance with the
fundamental principles of professional competence and due care and profession-
al behaviour.
115.9 A2 SA A secure ordinary electronic signature means an electronic signature generated
by a technology system or application that contains data security features which
protect the ordinary electronic signature from unauthorised use and access.
Examples of ordinary electronic signatures that are not secure include, but are
not limited to:
• A typed name or initials in electronic format marked as “signed electronically”
• A wet-ink signature that is photographed or scanned and thus transformed
into an electronic format
• The use of a stylus without data security features

Considerations When Choosing an Electronic Signature

115.10 A1 SA Factors that are relevant when the firm decides whether an ordinary or advanced
electronic signature is appropriately secure in the circumstances, include:
• The nature and extent of security provided, for example:
o Whether it meets recognised security standards, such as the information
security management system standard (ISO 27001); and/or
o The type and number of data security features that it incorporates; and/or
o The strength of applicable access controls
• Whether the service provider is reputable

Considerations When Using an Ordinary Electronic Signature

115.11 A1 SA The inappropriate use of a secure ordinary electronic signature might create
threats to compliance with the fundamental principles of professional competence
and due care and professional behaviour when unauthorised access to the secure
ordinary electronic signature is obtained and it is used to sign an audit, review
or other assurance report without the knowledge of the individual professional
accountant to whom the secure ordinary electronic signature belongs. The level
of threats will be affected by how the firm responds to the factors in 115.10 A1
SA.
115.11 2 SA Examples of actions that might be safeguards to address such threats include:
• The professional accountant taking precautions to prevent unauthorised use
of the secure ordinary electronic signature;
• Obtaining assistance or training from someone with the necessary expertise
on the use of a secure ordinary electronic signature; and
• Should the unauthorised user of the secure ordinary electronic signature be
holding out to be a professional accountant, reporting the unauthorised use of
the secure ordinary electronic signature to the Regulatory Board or the Insti-
tute and taking the necessary corrective action.
ET – 36 SAICA Student Handbook 2023/2024

Section 120
The Conceptual Framework
Introduction
120.1 The circumstances in which professional accountants operate might create threats
to compliance with the fundamental principles. Section 120 sets out requirements
and application material, including a conceptual framework, to assist professional
accountants in complying with the fundamental principles and meeting their re-
sponsibility to act in the public interest. Such requirements and application material
accommodate the wide range of facts and circumstances, including the various
professional activities, interests and relationships, that create threats to compliance
with the fundamental principles. In addition, they deter professional accountants
from concluding that a situation is permitted solely because that situation is not
specifically prohibited by the Code.
120.2 The conceptual framework specifies an approach for a professional accountant to:
(a) Identify threats to compliance with the fundamental principles;
(b) Evaluate the threats identified; and
(c) Address the threats by eliminating or reducing them to an acceptable level.

Requirements and Application Material

General
R120.3 The professional accountant shall apply the conceptual framework to identify,
evaluate and address threats to compliance with the fundamental principles set out
in Section 110.
120.3 A1 Additional requirements and application material that are relevant to the appli-
cation of the conceptual framework are set out in:
(a) Part 2 – Professional accountants in Business;
(b) Part 3 – Professional accountants in Public Practice; and
(c) Part 4 – Independence Standards, as follows:
(i) Part 4A – Independence for Audit and Review Engagements; and
(ii) Part 4B – Independence for Assurance Engagements Other than
Audit and Review Engagements.
R120.4 When dealing with an ethics issue, the professional accountant shall consider the
context in which the issue has arisen or might arise. Where an individual who is a
professional accountant in public practice is performing professional activities
pursuant to the professional accountant’s relationship with the firm, whether as a
contractor, employee or owner, the individual shall comply with the provisions in
Part 2 that apply to these circumstances.
R120.5 When applying the conceptual framework, the professional accountant shall:
(a) Have an inquiring mind
(b) Exercise professional judgement; and
(c) Use the reasonable and informed third party test described in paragraph
120.5 A6.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 37

Having an inquiring mind

120.5 A1 An inquiring mind is a prerequisite to obtaining an understanding of known facts
and circumstances necessary for the proper application of the conceptual frame-
work. 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 activity
being undertaken; and
(b) Being open and alert to a need for further investigation or other action.
120.5 A2 When considering the source, relevance and sufficiency of information obtained,
the professional accountant might consider, among other matters, whether:
• New information has emerged or there have been changes in facts and circum-
stances.
• 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 professional account-
ant.
• There is an inconsistency between the known facts and circumstances and the
professional accountant’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.
120.5 A3 Paragraph R120.5 requires all professional accountants to have an inquiring mind
when identifying, evaluating and addressing threats to the fundamental principles.
This prerequisite for applying the conceptual framework applies to all professional
accountants regardless of the professional activity undertaken. Under auditing,
review and other assurance standards, including those issued by the IAASB, pro-
fessional accountants are also required to exercise professional scepticism, which
includes a critical assessment of evidence.

Exercising Professional Judgement

120.5 A4 Professional judgement 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 activities,
and the interests and relationships involved.
120.5 A5 Professional judgement is required when the professional accountant 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 professional accountant might
consider matters such as whether:
• The professional accountant’s expertise and experience are sufficient to reach
a conclusion.
• There is a need to consult with others with relevant expertise or experience.
The professional accountant’s own preconception or bias might be affecting
the professional accountant’s exercise of professional judgement.
ET – 38 SAICA Student Handbook 2023/2024

Reasonable and Informed Third Party

120.5 A6 The reasonable and informed third party test is a consideration by the professional
accountant about whether the same conclusions would likely be reached by another
party. Such consideration is made from the perspective of a reasonable and in-
formed third party, who weighs all the relevant facts and circumstances that the
professional accountant knows, or could reasonably be expected to know, at the
time 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 professional
accountant’s conclusions in an impartial manner.
Identifying Threats
R120.6 The professional accountant shall identify threats to compliance with the funda-
mental principles.
120.6 A1 An understanding of the facts and circumstances, including any professional activ-
ities, interests and relationships that might compromise compliance with the fun-
damental principles, is a prerequisite to the professional accountant’s identification
of threats to such compliance. The existence of certain conditions, policies and
procedures established by the profession, legislation, regulation, the firm, or the
employing organisation that can enhance the professional accountant acting ethic-
ally might also help identify threats to compliance with the fundamental prin-
ciples. Paragraph 120.8 A2 includes general examples of such conditions, policies
and procedures which are also factors that are relevant in evaluating the level of
threats.
120.6 A2 Threats to compliance with the fundamental principles 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.
120.6 A3 Threats to compliance with the fundamental principles fall into one or more of the
following categories:
(a) Self-interest threat – the threat that a financial or other interest will inappro-
priately influence a professional accountant’s judgement or behaviour;
(b) Self-review threat – the threat that a professional accountant will not appro-
priately evaluate the results of a previous judgement made; or an activity
performed by the professional accountant, or by another individual within
the professional accountant’s firm or employing organisation, on which the
professional accountant will rely when forming a judgement as part of per-
forming a current activity;
(c) Advocacy threat – the threat that a professional accountant will promote a
client’s or employing organisation’s position to the point that the professional
accountant’s objectivity is compromised;
(d) Familiarity threat – the threat that due to a long or close relationship with a
client, or employing organisation, a professional accountant will be too sym-
pathetic to their interests or too accepting of their work; and
(e) Intimidation threat – the threat that a professional accountant will be deter-
red from acting objectively because of actual or perceived pressures, includ-
ing attempts to exercise undue influence over the professional accountant.
120.6 A4 A circumstance might create more than one threat, and a threat might affect com-
pliance with more than one fundamental principle.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 39

Evaluating Threats
R120.7 When the professional accountant identifies a threat to compliance with the funda-
mental principles, the professional accountant shall evaluate whether such a threat
is at an acceptable level.

Acceptable Level
120.7 A1 An acceptable level is a level at which a professional accountant using the reason-
able and informed third party test would likely conclude that the professional
accountant complies with the fundamental principles.

Factors Relevant in Evaluating the Level of Threats

120.8 A1 The consideration of qualitative as well as quantitative factors is relevant in the
professional accountant’s evaluation of threats, as is the combined effect of mul-
tiple threats, if applicable.
120.8 A2 The existence of conditions, policies and procedures described in paragraph
120.6 A1 might also be factors that are relevant in evaluating the level of threats to
compliance with fundamental principles. Examples of such conditions, policies
and procedures include:
• Corporate governance requirements.
• Educational, training and experience requirements for the profession.
• Effective complaint systems which enable the professional accountant and the
general public to draw attention to unethical behaviour.
• An explicitly stated duty to report breaches of ethics requirements.
• Professional or regulatory monitoring and disciplinary procedures.

Consideration of New Information or Changes in Facts and Circumstances

R120.9 If the professional accountant becomes aware of new information or changes in
facts and circumstances that might impact whether a threat has been eliminated or
reduced to an acceptable level, the professional accountant shall re-evaluate and
address that threat accordingly.
120.9 A1 Remaining alert throughout the professional activity assists the professional account-
ant 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 professional accountant’s conclusions about whether safeguards
applied continue to be appropriate to address identified threats.
(120.9 A2 has been elevated into a South African requirement R120.9a SA)
R120.9a SA If new information results in the identification of a new threat, the professional
accountant shall evaluate and, as appropriate, address this threat. (Ref:
Paras. R120.7 and R120.10).

Addressing Threats
R120.10 If the professional accountant determines that the identified threats to compliance
with the fundamental principles are not at an acceptable level, the professional
accountant shall address the threats by eliminating them or reducing them to an
acceptable level. The professional accountant shall do so by:
(a) Eliminating the circumstances, including interests or relationships, that are
creating the threats;
ET – 40 SAICA Student Handbook 2023/2024

(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 activity.
Actions to Eliminate Threats
120.10 A1 Depending on the facts and circumstances, a threat might be addressed by elimin-
ating the circumstance creating the threat. However, there are some situations in
which threats can only be addressed by declining or ending the specific profes-
sional activity. 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
120.10 A2 Safeguards are actions, individually or in combination, that the professional
accountant takes that effectively reduce threats to compliance with the fundamen-
tal principles to an acceptable level.
Consideration of Significant Judgements Made and Overall Conclusions Reached
R120.11 The professional accountant shall form an overall conclusion about whether the
actions that the professional accountant takes, or intends to take, to address the
threats created will eliminate those threats or reduce them to an acceptable level.
In forming the overall conclusion, the professional accountant shall:
(a) Review any significant judgements made or conclusions reached; and
(b) Use the reasonable and informed third party test.

Other Considerations when Applying the Conceptual Framework

Bias
120.12 A1 Conscious or unconscious bias affects the exercise of professional judgement
when identifying, evaluating and addressing threats to compliance with the funda-
mental principles.
120.12 A2 Examples of potential bias to be aware of when exercising professional judgment
include:
• Anchoring bias, which is a tendency to use an initial piece of information as an
anchor against which subsequent information is inadequately assessed.
• Automation bias, which is a tendency to favour output generated from auto-
mated systems, even when human reasoning or contradictory information raises
questions as to whether such output is reliable or fit for purpose.
• Availability bias, which is a tendency to place more weight on events or ex-
periences that immediately come to mind or are readily available than on those
that are not.
• Confirmation bias, which is a tendency to place more weight on information
that corroborates an existing belief than information that contradicts or casts
doubt on that belief.
• Groupthink, which is a tendency for a group of individuals to discourage indi-
vidual creativity and responsibility and as a result reach a decision without
critical reasoning or consideration of alternatives.
• Overconfidence bias, which is a tendency to overestimate one’s own ability to
make accurate assessments of risk or other judgements or decisions.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 41

• Representation bias, which is a tendency to base an understanding on a pattern

of experiences, events or beliefs that is assumed to be representative.
• Selective perception, which is a tendency for a person’s expectations to influ-
ence how the person views a particular matter or person.
120.12 A3 Actions that might mitigate the effect of bias include:
• Seeking advice from experts to obtain additional input.
• Consulting with others to ensure appropriate challenge as part of the evaluation
process.
• Receiving training related to the identification of bias as part of professional
development.

Organisational Culture
120.13 A1 The effective application of the conceptual framework by a professional account-
ant is enhanced when the importance of ethical values that align with the funda-
mental principles and other provisions set out in the Code is promoted through the
internal culture of the professional accountant’s firm
120.13 A2 The promotion of an ethical culture within an organisation is most effective when:
(a) Leaders and those in managerial roles promote the importance of, and hold
themselves and others accountable for demonstrating, the ethical values of
the organisation;
(b) Appropriate education and training programs, management processes, and
performance evaluation and reward criteria that promote an ethical culture
are in place;
(c) Effective policies and procedures are in place to encourage and protect those
who report actual or suspected illegal or unethical behaviour, including
whistle-blowers; and
(d) The organisation adheres to ethical values in its dealings with third parties.
120.13 A3 Professional accountants are expected to encourage and promote an ethics-based
culture in their organisation, taking into account their position and seniority.

Considerations for Audits, Reviews, Other Assurance and Related Services Engagements
Firm Culture
120.14 A1 ISQM 1 sets out requirements and application material relating to firm culture in
the context of a firm’s responsibilities to design, implement and operate a system
of quality management for audits or reviews of financial statements, or other
assurance or related services engagements.

Independence
120.15 A1 Professional accountants in public practice are required by Independence Stand-
ards to be independent when performing audits, reviews, or other assurance
engagements. 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
judgement, thereby allowing an individual to act with integrity, and exercise
objectivity and professional scepticism.
ET – 42 SAICA Student Handbook 2023/2024

(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 firm’s or an audit or assurance team member’s integrity, ob-
jectivity or professional scepticism has been compromised.
120.15 A2 Independence Standards set out requirements and application material on how to
apply the conceptual framework to maintain independence when performing
audits, reviews or other assurance engagements. Professional accountants and
firms are required to comply with these standards in order to be independent when
conducting such engagements. The conceptual framework to identify, evaluate and
address threats to compliance with the fundamental principles applies in the same
way to compliance with independence requirements. The categories of threats to
compliance with the fundamental principles described in paragraph 120.6 A3 are
also the categories of threats to compliance with independence requirements.
120.15 A3 Conditions, policies and procedures described in paragraphs 120.6 A1 and 120.8
A2 that might assist in identifying and evaluating threats to compliance with the
fundamental principles might also be factors relevant to identifying and evaluating
threats to independence. In the context of audits, reviews and other assurance
engagements, a system of quality management designed, implemented and oper-
ated by a firm in accordance with the quality management standards issued by the
IAASB is an example of such conditions, policies and procedures.

Professional Scepticism
120.16 A1 Under auditing, review and other assurance standards, including those issued by
the IAASB, professional accountants in public practice are required to exercise
professional scepticism when planning and performing audits, reviews and other
assurance engagements. Professional scepticism and the fundamental principles
that are described in Section 110 are inter-related concepts.
120.16 A2 In an audit of financial statements, compliance with the fundamental principles,
individually and collectively, supports the exercise of professional scepticism, as
shown in the following examples:
• Integrity requires the professional accountant to be straightforward and honest.
For example, the professional accountant complies with the principle of integ-
rity by:
(a) Being straightforward and honest when raising concerns about a position
taken by a client; and
(b) Pursuing inquiries about inconsistent information and seeking further audit
evidence to address concerns about statements that might be materially
false or misleading in order to make informed decisions about the appro-
priate course of action in the circumstances.
(c) Having the strength of character to act appropriately, even when facing
pressure to do otherwise or when doing so might create potential adverse
personal or organisational consequences. Acting appropriately involves:
(a) Standing one’s ground when confronted by dilemmas and difficult
situations; or
(b) Challenging others as and when circumstances warrant, in a manner
appropriate to the circumstances.
In doing so, the professional accountant demonstrates the critical assess-
ment of audit evidence that contributes to the exercise of professional
scepticism.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 43

• Objectivity requires the professional accountant to exercise professional or

business judgement without being compromised by:
(a) Bias;
(b) Conflict of interest; or
(c) Undue influence of, or undue reliance on, individuals, organisations, tech-
nology or other factors.
For example, the professional accountant complies with the principle of object-
ivity by:
(a) Recognizing circumstances or relationships such as familiarity with the
client, that might compromise the professional accountant’s professional
or business judgement; and
(b) Considering the impact of such circumstances and relationships on the
professional accountant’s judgement when evaluating the sufficiency and
appropriateness of audit evidence related to a matter material to the client’s
financial statements.
In doing so, the professional accountant behaves in a manner that contributes
to the exercise of professional scepticism.
• Professional competence and due care requires the professional accountant to
have professional knowledge and skill at the level required to ensure the pro-
vision of competent professional service, and to act diligently in accordance
with applicable standards, laws and regulations. For example, the professional
accountant complies with the principle of professional competence and due
care by:
(a) Applying knowledge that is relevant to a particular client’s industry and
business activities in order to properly identify risks of material misstate-
ment;
(b) Designing and performing appropriate audit procedures; and
(c) Applying relevant knowledge when critically assessing whether audit evi-
dence is sufficient and appropriate in the circumstances.
In doing so, the professional accountant behaves in a manner that contributes
to the exercise of professional scepticism.

Page
PART 2 – PROFESSIONAL ACCOUNTANTS IN BUSINESS
Section 200 Applying the Conceptual Framework – Professional Accountants
in Business ...................................................................................................... 44
Section 210 Conflicts of Interest ........................................................................................ 47
Section 220 Preparation and Presentation of Information .................................................. 49
Section 230 Acting with Sufficient Expertise .................................................................... 53
Section 240 Financial Interests, Compensation and Incentives Linked to
Financial Reporting and Decision Making ..................................................... 54
Section 250 Inducements, Including Gifts and Hospitality ................................................ 55
Section 260 Responding to Non-Compliance with Laws and Regulations ........................ 59
Section 270 Pressure to Breach the Fundamental Principles ............................................. 67
ET – 44 SAICA Student Handbook 2023/2024

PART 2 – PROFESSIONAL ACCOUNTANTS IN BUSINESS

Section 200
Applying the Conceptual Framework – Professional Accountants in
Business
Introduction
200.1 This Part of the Code sets out requirements and application material for pro-
fessional accountants in business when applying the conceptual framework set out
in Section 120. It does not describe all of the facts and circumstances, including
professional activities, interests and relationships, that could be encountered by
professional accountants in business, which create or might create threats to com-
pliance with the fundamental principles. Therefore, the conceptual framework
requires professional accountants in business to be alert for such facts and circum-
stances.
200.2 Investors, creditors, employing organisations and other sectors of the business
community, as well as governments and the general public, might rely on the work
of professional accountants in business. Professional accountants in business
might be solely or jointly responsible for the preparation and reporting of financial
and other information, on which both their employing organisations and third
parties might rely. They might also be responsible for providing effective financial
management and competent advice on a variety of business-related matters.
200.3 A professional accountant in business might be an employee, contractor, partner,
director (executive or non-executive), owner-manager, or volunteer of an employ-
ing organisation. The legal form of the relationship of the professional accountant
with the employing organisation has no bearing on the ethical responsibilities
placed on the professional accountant.
200.4 In this Part, the term “professional accountant” refers to:
(a) A professional accountant in business; and
(b) An individual who is a professional accountant in public practice when per-
forming professional activities pursuant to the professional accountant’s
relationship with the professional accountant’s firm, whether as a contractor,
employee or owner. More information on when Part 2 is applicable to pro-
fessional accountants in public practice is set out in paragraphs R120.4,
R300.5 and 300.5 A1.

Requirements and Application Material

General
R200.5 A professional accountant shall comply with the fundamental principles set out in
Section 110 and apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to compliance with the fundamental principles.
200.5 A1 A professional accountant has a responsibility to further the legitimate objectives
of the professional accountant’s employing organisation. The Code does not seek
to hinder accountants from fulfilling that responsibility, but addresses circum-
stances in which compliance with the fundamental principles might be comprom-
ised.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 45

200.5 A2 Professional accountants may promote the position of the employing organisation
when furthering the legitimate goals and objectives of their employing organ-
isation, provided that any statements made are neither false nor misleading. Such
actions usually would not create an advocacy threat.
200.5 A3 The more senior the position of a professional accountant, the greater will be the
ability and opportunity to access information, and to influence policies, decisions
made and actions taken by others involved with the employing organisation. To
the extent that they are able to do so, taking into account their position and senior-
ity in the organisation, professional accountants are expected to encourage and
promote an ethics-based culture in the organisation in accordance with paragraph
120.13 A3. Examples of actions that might be taken include the introduction, im-
plementation and oversight of:
• Ethics education and training programmes.
• Management processes and performance evaluation and reward criteria that
promote an ethical culture.
• Ethics and whistle-blowing policies.
• Policies and procedures designed to prevent non-compliance with laws and
regulations.
Identifying Threats
200.6 A1 Threats to compliance with the fundamental principles might be created by a broad
range of facts and circumstances. The categories of threats are described in para-
graph 120.6 A3. The following are examples of facts and circumstances within
each of those categories that might create threats for a professional accountant
when undertaking a professional activity:
(a) Self-interest Threats
• A professional accountant holding a financial interest in, or receiving a
loan or guarantee from, the employing organisation.
• A professional accountant participating in incentive compensation
arrangements offered by the employing organisation.
• A professional accountant having access to corporate assets for personal
use.
• A professional accountant being offered a gift or special treatment from a
supplier of the employing organisation.
(b) Self-review Threats
• A professional accountant determining the appropriate accounting treat-
ment for a business combination after performing the feasibility study
supporting the purchase decision.
(c) Advocacy Threats
• A professional accountant having the opportunity to manipulate infor-
mation in a prospectus in order to obtain favourable financing.
(d) Familiarity Threats
• A professional accountant being responsible for the financial reporting of
the employing organisation when an immediate or close family member
employed by the organisation makes decisions that affect the financial
reporting of the organisation.
• A professional accountant having a long association with individuals
influencing business decisions.
ET – 46 SAICA Student Handbook 2023/2024

(e) Intimidation Threats

• A professional accountant or immediate or close family member facing
the threat of dismissal or replacement over a disagreement about:
o The application of an accounting principle.
o The way in which financial information is to be reported.
• An individual attempting to influence the decision-making process of the
professional accountant, for example with regard to the awarding of con-
tracts or the application of an accounting principle.

Evaluating Threats
200.7 A1 The conditions, policies and procedures described in paragraphs 120.6 A1 and
120.8 A2 might impact the evaluation of whether a threat to compliance with the
fundamental principles is at an acceptable level.
200.7 A2 The professional accountant’s evaluation of the level of a threat is also impacted
by the nature and scope of the professional activity.
200.7 A3 The professional accountant’s evaluation of the level of a threat might be impacted
by the work environment within the employing organisation and its operating en-
vironment. For example:
• Leadership that stresses the importance of ethical behaviour and the expect-
ation that employees will act in an ethical manner.
• Policies and procedures to empower and encourage employees to communicate
ethics issues that concern them to senior levels of management without fear of
retribution.
• Policies and procedures to implement and monitor the quality of employee
performance.
• Systems of corporate oversight or other oversight structures and strong internal
controls.
• Recruitment procedures emphasising the importance of employing high calibre
competent personnel.
• Timely communication of policies and procedures, including any changes to
them, to all employees, and appropriate training and education on such policies
and procedures.
• Ethics and code of conduct policies.
200.7 A4 Professional accountants might consider obtaining legal advice where they believe
that unethical behaviour or actions by others have occurred, or will continue to
occur, within the employing organisation.

Addressing Threats
200.8 A1 Sections 210 to 270 describe certain threats that might arise during the course of
performing professional activities and include examples of actions that might
address such threats.
200.8 A2 In extreme situations, if the circumstances that created the threats cannot be elim-
inated and safeguards are not available or capable of being applied to reduce the
threat to an acceptable level, it might be appropriate for a professional accountant
to resign from the employing organisation.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 47

Communicating with Those Charged with Governance

R200.9 When communicating with those charged with governance in accordance with the
Code, a professional accountant shall determine the appropriate individual(s) with-
in the employing organisation’s governance structure with whom to communicate.
If the professional accountant communicates with a subgroup of those charged
with governance, the professional accountant shall determine whether communi-
cation with all of those charged with governance is also necessary so that they are
adequately informed.
200.9 A1 In determining with whom to communicate, a professional accountant might
consider:
(a) The nature and importance of the circumstances; and
(b) The matter to be communicated.
200.9 A2 Examples of a subgroup of those charged with governance include an audit com-
mittee or an individual member of those charged with governance.
R200.10 If a professional accountant communicates with individuals who have management
responsibilities as well as governance responsibilities, the professional accountant
shall be satisfied that communication with those individuals adequately informs all
of those in a governance role with whom the professional accountant would other-
wise communicate.
200.10 A1 In some circumstances, all of those charged with governance are involved in man-
aging the employing organisation, for example, a small business where a single
owner manages the organisation and no one else has a governance role. In these
cases, if matters are communicated with individual(s) with management respon-
sibilities, and those individual(s) also have governance responsibilities, the pro-
fessional accountant has satisfied the requirement to communicate with those
charged with governance.

Section 210
Conflicts of Interest
Introduction
210.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
210.2 A conflict of interest creates threats to compliance with the principle of objectivity
and might create threats to compliance with the other fundamental principles.
Such threats might be created when:
(a) A professional accountant undertakes a professional activity related to a
particular matter for two or more parties whose interests with respect to that
matter are in conflict; or
(b) The interest of a professional accountant with respect to a particular matter
and the interests of a party for whom the professional accountant undertakes
a professional activity related to that matter are in conflict.
A party might include an employing organisation, a vendor, a customer, a lender,
a shareholder, or another party.
210.3 This section sets out specific requirements and application material relevant to
applying the conceptual framework to conflicts of interest.
ET – 48 SAICA Student Handbook 2023/2024

Requirements and Application Material

General
R210.4 A professional accountant shall not allow a conflict of interest to compromise pro-
fessional or business judgement.
210.4 A1 Examples of circumstances that might create a conflict of interest include:
• Serving in a management or governance position for two employing organ-
isations and acquiring confidential information from one organisation that
might be used by the professional accountant to the advantage or disadvantage
of the other organisation.
• Undertaking a professional activity for each of two parties in a partnership,
where both parties are employing the professional accountant to assist them to
dissolve their partnership.
• Preparing financial information for certain members of management of the
professional accountant’s employing organisation who are seeking to under-
take a management buy-out.
• Being responsible for selecting a vendor for the employing organisation when
an immediate family member of the professional accountant might benefit
financially from the transaction.
• Serving in a governance capacity in an employing organisation that is approv-
ing certain investments for the company where one of those investments will
increase the value of the investment portfolio of the professional accountant or
an immediate family member.

Conflict Identification
R210.5 A professional accountant shall take reasonable steps to identify circumstances
that might create a conflict of interest, and therefore a threat to compliance with
one or more of the fundamental principles. Such steps shall include identifying:
(a) The nature of the relevant interests and relationships between the parties
involved; and
(b) The activity and its implication for relevant parties.
R210.6 A professional accountant shall remain alert to changes over time in the nature of
the activities, interests and relationships that might create a conflict of interest
while performing a professional activity.

Threats Created by Conflicts of Interest

210.7 A1 In general, the more direct the connection between the professional activity and
the matter on which the parties’ interests conflict, the more likely the level of the
threat is not at an acceptable level.
210.7 A2 An example of an action that might eliminate threats created by conflicts of
interest is withdrawing from the decision-making process related to the matter
giving rise to the conflict of interest.
210.7 A3 Examples of actions that might be safeguards to address threats created by con-
flicts of interest include:
• Restructuring or segregating certain responsibilities and duties.
• Obtaining appropriate oversight, for example, acting under the supervision of
an executive or non-executive director.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 49

Disclosure and Consent

General
210.8 A1 It is generally necessary to:
(a) Disclose the nature of the conflict of interest and how any threats created
were addressed to the relevant parties, including to the appropriate levels
within the employing organisation affected by a conflict; and
(b) Obtain consent from the relevant parties for the professional accountant to
undertake the professional activity when safeguards are applied to address
the threat.
210.8 A2 Consent might be implied by a party’s conduct in circumstances where the pro-
fessional accountant has sufficient evidence to conclude that the parties know the
circumstances at the outset and have accepted the conflict of interest if they do not
raise an objection to the existence of the conflict.
210.8 A3 If such disclosure or consent is not in writing, the professional accountant is
encouraged to document:
(a) The nature of the circumstances giving rise to the conflict of interest;
(b) The safeguards applied to address the threats when applicable; and
(c) The consent obtained.

Other Considerations
210.9 A1 When addressing a conflict of interest, the professional accountant is encouraged
to seek guidance from within the employing organisation or from others, such as a
professional body, legal counsel or another professional accountant. When making
such disclosures or sharing information within the employing organisation and
seeking guidance of third parties, the principle of confidentiality applies.

Section 220
Preparation and Presentation of Information
Introduction
220.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
220.2 Preparing or presenting information might create a self-interest, intimidation or
other threats to compliance with one or more of the fundamental principles. This
section sets out specific requirements and application material relevant to applying
the conceptual framework in such circumstances.

Requirements and Application Material

General
220.3 A1 Professional accountants at all levels in an employing organisation are involved in
the preparation or presentation of information both within and outside the organ-
isation.
220.3 A2 Stakeholders to whom, or for whom, such information is prepared or presented,
include:
• Management and those charged with governance.
ET – 50 SAICA Student Handbook 2023/2024

• Investors and lenders or other creditors.

• Regulatory bodies.
This information might assist stakeholders in understanding and evaluating aspects
of the employing organisation’s state of affairs and in making decisions concern-
ing the organisation. Information can include financial and non-financial infor-
mation that might be made public or used for internal purposes.
Examples include:
• Operating and performance reports.
• Decision support analyses.
• Budgets and forecasts.
• Information provided to the internal and external auditors.
• Risk analyses.
• General and special purpose financial statements.
• Tax returns.
• Reports filed with regulatory bodies for legal and compliance purposes.
220.3 A3 For the purposes of this section, preparing or presenting information includes
recording, maintaining and approving information.
R220.4 When preparing or presenting information, a professional accountant shall:
(a) Prepare or present the information in accordance with a relevant reporting
framework, where applicable;
(b) Prepare or present the information in a manner that is intended neither to
mislead nor to influence contractual or regulatory outcomes inappropriately;
(c) Exercise professional judgement to:
(i) Represent the facts accurately and completely in all material respects;
(ii) Describe clearly the true nature of business transactions or activities;
and
(iii) Classify and record information in a timely and proper manner; and
(d) Not omit anything with the intention of rendering the information misleading
or of influencing contractual or regulatory outcomes inappropriately.
(e) Avoid undue influence of, or undue reliance on, individuals, organisations or
technology; and
(f) Be aware of the risk of bias.
220.4 A1 An example of influencing a contractual or regulatory outcome inappropriately is
using an unrealistic estimate with the intention of avoiding violation of a contract-
ual requirement such as a debt covenant or of a regulatory requirement such as a
capital requirement for a financial institution.
Use of Discretion in Preparing or Presenting Information
R220.5 Preparing or presenting information might require the exercise of discretion in
making professional judgements. The professional accountant shall not exercise
such discretion with the intention of misleading others or influencing contractual
or regulatory outcomes inappropriately.
220.5 A1 Examples of ways in which discretion might be misused to achieve inappropriate
outcomes include:
• Determining estimates, for example, determining fair value estimates in order
to misrepresent profit or loss.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 51

• Selecting or changing an accounting policy or method among two or more

alternatives permitted under the applicable financial reporting framework, for
example, selecting a policy for accounting for long-term contracts in order to
misrepresent profit or loss.
• Determining the timing of transactions, for example, timing the sale of an asset
near the end of the fiscal year in order to mislead.
• Determining the structuring of transactions, for example, structuring financing
transactions in order to misrepresent assets and liabilities or classification of
cash flows.
• Selecting disclosures, for example, omitting or obscuring information relating
to financial or operating risk in order to mislead.
R220.6 When performing professional activities, especially those that do not require com-
pliance with a relevant reporting framework, the professional accountant shall
exercise professional judgement to identify and consider:
(a) The purpose for which the information is to be used;
(b) The context within which it is given; and
(c) The audience to whom it is addressed.
220.6 A1 For example, when preparing or presenting pro forma reports, budgets or fore-
casts, the inclusion of relevant estimates, approximations and assumptions, where
appropriate, would enable those who might rely on such information to form their
own judgements.
220.6 A2 The professional accountant might also consider clarifying the intended audience,
context and purpose of the information to be presented.

Relying on the Work of Others

R220.7 A professional accountant who intends to rely on the work of other individuals,
either internal or external to the employing organisation, or other organisations
shall exercise professional judgement to determine what steps to take, if any, in
order to fulfil the responsibilities set out in paragraph R220.4.
220.7 A1 Factors to consider in determining whether reliance on others is reasonable in-
clude:
• The reputation and expertise of, and resources available to, the other individual
or organisation.
• Whether the other individual is subject to applicable professional and ethics
standards.
Such information might be gained from prior association with, or from consulting
others about, the other individual or organisation.

Addressing Information that Is or Might be Misleading

R220.8 When the professional accountant knows or has reason to believe that the infor-
mation with which the accountant is associated is misleading, the professional
accountant shall take appropriate actions to seek to resolve the matter.
220.8 A1 Actions that might be appropriate include:
• Discussing concerns that the information is misleading with the professional
accountant’s superior and/or the appropriate level(s) of management within
the professional accountant’s employing organisation or those charged with
ET – 52 SAICA Student Handbook 2023/2024

governance, and requesting such individuals to take appropriate action to re-

solve the matter. Such action might include:
o Having the information corrected.
o If the information has already been disclosed to the intended users, inform-
ing them of the correct information.
• Consulting the policies and procedures of the employing organisation (for
example, an ethics or whistle-blowing policy) regarding how to address such
matters internally.
220.8 A2 The professional accountant might determine that the employing organisation has
not taken appropriate action. If the professional accountant continues to have
reason to believe that the information is misleading, the following further actions
might be appropriate provided that the professional accountant remains alert to the
principle of confidentiality:
• Consulting with:
o A relevant professional body.
o The internal or external auditor of the employing organisation.
o Legal counsel.
• Determining whether any requirements exist to communicate to:
o Third parties, including users of the information.
o Regulatory and oversight authorities.
R220.9 If after exhausting all feasible options, the professional accountant determines that
appropriate action has not been taken and there is reason to believe that the infor-
mation is still misleading, the professional accountant shall refuse to be or to
remain associated with the information.
220.9 A1 In such circumstances, it might be appropriate for a professional accountant to
resign from the employing organisation.

Documentation
220.10 A1 The professional accountant is encouraged to document:
• The facts.
• The accounting principles or other relevant professional standards involved.
• The communications and parties with whom matters were discussed.
• The courses of action considered.
• How the professional accountant attempted to address the matter(s).
Other Considerations
220.11 A1 Where threats to compliance with the fundamental principles relating to the pre-
paration or presentation of information arise from a financial interest, including
compensation and incentives linked to financial reporting and decision making,
the requirements and application material set out in Section 240 apply.
220.11 A2 Where the misleading information might involve non-compliance with laws and
regulations, the requirements and application material set out in Section 260
apply.
220.11 A3 Where threats to compliance with the fundamental principles relating to the pre-
paration or presentation of information arise from pressure, the requirements and
application material set out in Section 270 apply.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 53

Section 230
Acting with Sufficient Expertise
Introduction
230.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
230.2 Acting without sufficient expertise creates a self-interest threat to compliance with
the principle of professional competence and due care. This section sets out spe-
cific requirements and application material relevant to applying the conceptual
framework in such circumstances.

Requirements and Application Material

General
R230.3 A professional accountant shall not intentionally mislead an employing organ-
isation as to the level of expertise or experience possessed.
230.3 A1 The principle of professional competence and due care requires that a professional
accountant only undertake significant tasks for which the professional accountant
has, or can obtain, sufficient training or experience.
230.3 A2 A self-interest threat to compliance with the principle of professional competence
and due care might be created if a professional accountant has:
• Insufficient time for performing or completing the relevant duties.
• Incomplete, restricted or otherwise inadequate information for performing the
duties.
• Insufficient experience, training and/or education.
• Inadequate resources for the performance of the duties.
230.3 A3 Factors that are relevant in evaluating the level of such a threat include:
• The extent to which the professional accountant is working with others.
• The relative seniority of the professional accountant in the business.
• The level of supervision and review applied to the work.
230.3 A4 Examples of actions that might be safeguards to address such a self-interest threat
include:
• Obtaining assistance or training from someone with the necessary expertise.
• Ensuring that there is adequate time available for performing the relevant
duties.
R230.4 If a threat to compliance with the principle of professional competence and due
care cannot be addressed, a professional accountant shall determine whether to
decline to perform the duties in question. If the professional accountant determines
that declining is appropriate, the professional accountant shall communicate the
reasons.

Other Considerations
230.5 A1 The requirements and application material in Section 270 apply when a pro-
fessional accountant is pressured to act in a manner that might lead to a breach of
the principle of professional competence and due care.
ET – 54 SAICA Student Handbook 2023/2024

Section 240
Financial Interests, Compensation and Incentives linked to Financial
Reporting and Decision Making
Introduction
240.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats.
240.2 Having a financial interest, or knowing of a financial interest held by an immedi-
ate or close family member might create a self-interest threat to compliance with
the principles of objectivity or confidentiality. This section sets out specific require-
ments and application material relevant to applying the conceptual framework in
such circumstances.

Requirements and Application Material

General
R240.3 A professional accountant shall not manipulate information or use confidential
information for personal gain or for the financial gain of others.
240.3 A1 Professional accountants might have financial interests or might know of financial
interests of immediate or close family members that, in certain circumstances,
might create threats to compliance with the fundamental principles. Financial in-
terests include those arising from compensation or incentive arrangements linked
to financial reporting and decision making.
240.3 A2 Examples of circumstances that might create a self-interest threat include situations
in which the professional accountant or an immediate or close family member:
• Has a motive and opportunity to manipulate price-sensitive information in
order to gain financially.
• Holds a direct or indirect financial interest in the employing organisation and
the value of that financial interest might be directly affected by decisions made
by the professional accountant.
• Is eligible for a profit-related bonus and the value of that bonus might be dir-
ectly affected by decisions made by the professional accountant.
• Holds, directly or indirectly, deferred bonus share rights or share options in the
employing organisation, the value of which might be affected by decisions
made by the professional accountant.
• Participates in compensation arrangements which provide incentives to achieve
targets or to support efforts to maximise the value of the employing organ-
isation’s shares. An example of such an arrangement might be through partici-
pation in incentive plans which are linked to certain performance conditions
being met.
240.3 A3 Factors that are relevant in evaluating the level of such a threat include:
• The significance of the financial interest. What constitutes a significant finan-
cial interest will depend on personal circumstances and the materiality of the
financial interest to the individual.
• Policies and procedures for a committee independent of management to deter-
mine the level or form of senior management remuneration.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 55

• In accordance with any internal policies, disclosure to those charged with

governance of:
o All relevant interests.
o Any plans to exercise entitlements or trade in relevant shares.
• Internal and external audit procedures that are specific to address issues that
give rise to the financial interest.
240.3 A4 Threats created by compensation or incentive arrangements might be compounded
by explicit or implicit pressure from superiors or colleagues. See Section 270,
Pressure to Breach the Fundamental Principles.

Section 250
Inducements, including Gifts and Hospitality
Introduction
250.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
250.2 Offering or accepting inducements might create a self-interest, familiarity or in-
timidation threat to compliance with the fundamental principles, particularly the
principles of integrity, objectivity and professional behaviour.
250.3 This section sets out requirements and application material relevant to applying
the conceptual framework in relation to the offering and accepting of inducements
when performing professional services that does not constitute non-compliance
with laws and regulations. This section also requires a professional accountant to
comply with relevant laws and regulations when offering or accepting induce-
ments.

Requirements and Application Material

General
250.4 A1 An inducement is an object, situation, or action that is used as a means to influ-
ence another individual’s behaviour, but not necessarily with the intent to improp-
erly influence that individual’s behaviour. Inducements can range from minor acts
of hospitality between business colleagues to acts that result in non-compliance
with laws and regulations. An inducement can take many different forms, for
example:
• Gifts.
• Hospitality.
• Entertainment.
• Political or charitable donations.
• Appeals to friendship and loyalty.
• Employment or other commercial opportunities.
• Preferential treatment, rights or privileges.

Inducements Prohibited by Laws and Regulations

R250.5 In many jurisdictions, there are laws and regulations, such as those related to
bribery and corruption, that prohibit the offering or accepting of inducements in
ET – 56 SAICA Student Handbook 2023/2024

certain circumstances. The professional accountant shall obtain an understanding

of relevant laws and regulations and comply with them when the professional
accountant encounters such circumstances.
Inducements Not Prohibited by Laws and Regulations
250.6 A1 The offering or accepting of inducements that is not prohibited by laws and regu-
lations might still create threats to compliance with the fundamental principles.
Inducements with Intent to Improperly Influence Behaviour
R250.7 A professional accountant shall not offer, or encourage others to offer, any induce-
ment that is made, or which the professional accountant considers a reasonable
and informed third party would be likely to conclude is made, with the intent to
improperly influence the behaviour of the recipient or of another individual.
R250.8 A professional accountant shall not accept, or encourage others to accept, any
inducement that the professional accountant concludes is made, or considers a
reasonable and informed third party would be likely to conclude is made, with the
intent to improperly influence the behaviour of the recipient or of another indi-
vidual.
250.9 A1 An inducement is considered as improperly influencing an individual’s behaviour
if it causes the individual to act in an unethical manner. Such improper influence
can be directed either towards the recipient or towards another individual who has
some relationship with the recipient. The fundamental principles are an appropri-
ate frame of reference for a professional accountant in considering what consti-
tutes unethical behaviour on the part of the professional accountant and, if neces-
sary by analogy, other individuals.
250.9 A2 A breach of the fundamental principle of integrity arises when a professional
accountant offers or accepts, or encourages others to offer or accept, an induce-
ment where the intent is to improperly influence the behaviour of the recipient or
of another individual.
250.9 A3 The determination of whether there is actual or perceived intent to improperly
influence behaviour requires the exercise of professional judgement. Relevant fac-
tors to consider might include:
• The nature, frequency, value and cumulative effect of the inducement.
• Timing of when the inducement is offered relative to any action or decision
that it might influence.
• Whether the inducement is a customary or cultural practice in the circum-
stances, for example, offering a gift on the occasion of a religious holiday or
wedding.
• Whether the inducement is an ancillary part of a professional service, for ex-
ample, offering or accepting lunch in connection with a business meeting.
• Whether the offer of the inducement is limited to an individual recipient or
available to a broader group. The broader group might be internal or external
to the employing organisation, such as other customers or vendors.
• The roles and positions of the individuals offering or being offered the induce-
ment.
• Whether the professional accountant knows, or has reason to believe, that
accepting the inducement would breach the policies and procedures of the
counterparty’s employing organisation.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 57

• The degree of transparency with which the inducement is offered.

• Whether the inducement was required or requested by the recipient.
• The known previous behaviour or reputation of the offeror.
Consideration of Further Actions
250.10 A1 If the professional accountant becomes aware of an inducement offered with
actual or perceived intent to improperly influence behaviour, threats to compliance
with the fundamental principles might still be created even if the requirements in
paragraphs R250.7 and R250.8 are met.
250.10 A2 Examples of actions that might be safeguards to address such threats include:
• Informing senior management or those charged with governance of the em-
ploying organisation of the professional accountant or the offeror regarding the
offer.
• Amending or terminating the business relationship with the offeror.
Inducements with No Intent to Improperly Influence Behaviour
250.11 A1 The requirements and application material set out in the conceptual framework
apply when a professional accountant has concluded there is no actual or per-
ceived intent to improperly influence the behaviour of the recipient or of another
individual.
250.11 A2 If such an inducement is trivial and inconsequential, any threats created will be at
an acceptable level.
250.11 A3 Examples of circumstances where offering or accepting such an inducement might
create threats even if the professional accountant has concluded there is no actual
or perceived intent to improperly influence behaviour include:
• Self-interest threats
o A professional accountant is offered part-time employment by a vendor.
• Familiarity threats
o A professional accountant regularly takes a customer or supplier to sporting
events.
• Intimidation threats
o A professional accountant accepts hospitality, the nature of which could be
perceived to be inappropriate were it to be publicly disclosed.
250.11 A4 Relevant factors in evaluating the level of such threats created by offering or
accepting such an inducement include the same factors set out in paragraph 250.9
A3 for determining intent.
250.11 A5 Examples of actions that might eliminate threats created by offering or accepting
such an inducement include:
• Declining or not offering the inducement.
• Transferring responsibility for any business-related decision involving the
counterparty to another individual who the professional accountant has no
reason to believe would be, or would be perceived to be, improperly influ-
enced in making the decision.
250.11 A6 Examples of actions that might be safeguards to address such threats created by
offering or accepting such an inducement include:
• Being transparent with senior management or those charged with governance
of the employing organisation of the professional accountant or of the counter-
party about offering or accepting an inducement.
ET – 58 SAICA Student Handbook 2023/2024

• Registering the inducement in a log maintained by the employing organisation

of the professional accountant or the counterparty.
• Having an appropriate reviewer, who is not otherwise involved in undertaking
the professional activity, review any work performed or decisions made by the
professional accountant with respect to the individual or organisation from
which the professional accountant accepted the inducement.
• Donating the inducement to charity after receipt and appropriately disclosing
the donation, for example, to those charged with governance or the individual
who offered the inducement.
• Reimbursing the cost of the inducement, such as hospitality, received.
• As soon as possible, returning the inducement, such as a gift, after it was ini-
tially accepted.

Immediate or Close Family Members

R250.12 A professional accountant shall remain alert to potential threats to the professional
accountant’s compliance with the fundamental principles created by the offering
of an inducement:
(a) By an immediate or close family member of the professional accountant to a
counterparty with whom the professional accountant has a professional
relationship; or.
(b) To an immediate or close family member of the professional accountant by a
counterparty with whom the professional accountant has a professional
relationship.
R250.13 Where the professional accountant becomes aware of an inducement being offered
to or made by an immediate or close family member and concludes there is intent
to improperly influence the behaviour of the professional accountant or of the
counterparty, or considers a reasonable and informed third party would be likely
to conclude such intent exists, the professional accountant shall advise the imme-
diate or close family member not to offer or accept the inducement.
250.13 A1 The factors set out in paragraph 250.9 A3 are relevant in determining whether there
is actual or perceived intent to improperly influence the behaviour of the pro-
fessional accountant or of the counterparty. Another factor that is relevant is the
nature or closeness of the relationship, between:
(a) The professional accountant and the immediate or close family member;
(b) The immediate or close family member and the counterparty; and
(c) The professional accountant and the counterparty.
For example, the offer of employment, outside of the normal recruitment process,
to the spouse of the professional accountant by a counterparty with whom the pro-
fessional accountant is negotiating a significant contract might indicate such
intent.
250.13 A2 The application material in paragraph 250.10 A2 is also relevant in addressing
threats that might be created when there is actual or perceived intent to improperly
influence the behaviour of the professional accountant, or of the counterparty even
if the immediate or close family member has followed the advice given pursuant
to paragraph R250.13.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 59

Application of the Conceptual Framework

250.14 A1 Where the professional accountant becomes aware of an inducement offered in the
circumstances addressed in paragraph R250.12, threats to compliance with the fun-
damental principles might be created where:
(a) The immediate or close family member offers or accepts the inducement
contrary to the advice of the professional accountant pursuant to paragraph
R250.13; or
(b) The professional accountant does not have reason to believe an actual or
perceived intent to improperly influence the behaviour of the professional
accountant or of the counterparty exists.
250.14 A2 The application material in paragraphs 250.11 A1 to 250.11 A6 is relevant for the
purposes of identifying, evaluating and addressing such threats. Factors that are
relevant in evaluating the level of threats in these circumstances also include the
nature or closeness of the relationships set out in paragraph 250.13 A1.
Other Considerations
250.15 A1 If a professional accountant is offered an inducement by the employing organisa-
tion relating to financial interest, compensation and incentives linked to perform-
ance, the requirements and application material in Section 240 apply.
250.15 A2 If a professional accountant encounters or is made aware of inducements that might
result in non-compliance or suspected non-compliance with laws and regulations
by other individuals working for or under the direction of the employing organisa-
tion, the requirement and application material set out in Section 260 apply.
250.15 A3 If a professional accountant faces pressure to offer or accept inducements that
might create threats to compliance with the fundamental principles, the require-
ment and application material set out in Section 270 apply.

Section 260
Responding to Non-Compliance with Laws and Regulations
Introduction
260.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
260.2 A self-interest or intimidation threat to compliance with the principles of integrity
and professional behaviour is created when a professional accountant becomes
aware of non-compliance or suspected non-compliance with laws and regulations.
260.3 A professional accountant might encounter or be made aware of non-compliance
or suspected non-compliance in the course of carrying out professional activities.
This section guides the professional accountant in assessing the implications of the
matter and the possible courses of action when responding to non-compliance or
suspected non-compliance with:
(a) Laws and regulations generally recognised to have a direct effect on the
determination of material amounts and disclosures in the employing organ-
isation’s financial statements; and
(b) Other laws and regulations that do not have a direct effect on the determin-
ation of the amounts and disclosures in the employing organisation’s finan-
cial statements, but compliance with which might be fundamental to the
ET – 60 SAICA Student Handbook 2023/2024

operating aspects of the employing organisation’s business, to its ability to

continue its business, or to avoid material penalties.

Objectives of the Professional Accountant in Relation to Non-compliance with Laws

and Regulations
260.4 A distinguishing mark of the accountancy profession is its acceptance of the
responsibility to act in the public interest. When responding to non-compliance or
suspected non-compliance, the objectives of the professional accountant are:
(a) To comply with the principles of integrity and professional behaviour;
(b) By alerting management or, where appropriate, those charged with govern-
ance of the employing organisation, to seek to:
(i) Enable them to rectify, remediate or mitigate the consequences of the
identified or suspected non-compliance; or
(ii) Deter the non-compliance where it has not yet occurred; and
(c) To take such further action as appropriate in the public interest.

Requirements and Application Material

General
260.5 A1 Non-compliance with laws and regulations (“non-compliance”) comprises acts of
omission or commission, intentional or unintentional, which are contrary to the
prevailing laws or regulations committed by the following parties:
(a) The professional accountant’s employing organisation;
(b) Those charged with governance of the employing organisation;
(c) Management of the employing organisation; or
(d) Other individuals working for or under the direction of the employing
organisation.
260.5 A2 Examples of laws and regulations which this section addresses include those that
deal with:
• Fraud, corruption and bribery.
• Money laundering, terrorist financing and proceeds of crime.
• Securities markets and trading.
• Banking and other financial products and services.
• Data protection.
• Tax and pension liabilities and payments.
• Environmental protection.
• Public health and safety.
260.5 A3 Non-compliance might result in fines, litigation or other consequences for the em-
ploying organisation, potentially materially affecting its financial statements. Im-
portantly, such non-compliance might have wider public interest implications in
terms of potentially substantial harm to investors, creditors, employees or the gen-
eral public. For the purposes of this section, non-compliance that causes substan-
tial harm is one that results in serious adverse consequences to any of these parties
in financial or non-financial terms. Examples include the perpetration of a fraud
resulting in significant financial losses to investors, and breaches of environmental
laws and regulations endangering the health or safety of employees or the public.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 61

R260.6 In some jurisdictions, there are legal or regulatory provisions governing how pro-
fessional accountants are required to address non-compliance or suspected non-
compliance. These legal or regulatory provisions might differ from or go beyond
the provisions in this section. When encountering such non-compliance or sus-
pected non-compliance, the professional accountant shall obtain an understanding
of those legal or regulatory provisions and comply with them, including:
(a) Any requirement to report the matter to an appropriate authority; and
(b) Any prohibition on alerting the relevant party.
260.6 A1 A prohibition on alerting the relevant party might arise, for example, pursuant to
anti-money laundering legislation.
260.7 A1 This section applies regardless of the nature of the employing organisation, includ-
ing whether or not it is a public interest entity.
260.7 A2 A professional accountant who encounters or is made aware of matters that are
clearly inconsequential is not required to comply with this section. Whether a
matter is clearly inconsequential is to be judged with respect to its nature and its
impact, financial or otherwise, on the employing organisation, its stakeholders and
the general public.
260.7 A3 This section does not address:
(a) Personal misconduct unrelated to the business activities of the employing
organisation; and
(b) Non-compliance by parties other than those specified in paragraph 260.5 A1.
The professional accountant might nevertheless find the guidance in this section
helpful in considering how to respond in these situations.
Responsibilities of the Employing Organisation’s Management and those Charged
with Governance
260.8 A1 The employing organisation’s management, with the oversight of those charged
with governance, is responsible for ensuring that the employing organisation’s
business activities are conducted in accordance with laws and regulations. Man-
agement and those charged with governance are also responsible for identifying
and addressing any non-compliance by:
(a) The employing organisation;
(b) An individual charged with governance of the employing organisation;
(c) A member of management; or
(d) Other individuals working for or under the direction of the employing
organisation.

Responsibilities of All Professional Accountants

R260.9 If protocols and procedures exist within the professional accountant’s employing
organisation to address non-compliance or suspected non-compliance, the pro-
fessional accountant shall consider them in determining how to respond to such
non-compliance.
260.9 A1 Many employing organisations have established protocols and procedures regard-
ing how to raise non-compliance or suspected non-compliance internally. These
protocols and procedures include, for example, an ethics policy or internal whistle-
blowing mechanism. Such protocols and procedures might allow matters to be
reported anonymously through designated channels.
ET – 62 SAICA Student Handbook 2023/2024

R260.10 Where a professional accountant becomes aware of a matter to which this section
applies, the steps that the professional accountant takes to comply with this section
shall be taken on a timely basis. For the purpose of taking timely steps, the pro-
fessional accountant shall have regard to the nature of the matter and the potential
harm to the interests of the employing organisation, investors, creditors, employ-
ees or the general public.

Responsibilities of Senior Professional Accountants in Business

260.11 A1 Senior professional accountants in business (“senior professional accountants”)
are directors, officers or senior employees able to exert significant influence over,
and make decisions regarding, the acquisition, deployment and control of the
employing organisation’s human, financial, technological, physical and intangible
resources. There is a greater expectation for such individuals to take whatever
action is appropriate in the public interest to respond to non-compliance or sus-
pected non-compliance than other professional accountants within the employing
organisation. This is because of senior professional accountants’ roles, positions
and spheres of influence within the employing organisation.

Obtaining an Understanding of the Matter

R260.12 If, in the course of carrying out professional activities, a senior professional
accountant becomes aware of information concerning non-compliance or sus-
pected non-compliance, the professional accountant shall obtain an understanding
of the matter. This understanding shall include:
(a) The nature of the non-compliance or suspected non-compliance and the
circumstances in which it has occurred or might occur;
(b) The application of the relevant laws and regulations to the circumstances;
and
(c) An assessment of the potential consequences to the employing organisation,
investors, creditors, employees or the wider public.
260.12 A1 A senior professional accountant is expected to apply knowledge and expertise,
and exercise professional judgement. However, the professional accountant is not
expected to have a level of understanding of laws and regulations greater than that
which is required for the professional accountant’s role within the employing
organisation. Whether an act constitutes non-compliance is ultimately a matter to
be determined by a court or other appropriate adjudicative body.
260.12 A2 Depending on the nature and significance of the matter, the senior professional
accountant might cause, or take appropriate steps to cause, the matter to be inves-
tigated internally. The professional accountant might also consult on a confidential
basis with others within the employing organisation or a professional body, or
with legal counsel.

Addressing the Matter

R260.13 If the senior professional accountant identifies or suspects that non-compliance
has occurred or might occur, the professional accountant shall, subject to para-
graph R260.9, discuss the matter with the professional accountant’s immediate
superior, if any. If the professional accountant’s immediate superior appears to be
involved in the matter, the professional accountant shall discuss the matter with
the next higher level of authority within the employing organisation.
260.13 A1 The purpose of the discussion is to enable a determination to be made as to how to
address the matter.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 63

R260.14 The senior professional accountant shall also take appropriate steps to:
(a) Have the matter communicated to those charged with governance;
(b) Comply with applicable laws and regulations, including legal or regulatory
provisions governing the reporting of non-compliance or suspected non-
compliance to an appropriate authority;
(c) Have the consequences of the non-compliance or suspected non-compliance
rectified, remediated or mitigated;
(d) Reduce the risk of re-occurrence; and
(e) Seek to deter the commission of the non-compliance if it has not yet occurred.
260.14 A1 The purpose of communicating the matter to those charged with governance is to
obtain their concurrence regarding appropriate actions to take to respond to the
matter and to enable them to fulfil their responsibilities.
260.14 A2 Some laws and regulations might stipulate a period within which reports of
non-compliance or suspected non-compliance are to be made to an appropriate
authority.
R260.15 In addition to responding to the matter in accordance with the provisions of this
section, the senior professional accountant shall determine whether disclosure of
the matter to the employing organisation’s external auditor, if any, is needed.
260.15 A1 Such disclosure would be pursuant to the senior professional accountant’s duty or
legal obligation to provide all information necessary to enable the auditor to per-
form the audit.

Determining Whether Further Action Is Needed

R260.16 The senior professional accountant shall assess the appropriateness of the response
of the professional accountant’s superiors, if any, and those charged with govern-
ance.
260.16 A1 Relevant factors to consider in assessing the appropriateness of the response of the
senior professional accountant’s superiors, if any, and those charged with govern-
ance include whether:
• The response is timely.
• They have taken or authorised appropriate action to seek to rectify, remediate
or mitigate the consequences of the non-compliance, or to avert the non-
compliance if it has not yet occurred.
• The matter has been disclosed to an appropriate authority where appropriate
and, if so, whether the disclosure appears adequate.
R260.17 In light of the response of the senior professional accountant’s superiors, if any,
and those charged with governance, the professional accountant shall determine if
further action is needed in the public interest.
260.17 A1 The determination of whether further action is needed, and the nature and extent
of it, will depend on various factors, including:
• The legal and regulatory framework.
• The urgency of the situation.
• The pervasiveness of the matter throughout the employing organisation.
• Whether the senior professional accountant continues to have confidence in the
integrity of the professional accountant’s superiors and those charged with
governance.
ET – 64 SAICA Student Handbook 2023/2024

• Whether the non-compliance or suspected non-compliance is likely to recur.

• Whether there is credible evidence of actual or potential substantial harm to
the interests of the employing organisation, investors, creditors, employees or
the general public.
260.17 A2 Examples of circumstances that might cause the senior professional accountant no
longer to have confidence in the integrity of the professional accountant superiors
and those charged with governance include situations where:
• The professional accountant suspects or has evidence of their involvement or
intended involvement in any non-compliance.
• Contrary to legal or regulatory requirements, they have not reported, or author-
ised the reporting of, the matter to an appropriate authority within a reasonable
period.
R260.18 The senior professional accountant shall exercise professional judgement in deter-
mining the need for, and nature and extent of, further action. In making this deter-
mination, the professional accountant shall take into account whether a reasonable
and informed third party would be likely to conclude that the professional account-
ant has acted appropriately in the public interest.
260.18 A1 Further action that the senior professional accountant might take includes:
• Informing the management of the parent entity of the matter if the employing
organisation is a member of a group.
• Disclosing the matter to an appropriate authority even when there is no legal or
regulatory requirement to do so.
• Resigning from the employing organisation.
260.18 A2 Resigning from the employing organisation is not a substitute for taking other
actions that might be needed to achieve the senior professional accountant’s object-
ives under this section. In some jurisdictions, however, there might be limitations
as to the further actions available to the professional accountant. In such circum-
stances, resignation might be the only available course of action.

Seeking Advice
260.19 A1 As assessment of the matter might involve complex analysis and judgements, the
senior professional accountant might consider:
• Consulting internally.
• Obtaining legal advice to understand the professional accountant’s options and
the professional or legal implications of taking any particular course of action.
• Consulting on a confidential basis with a regulatory or professional body.

Determining Whether to Disclose the Matter to an Appropriate Authority

260.20 A1 Disclosure of the matter to an appropriate authority would be precluded if doing
so would be contrary to law or regulation. Otherwise, the purpose of making dis-
closure is to enable an appropriate authority to cause the matter to be investigated
and action to be taken in the public interest.
260.20 A2 The determination of whether to make such a disclosure depends in particular on
the nature and extent of the actual or potential harm that is or might be caused by
the matter to investors, creditors, employees or the general public. For example,
the senior professional accountant might determine that disclosure of the matter to
an appropriate authority is an appropriate course of action if:
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 65

• The employing organisation is engaged in bribery (for example, of local or

foreign government officials for purposes of securing large contracts).
• The employing organisation is regulated and the matter is of such significance
as to threaten its licence to operate.
• The employing organisation is listed on a securities exchange and the matter
might result in adverse consequences to the fair and orderly market in the
employing organisation’s securities or pose a systemic risk to the financial
markets.
• It is likely that the employing organisation would sell products that are harmful
to public health or safety.
• The employing organisation is promoting a scheme to its clients to assist them
in evading taxes.
260.20 A3 The determination of whether to make such a disclosure will also depend on
external factors such as:
• Whether there is an appropriate authority that is able to receive the information,
and cause the matter to be investigated and action to be taken. The appropriate
authority will depend upon the nature of the matter. For example, the appropri-
ate authority would be a securities regulator in the case of fraudulent financial
reporting or an environmental protection agency in the case of a breach of en-
vironmental laws and regulations.
• Whether there exists robust and credible protection from civil, criminal or pro-
fessional liability or retaliation afforded by legislation or regulation, such as
under whistle-blowing legislation or regulation.
• Whether there are actual or potential threats to the physical safety of the senior
professional accountant or other individuals.
R260.21 If the senior professional accountant determines that disclosure of the matter to an
appropriate authority is an appropriate course of action in the circumstances, that
disclosure is permitted pursuant to paragraph R114.1(d) of the Code. When making
such disclosure, the professional accountant shall act in good faith and exercise
caution when making statements and assertions.

Imminent Breach
R260.22 In exceptional circumstances, the senior professional accountant might become
aware of actual or intended conduct that the professional accountant has reason to
believe would constitute an imminent breach of a law or regulation that would
cause substantial harm to investors, creditors, employees or the general public.
Having first considered whether it would be appropriate to discuss the matter with
management or those charged with governance of the employing organisation, the
professional accountant shall exercise professional judgement and determine
whether to disclose the matter immediately to an appropriate authority in order to
prevent or mitigate the consequences of such imminent breach. If disclosure is
made, that disclosure is permitted pursuant to paragraph R114.1(d) of the Code.

Documentation
260.23 A1 In relation to non-compliance or suspected non-compliance that falls within the
scope of this section, the senior professional accountant is encouraged to have the
following matters documented:
• The matter.
ET – 66 SAICA Student Handbook 2023/2024

• The results of discussions with the professional accountant’s superiors, if any,

and those charged with governance and other parties.
• How the professional accountant’s superiors, if any, and those charged with
governance have responded to the matter.
• The courses of action the professional accountant considered, the judgements
made and the decisions that were taken.
• How the professional accountant is satisfied that the professional accountant
has fulfilled the responsibility set out in paragraph R260.17.
Responsibilities of Professional accountants Other than Senior Professional accountants
R260.24 If, in the course of carrying out professional activities, a professional accountant
becomes aware of information concerning non-compliance or suspected non-
compliance, the professional accountant shall seek to obtain an understanding of
the matter. This understanding shall include the nature of the non-compliance or
suspected non-compliance and the circumstances in which it has occurred or might
occur.
260.24 A1 The professional accountant is expected to apply knowledge and expertise, and
exercise professional judgement. However, the professional accountant is not
expected to have a level of understanding of laws and regulations greater than that
which is required for the professional accountant’s role within the employing
organisation. Whether an act constitutes non-compliance is ultimately a matter to
be determined by a court or other appropriate adjudicative body.
260.24 A2 Depending on the nature and significance of the matter, the professional account-
ant might consult on a confidential basis with others within the employing organ-
isation or a professional body, or with legal counsel.
R260.25 If the professional accountant identifies or suspects that non-compliance has occur-
red or might occur, the professional accountant shall, subject to paragraph R260.9,
inform an immediate superior to enable the superior to take appropriate action. If
the professional accountant’s immediate superior appears to be involved in the
matter, the professional accountant shall inform the next higher level of authority
within the employing organisation.
R260.26 In exceptional circumstances, the professional accountant may determine that dis-
closure of the matter to an appropriate authority is an appropriate course of action.
If the professional accountant does so pursuant to paragraphs 260.20 A2 and A3,
that disclosure is permitted pursuant to paragraph R114.1(d) of the Code. When
making such disclosure, the professional accountant shall act in good faith and
exercise caution when making statements and assertions.
Documentation
260.27 A1 In relation to non-compliance or suspected non-compliance that falls within the
scope of this section, the professional accountant is encouraged to have the fol-
lowing matters documented:
• The matter.
• The results of discussions with the professional accountant’s superior, manage-
ment and, where applicable, those charged with governance and other parties.
• How the professional accountant’s superior has responded to the matter.
• The courses of action the professional accountant considered, the judgements
made and the decisions that were taken.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 67

Section 270
Pressure to Breach the Fundamental Principles
Introduction
270.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
270.2 Pressure exerted on, or by, a professional accountant might create an intimidation
or other threat to compliance with one or more of the fundamental principles. This
section sets out specific requirements and application material relevant to applying
the conceptual framework in such circumstances.

Requirements and Application Material

General
R270.3 A professional accountant shall not:
(a) Allow pressure from others to result in a breach of compliance with the fun-
damental principles; or
(b) Place pressure on others that the professional accountant knows, or has reason
to believe, would result in the other individuals breaching the fundamental
principles.
270.3 A1 A professional accountant might face pressure that creates threats to compliance
with the fundamental principles, for example an intimidation threat, when under-
taking a professional activity. Pressure might be explicit or implicit and might
come from:
• Within the employing organisation, for example, from a colleague or superior.
• An external individual or organisation such as a vendor, customer or lender.
• Internal or external targets and expectations.
270.3 A2 Examples of pressure that might result in threats to compliance with the funda-
mental principles include:
• Pressure related to conflicts of interest:
o Pressure from a family member bidding to act as a vendor to the pro-
fessional accountant’s employing organisation to select the family member
over another prospective vendor.
See also Section 210, Conflicts of Interest.
• Pressure to influence preparation or presentation of information:
o Pressure to report misleading financial results to meet investor, analyst or
lender expectations.
o Pressure from elected officials on public sector professional accountants to
misrepresent programmes or projects to voters.
o Pressure from colleagues to misstate income, expenditure or rates of return
to bias decision-making on capital projects and acquisitions.
o Pressure from superiors to approve or process expenditures that are not
legitimate business expenses.
o Pressure to suppress internal audit reports containing adverse findings.
See also Section 220, Preparation and Presentation of Information.
ET – 68 SAICA Student Handbook 2023/2024

• Pressure to act without sufficient expertise or due care:

o Pressure from superiors to inappropriately reduce the extent of work
performed.
o Pressure from superiors to perform a task without sufficient skills or train-
ing or within unrealistic deadlines.
See also Section 230, Acting with Sufficient Expertise.
• Pressure related to financial interests:
o Pressure from superiors, colleagues or others, for example, those who might
benefit from participation in compensation or incentive arrangements to
manipulate performance indicators.
See also Section 240, Financial Interests, Compensation and Incentives Linked
to Financial Reporting and Decision Making.
• Pressure related to inducements:
o Pressure from others, either internal or external to the employing organ-
isation, to offer inducements to influence inappropriately the judgement or
decision making process of an individual or organisation.
o Pressure from colleagues to accept a bribe or other inducement, for ex-
ample to accept inappropriate gifts or entertainment from potential vendors
in a bidding process.
See also Section 250, Inducements, Including Gifts and Hospitality.
• Pressure related to non-compliance with laws and regulations:
o Pressure to structure a transaction to evade tax.
See also Section 260, Responding to Non-compliance with Laws and Regu-
lations.
• Pressure related to level of fees
o Pressure exerted by a professional accountant on another professional
accountant to provide professional services at a fee level that does not
allow for sufficient and appropriate resources (including human, techno-
logical and intellectual resources) to perform the services in accordance
with technical and professional standards.
See also Section 330, Fees and Other Types of Remuneration.
270.3 A3 Factors that are relevant in evaluating the level of threats created by pressure
include:
• The intent of the individual who is exerting the pressure and the nature and
extent of the pressure.
• The application of laws, regulations, and professional standards to the circum-
stances.
• The culture and leadership of the employing organisation including the extent
to which they reflect or emphasise the importance of ethical behaviour and the
expectation that employees will act ethically. For example, a corporate culture
that tolerates unethical behaviour might increase the likelihood that the pres-
sure would result in a threat to compliance with the fundamental principles.
• Policies and procedures, if any, that the employing organisation has established,
such as ethics or human resources policies that address pressure.
270.3 A4 Discussing the circumstances creating the pressure and consulting with others
about those circumstances might assist the professional accountant to evaluate the
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 69

level of the threat. Such discussion and consultation, which requires being alert to
the principle of confidentiality, might include:
• Discussing the matter with the individual who is exerting the pressure to seek
to resolve it.
• Discussing the matter with the professional accountant’s superior, if the super-
ior is not the individual exerting the pressure.
• Escalating the matter within the employing organisation, including when appro-
priate, explaining any consequential risks to the organisation, for example
with:
o Higher levels of management.
o Internal or external auditors.
o Those charged with governance.
• Disclosing the matter in line with the employing organisation’s policies, in-
cluding ethics and whistleblowing policies, using any established mechanism,
such as a confidential ethics hotline.
• Consulting with:
o A colleague, superior, human resources personnel, or another professional
accountant;
o Relevant professional or regulatory bodies or industry associations; or
o Legal counsel.
270.3 A5 An example of an action that might eliminate threats created by pressure is the pro-
fessional accountant’s request for a restructure of, or segregation of, certain respon-
sibilities and duties so that the professional accountant is no longer involved with
the individual or entity exerting the pressure.

Documentation
270.4 A1 The professional accountant is encouraged to document:
• The facts.
• The communications and parties with whom these matters were discussed.
• The courses of action considered.
• How the matter was addressed.

Page
PART 3 – PROFESSIONAL ACCOUNTANTS IN PUBLIC PRACTICE
Section 300 Applying the Conceptual Framework – Professional Accountants
in Public Practice ............................................................................................ 70
Section 310 Conflicts of Interest ........................................................................................ 75
Section 320 Professional Appointments ............................................................................. 79
Section 321 Second Opinions ............................................................................................. 82
Section 325 Objectivity of an Engagement Quality Reviewer and other Appropriate
Reviewers ....................................................................................................... 84
Section 330 Fees and Other Types of Remuneration ......................................................... 85
Section 340 Inducements, Including Gifts and Hospitality ................................................ 87
Section 350 Custody of Client Assets ................................................................................ 92
Section 360 Responding to Non-Compliance with Laws and Regulations ........................ 94
ET – 70 SAICA Student Handbook 2023/2024

PART 3 – PROFESSIONAL ACCOUNTANTS IN PUBLIC

PRACTICE
Section 300
Applying the Conceptual Framework – Professional Accountants
in Public Practice
Introduction
300.1 This Part of the Code sets out requirements and application material for profes-
sional accountants in public practice when applying the conceptual framework set
out in Section 120. It does not describe all of the facts and circumstances, includ-
ing professional activities, interests and relationships, that could be encountered
by professional accountants in public practice, which create or might create threats
to compliance with the fundamental principles. Therefore, the conceptual frame-
work requires professional accountants in public practice to be alert for such facts
and circumstances.
300.2 The requirements and application material that apply to professional accountants
in public practice are set out in:
• Part 3 – Professional Accountants in Public Practice, Sections 300 to 399,
which applies to all professional accountants in public practice, whether they
provide assurance services or not.
• Independence Standards as follows:
o Part 4A – Independence for Audit and Review Engagements, Sections 400
to 899, which applies to professional accountants in public practice when
performing audit and review engagements.
o Part 4B – Independence for Assurance Engagements Other than Audit and
Review Engagements, Sections 900 to 999, which applies to professional
accountants in public practice when performing assurance engagements
other than audit or review engagements.
300.3 In this Part, the term “professional accountant” refers to individual professional
accountants in public practice and their firms.

Requirements and Application Material

General
R300.4 A professional accountant shall comply with the fundamental principles set out in
Section 110 and apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to compliance with the fundamental principles.
R300.5 When dealing with an ethics issue, the professional accountant shall consider the
context in which the issue has arisen or might arise. Where an individual who is a
professional accountant in public practice is performing professional activities
pursuant to the professional accountant’s relationship with the firm, whether as a
contractor, employee or owner, the individual shall comply with the provisions in
Part 2 that apply to these circumstances.
300.5 A1 Examples of situations in which the provisions in Part 2 apply to a professional
accountant in public practice include:
• Facing a conflict of interest when being responsible for selecting a vendor for
the firm when an immediate family member of the professional accountant
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 71

might benefit financially from the contract. The requirements and application
material set out in Section 210 apply in these circumstances.
• Preparing or presenting financial information for the professional accountant’s
client or firm. The requirements and application material set out in Section 220
apply in these circumstances.
• Being offered an inducement such as being regularly offered complimentary
tickets to attend sporting events by a supplier of the firm. The requirements
and application material set out in Section 250 apply in these circumstances.
• Facing pressure from an engagement partner to report chargeable hours in-
accurately for a client engagement. The requirements and application material
set out in Section 270 apply in these circumstances.

Identifying Threats
300.6 A1 Threats to compliance with the fundamental principles might be created by a
broad range of facts and circumstances. The categories of threats are described in
paragraph 120.6 A3. The following are examples of facts and circumstances with-
in each of those categories of threats that might create threats for a professional
accountant when undertaking a professional service:
(a) Self-interest Threats
• A professional accountant having a direct financial interest in a client.
• A professional accountant quoting a low fee to obtain a new engagement
and the fee is so low that it might be difficult to perform the professional
service in accordance with applicable technical and professional stand-
ards for that price.
• A professional accountant having a close business relationship with a
client.
• A professional accountant having access to confidential information that
might be used for personal gain.
• A professional accountant discovering a significant error when evaluating
the results of a previous professional service performed by a member of
the professional accountant’s firm.
(b) Self-review Threats
• A professional accountant issuing an assurance report on the effectiveness
of the operation of financial systems after implementing the systems.
• A professional accountant having prepared the original data used to gen-
erate records that are the subject matter of the assurance engagement.
(c) Advocacy Threats
• A professional accountant promoting the interests of, or shares in, a client.
• A professional accountant acting as an advocate on behalf of a client in
litigation or disputes with third parties.
• A professional accountant lobbying in favour of legislation on behalf of a
client.
(d) Familiarity Threats
• A professional accountant having a close or immediate family member
who is a director or officer of the client.
ET – 72 SAICA Student Handbook 2023/2024

• A director or officer of the client, or an employee in a position to exert

significant influence over the subject matter of the engagement, having
recently served as the engagement partner.
• An audit team member having a long association with the audit client.
• An individual who is being considered to serve as an appropriate re-
viewer, as a safeguard to address a threat, having a close relationship
with an individual who performed the work.
(e) Intimidation Threats
• A professional accountant being threatened with dismissal from a client
engagement or the firm because of a disagreement about a professional
matter.
• A professional accountant feeling pressured to agree with the judgement
of a client because the client has more expertise on the matter in ques-
tion.
• A professional accountant being informed that a planned promotion will
not occur unless the professional accountant agrees with an inappropriate
accounting treatment.
• A professional accountant having accepted a significant gift from a client
and being threatened that acceptance of this gift will be made public.

Evaluating Threats
300.7 A1 The conditions, policies and procedures described in paragraph 120.6 A1 and
120.8 A2 might impact the evaluation of whether a threat to compliance with the
fundamental principles is at an acceptable level. Such conditions, policies and pro-
cedures might relate to:
(a) The client and its operating environment; and
(b) The firm and its operating environment.
300.7 A2 The professional accountant’s evaluation of the level of a threat is also impacted
by the nature and scope of the professional service.

The Client and its Operating Environment

300.7 A3 The professional accountant’s evaluation of the level of a threat might be impacted
by whether the client is:
(a) An audit client and whether the audit client is a public interest entity;
(b) An assurance client that is not an audit client; or
(c) A non-assurance 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 compliance
with the principle of objectivity with respect to the audit.
300.7 A4 The corporate governance structure, including the leadership of a client might
promote compliance with the fundamental principles. Accordingly, a professional
accountant’s evaluation of the level of a threat might also be impacted by a
client’s operating environment. For example:
• The client requires appropriate individuals other than management to ratify or
approve the appointment of a firm to perform an engagement.
• The client has competent employees with experience and seniority to make
managerial decisions.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 73

• 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 over-
sight and communications regarding the firm’s services.

The Firm and its Operating Environment

300.7 A5 A professional accountant’s evaluation of the level of a threat might be impacted
by the work environment within the professional accountant’s firm and its oper-
ating environment. For example:
• Leadership of the firm that promotes compliance with the fundamental prin-
ciples and establishes the expectation that assurance team members will act in
the public interest.
• Policies or procedures for establishing and monitoring compliance with the
fundamental principles by all personnel.
• Compensation, performance appraisal and disciplinary policies and procedures
that promote compliance with the fundamental principles.
• Management of the reliance on revenue received from a single client.
• The engagement partner having authority within the firm for decisions con-
cerning compliance with the fundamental principles, including any decisions
about accepting or providing services to a client.
• Educational, training and experience requirements.
• Processes to facilitate and address internal and external concerns or com-
plaints.

Consideration of New Information or Changes in Facts and Circumstances

300.7 A6 New information or changes in facts and circumstances might:
(a) Impact the level of a threat; or
(b) Affect the professional accountant’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 con-
ceptual framework requires that the professional accountant re-evaluate and address
the threats accordingly. (Ref: Paras. R120.9 and R120.10).
300.7 A7 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.
• When the client becomes a listed entity or acquires another business unit.
• When the firm merges with another firm.
• When the professional accountant is jointly engaged by two clients and a dis-
pute emerges between the two clients.
• When there is a change in the professional accountant’s personal or immediate
family relationships.

Addressing Threats
300.8 A1 Paragraphs R120.10 to 120.10 A2 set out requirements and application material
for addressing threats that are not at an acceptable level.
ET – 74 SAICA Student Handbook 2023/2024

Examples of Safeguards
300.8 A2 Safeguards vary depending on the facts and circumstances. Examples of actions
that in certain circumstances might be safeguards to address threats include:
• Assigning additional time and qualified personnel to required tasks when an
engagement has been accepted might address a self-interest threat.
• 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 teams with separate reporting lines for the provi-
sion of non-assurance services to an assurance client might address self-review,
advocacy or familiarity threats.
• Involving another firm to perform or re-perform part of the engagement might
address self-interest, self-review, advocacy, familiarity or intimidation threats.
• Disclosing to clients any referral fees or commission arrangements received
for recommending services or products might address a self-interest threat.
• Separating teams when dealing with matters of a confidential nature might
address a self-interest threat.
300.8 A3 The remaining sections of Part 3 and Independence Standards describe certain
threats that might arise during the course of performing professional services and
include examples of actions that might address threats.

Appropriate Reviewer
300.8 A4 An appropriate reviewer is a professional with the necessary knowledge, skills,
experience and authority to review, in an objective manner, the relevant work per-
formed or service provided. Such an individual might be a professional account-
ant.

Communicating with Those Charged with Governance

R300.9 When communicating with those charged with governance in accordance with the
Code, a professional accountant shall determine the appropriate individual(s) with-
in the entity’s governance structure with whom to communicate. If the professional
accountant communicates with a subgroup of those charged with governance, the
professional accountant shall determine whether communication with all of those
charged with governance is also necessary so that they are adequately informed.
300.9 A1 In determining with whom to communicate, a professional accountant might
consider:
(a) The nature and importance of the circumstances; and
(b) The matter to be communicated.
300.9 A2 Examples of a subgroup of those charged with governance include an audit com-
mittee or an individual member of those charged with governance.
R300.10 If a professional accountant communicates with individuals who have management
responsibilities as well as governance responsibilities, the professional accountant
shall be satisfied that communication with those individuals adequately informs all
of those in a governance role with whom the professional accountant would other-
wise communicate.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 75

300.10 A1 In some circumstances, all of those charged with governance are involved in man-
aging 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 commu-
nicated to individual(s) with management responsibilities, and those individual(s)
also have governance responsibilities, the professional accountant has satisfied the
requirement to communicate with those charged with governance.

Section 310
Conflicts of Interest
Introduction
310.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
310.2 A conflict of interest creates threats to compliance with the principle of objectivity
and might create threats to compliance with the other fundamental principles.
Such threats might be created when:
(a) A professional accountant provides a professional service related to a particu-
lar matter for two or more clients whose interests with respect to that matter
are in conflict; or
(b) The interests of a professional accountant with respect to a particular matter
and the interests of the client for whom the professional accountant provides
a professional service related to that matter are in conflict.
310.3 This section sets out specific requirements and application material relevant to
applying the conceptual framework to conflicts of interest. When a professional
accountant provides an audit, review or other assurance service, independence is
also required in accordance with Independence Standards.

Requirements and Application Material

General
R310.4 A professional accountant shall not allow a conflict of interest to compromise pro-
fessional or business judgement.
310.4 A1 Examples of circumstances that might create a conflict of interest include:
• Providing a transaction advisory service to a client seeking to acquire an audit
client, where the firm has obtained confidential information during the course
of the audit that might be relevant to the transaction.
• Providing advice to two clients at the same time where the clients are compet-
ing to acquire the same company and the advice might be relevant to the par-
ties’ competitive positions.
• Providing services to a seller and a buyer in relation to the same transaction.
• Preparing valuations of assets for two parties who are in an adversarial posi-
tion with respect to the assets.
• Representing two clients in the same matter who are in a legal dispute with each
other, such as during divorce proceedings, or the dissolution of a partnership.
• In relation to a licence agreement, providing an assurance report for a licensor
on the royalties due while advising the licensee on the amounts payable.
ET – 76 SAICA Student Handbook 2023/2024

• Advising a client to invest in a business in which, for example, the spouse of

the professional accountant has a financial interest.
• Providing strategic advice to a client on its competitive position while having a
joint venture or similar interest with a major competitor of the client.
• Advising a client on acquiring a business which the firm is also interested in
acquiring.
• Advising a client on buying a product or service while having a royalty or
commission agreement with a potential seller of that product or service.

Conflict Identification
General
R310.5 Before accepting a new client relationship, engagement, or business relationship, a
professional accountant shall take reasonable steps to identify circumstances that
might create a conflict of interest, and therefore a threat to compliance with one or
more of the fundamental principles. Such steps shall include identifying:
(a) The nature of the relevant interests and relationships between the parties
involved; and
(b) The service and its implication for relevant parties.
310.5 A1 An effective conflict identification process assists a professional accountant when
taking reasonable steps to identify interests and relationships that might create an
actual or potential conflict of interest, both before determining whether to accept
an engagement and throughout the engagement. Such a process includes consider-
ing matters identified by external parties, for example clients or potential clients.
The earlier an actual or potential conflict of interest is identified, the greater the
likelihood of the professional accountant being able to address threats created by
the conflict of interest.
310.5 A2 An effective process to identify actual or potential conflicts of interest will take
into account factors such as:
• The nature of the professional services provided.
• The size of the firm.
• The size and nature of the client base.
• The structure of the firm, for example, the number and geographic location of
offices.
310.5 A3 More information on client acceptance is set out in Section 320, Professional
Appointments.
Changes in Circumstances
R310.6 A professional accountant shall remain alert to changes over time in the nature of
services, interests and relationships that might create a conflict of interest while
performing an engagement.
310.6 A1 The nature of services, interests and relationships might change during the engage-
ment. This is particularly true when a professional accountant is asked to conduct
an engagement in a situation that might become adversarial, even though the
parties who engage the professional accountant initially might not be involved in a
dispute.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 77

Network Firms
R310.7 If the firm is a member of a network, a professional accountant shall consider con-
flicts of interest that the professional accountant has reason to believe might exist
or arise due to interests and relationships of a network firm.
310.7 A1 Factors to consider when identifying interests and relationships involving a net-
work firm include:
• The nature of the professional services provided.
• The clients served by the network.
• The geographic locations of all relevant parties.

Threats Created by Conflicts of Interest

310.8 A1 In general, the more direct the connection between the professional service and the
matter on which the parties’ interests conflict, the more likely the level of the
threat is not at an acceptable level.
310.8 A2 Factors that are relevant in evaluating the level of a threat created by a conflict of
interest include measures that prevent unauthorised disclosure of confidential
information when performing professional services related to a particular matter
for two or more clients whose interests with respect to that matter are in conflict.
These measures include:
• The existence of separate practice areas for specialty functions within the firm,
which might act as a barrier to the passing of confidential client information
between practice areas.
• Policies and procedures to limit access to client files.
• Confidentiality agreements signed by personnel and partners of the firm.
• Separation of confidential information physically and electronically.
• Specific and dedicated training and communication.
310.8 A3 Examples of actions that might be safeguards to address threats created by a con-
flict of interest include:
• Having separate teams who are provided with clear policies and procedures on
maintaining confidentiality.
• Having an appropriate reviewer, who is not involved in providing the service
or otherwise affected by the conflict, review the work performed to assess
whether the key judgements and conclusions are appropriate.

Disclosure and Consent

General
R310.9 A professional accountant shall exercise professional judgement to determine
whether the nature and significance of a conflict of interest are such that specific
disclosure and explicit consent are necessary when addressing the threat created
by the conflict of interest.
310.9 A1 Factors to consider when determining whether specific disclosure and explicit
consent are necessary include:
• The circumstances creating the conflict of interest.
• The parties that might be affected.
• The nature of the issues that might arise.
• The potential for the particular matter to develop in an unexpected manner.
ET – 78 SAICA Student Handbook 2023/2024

310.9 A2 Disclosure and consent might take different forms, for example:
• General disclosure to clients of circumstances where, as is common commercial
practice, the professional accountant does not provide professional services
exclusively to any one client (for example, in a particular professional service
and market sector). This enables the client to provide general consent accord-
ingly. For example, a professional accountant might make general disclosure
in the standard terms and conditions for the engagement.
• Specific disclosure to affected clients of the circumstances of the particular con-
flict in sufficient detail to enable the client to make an informed decision about
the matter and to provide explicit consent accordingly. Such disclosure might
include a detailed presentation of the circumstances and a comprehensive
explanation of any planned safeguards and the risks involved.
• Consent might be implied by clients’ conduct in circumstances where the pro-
fessional accountant has sufficient evidence to conclude that clients know the
circumstances at the outset and have accepted the conflict of interest if they do
not raise an objection to the existence of the conflict.
310.9 A3 It is generally necessary:
(a) To disclose the nature of the conflict of interest and how any threats created
were addressed to clients affected by a conflict of interest; and
(b) To obtain consent of the affected clients to perform the professional services
when safeguards are applied to address the threat.
310.9 A4 If such disclosure or consent is not in writing, the professional accountant is
encouraged to document:
(a) The nature of the circumstances giving rise to the conflict of interest;
(b) The safeguards applied to address the threats when applicable; and
(c) The consent obtained.
When Explicit Consent is Refused
R310.10 If a professional accountant has determined that explicit consent is necessary in
accordance with paragraph R310.9 and the client has refused to provide consent,
the professional accountant shall either:
(a) End or decline to perform professional services that would result in the con-
flict of interest; or
(b) End relevant relationships or dispose of relevant interests to eliminate the
threat or reduce it to an acceptable level.

Confidentiality
General
R310.11 A professional accountant shall remain alert to the principle of confidentiality,
including when making disclosures or sharing information within the firm or net-
work and seeking guidance from third parties.
310.11 A1 Subsection 114 sets out requirements and application material relevant to situ-
ations that might create a threat to compliance with the principle of confidentiality.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 79

When Disclosure to Obtain Consent would Breach Confidentiality

R310.12 When making specific disclosure for the purpose of obtaining explicit consent
would result in a breach of confidentiality, and such consent cannot therefore be
obtained, the firm shall only accept or continue an engagement if:
(a) The firm does not act in an advocacy role for one client in an adversarial
position against another client in the same matter;
(b) Specific measures are in place to prevent disclosure of confidential infor-
mation between the engagement teams serving the two clients; and
(c) The firm is satisfied that a reasonable and informed third party would be
likely to conclude that it is appropriate for the firm to accept or continue the
engagement because a restriction on the firm’s ability to provide the pro-
fessional service would produce a disproportionate adverse outcome for the
clients or other relevant third parties.
310.12 A1 A breach of confidentiality might arise, for example, when seeking consent to
perform:
• A transaction-related service for a client in a hostile takeover of another client
of the firm.
• A forensic investigation for a client regarding a suspected fraud, where the
firm has confidential information from its work for another client who might
be involved in the fraud.
Documentation
R310.13 In the circumstances set out in paragraph R310.12, the professional accountant
shall document:
(a) The nature of the circumstances, including the role that the professional
accountant is to undertake;
(b) The specific measures in place to prevent disclosure of information between
the teams serving the two clients; and
(c) Why it is appropriate to accept or continue the engagement.

Section 320
Professional Appointments
Introduction
320.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
320.2 Acceptance of a new client relationship or changes in an existing engagement
might create a threat to compliance with one or more of the fundamental principles.
This section sets out specific requirements and application material relevant to
applying the conceptual framework in such circumstances.

Requirements and Application Material

Client and Engagement Acceptance
General
320.3 A1 Threats to compliance with the principles of integrity or professional behaviour
might be created, for example, from questionable issues associated with the client
ET – 80 SAICA Student Handbook 2023/2024

(its owners, management or activities). Issues that, if known, might create such a
threat include client involvement in illegal activities, dishonesty, questionable fin-
ancial reporting practices or other unethical behaviour.
320.3 A2 Factors that are relevant in evaluating the level of such a threat include:
• Knowledge and understanding of the client, its owners, management and those
charged with governance and business activities.
• The client’s commitment to address the questionable issues, for example,
through improving corporate governance practices or internal controls.
320.3 A3 A self-interest threat to compliance with the principle of professional competence
and due care is created if the team does not possess, or cannot acquire, the compe-
tencies to perform the professional services.
320.3 A4 Factors that are relevant in evaluating the level of such a threat include:
• An appropriate understanding of:
o The nature of the client’s business;
o The complexity of its operations;
o The requirements of the engagement; and
o The purpose, nature and scope of the work to be performed.
• Knowledge of relevant industries or subject matter.
• Experience with relevant regulatory or reporting requirements.
• Policies and procedures that the firm has implemented, as part of a system of
quality management in accordance with quality management standards such as
ISQM 1, that respond to quality risks relating to the firm’s ability to perform
the engagement in accordance with professional standards and applicable legal
and regulatory requirements.
The level of fees and the extent to which they have regard to the resources required,
taking into account the professional accountant’s commercial and market priorities.
320.3 A5 Examples of actions that might be safeguards to address a self-interest threat
include:
• Assigning sufficient engagement personnel with the necessary competencies.
• Agreeing on a realistic time frame for the performance of the engagement.
• Using experts where necessary.

Changes in a Professional Appointment

General
R320.4 A professional accountant shall determine whether there are any reasons for not
accepting an engagement when the professional accountant :
(a) Is asked by a potential client to replace another professional accountant ;
(b) Considers tendering for an engagement held by another professional account-
ant; or
(c) Considers undertaking work that is complementary or additional to that of
another professional accountant.
320.4 A1 There might be reasons for not accepting an engagement. One such reason might
be if a threat created by the facts and circumstances cannot be addressed by apply-
ing safeguards. For example, there might be a self-interest threat to compliance
with the principle of professional competence and due care if a professional
accountant accepts the engagement before knowing all the relevant facts.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 81

320.4 A2 If a professional accountant is asked to undertake work that is complementary or

additional to the work of an existing or predecessor accountant, a self-interest threat
to compliance with the principle of professional competence and due care might
be created, for example, as a result of incomplete information.
320.4 A3 A factor that is relevant in evaluating the level of such a threat is whether tenders
state that, before accepting the engagement, contact with the existing or predeces-
sor accountant will be requested. This contact gives the proposed accountant the
opportunity to inquire whether there are any reasons why the engagement should
not be accepted.
320.4 A4 Examples of actions that might be safeguards to address such a self-interest threat
include:
• Asking the existing or predecessor accountant to provide any known infor-
mation of which, in the existing or predecessor accountant’s opinion, the pro-
posed accountant needs to be aware before deciding whether to accept the
engagement. For example, inquiry might reveal previously undisclosed perti-
nent facts and might indicate disagreements with the existing or predecessor
accountant that might influence the decision to accept the appointment.
• Obtaining information from other sources such as through inquiries of third
parties or background investigations regarding senior management or those
charged with governance of the client.

Communicating with the Existing or Predecessor Accountant

320.5A1 A proposed accountant will usually need the client’s permission, preferably in
writing, to initiate discussions with the existing or predecessor accountant.
R320.6 If unable to communicate with the existing or predecessor accountant, the pro-
posed accountant shall take other reasonable steps to obtain information about any
possible threats.
R320.6a SA If the proposed client refuses or fails to give permission for the proposed account-
ant to communicate with the existing or predecessor accountant, the proposed
accountant shall decline the appointment, unless there are exceptional circum-
stances of which the proposed accountant has full knowledge, and the proposed
accountant is satisfied regarding all relevant facts, by some other means.

Communicating with the Proposed Accountant

R320.7 When an existing or predecessor accountant is asked to respond to a communi-
cation from a proposed accountant, the existing or predecessor accountant shall:
(a) Comply with relevant laws and regulations governing the request; and
(b) Provide any information honestly and unambiguously.
320.7 A1 An existing or predecessor accountant is bound by confidentiality. Whether the
existing or predecessor accountant is permitted or required to discuss the affairs of
a client with a proposed accountant will depend on the nature of the engagement
and:
(a) Whether the existing or predecessor accountant has permission from the
client for the discussion; and
(b) The legal and ethics requirements relating to such communications and dis-
closure, which might vary by jurisdiction.
320.7 A2 Circumstances where a professional accountant is or might be required to disclose
confidential information, or when disclosure might be appropriate, are set out in
paragraph 114.1 A1 of the Code.
ET – 82 SAICA Student Handbook 2023/2024

R320.7a SA The proposed accountant shall treat any information provided by the existing or
predecessor accountant in the strictest confidence.
Changes in Audit or Review Appointments
R320.8 In the case of an audit or review of financial statements, a professional accountant
shall request the existing or predecessor accountant to provide known information
regarding any facts or other information of which, in the existing or predecessor
accountant’s opinion, the proposed accountant needs to be aware before deciding
whether to accept the engagement. Except for the circumstances involving non-
compliance or suspected non-compliance with laws and regulations set out in
paragraphs R360.21 and R360.22:
(a) If the client consents to the existing or predecessor accountant disclosing any
such facts or other information, the existing or predecessor accountant shall
provide the information honestly and unambiguously; and
(b) If the client fails or refuses to grant the existing or predecessor accountant
permission to discuss the client’s affairs with the proposed accountant, the
existing or predecessor accountant shall disclose this fact to the proposed
accountant, who shall carefully consider such failure or refusal when deter-
mining whether to accept the appointment.

Client and Engagement Continuance

R320.9 For a recurring client engagement, a professional accountant shall periodically
review whether to continue with the engagement.
320.9 A1 Potential threats to compliance with the fundamental principles might be created
after acceptance which, had they been known earlier, would have caused the pro-
fessional accountant to decline the engagement. For example, a self-interest threat
to compliance with the principle of integrity might be created by improper earn-
ings management or balance sheet valuations.

Using the Work of an Expert

R320.10 When a professional accountant intends to use the work of an expert, the pro-
fessional accountant shall determine whether the use is warranted.
320.10 A1 Factors to consider when a professional accountant intends to use the work of an
expert include the reputation and expertise of the expert, the resources available to
the expert, and the professional and ethics standards applicable to the expert. This
information might be gained from prior association with the expert or from con-
sulting others.

Section 321
Second Opinions
Introduction
321.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats
321.2 Providing a second opinion to an entity that is not an existing client might create a
self-interest or other threat to compliance with one or more of the fundamental
principles. This section sets out specific requirements and application material
relevant to applying the conceptual framework in such circumstances.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 83

Requirements and Application Material

General
321.3 A1 A professional accountant might be asked to provide a second opinion on the
application of accounting, auditing, reporting or other standards or principles to
(a) specific circumstances, or (b) transactions by or on behalf of a company or an
entity that is not an existing client. The second opinion could relate to a matter
that has been considered, or might be expected to have been, or might be expected
to be considered by that client’s existing or predecessor accountant. A threat, for
example, a self-interest threat to compliance with the principle of professional
competence and due care, might be created if the second opinion is not based on
the same facts that the existing or predecessor accountant had, or is based on in-
adequate evidence.
321.3 A2 A factor that is relevant in evaluating the level of such a self-interest threat is the
circumstances of the request and all the other available facts and assumptions
relevant to the expression of a professional judgement.
321.3 A3 Examples of actions that might be safeguards to address such a self-interest
threat include:
• With the client’s permission, obtaining information from the existing or pre-
decessor accountant and confirming that the facts relevant to the issue are
complete.
• Describing the limitations surrounding any second opinion in communications
with the client.
• Having an appropriate reviewer who has not taken part in the second opin-
ion, review the draft second opinion.
(The following bullet has been elevated into a South African requirement
R321.5 SA)
321.3 A4 SA With the client’s permission, a professional accountant may through enquiries of
the client and enquiries of the existing or predecessor accountant:
• Ascertain the circumstances surrounding the proposed engagement for a sec-
ond opinion.
• Ascertain whether the client has sought a second opinion from other pro-
fessional accountant(s).
R321.3a SA A professional accountant shall provide a second opinion in writing.
321.3a A1 SA Providing an oral and other forms of a second opinion can be misunderstood
without the support of a written report.
R321.3b SA A professional accountant shall not provide a second opinion regarding an
opinion expressed on financial statements performed in terms of the ISAs.
When Permission to Communicate is Not Provided
R321.4 If an entity seeking a second opinion from a professional accountant will not
permit the professional accountant to communicate with the existing or prede-
cessor accountant, the professional accountant shall decline the appointment, un-
less there are exceptional circumstances of which the professional accountant
has full knowledge, and the professional accountant is satisfied regarding all
relevant facts, by some other means.
Providing the Existing or Predecessor Accountant with a Copy of the Second Opinion
R321.5 SA A professional accountant shall, in terms of the engagement with the client, pro-
vide the existing or predecessor accountant with a copy of the second opinion, at
the same time as it is given to the client.
ET – 84 SAICA Student Handbook 2023/2024

321.5 A1 SA The purpose of providing the existing or predecessor accountant with a copy of
the second opinion is to ensure that the professional accountant and the existing
or predecessor accountant have the same information.

Section 325
Objectivity of an Engagement Quality Reviewer and other
Appropriate Reviewers
Introduction
325.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
325.2 Appointing an engagement quality reviewer who has involvement in the work
being reviewed or close relationships with those responsible for performing that
work might create threats to compliance with the principle of objectivity.
325.3 This section sets out specific application material relevant to applying the concep-
tual framework in relation to the objectivity of an engagement quality reviewer.
325.4 An engagement quality reviewer is also an example of an appropriate reviewer as
described in paragraph 300.8 A4. Therefore, the application material in this sec-
tion might apply in circumstances where a professional accountant appoints an
appropriate reviewer to review work performed as a safeguard to address identi-
fied threats.
Application Material
General
325.5 A1 Quality engagements are achieved through planning and performing engagements
and reporting on them in accordance with professional standards and applicable
legal and regulatory requirements. ISQM 1 establishes the firm’s responsibilities
for its system of quality management and requires the firm to design and imple-
ment responses to address quality risks related to engagement performance. Such
responses include establishing policies or procedures addressing engagement qual-
ity reviews in accordance with ISQM 2.
325.5 A2 An engagement quality reviewer is a partner, other individual in the firm, or an ex-
ternal individual, appointed by the firm to perform the engagement quality review.
Identifying Threats
325.6 A1 The following are examples of circumstances where threats to the objectivity of
a professional accountant7 appointed as an engagement quality reviewer might be
created:
(a) Self-interest threat
• Two engagement partners each serving as an engagement quality reviewer
for the other’s engagement.
(b) Self-review threat
• An accountant serving as an engagement quality reviewer on an audit
engagement after previously serving as the engagement partner.
________________________

7 International Standard on Quality Management (ISQM) 2 (Paragraphs 13(b), 17 and 18) allows for other indi-
viduals in the firm or an external individual to be appointed as an EQR. This role is not limited to a professional
accountant.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 85

(c) Familiarity threat

• An accountant serving as an engagement quality reviewer has a close re-
lationship with or is an immediate family member of another individual
who is involved in the engagement.
(d) Intimidation threat
• An accountant serving as an engagement quality reviewer for an engage-
ment has a direct reporting line to the partner responsible for the engage-
ment.
Evaluating Threats
325.7 A1 Factors that are relevant in evaluating the level of threats to the objectivity of an
individual appointed as an engagement quality reviewer include:
• The role and seniority of the individual.
• The nature of the individual’s relationship with others involved on the en-
gagement.
• The length of time the individual was previously involved with the engage-
ment and the individual’s role.
• When the individual was last involved in the engagement prior to being ap-
pointed as engagement quality reviewer and any subsequent relevant changes
to the circumstances of the engagement.
• The nature and complexity of issues that required significant judgment from
the individual in any previous involvement in the engagement.
Addressing Threats
325.8 A1 An example of an action that might eliminate an intimidation threat is reassigning
reporting responsibilities within the firm.
325.8 A2 An example of an action that might be a safeguard to address a self-review threat
is implementing a period of sufficient duration (a cooling-off period) before the
individual who was on the engagement is appointed as an engagement quality
reviewer.

Cooling-off Period
325.8 A3 ISQM 2 requires the firm to establish policies or procedures that specify, as a con-
dition for eligibility, a cooling-off period of two years before the engagement part-
ner can assume the role of engagement quality reviewer. This serves to enable
compliance with the principle of objectivity and the consistent performance of
quality engagements.
325.8 A4 The cooling-off period required by ISQM 2 is distinct from, and does not modify,
the partner rotation requirements in Section 540, which are designed to address
threats to independence created by long association with an audit client.

Section 330
Fees and other Types of Remuneration
Introduction
330.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
ET – 86 SAICA Student Handbook 2023/2024

330.2 The level and nature of fee and other remuneration arrangements might create a
self-interest threat to compliance with one or more of the fundamental principles.
This section sets out specific application material relevant to applying the concep-
tual framework in such circumstances.

Application Material
Level of Fees
330.3 A1 The level of fees quoted might impact a professional accountant’s ability to per-
form professional services in accordance with technical and professional standards.
330.3 A2 A professional accountant might quote whatever fee is considered appropriate.
Quoting a fee lower than another professional accountant is not in itself unethical.
However, the level of fees quoted creates a self-interest threat to compliance with
the principle of professional competence and due care if the fee quoted is so low
that it might be difficult to perform the engagement in accordance with applicable
technical and professional standards.
330.3 A3 Factors that are relevant in evaluating the level of such a threat include:
• Whether the client is aware of the terms of the engagement and, in particular,
the basis on which fees are determined and which professional services are
covered.
• Whether the level of the fee is set by an independent third party such as a regu-
latory body.
330.3 A4 Examples of actions that might be safeguards to address such a self-interest threat
include:
• Adjusting the level of fees or the scope of the engagement.
• Having an appropriate reviewer review the work performed.

Contingent Fees
R330.4 SA A professional accountant shall not charge contingent fees for the preparation of
an original or amended tax return, as contingent fees for these services create a
self-interest threat to objectivity that cannot be eliminated and safeguards are not
capable of being applied to reduce the threat to an acceptable level.
330.4 A1 Contingent fees are used for certain types of non-assurance services. However, con-
tingent fees might create threats to compliance with the fundamental principles,
particularly a self-interest threat to compliance with the principle of objectivity, in
certain circumstances.
330.4 A2 Factors that are relevant in evaluating the level of such threats include:
• The nature of the engagement.
• The range of possible fee amounts.
• The basis for determining the fee.
• Disclosure to intended users of the work performed by the professional
accountant and the basis of remuneration.
• Quality management policies and procedures.
• Whether an independent third party is to review the outcome or result of the
transaction.
• Whether the level of the fee is set by an independent third party such as a regu-
latory body.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 87

330.4 A3 Examples of actions that might be safeguards to address such a self-interest threat
include:
• Having an appropriate reviewer who was not involved in performing the non-
assurance service review the work performed by the professional accountant.
• Obtaining an advance written agreement with the client on the basis of re-
muneration.
330.4 A4 Requirements and application material related to contingent fees for services pro-
vided to audit or review clients and other assurance clients are set out in Independ-
ence Standards.

Referral Fees or Commissions

330.5 A1 A self-interest threat to compliance with the principles of objectivity and pro-
fessional competence and due care is created if a professional accountant pays or
receives a referral fee or receives a commission relating to a client. Such referral
fees or commissions include, for example:
• A fee paid to another professional accountant for the purposes of obtaining
new client work when the client continues as a client of the existing accountant
but requires specialist services not offered by that professional accountant.
• A fee received for referring a continuing client to another professional account-
ant or other expert where the existing accountant does not provide the specific
professional service required by the client.
• A commission received from a third party (for example, a software vendor) in
connection with the sale of goods or services to a client.
330.5 A2 Examples of actions that might be safeguards to address such a self-interest threat
include:
• Obtaining an advance agreement upfront and in writing from the client for
commission arrangements in connection with the sale by another party of
goods or services to the client might address a self-interest threat.
• Disclosing to clients, upfront and in writing any referral fees or commission
arrangements paid to, or received from, another professional accountant or
third party for recommending services or products might address a self-interest
threat.

Purchase or Sale of a Firm

330.6 A1 A professional accountant may purchase all or part of another firm on the basis
that payments will be made to individuals formerly owning the firm or to their
heirs or estates. Such payments are not referral fees or commissions for the pur-
poses of this section.

Section 340
Inducements, including Gifts and Hospitality
Introduction
340.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
ET – 88 SAICA Student Handbook 2023/2024

340.2 Offering or accepting inducements might create a self-interest, familiarity or

intimidation threat to compliance with the fundamental principles, particularly the
principles of integrity, objectivity and professional behaviour.
340.3 This section sets out requirements and application material relevant to applying
the conceptual framework in relation to the offering and accepting of inducements
when performing professional services that does not constitute non-compliance
with laws and regulations. This section also requires a professional accountant to
comply with relevant laws and regulations when offering or accepting induce-
ments.

Requirements and Application Material

General
340.4 A1 An inducement is an object, situation, or action that is used as a means to influ-
ence another individual’s behaviour, but not necessarily with the intent to improp-
erly influence that individual’s behaviour. Inducements can range from minor acts
of hospitality between professional accountants and existing or prospective clients
to acts that result in non-compliance with laws and regulations. An inducement
can take many different forms, for example:
• Gifts.
• Hospitality.
• Entertainment.
• Political or charitable donations.
• Appeals to friendship and loyalty.
• Employment or other commercial opportunities.
• Preferential treatment, rights or privileges.

Inducements Prohibited by Laws and Regulations

R340.5 In many jurisdictions, there are laws and regulations, such as those related to
bribery and corruption, that prohibit the offering or accepting of inducements in
certain circumstances. The professional accountant shall obtain an understanding
of relevant laws and regulations and comply with them when the professional
accountant encounters such circumstances.

Inducements Not Prohibited by Laws and Regulations

340.6 A1 The offering or accepting of inducements that is not prohibited by laws and regu-
lations might still create threats to compliance with the fundamental principles.
Inducements with Intent to Improperly Influence Behaviour
R340.7 A professional accountant shall not offer, or encourage others to offer, any induce-
ment that is made, or which the professional accountant considers a reasonable
and informed third party would be likely to conclude is made, with the intent to
improperly influence the behaviour of the recipient or of another individual.
R340.8 A professional accountant shall not accept, or encourage others to accept, any
inducement that the professional accountant concludes is made, or considers a
reasonable and informed third party would be likely to conclude is made, with the
intent to improperly influence the behaviour of the recipient or of another individ-
ual.
340.9 A1 An inducement is considered as improperly influencing an individual’s behaviour
if it causes the individual to act in an unethical manner. Such improper influence
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 89

can be directed either towards the recipient or towards another individual who has
some relationship with the recipient. The fundamental principles are an appropriate
frame of reference for a professional accountant in considering what constitutes
unethical behaviour on the part of the professional accountant and, if necessary by
analogy, other individuals.
340.9 A2 A breach of the fundamental principle of integrity arises when a professional
accountant offers or accepts, or encourages others to offer or accept, an inducement
where the intent is to improperly influence the behaviour of the recipient or of
another individual.
340.9 A3 The determination of whether there is actual or perceived intent to improperly
influence behaviour requires the exercise of professional judgement. Relevant fac-
tors to consider might include:
• The nature, frequency, value and cumulative effect of the inducement.
• Timing of when the inducement is offered relative to any action or decision
that it might influence.
• Whether the inducement is a customary or cultural practice in the circum-
stances, for example, offering a gift on the occasion of a religious holiday or
wedding.
• Whether the inducement is an ancillary part of a professional service, for ex-
ample, offering or accepting lunch in connection with a business meeting.
• Whether the offer of the inducement is limited to an individual recipient or
available to a broader group. The broader group might be internal or external
to the firm, such as other suppliers to the client.
• The roles and positions of the individuals at the firm or the client offering or
being offered the inducement.
• Whether the professional accountant knows, or has reason to believe, that
accepting the inducement would breach the policies and procedures of the
client.
• The degree of transparency with which the inducement is offered.
• Whether the inducement was required or requested by the recipient.
• The known previous behaviour or reputation of the offeror.

Consideration of Further Actions

340.10 A1 If the professional accountant becomes aware of an inducement offered with
actual or perceived intent to improperly influence behaviour, threats to compliance
with the fundamental principles might still be created even if the requirements in
paragraphs R340.7 and R340.8 are met.
340.10 A2 Examples of actions that might be safeguards to address such threats include:
• Informing senior management of the firm or those charged with governance of
the client regarding the offer.
• Amending or terminating the business relationship with the client.

Inducements with No Intent to Improperly Influence Behaviour

340.11 A1 The requirements and application material set out in the conceptual framework
apply when a professional accountant has concluded there is no actual or per-
ceived intent to improperly influence the behaviour of the recipient or of another
individual.
ET – 90 SAICA Student Handbook 2023/2024

340.11 A2 If such an inducement is trivial and inconsequential, any threats created will be at
an acceptable level.
340.11 A3 Examples of circumstances where offering or accepting such an inducement might
create threats even if the professional accountant has concluded there is no actual
or perceived intent to improperly influence behaviour include:
• Self-interest threats
o A professional accountant is offered hospitality from the prospective acquirer
of a client while providing corporate finance services to the client.
• Familiarity threats
o A professional accountant regularly takes an existing or prospective client
to sporting events.
• Intimidation threats
o A professional accountant accepts hospitality from a client, the nature of
which could be perceived to be inappropriate were it to be publicly dis-
closed.
340.11 A4 Relevant factors in evaluating the level of such threats created by offering or
accepting such an inducement include the same factors set out in paragraph 340.9
A3 for determining intent.
340.11 A5 Examples of actions that might eliminate threats created by offering or accepting
such an inducement include:
• Declining or not offering the inducement.
• Transferring responsibility for the provision of any professional services to the
client to another individual who the professional accountant has no reason to
believe would be, or would be perceived to be, improperly influenced when
providing the services.
340.11 A6 Examples of actions that might be safeguards to address such threats created by
offering or accepting such an inducement include:
• Being transparent with senior management of the firm or of the client about
offering or accepting an inducement.
• Registering the inducement in a log monitored by senior management of the
firm or another individual responsible for the firm’s ethics compliance or main-
tained by the client.
• Having an appropriate reviewer, who is not otherwise involved in providing
the professional service, review any work performed or decisions made by the
professional accountant with respect to the client from which the professional
accountant accepted the inducement.
• Donating the inducement to charity after receipt and appropriately disclosing
the donation, for example, to a member of senior management of the firm or
the individual who offered the inducement.
• Reimbursing the cost of the inducement, such as hospitality, received.
• As soon as possible, returning the inducement, such as a gift, after it was ini-
tially accepted.

Immediate or Close Family Members

R340.12 A professional accountant shall remain alert to potential threats to the professional
accountant’s compliance with the fundamental principles created by the offering
of an inducement:
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 91

(a) By an immediate or close family member of the professional accountant to

an existing or prospective client of the professional accountant.
(b) To an immediate or close family member of the professional accountant by
an existing or prospective client of the professional accountant.
R340.13 Where the professional accountant becomes aware of an inducement being offered
to or made by an immediate or close family member and concludes there is intent
to improperly influence the behaviour of the professional accountant or of an
existing or prospective client of the professional accountant, or considers a reason-
able and informed third party would be likely to conclude such intent exists, the
professional accountant shall advise the immediate or close family member not to
offer or accept the inducement.
340.13 A1 The factors set out in paragraph 340.9 A3 are relevant in determining whether
there is actual or perceived intent to improperly influence the behaviour of the
professional accountant or of the existing or prospective client. Another factor that
is relevant is the nature or closeness of the relationship, between:
(a) The professional accountant and the immediate or close family member;
(b) The immediate or close family member and the existing or prospective client;
and
(c) The professional accountant and the existing or prospective client.
For example, the offer of employment, outside of the normal recruitment process,
to the spouse of the professional accountant by a client for whom the professional
accountant is providing a business valuation for a prospective sale might indicate
such intent.
340.13 A2 The application material in paragraph 340.10 A2 is also relevant in addressing
threats that might be created when there is actual or perceived intent to improperly
influence the behaviour of the professional accountant, or of the existing or pro-
spective client even if the immediate or close family member has followed the
advice given pursuant to paragraph R340.13.

Application of the Conceptual Framework

340.14 A1 Where the professional accountant becomes aware of an inducement offered in the
circumstances addressed in paragraph R340.12, threats to compliance with the
fundamental principles might be created where:
(a) The immediate or close family member offers or accepts the inducement
contrary to the advice of the professional accountant pursuant to paragraph
R340.13; or
(b) The professional accountant does not have reason to believe an actual or
perceived intent to improperly influence the behaviour of the professional
accountant or of the existing or prospective client exists.
340.14 A2 The application material in paragraphs 340.11 A1 to 340.11 A6 is relevant for the
purposes of identifying, evaluating and addressing such threats. Factors that are
relevant in evaluating the level of threats in these circumstances also include the
nature or closeness of the relationships set out in paragraph 340.13 A1.

Other Considerations
340.15 A1 If a professional accountant encounters or is made aware of inducements that
might result in non-compliance or suspected non-compliance with laws and regu-
lations by a client or individuals working for or under the direction of the client,
the requirements and application material in Section 360 apply.
ET – 92 SAICA Student Handbook 2023/2024

340.15 A2 If a firm, network firm or an audit team member is being offered gifts or hospital-
ity from an audit client, the requirement and application material set out in Section
420 apply.
340.15 A3 If a firm or an assurance team member is being offered gifts or hospitality from an
assurance client, the requirement and application material set out in Section 906
apply.

Section 350
Custody of Client Assets
Introduction
350.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
350.2 Holding client assets whilst providing professional services creates a self-interest or
other threat to compliance with the fundamental principles of professional behav-
iour and objectivity. This section sets out specific requirements and application
material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

Before Taking Custody
R350.3 A professional accountant shall not assume custody of client money or other assets
unless permitted to do so by law and in accordance with any conditions under
which such custody may be taken.
R350.4 As part of client and engagement acceptance procedures related to assuming cus-
tody of client money or assets, a professional accountant shall:
(a) Make inquiries about the source of the assets; and
(b) Consider related legal and regulatory obligations.
(350.4 A1 has been elevated into a South African requirement R350.4a SA)
R350.4a SA Inquiries about the source of client assets might reveal, for example, that the
assets were derived from illegal activities, such as money laundering. The profes-
sional accountant shall not accept or hold the assets in such circumstances, and
the provisions of Section 360 would apply.
After Taking Custody
R350.5 A professional accountant entrusted with money or other assets belonging to others
shall:
(a) Comply with the laws and regulations relevant to holding and accounting for
the assets;
(b) Keep the assets separately from personal or firm assets;
(c) Use the assets only for the purpose for which they are intended; and
(d) Be ready at all times to account for the assets and any income, dividends, or
gains generated, to any entity or individuals entitled to that accounting.
Client Monies
R350.6 SA If a professional accountant is entrusted with client monies, which come into the
professional accountant’s possession or under the professional accountant’s
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 93

control and for which the professional accountant is responsible to account to a

client, the professional accountant shall:
(a) Not refer to such client monies as being “in trust” or in a “trust account” as
this could be misleading;
(b) Maintain one or more bank accounts with an institution or institutions
registered in terms of the Banks Act, 1990 (Act 94 of 1990), that are sepa-
rate from the professional accountant’s own bank account;
(c) Appropriately designate such bank accounts. This includes a general bank
account in the professional accountant’s name where all client monies are
held (such as ABC’s Client Account), or a specific account named and oper-
ated per relevant client;
(d) Deposit client monies without delay to the credit of such client account;
(e) Maintain such records as may reasonably be expected to ensure that the
client monies can be readily identified as being the property of the client, for
example, detailed bookkeeping and being able to supply the client with an
analysis of the account/s;
(f) Perform a reconciliation between the designated bank account and the client
monies ledger account/s; and
(g) Not hold client monies indefinitely unless specifically allowed by laws and
regulations. Professional accountants are encouraged to hold client monies
for a limited period, depending on the professional service provided.

Client Assets other than Monies

R350.7 SA If a professional accountant is entrusted with client assets other than client monies
which come into the professional accountant’s possession or under the profes-
sional accountant’s control and for which the professional accountant is respon-
sible to account to a client, the professional accountant shall:
(a) Not refer to such client assets as being held “in trust” or in a “trust
account” as this could be misleading;
(b) Maintain such records as may be reasonably expected to ensure that the
client assets can readily be identified as being the property of the client; and
(c) If client assets are in the form of documents of title to money, or documents
of title that can be converted into money, make such arrangements as may be
appropriate in the circumstances to safeguard such documents against un-
authorised use.

Possible Measures of Protection

R350.8 SA A professional accountant shall apply appropriate measures to protect the client
assets.
350.8 A1 SA Examples of measures may include:
(a) If the professional accountant administers a large number of client accounts
that hold client monies the professional accountant may utilise an umbrella
account with sub-accounts for each client;
(b) If the professional service requires the professional accountant to be en-
trusted with client monies for an unusually long period and the professional
accountant is not the auditor or assurance provider, the professional
accountant shall request the client to open a separate bank account and pro-
vide the professional accountant with appropriate power of attorney or sig-
natory rights over the account;
ET – 94 SAICA Student Handbook 2023/2024

(c) Before taking custody of client assets the professional accountant shall con-
sider whether the firm’s indemnity and fidelity insurance is sufficient to cover
incidents of fraud or theft; and
(d) Where a formal engagement letter is entered into covering the professional
service involving custody of client assets, the engagement letter shall address
the risks and responsibilities relating to such client assets.
Custody of Client Assets for Audit or Other Assurance Clients
R350.9 SA A professional accountant shall not accept custody of an audit or assurance
client’s assets unless the threat to independence can be eliminated or reduced to
an acceptable level. The independence requirements in paragraphs R600.7 –
R600.8 apply for audit and review engagements and paragraphs R950.6 – R950.7
apply to other assurance engagements.

Section 360
Responding to Non-Compliance with Laws and Regulations
Introduction
360.1 Professional accountants are required to comply with the fundamental principles
and apply the conceptual framework set out in Section 120 to identify, evaluate
and address threats.
360.2 A self-interest or intimidation threat to compliance with the fundamental prin-
ciples of integrity and professional behaviour is created when a professional
accountant becomes aware of non-compliance or suspected non-compliance with
laws and regulations.
360.3 A professional accountant might encounter or be made aware of non-compliance
or suspected non-compliance in the course of providing a professional service to a
client. This section guides the professional accountant in assessing the implications
of the matter and the possible courses of action when responding to non-
compliance or suspected non-compliance with:
(a) Laws and regulations generally recognised to have a direct effect on the
determination of material amounts and disclosures in the client’s financial
statements; and
(b) Other laws and regulations that do not have a direct effect on the determin-
ation of the amounts and disclosures in the client’s financial statements, but
compliance with which might be fundamental to the operating aspects of the
client’s business, to its ability to continue its business, or to avoid material
penalties.

Objectives of the Professional Accountant in Relation to Non-compliance

with Laws and Regulations
360.4 A distinguishing mark of the accountancy profession is its acceptance of the
responsibility to act in the public interest. When responding to non-compliance or
suspected non-compliance, the objectives of the professional accountant are:
(a) To comply with the principles of integrity and professional behaviour;
(b) By alerting management or, where appropriate, those charged with govern-
ance of the client, to seek to:
(i) Enable them to rectify, remediate or mitigate the consequences of the
identified or suspected non-compliance; or
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 95

(ii) Deter the commission of the non-compliance where it has not yet
occurred; and
(c) To take such further action as appropriate in the public interest.

Requirements and Application Material

General
360.5 A1 Non-compliance with laws and regulations (“non-compliance”) comprises acts of
omission or commission, intentional or unintentional, which are contrary to the
prevailing laws or regulations committed by the following parties:
(a) A client;
(b) Those charged with governance of a client;
(c) Management of a client; or
(d) Other individuals working for or under the direction of a client.
360.5 A2 Examples of laws and regulations which this section addresses include those that
deal with:
• Fraud, corruption and bribery.
• Money laundering, terrorist financing and proceeds of crime.
• Securities markets and trading.
• Banking and other financial products and services.
• Data protection.
• Tax and pension liabilities and payments.
• Environmental protection.
• Public health and safety.
360.5 A3 Non-compliance might result in fines, litigation or other consequences for the
client, potentially materially affecting its financial statements. Importantly, such
non-compliance might have wider public interest implications in terms of poten-
tially substantial harm to investors, creditors, employees or the general public. For
the purposes of this section, an act that causes substantial harm is one that results
in serious adverse consequences to any of these parties in financial or non-
financial terms. Examples include the perpetration of a fraud resulting in signifi-
cant financial losses to investors, and breaches of environmental laws and regu-
lations endangering the health or safety of employees or the public.
R360.6 In some jurisdictions, there are legal or regulatory provisions governing how pro-
fessional accountants should address non-compliance or suspected non-compliance.
These legal or regulatory provisions might differ from or go beyond the provisions
in this section. When encountering such non-compliance or suspected non-
compliance, the professional accountant shall obtain an understanding of those
legal or regulatory provisions and comply with them, including:
(a) Any requirement to report the matter to an appropriate authority; and
(b) Any prohibition on alerting the client.
360.6 A1 A prohibition on alerting the client might arise, for example, pursuant to anti-
money laundering legislation.
360.7 A1 This section applies regardless of the nature of the client, including whether or not
it is a public interest entity.
ET – 96 SAICA Student Handbook 2023/2024

360.7 A2 A professional accountant who encounters or is made aware of matters that are
clearly inconsequential is not required to comply with this section. Whether a mat-
ter is clearly inconsequential is to be judged with respect to its nature and its im-
pact, financial or otherwise, on the client, its stakeholders and the general public.
360.7 A3 This section does not address:
(a) Personal misconduct unrelated to the business activities of the client; and
(b) Non-compliance by parties other than those specified in paragraph 360.5 A1.
This includes, for example, circumstances where a professional accountant
has been engaged by a client to perform a due diligence assignment on a
third party entity and the identified or suspected non-compliance has been
committed by that third-party.
The professional accountant might nevertheless find the guidance in this section
helpful in considering how to respond in these situations.

Responsibilities of Management and Those Charged with Governance

360.8 A1 Management, with the oversight of those charged with governance, is responsible
for ensuring that the client’s business activities are conducted in accordance with
laws and regulations. Management and those charged with governance are also
responsible for identifying and addressing any non-compliance by:
(a) The client;
(b) An individual charged with governance of the entity;
(c) A member of management; or
(d) Other individuals working for or under the direction of the client.

Responsibilities of All Professional Accountants

R360.9 Where a professional accountant becomes aware of a matter to which this section
applies, the steps that the professional accountant takes to comply with this section
shall be taken on a timely basis. In taking timely steps, the professional accountant
shall have regard to the nature of the matter and the potential harm to the interests
of the entity, investors, creditors, employees or the general public.

Audits of Financial Statements

Obtaining an Understanding of the Matter
R360.10 If a professional accountant engaged to perform an audit of financial statements
becomes aware of information concerning non-compliance or suspected non-
compliance, the professional accountant shall obtain an understanding of the mat-
ter. This understanding shall include the nature of the non-compliance or suspect-
ed non-compliance and the circumstances in which it has occurred or might occur.
360.10 A1 The professional accountant might become aware of the non-compliance or sus-
pected non-compliance in the course of performing the engagement or through
information provided by other parties.
360.10 A2 The professional accountant is expected to apply knowledge and expertise, and
exercise professional judgement. However, the professional accountant is not
expected to have a level of knowledge of laws and regulations greater than that
which is required to undertake the engagement. Whether an act constitutes non-
compliance is ultimately a matter to be determined by a court or other appropriate
adjudicative body.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 97

360.10 A3 Depending on the nature and significance of the matter, the professional account-
ant might consult on a confidential basis with others within the firm, a network
firm, the Institute, the Regulatory Board, or with legal counsel.
R360.11 If the professional accountant identifies or suspects that non-compliance has occur-
red or might occur, the professional accountant shall discuss the matter with the
appropriate level of management and, where appropriate, those charged with gov-
ernance.
360.11 A1 The purpose of the discussion is to clarify the professional accountant’s under-
standing of the facts and circumstances relevant to the matter and its potential con-
sequences. The discussion also might prompt management or those charged with
governance to investigate the matter.
360.11 A2 The appropriate level of management with whom to discuss the matter is a ques-
tion of professional judgement. Relevant factors to consider include:
• The nature and circumstances of the matter.
• The individuals actually or potentially involved.
• The likelihood of collusion.
• The potential consequences of the matter.
• Whether that level of management is able to investigate the matter and take
appropriate action.
360.11 A3 The appropriate level of management is usually at least one level above the indi-
vidual or individuals involved or potentially involved in the matter. In the context
of a group, the appropriate level might be management at an entity that controls
the client.
360.11 A4 The professional accountant might also consider discussing the matter with internal
auditors, where applicable.
R360.12 If the professional accountant believes that management is involved in the non-
compliance or suspected non-compliance, the professional accountant shall discuss
the matter with those charged with governance.

Addressing the Matter

R360.13 In discussing the non-compliance or suspected non-compliance with management
and, where appropriate, those charged with governance, the professional account-
ant shall advise them to take appropriate and timely actions, if they have not
already done so, to:
(a) Rectify, remediate or mitigate the consequences of the non-compliance;
(b) Deter the commission of the non-compliance where it has not yet occurred;
or
(c) Disclose the matter to an appropriate authority where required by law or
regulation or where considered necessary in the public interest.
R360.14 The professional accountant shall consider whether management and those charged
with governance understand their legal or regulatory responsibilities with respect
to the non-compliance or suspected non-compliance.
360.14 A1 If management and those charged with governance do not understand their legal or
regulatory responsibilities with respect to the matter, the professional accountant
might suggest appropriate sources of information or recommend that they obtain
legal advice.
ET – 98 SAICA Student Handbook 2023/2024

R360.15 The professional accountant shall comply with applicable:

(a) Laws and regulations, including legal or regulatory provisions governing the
reporting of non-compliance or suspected non-compliance to an appropriate
authority; and
(b) Requirements under auditing standards, including those relating to:
• Identifying and responding to non-compliance, including fraud.
• Communicating with those charged with governance.
• Considering the implications of the non-compliance or suspected non-
compliance for the auditor’s report.
360.15 A1 Some laws and regulations might stipulate a period within which reports of
non-compliance or suspected non-compliance are to be made to an appropriate
authority.
Communication with Respect to Groups
R360.16 Where a professional accountant becomes aware of non-compliance or suspected
non-compliance in either of the following two situations in the context of a group,
the professional accountant shall communicate the matter to the group engagement
partner unless prohibited from doing so by law or regulation:
(a) The professional accountant performs audit work related to a component for
purposes of the group audit; or
(b) The professional accountant is engaged to perform an audit of the financial
statements of a legal entity or business unit that is part of a group for pur-
poses other than the group audit, for example, a statutory audit.
The communication to the group engagement partner shall be in addition to re-
sponding to the matter in accordance with the provisions of this section.
360.16 A1 The purpose of the communication is to enable the group engagement partner to be
informed about the matter and to determine, in the context of the group audit,
whether and, if so, how to address it in accordance with the provisions in this sec-
tion. The communication requirement in paragraph R360.16 applies regardless of
whether the group engagement partner’s firm or network is the same as or differ-
ent from the professional accountant’s firm or network.
R360.17 Where the group engagement partner becomes aware of non-compliance or sus-
pected non-compliance in the course of a group audit, the group engagement part-
ner shall consider whether the matter might be relevant to:
(a) One or more components subject to audit work for purposes of the group
audit; or
(b) One or more legal entities or business units that are part of the group and
whose financial statements are subject to audit for purposes other than the
group audit, for example, a statutory audit.
This consideration shall be in addition to responding to the matter in the context of
the group audit in accordance with the provisions of this section.
R360.18 If the non-compliance or suspected non-compliance might be relevant to one or
more of the components specified in paragraph R360.17(a) and legal entities or
business units specified in paragraph R360.17 (b), the group engagement partner
shall take steps to have the matter communicated to those performing a u d i t
work at the components, legal entities or business units unless prohibited from
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 99

doing so by law or regulation. If necessary, the group engagement partner shall ar-
range for appropriate inquiries to be made (either of management or from publicly
available information) as to whether the relevant legal entities or business units
specified in paragraph R360.17(b) are subject to audit and, if so, to ascertain to the
extent practicable the identity of the auditors.
360.18 A1 The purpose of the communication is to enable those responsible for audit work at
the components, legal entities or business units to be informed about the matter
and to determine whether and, if so, how to address it in accordance with the pro-
visions in this section. The communication requirement applies regardless of
whether the group engagement partner’s firm or network is the same as or differ-
ent from the firms or networks of those performing audit work at the components,
legal entities or business units.

Determining Whether Further Action Is Needed

R360.19 The professional accountant shall assess the appropriateness of the response of
management and, where applicable, those charged with governance.
360.19 A1 Relevant factors to consider in assessing the appropriateness of the response of
management and, where applicable, those charged with governance include
whether:
• The response is timely.
• The non-compliance or suspected non-compliance has been adequately inves-
tigated.
• Action has been, or is being, taken to rectify, remediate or mitigate the con-
sequences of any non-compliance.
• Action has been, or is being, taken to deter the commission of any non-
compliance where it has not yet occurred.
• Appropriate steps have been, or are being, taken to reduce the risk of re-
occurrence, for example, additional controls or training.
• The non-compliance or suspected non-compliance has been disclosed to an
appropriate authority where appropriate and, if so, whether the disclosure
appears adequate.
R360.20 In light of the response of management and, where applicable, those charged with
governance, the professional accountant shall determine if further action is needed
in the public interest.
360.20 A1 The determination of whether further action is needed, and the nature and extent
of it, will depend on various factors, including:
• The legal and regulatory framework.
• The urgency of the situation.
• The pervasiveness of the matter throughout the client.
• Whether the professional accountant continues to have confidence in the integ-
rity of management and, where applicable, those charged with governance.
• Whether the non-compliance or suspected non-compliance is likely to recur.
• Whether there is credible evidence of actual or potential substantial harm to
the interests of the entity, investors, creditors, employees or the general public.
360.20 A2 Examples of circumstances that might cause the professional accountant no longer
to have confidence in the integrity of management and, where applicable, those
charged with governance include situations where:
• The professional accountant suspects or has evidence of their involvement or
intended involvement in any non-compliance.
ET – 100 SAICA Student Handbook 2023/2024

• The professional accountant is aware that they have knowledge of such non-
compliance and, contrary to legal or regulatory requirements, have not reported,
or authorised the reporting of, the matter to an appropriate authority within a
reasonable period.
R360.21 The professional accountant shall exercise professional judgement in determining
the need for, and nature and extent of, further action. In making this determination,
the professional accountant shall take into account whether a reasonable and in-
formed third party would be likely to conclude that the professional accountant
has acted appropriately in the public interest.
360.21 A1 Further action that the professional accountant might take includes:
• Disclosing the matter to an appropriate authority even when there is no legal or
regulatory requirement to do so.
• Withdrawing from the engagement and the professional relationship where
permitted by law or regulation.
360.21 A2 Withdrawing from the engagement and the professional relationship is not a sub-
stitute for taking other actions that might be needed to achieve the professional
accountant’s objectives under this section. In some jurisdictions, however, there
might be limitations as to the further actions available to the professional account-
ant. In such circumstances, withdrawal might be the only available course of action.
R360.22 Where the professional accountant has withdrawn from the professional relation-
ship pursuant to paragraphs R360.20 and 360.21 A1, the professional accountant
shall, on request by the proposed accountant pursuant to paragraph R320.8, pro-
vide all relevant facts and other information concerning the identified or suspected
non-compliance to the proposed accountant. The predecessor accountant shall do
so, even in the circumstances addressed in paragraph R320.8(b) where the client
fails or refuses to grant the predecessor accountant permission to discuss the client’s
affairs with the proposed accountant, unless prohibited by law or regulation.
360.22 A1 The facts and other information to be provided are those that, in the predecessor
accountant’s opinion, the proposed accountant needs to be aware of before deciding
whether to accept the audit appointment. Section 320 addresses communications
from proposed accountants.
R360.23 If the proposed accountant is unable to communicate with the predecessor account-
ant, the proposed accountant shall take reasonable steps to obtain information
about the circumstances of the change of appointment by other means.
360.23 A1 Other means to obtain information about the circumstances of the change of
appointment include inquiries of third parties or background investigations of
management or those charged with governance.
360.24 A1 As assessment of the matter might involve complex analysis and judgements, the
professional accountant might consider:
• Consulting internally.
• Obtaining legal advice to understand the professional accountant’s options and
the professional or legal implications of taking any particular course of action.
• Consulting on a confidential basis with a regulatory or professional body.
Determining Whether to Disclose the Matter to an Appropriate Authority
360.25 A1 Disclosure of the matter to an appropriate authority would be precluded if doing
so would be contrary to law or regulation. Otherwise, the purpose of making dis-
closure is to enable an appropriate authority to cause the matter to be investigated
and action to be taken in the public interest.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 101

360.25 A2 The determination of whether to make such a disclosure depends in particular on

the nature and extent of the actual or potential harm that is or might be caused by
the matter to investors, creditors, employees or the general public. For example,
the registered auditor might determine that disclosure of the matter to an appropri-
ate authority is an appropriate course of action if:
• The entity is engaged in bribery (for example, of local or foreign government
officials for purposes of securing large contracts).
• The entity is regulated and the matter is of such significance as to threaten its
licence to operate.
• The entity is listed on a securities exchange and the matter might result in ad-
verse consequences to the fair and orderly market in the entity’s securities or
pose a systemic risk to the financial markets.
• It is likely that the entity would sell products that are harmful to public health
or safety.
• The entity is promoting a scheme to its clients to assist them in evading taxes.
360.25 A3 The determination of whether to make such a disclosure will also depend on
external factors such as:
• Whether there is an appropriate authority that is able to receive the infor-
mation, and cause the matter to be investigated and action to be taken. The
appropriate authority will depend on the nature of the matter. For example, the
appropriate authority would be a securities regulator in the case of fraudulent
financial reporting or an environmental protection agency in the case of a
breach of environmental laws and regulations.
• Whether there exists robust and credible protection from civil, criminal or pro-
fessional liability or retaliation afforded by legislation or regulation, such as
under whistle-blowing legislation or regulation.
• Whether there are actual or potential threats to the physical safety of the pro-
fessional accountant or other individuals.
R360.26 If the professional accountant determines that disclosure of the non-compliance or
suspected non-compliance to an appropriate authority is an appropriate course of
action in the circumstances, that disclosure is permitted pursuant to paragraph
R114.1(d) of the Code. When making such disclosure, the professional accountant
shall act in good faith and exercise caution when making statements and asser-
tions. The professional accountant shall also consider whether it is appropriate to
inform the client of the professional accountant intentions before disclosing the
matter.

Imminent Breach
R360.27 In exceptional circumstances, the professional accountant might become aware of
actual or intended conduct that the professional accountant has reason to believe
would constitute an imminent breach of a law or regulation that would cause sub-
stantial harm to investors, creditors, employees or the general public. Having first
considered whether it would be appropriate to discuss the matter with manage-
ment or those charged with governance of the entity, the professional accountant
shall exercise professional judgement and determine whether to disclose the
matter immediately to an appropriate authority in order to prevent or mitigate the
consequences of such imminent breach. If disclosure is made, that disclosure is
permitted pursuant to paragraph R114.1(d) of the Code.
ET – 102 SAICA Student Handbook 2023/2024

Documentations
R360.28 In relation to non-compliance or suspected non-compliance that falls within the
scope of this section, the professional accountant shall document:
• How management and, where applicable, those charged with governance have
responded to the matter.
• The courses of action the professional accountant considered, the judgements
made and the decisions that were taken, having regard to the reasonable and
informed third party test.
• How the professional accountant is satisfied that the professional accountant
has fulfilled the responsibility set out in paragraph R360.20.
360.28 A1 This documentation is in addition to complying with the documentation require-
ments under applicable auditing standards. ISAs, for example, require a profes-
sional accountant performing an audit of financial statements to:
• Prepare documentation sufficient to enable an understanding of significant
matters arising during the audit, the conclusions reached, and significant pro-
fessional judgements made in reaching those conclusions;
• Document discussions of significant matters with management, those charged
with governance, and others, including the nature of the significant matters dis-
cussed and when and with whom the discussions took place; and
• Document identified or suspected non-compliance, and the results of discussion
with management and, where applicable, those charged with governance and
other parties outside the entity.

Professional Services Other than Audits of Financial Statements

Obtaining an Understanding of the Matter and Addressing It with Management
and Those Charged with Governance
R360.29 If a professional accountant engaged to provide a professional service other than
an audit of financial statements becomes aware of information concerning non-
compliance or suspected non-compliance, the professional accountant shall seek to
obtain an understanding of the matter. This understanding shall include the nature
of the non-compliance or suspected non-compliance and the circumstances in
which it has occurred or might be about to occur.
360.29 A1 The professional accountant is expected to apply knowledge and expertise, and
exercise professional judgement. However, the professional accountant is not ex-
pected to have a level of understanding of laws and regulations beyond that which
is required for the professional service for which the professional accountant was
engaged. Whether an act constitutes actual non-compliance is ultimately a matter
to be determined by a court or other appropriate adjudicative body.
360.29 A2 Depending on the nature and significance of the matter, the professional account-
ant might consult on a confidential basis with others within the firm, a network
firm or the Institute, the Regulatory Board, or with legal counsel.
R360.30 If the professional accountant identifies or suspects that non-compliance has occur-
red or might occur, the professional accountant shall discuss the matter with the
appropriate level of management. If the professional accountant has access to those
charged with governance, the professional accountant shall also discuss the matter
with them where appropriate.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 103

360.30 A1 The purpose of the discussion is to clarify the professional accountant’s under-
standing of the facts and circumstances relevant to the matter and its potential con-
sequences. The discussion also might prompt management or those charged with
governance to investigate the matter.
360.30 A2 The appropriate level of management with whom to discuss the matter is a ques-
tion of professional judgement. Relevant factors to consider include:
• The nature and circumstances of the matter.
• The individuals actually or potentially involved.
• The likelihood of collusion.
• The potential consequences of the matter.
• Whether that level of management is able to investigate the matter and take
appropriate action.

Communicating the Matter to the Entity’s External Auditor

R360.31 If the professional accountant is performing a non-audit service for:
(a) An audit client of the firm; or
(b) A component of an audit client of the firm,
the professional accountant shall communicate the non-compliance or suspected
non-compliance within the firm, unless prohibited from doing so by law or regu-
lation. The communication shall be made in accordance with the firm’s protocols
or procedures. In the absence of such protocols and procedures, it shall be made
directly to the audit engagement partner.
R360.32 If the professional accountant is performing a non-audit service for:
(a) An audit client of a network firm; or
(b) A component of an audit client of a network firm,
the professional accountant shall consider whether to communicate the non-
compliance or suspected non-compliance to the network firm. Where the commu-
nication is made, it shall be made in accordance with the network’s protocols or
procedures. In the absence of such protocols and procedures, it shall be made dir-
ectly to the audit engagement partner.
R360.33 If the professional accountant is performing a non-audit service for a client that is
not:
(a) An audit client of the firm or a network firm; or
(b) A component of an audit client of the firm or a network firm,
the professional accountant shall consider whether to communicate the non-
compliance or suspected non-compliance to the firm that is the client’s external
auditor, if any.
Relevant Factors to Consider
360.34 A1 Factors relevant to considering the communication in accordance with paragraphs
R360.31 to R360.33 include:
• Whether doing so would be contrary to law or regulation.
• Whether there are restrictions about disclosure imposed by a regulatory agency
or prosecutor in an ongoing investigation into the non-compliance or suspected
non-compliance.
• Whether the purpose of the engagement is to investigate potential non-
compliance within the entity to enable it to take appropriate action.
ET – 104 SAICA Student Handbook 2023/2024

• Whether management or those charged with governance have already in-

formed the entity’s external auditor about the matter.
• The likely materiality of the matter to the audit of the client’s financial state-
ments or, where the matter relates to a component of a group, its likely materi-
ality to the audit of the group financial statements.
Purpose of Communication
360.35 A1 In the circumstances addressed in paragraphs R360.31 to R360.33, the purpose of
the communication is to enable the audit engagement partner to be informed about
the non-compliance or suspected non-compliance and to determine whether and, if
so, how to address it in accordance with the provisions of this section.

Considering Whether Further Action Is Needed

R360.36 The professional accountant shall also consider whether further action is needed in
the public interest.
360.36 A1 Whether further action is needed, and the nature and extent of it, will depend on
factors such as:
• The legal and regulatory framework.
• The appropriateness and timeliness of the response of management and, where
applicable, those charged with governance.
• The urgency of the situation.
• The involvement of management or those charged with governance in the
matter.
• The likelihood of substantial harm to the interests of the client, investors, cred-
itors, employees or the general public.
360.36 A2 Further action by the professional accountant might include:
• Disclosing the matter to an appropriate authority even when there is no legal or
regulatory requirement to do so.
• Withdrawing from the engagement and the professional relationship where
permitted by law or regulation.
360.36 A3 In considering whether to disclose to an appropriate authority, relevant factors to
take into account include:
• Whether doing so would be contrary to law or regulation.
• Whether there are restrictions about disclosure imposed by a regulatory agency
or prosecutor in an ongoing investigation into the non-compliance or suspected
non-compliance.
• Whether the purpose of the engagement is to investigate potential non-
compliance within the entity to enable it to take appropriate action.
R360.37 If the professional accountant determines that disclosure of the non-compliance or
suspected non-compliance to an appropriate authority is an appropriate course of
action in the circumstances, that disclosure is permitted pursuant to paragraph
R114.1(d) of the Code. When making such disclosure, the professional accountant
shall act in good faith and exercise caution when making statements and asser-
tions. The professional accountant shall also consider whether it is appropriate to
inform the client of the professional accountant’s intentions before disclosing the
matter.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 105

Imminent Breach
R360.38 In exceptional circumstances, the professional accountant might become aware of
actual or intended conduct that the professional accountant has reason to believe
would constitute an imminent breach of a law or regulation that would cause sub-
stantial harm to investors, creditors, employees or the general public. Having first
considered whether it would be appropriate to discuss the matter with manage-
ment or those charged with governance of the entity, the professional accountant
shall exercise professional judgement and determine whether to disclose the mat-
ter immediately to an appropriate authority in order to prevent or mitigate the con-
sequences of such imminent breach of law or regulation. If disclosure is made, that
disclosure is permitted pursuant to paragraph R114.1(d) of the Code.

Seeking Advice
360.39 A1 The professional accountant might consider:
• Consulting internally.
• Obtaining legal advice to understand the professional or legal implications of
taking any particular course of action.
• Consulting on a confidential basis with a regulatory or professional body.

Documentation
360.40 A1 In relation to non-compliance or suspected non-compliance that falls within the
scope of this section, the registered auditor is encouraged to document:
• The matter.
• The results of discussion with management and, where applicable, those
charged with governance and other parties.
• How management and, where applicable, those charged with governance have
responded to the matter.
• The courses of action the registered auditor considered, the judgements made
and the decisions that were taken.
• The courses of action the registered auditor considered, the judgements made
and the decisions that were taken.
• How the registered auditor is satisfied that the registered auditor has fulfilled
the responsibility set out in paragraph R360.36
ET – 106 SAICA Student Handbook 2023/2024

Page
PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW ENGAGEMENTS ....... 106
Section 400 Applying the Conceptual Framework to Independence for Audit and
Review Engagements ..................................................................................... 106
Section 405 Group Audits .................................................................................................. 120
Section 410 Fees ................................................................................................................. 127
Section 411 Compensation and Evaluation Policies .......................................................... 137
Section 420 Gifts and Hospitality ....................................................................................... 137
Section 430 Actual or Threatened Litigation ..................................................................... 138
Section 510 Financial Interests ........................................................................................... 139
Section 511 Loans and Guarantees ..................................................................................... 142
Section 520 Business Relationships ................................................................................... 143
Section 521 Family and Personal Relationships................................................................. 145
Section 522 Recent Service with an Audit Client .............................................................. 147
Section 523 Serving as a Director or Officer of an Audit Client ....................................... 148
Section 524 Employment with an Audit Client .................................................................. 149
Section 525 Temporary Personnel Assignments ................................................................ 151
Section 540 Long Association of Personnel (Including Partner Rotation)
with an Audit Client ....................................................................................... 152
Section 600 Provision of Non-Assurance Services to an Audit Client .............................. 157
Subsection 601 – Accounting and Bookkeeping Services .............................................. 164
Subsection 602 – Administrative Services ...................................................................... 167
Subsection 603 – Valuation Services .............................................................................. 167
Subsection 604 – Tax Services ........................................................................................ 169
Subsection 605 – Internal Audit Services........................................................................ 175
Subsection 606 – Information Technology Systems Services ........................................ 178
Subsection 607 – Litigation Support Services ................................................................. 180
Subsection 608 – Legal Services ..................................................................................... 182
Subsection 609 – Recruiting Services ............................................................................. 184
Subsection 610 – Corporate Finance Services ................................................................ 186
Section 800 Reports on Special Purpose Financial Statements That Include a
Restriction on Use and Distribution (Audit and Review Engagements) ........ 187

INDEPENDENCE STANDARDS
(PARTS 4A and 4B)

PART 4A – INDEPENDENCE FOR AUDIT AND REVIEW

ENGAGEMENTS

Section 400
Applying the Conceptual Framework to Independence for Audit and
Review Engagements
Introduction
General
400.1 It is in the public interest and required by the Code that professional accountants in
public practice be independent when performing audit or review engagements.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 107

400.2 This Part applies to both audit and review engagements unless otherwise stated. The
terms “audit,” “audit team,” “audit engagement,” “audit client,” and “audit report”
apply equally to review, review team, review engagement, review client, and review
engagement report.
400.3 In this Part, the term “professional accountant” refers to individual professional
accountants in public practice and their firms.
400.4 ISQM 1 requires a firm to design, implement and operate a system of quality manage-
ment for audits or reviews of financial statements performed by the firm. As part of
this system of quality management, ISQM 1 requires the firm to establish quality
objectives that address the fulfilment of responsibilities in accordance with relevant
ethical requirements, including those related to independence. Under ISQM 1, rele-
vant ethical requirements are those related to the firm, its personnel and, when applic-
able, others subject to the independence requirements to which the firm and the firm’s
engagements are subject. ISAs and ISREs establish responsibilities for engagement
partners and engagement teams at the level of the engagement for audits and reviews,
respectively. The allocation of responsibilities within a firm will depend on its size,
structure and organisation. Many of the provisions of this Part do not prescribe the
specific responsibility of individuals within the firm for actions related to independ-
ence, instead referring to “firm” for ease of reference. A firm assigns operational
responsibility for compliance with independence requirements to an individual(s) in
accordance with ISQM 1. In addition, an individual professional accountant remains
responsible for compliance with any provisions that apply to that professional account-
ant’s activities, interests or relationships.
400.5 Independence is linked to the 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
judgement, thereby allowing an individual to act with integrity, and exercise
objectivity and professional scepticism.
(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 firm’s, or an audit team member’s, integrity, objectivity or pro-
fessional scepticism has been compromised.
In this Part, references to an individual or firm being “independent” mean that the
individual or firm has complied with the provisions of this Part.
400.6 When performing audit engagements, the Code requires firms to comply with the fun-
damental principles and be independent. This Part sets out specific requirements and
application material on how to apply the conceptual framework to maintain independ-
ence when performing such engagements. The conceptual framework set out in Sec-
tion 120 applies to independence as it does to the fundamental principles set out
in Section 110. Section 405 sets out specific requirements and application material
applicable in a group audit.
400.7 This Part describes:
(a) Facts and circumstances, including professional activities, interests and relation-
ships, 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 safe-
guards to reduce them to an acceptable level.
ET – 108 SAICA Student Handbook 2023/2024

Engagement Team and Audit Team

400.8 This Part applies to all audit team members, including engagement team members.
400.9 An engagement team for an audit engagement includes all partners and staff in the
firm who perform audit work on the engagement, and any other individuals who
perform audit procedures who are from:
(a) A network firm; or
(b) A firm that is not a network firm, or another service provider.
For example, an individual from a component auditor firm who performs audit pro-
cedures on the financial information of a component for purposes of a group audit
is a member of the engagement team for the group audit.
400.10 In ISQM 1, a service provider includes an individual or organization external to the
firm that provides a resource that is used in the performance of engagements. Ser-
vice providers exclude the firm, a network firm or other structures or organizations
in the network.
400.11 An audit engagement might involve experts within, or engaged by, the firm, a net-
work firm, or a component auditor firm outside a group auditor firm’s network,
who assist in the engagement. Depending on the role of the individuals, they might
be engagement team or audit team members. For example:
• Individuals with expertise in a specialized area of accounting or auditing who
perform audit procedures are engagement team members. These include, for
example, individuals with expertise in accounting for income taxes or in analys-
ing complex information produced by automated tools and techniques for the
purpose of identifying unusual or unexpected relationships.
• Individuals within, or engaged by, the firm who have direct influence over the
outcome of the audit engagement through consultation regarding technical or
industry-specific issues, transactions or events for the engagement are audit
team members but not engagement team members.
However, individuals who are external experts are neither engagement team nor
audit team members.
400.12 If the audit engagement is subject to an engagement quality review, the engage-
ment quality reviewer and any other individuals performing the engagement qual-
ity review are audit team members but not engagement team members.
Public Interest Entities
400.13 Some of the requirements and application material set out in this Part reflect the
extent of public interest in certain entities which are defined to be public interest
entities.
Part of 400.13 has been elevated to a South African requirement
R400.13a SA Firms shall determine whether 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 institu-
tions, such as banks and insurance companies, and pension funds.
• Number of equity or debt holders.
• Size.
• Number of employees.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 109

R400.13b SA A professional accountant shall regard the following entities as generally satisfy-
ing the conditions in paragraph R400.8a SA as having a large number and wide
range of stakeholders, and thus are likely to be considered as Public Interest En-
tities:
• Major Public Entities that directly or indirectly provide essential or strategic
services or hold strategic assets for the benefit of the country.
• Banks as defined in the Banks Act 1990, (Act 94 of 1990) and Mutual Banks as
defined in the Mutual Bank Act 1993, (Act 124 of 1993).
• Market infrastructure as defined in the Financial Markets Act 2012, (Act 19 of
2012)8.
• Insurers registered under the Long-term Insurance Act 1998, (Act 52 of 1998)
and the Short-term Insurance Act 1998, (Act 53 of 1998) excluding micro
lenders.
• Collective Investment Schemes, including hedge funds, in terms of the Collect-
ive Investment Schemes Control Act, 2002 (Act 45 of 2002) that hold assets in
excess of R15 billion.
• Funds as defined in the Pension Funds Act 1956, (Act 24 of 1956) that hold or
are otherwise responsible for safeguarding client assets in excess of R10 bil-
lion.
• Pension Fund Administrators (in terms of Section 13B of the Pension Funds
Act 1956, (Act 24 of 1956)) with total assets under administration in excess of
R20 billion.
• Financial Services Providers as defined in the Financial Advisory and Inter-
mediary Services Act 2002, (Act 37 of 2002) with assets under management in
excess of R50 billion.
• Medical Schemes as defined in the Medical Schemes Act, 1998 (Act 131 of
1998) that are open to the public (commonly referred to as “open medical
schemes”) or are restricted schemes with a large number of members.
• Authorised users of an exchange as defined in the Financial Markets Act, 2012
(Act 19 of 2012) who hold or are otherwise responsible for safeguarding client
assets in excess of R10 billion.
• Other issuers of debt and equity instruments to the public.9
R400.13c SA If a firm considers an audit client that falls under one or more of the above cat-
egories not to be a public interest entity, the firm shall document its reasoning and
its consideration of paragraph R400.13b SA.
Reports that Include a Restriction on Use and Distribution
400.14 An audit report might include a restriction on use and distribution. If it does and
the conditions set out in Section 800 are met, then the independence requirements
in this Part may be modified as provided in Section 800.
________________________

8 Market Infrastructure is defined in the Financial Markets Act, 2012 (Act No. 19 of 2012) as:
(a) A licensed central securities depository;
(b) A licensed clearing house;
(c) A licensed exchange; and
(d) A licensed trade repository.
9 For the purposes of this section, “the public” shall mean the public in general or large sectors of the public, such
as participants in Broad-Based Black Economic Empowerment schemes or participants in offers to large industry
sectors that result in the debt or equity instruments being owned by a large number and wide range of stakeholders.
ET – 110 SAICA Student Handbook 2023/2024

Assurance Engagements other than Audit and Review Engagements

400.15 Independence standards for assurance engagements that are not audit or review
engagements are set out in Part 4B – Independence for Assurance Engagements
Other than Audit and Review Engagements.

Requirements and Application Material

General
R400.16 A firm performing an audit engagement shall be independent.
R400.17 A firm shall apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to independence in relation to an audit engagement.

Prohibition on Assuming Management Responsibilities

R400.18 A firm or a network firm shall not assume a management responsibility for an
audit client.
400.18 A1 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.
400.18 A2 When a firm or a network firm assumes a management responsibility for an audit
client, self-review, self-interest and familiarity threats are created. Assuming a
management responsibility might also create an advocacy threat because the firm
or network firm becomes too closely aligned with the views and interests of
management.
400.18 A3 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.
• Directing and taking responsibility for the actions of employees in relation to
the employees ‘work for the entity.
• Authorising transactions.
• Controlling or managing bank accounts or investments.
• Deciding which recommendations of the firm or network firm or other third
parties to implement.
• Reporting to those charged with governance on behalf of management.
• Taking responsibility for:
o The preparation and fair presentation of the financial statements in accord-
ance with the applicable financial reporting framework.
o Designing, implementing, monitoring or maintaining internal control.
400.18 A4 Subject to compliance with paragraph R400.14, providing advice and recommen-
dations to assist the management of an audit client in discharging its responsibili-
ties is not assuming a management responsibility. The provision of advice and rec-
ommendations to an audit client might create a self-review threat and is addressed
in Section 600.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 111

R400.19 When performing a professional activity for an audit client, the firm shall be satis-
fied that client management makes all judgments and decisions that are the proper
responsibility of management. This includes ensuring that the client’s manage-
ment:
(a) Designates an individual who possesses suitable skill, knowledge and ex-
perience to be responsible at all times for the client’s decisions and to over-
see the activities. Such an individual, preferably within senior management,
would understand:
(i) The objectives, nature and results of the activities; and
(ii) The respective client and firm or network firm responsibilities.
However, the individual is not required to possess the expertise to perform
or re-perform the activities.
(b) Provides oversight of the activities and evaluates the adequacy of the results
of the activities performed for the client’s purpose.
(c) Accepts responsibility for the actions, if any, to be taken arising from the
results of the activities.

Related Entities
R400.20 As defined, an audit client that is a listed entity includes all of its related entities.
For all other entities, references to an audit client in this Part include related en-
tities over which the client has direct or indirect control. When the audit team
knows, or has reason to believe, that a relationship or circumstance involving any
other related entity of the client is relevant to the evaluation of the firm’s in-
dependence from the client, the audit team shall include that related entity when
identifying, evaluating and addressing threats to independence.
[Paragraphs 400.21 to 400.29 are intentionally left blank]

Period During which Independence is Required

R400.30 Independence, as required by this Part, shall be maintained during both:
(a) The engagement period; and
(b) The period covered by the financial statements.
400.30 A1 The engagement period starts when the engagement team begins to perform the
audit. The engagement period ends when the audit report is issued. When the en-
gagement 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.
R400.31 If an entity becomes an audit client during or after the period covered by the finan-
cial statements on which the firm will express an opinion, the firm shall determine
whether any threats to independence are created by:
(a) Financial or business relationships with the audit client during or after the
period covered by the financial statements but before accepting the audit en-
gagement; or
(b) Previous services provided to the audit client by the firm or a network firm.
400.31 A1 Threats to independence are created if a non-assurance service was provided to an
audit client during, or after the period covered by the financial statements, but
before the engagement team begins to perform the audit, and the service would not
be permitted during the engagement period.
ET – 112 SAICA Student Handbook 2023/2024

400.31 A2 A factor to be considered in such circumstances is whether the results of the ser-
vice provided might form part of or affect the accounting records, the internal con-
trols over financial reporting, or the financial statements on which the firm will
express an opinion
400.31 A3 Examples of actions that might be safeguards to address such threats to independ-
ence include:
• Not assigning professionals who performed the non-assurance service be mem-
bers of the engagement team.
• Having an appropriate reviewer review the audit work and non-assurance ser-
vice 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.
400.31 A4 A threat to independence created by the provision of a non-assurance service by a
firm or a network firm prior to the audit engagement period or prior to the period
covered by the financial statements on which the firm will express an opinion is
eliminated or reduced to an acceptable level if the results of such service have
been used or implemented in a period audited by another firm.

Audit Clients that are Public Interest Entities

R400.32 A firm shall not accept appointment as auditor of a public interest entity to which
the firm or the network firm has provided a non-assurance service prior to such
appointment that might create a self-review threat in relation to the financial state-
ments on which the firm will express an opinion unless:
(a) The provision of such service ceases before the commencement of the audit
engagement period;
(b) The firm takes action to address any threats to its independence; and
(c) The firm determines that, in the view of a reasonable and informed third
party, any threats to the firm’s independence have been or will be eliminated
or reduced to an acceptable level.
400.32 A1 Actions that might be regarded by a reasonable and informed third party as elimin-
ating or reducing to an acceptable level any threats to independence created by the
provision of non-assurance services to a public interest entity prior to appointment
as auditor of that entity include:
• The results of the service had been subject to auditing procedures in the course
of the audit of the prior year’s financial statements by a predecessor firm.
• The firm engages a professional accountant, who is not a member of the firm
expressing the opinion on the financial statements, to perform a review of the
first audit engagement affected by the self-review threat consistent with the
objective of an engagement quality review.
• The public interest entity engages another firm outside of the network to:
(i) Evaluate the results of the non-assurance service; or
(ii) Re-perform the service,
to the extent necessary to enable the other firm to take responsibility for the re-
sult of the service.
[Paragraphs 400.33 to 400.39 are intentionally left blank]
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 113

Communication with those Charged with Governance

400.40 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to communi-
cating with those charged with governance.
400.40 A2 Even when not required by the Code, applicable professional standards, laws or
regulations, regular communication is encouraged between a firm and those
charged with governance of the client regarding relationships and other matters
that might, in the firm’s opinion, reasonably bear on independence. Such commu-
nication enables those charged with governance to:
(a) Consider the firm’s judgements 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.
[Paragraphs 400.41 to 400.49 are intentionally left blank]

Network Firms
400.50 A1 Firms frequently form larger structures with other firms and entities to enhance
their ability to provide professional services. Whether these larger structures cre-
ate a network depends on the particular facts and circumstances. It does not
depend on whether the firms and entities are legally separate and distinct.
R400.51 A network firm shall be independent of the audit clients of the other firms within
the network as required by this Part.
400.51 A1 The independence requirements in this Part that apply to a network firm apply to
any entity that meets the definition of a network firm. It is not necessary for the
entity also to meet the definition of a firm. For example, a consulting practice or
professional law practice might be a network firm but not a firm.
R400.52 When associated with a larger structure of other firms and entities, a firm shall:
(a) Exercise professional judgement to determine whether a network is created
by such a larger structure;
(b) Consider whether a reasonable and informed third party would be likely to
conclude that the other firms and entities in the larger structure are associ-
ated in such a way that a network exists; and
(c) Apply such judgement consistently throughout such a larger structure.
R400.53 When determining whether a network is created by a larger structure of firms and
other entities, a firm shall conclude that a network exists when such a larger struc-
ture is aimed at co-operation and:
(a) It is clearly aimed at profit or cost sharing among the entities within the
structure. (Ref: Para. 400.53 A2);
(b) The entities within the structure share common ownership, control or man-
agement. (Ref: Para. 400.53 A3);
(c) The entities within the structure share common quality management policies
and procedures. (Ref: Para. 400.53 A4);
(d) The entities within the structure share a common business strategy. (Ref:
Para. 400.53 A5);
ET – 114 SAICA Student Handbook 2023/2024

(e) The entities within the structure share the use of a common brand name.
(Ref: Para. 400.53 A6, 400.53 A7); or
(f) The entities within the structure share a significant part of professional
resources. (Ref: Para 400.53 A8, 400.53 A9).
400.53 A1 There might be other arrangements between firms and entities within a larger
structure that constitute a network, in addition to those arrangements described in
paragraph R400.53. However, a larger structure might be aimed only at facilitating
the referral of work, which in itself does not meet the criteria necessary to consti-
tute a network.
400.53 A2 The sharing of immaterial costs does not in itself create a network. In addition, if
the sharing of costs is limited only to those costs related to the development of
audit methodologies, manuals or training courses, this would not in itself create a
network. Further, an association between a firm and an otherwise unrelated entity
jointly to provide a service or develop a product does not in itself create a net-
work. (Ref: Para. R400.53(a)).
400.53 A3 Common ownership, control or management might be achieved by contract or
other means. (Ref: Para. R400.53(b)).
400.53 A4 Common quality management policies and procedures are those designed, imple-
mented and operated across the larger structure. (Ref: Para. R400.53(c)).
400.53 A5 Sharing a common business strategy involves an agreement by the entities to
achieve common strategic objectives. An entity is not a network firm merely
because it co-operates with another entity solely to respond jointly to a request for
a proposal for the provision of a professional service. (Ref: Para. R400.53(d)).
400.53 A6 A common brand name includes common initials or a common name. A firm is
using a common brand name if it includes, for example, the common brand name
as part of, or along with, its firm name when a partner of the firm signs an audit
report. (Ref: Para. R400.53(e)).
400.53 A7 Even if a firm does not belong to a network and does not use a common brand
name as part of its firm name, it might appear to belong to a network if its station-
ery or promotional materials refer to the firm being a member of an association of
firms. Accordingly, if care is not taken in how a firm describes such membership,
a perception might be created that the firm belongs to a network. (Ref:
Para. R400.53(e)).
400.53 A8 Professional resources include:
• Common systems that enable firms to exchange information such as client
data, billing and time records.
• Partners and other personnel.
• Technical departments that consult on technical or industry specific issues,
transactions or events for assurance engagements.
• Audit methodology or audit manuals.
• Training courses and facilities. (Ref: Para. R400.53(f)).
400.53 A9 Whether the shared professional resources are significant depends on the circum-
stances. For example:
• The shared resources might be limited to common audit methodology or audit
manuals, with no exchange of personnel or client or market information. In
such circumstances, it is unlikely that the shared resources would be signifi-
cant. The same applies to a common training endeavour.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 115

•
The shared resources might involve the exchange of personnel or information,
such as where personnel are drawn from a shared pool, or where a common
technical department is created within the larger structure to provide partici-
pating firms with technical advice that the firms are required to follow. In such
circumstances, a reasonable and informed third party is more likely to con-
clude that the shared resources are significant. (Ref: Para. R400.53(f)).
R400.54 If a firm or a network sells a component of its practice, and the component contin-
ues to use all or part of the firm’s or network’s name for a limited time, the rele-
vant entities shall determine how to disclose that they are not network firms when
presenting themselves to outside parties.
400.54 A1 The agreement for the sale of a component of a practice might provide that, for a
limited period of time, the sold component can continue to use all or part of the
name of the firm or the network, even though it is no longer connected to the firm
or the network. In such circumstances, while the two entities might be practicing
under a common name, the facts are such that they do not belong to a larger struc-
ture aimed at cooperation. The two entities are therefore not network firms.
[Paragraphs 400.55 to 400.59 are intentionally left blank]

General Documentation of Independence for Audit and Review Engagements

R400.60 A firm shall document conclusions regarding compliance with this Part, and the
substance of any relevant discussions that support those conclusions. In particular:
(a) When safeguards are applied to address a threat, the firm shall document the
nature of the threat and the safeguards in place or applied; and
(b) When a threat required significant analysis and the firm concluded that the
threat was already at an acceptable level, the firm shall document the nature
of the threat and the rationale for the conclusion.
400.60 A1 Documentation provides evidence of the firm’s judgements in forming conclu-
sions regarding compliance with this Part. However, a lack of documentation does
not determine whether a firm considered a particular matter or whether the firm is
independent.
[Paragraphs 400.61 to 400.69 are intentionally left blank]

Mergers and Acquisitions

When a Client Merger Creates a Threat
400.70 A1 An entity might become a related entity of an audit client because of a merger or
acquisition. A threat to independence and, therefore, to the ability of a firm to con-
tinue an audit engagement might be created by previous or current interests or
relationships between a firm or network firm and such a related entity.
R400.71 In the circumstances set out in paragraph 400.70 A1,
(a) The firm shall identify and evaluate previous and current interests and re-
lationships with the related entity that, taking into account any actions taken
to address the threat, might affect its independence and therefore its ability
to continue the audit engagement after the effective date of the merger or
acquisition; and
(b) Subject to paragraph R400.72, the firm shall take steps to end any interests
or relationships that are not permitted by the Code by the effective date of
the merger or acquisition.
ET – 116 SAICA Student Handbook 2023/2024

R400.72 As an exception to paragraph R400.71(b), if the interest or relationship cannot

reasonably be ended by the effective date of the merger or acquisition, the firm
shall:
(a) Evaluate the threat that is created by the interest or relationship; and
(b) Discuss with those charged with governance the reasons why the interest or
relationship cannot reasonably be ended by the effective date and the evalu-
ation of the level of the threat.
400.72 A1 In some circumstances, it might not be reasonably possible to end an interest or
relationship creating a threat by the effective date of the merger or acquisition.
This might be because the firm provides a non-assurance service to the related en-
tity, which the entity is not able to transition in an orderly manner to another pro-
vider by that date.
400.72 A2 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 related entity relationship (for example,
whether the related entity is a subsidiary or parent).
• The length of time until the interest or relationship can reasonably be ended.
R400.73 If, following the discussion set out in paragraph R400.72(b), those charged with
governance request the firm to continue as the auditor, the 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 individual who has such an interest or relationship, including one that
has arisen through performing a non-assurance service that would not be
permitted by Section 600 and its subsections, will not be a member of the
engagement team for the audit or the individual responsible for the engage-
ment quality review; and
(c) Transitional measures will be applied, as necessary, and discussed with those
charged with governance.
400.73 A1 Examples of such transitional measures include:
• Having a professional accountant review the audit or non-assurance work as
appropriate.
• Having a professional accountant, who is not a member of the firm expressing
the opinion on the financial statements, perform a review that is consistent
with the objective of an engagement quality 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 neces-
sary to enable the other firm to take responsibility for the service.
R400.74 The 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
those charged with governance request the firm to complete the audit while con-
tinuing with an interest or relationship identified in paragraph 400.70 A1, the firm
shall only do so if it:
(a) Has evaluated the level of the threat and discussed the results with those
charged with governance;
(b) Complies with the requirements of paragraph R400.73(a) to (c); and
(c) Ceases to be the auditor no later than the date that the audit report is issued.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 117

If Objectivity Remains Compromised

R400.75 Even if all the requirements of paragraphs R400.71 to R400.74 could be met, the
firm shall determine whether the circumstances identified in paragraph 400.70 A1
create a threat that cannot be addressed such that objectivity would be comprom-
ised. If so, the firm shall cease to be the auditor.

Documentation
R400.76 The firm shall document:
(a) Any interests or relationships identified in paragraph 400.70 A1 that will not
be ended by the effective date of the merger or acquisition and the reasons
why they will not be ended;
(b) The transitional measures applied;
(c) The results of the discussion with those 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.
[Paragraphs 400.77 to 400.79 are intentionally left blank.]

Breach of an Independence Provision for Audit and Review Engagements

When a Firm Identifies a Breach
R400.80 If a firm concludes that a breach of a requirement in this Part has occurred, the
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
(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 in accordance with its policies and proce-
dures to:
(i) The engagement partner;
(ii) The individual with operational responsibility for compliance with
independence requirements;
(iii) Other relevant personnel in the firm and, where appropriate, the net-
work; and
(iv) Those subject to the independence requirements in Part 4A who need
to take appropriate action;
(d) Evaluate the significance of the breach and its impact on the firm’s objectiv-
ity and ability to issue an audit report; and
(e) Depending on 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.
ET – 118 SAICA Student Handbook 2023/2024

In making this determination, the firm shall exercise professional judgement and
take into account whether a reasonable and informed third party would be likely to
conclude that the firm’s objectivity would be compromised, and therefore, the
firm would be unable to issue an audit report.
400.80 A1 A breach of a provision of this Part might occur despite the firm having a system
of quality management designed to address independence requirements. It might
be necessary to end the audit engagement because of the breach.
400.80 A2 The significance and impact of a breach on the firm’s objectivity and ability to
issue an audit report will depend on factors such as:
• The nature and duration of the breach.
• 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 statements on which the firm will express an opinion.
• The extent of the self-interest, advocacy, intimidation or other threats created
by the breach.
400.80 A3 Depending upon the significance of the breach, examples of actions that the 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 audit client 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 rec-
ords 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.
R400.81 If the firm determines that action cannot be taken to address the consequences of
the breach satisfactorily, the firm shall inform those charged with governance as
soon as possible and take the steps necessary to end the audit engagement in com-
pliance with any applicable legal or regulatory requirements. Where ending the
engagement is not permitted by laws or regulations, the firm shall comply with
any reporting or disclosure requirements.
R400.82 If the firm determines that action can be taken to address the consequences of the
breach satisfactorily, the firm shall discuss with those 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 firm to issue an audit report;
(d) The conclusion that, in the firm’s professional judgement, objectivity has not
been compromised and the rationale for that conclusion; and
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 119

(e) Any steps proposed or taken by the firm to reduce or avoid the risk of further
breaches occurring.
Such discussion shall take place as soon as possible unless an alternative timing is
specified by those charged with governance for reporting less significant breaches.

Communication of Breaches to Those Charged with Governance

400.83 A1 Paragraphs R300.9 and R300.10 set out requirements with respect to communi-
cating with those charged with governance.
R400.84 With respect to breaches, the firm shall communicate in writing to those charged
with governance:
(a) All matters discussed in accordance with paragraph R400.82 and obtain the
concurrence of those 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 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 firm has taken, or proposes to take, to reduce or
avoid the risk of further breaches occurring.
R400.85 If those charged with governance do not concur that the action proposed by the
firm in accordance with paragraph R400.80(e)(ii) satisfactorily addresses the con-
sequences of the breach, the firm shall take the steps necessary to end the audit
engagement in accordance with paragraph R400.81.

Breaches Before the Previous Audit Report Was Issued

R400.86 If the breach occurred prior to the issuance of the previous audit report, the firm
shall comply with the provisions of Part 4A in evaluating the significance of the
breach and its impact on the firm’s objectivity and its ability to issue an audit re-
port in the current period.
R400.87 The firm shall also:
(a) Consider the impact of the breach, if any, on the 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 those charged with governance.

Documentation
R400.88 In complying with the requirements in paragraphs R400.80 to R400.87, the firm
shall document:
(a) The breach;
(b) The actions taken;
(c) The key decisions made;
(d) All the matters discussed with those charged with governance; and
(e) Any discussions with a professional or regulatory body or oversight authority.
R400.89 If the firm continues with the audit engagement, it shall document:
(a) The conclusion that, in the firm’s professional judgement, objectivity has not
been compromised; and
(b) The rationale for why the action taken satisfactorily addressed the conse-
quences of the breach so that the firm could issue an audit report.
ET – 120 SAICA Student Handbook 2023/2024

Section 405
Group Audits
Introduction
405.1 Section 400 requires a firm to be independent when performing an audit engage-
ment, and to apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to independence. This section sets out specific require-
ments and application material relevant to applying the conceptual framework
when performing a group audit engagement.

Requirements and Application Material

General
405.2 A1 ISAs apply to an audit of group financial statements. ISA 600 (Revised) deals with
special considerations that apply to an audit of group financial statements, includ-
ing when component auditors are involved. ISA 600 (Revised) requires the group
engagement partner to take responsibility for confirming whether the component
auditors understand and will comply with the relevant ethical requirements, in-
cluding those related to independence, that apply to the group audit. The inde-
pendence requirements referred to in ISA 600 (Revised), or other relevant auditing
standards applicable to group audits that are equivalent to ISA 600 (Revised), are
those specified in this section.
405.2 A2 A component auditor firm that participates in a group audit engagement might
separately issue an audit opinion on the financial statements of the component
audit client. Depending on the circumstances, the component auditor firm might
need to comply with different independence requirements when performing audit
work for a group audit and separately issuing an audit opinion on the financial
statements of the component audit client for statutory, regulatory or other reasons.
Communication Between a Group Auditor Firm and a Component Auditor Firm
R405.3 ISA 600 (Revised) requires the group engagement partner to take responsibility to
make a component auditor aware of the relevant ethical requirements that are
applicable given the nature and the circumstances of the group audit engagement.
When making the component auditor firm aware of the relevant ethical require-
ments, the group auditor firm shall communicate at appropriate times the neces-
sary information to enable the component auditor firm to meet its responsibilities
under this section.
405.3 A1 Examples of matters the group auditor firm might communicate include:
• Whether the group audit client is a public interest entity and the relevant ethical
requirements applicable to the group audit engagement.
• The related entities and other components within the group audit client that are
relevant to the independence considerations applicable to the component auditor
firm and the group audit team members within, or engaged by, that firm.
• The period during which the component auditor firm is required to be inde-
pendent.
• Whether an audit partner who performs work at the component for purposes of
the group audit is a key audit partner for the group audit.
R405.4 ISA 600 (Revised) also requires the group engagement partner to request the com-
ponent auditor to communicate whether the component auditor has complied with
the relevant ethical requirements, including those related to independence, that
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 121

apply to the group audit engagement. For the purposes of this section, such a
request shall include the communication of:
(a) Any independence matters that require significant judgment; and
(b) In relation to those matters, the component auditor firm’s conclusion wheth-
er the threats to its independence are at an acceptable level, and the rationale
for that conclusion.
405.4 A1 If a matter comes to the attention of the group engagement partner that indicates
that a threat to independence exists, ISA 220 (Revised) requires the group en-
gagement partner to evaluate the threat and take appropriate action.
Independence Considerations Applicable to Individuals
Members of the Group Audit Team Within, or Engaged by, a Group Auditor Firm and Its
Network Firms
R405.5 Members of the group audit team within, or engaged by, the group auditor firm
and its network firms shall be independent of the group audit client in accordance
with the requirements of this Part that are applicable to the audit team.
Other Members of the Group Audit Team
R405.6 Members of the group audit team within, or engaged by, a component auditor firm
outside the group auditor firm’s network shall be independent of:
(a) The component audit client;
(b) The entity on whose group financial statements the group auditor firm
expresses an opinion; and
(c) Any entity over which the entity in subparagraph (b) has direct or indirect
control, provided that such entity has direct or indirect control over the com-
ponent audit client,
in accordance with the requirements of this Part that are applicable to the audit
team.
R405.7 In relation to related entities or components within the group audit client other
than those covered in paragraph R405.6, a member of the group audit team within,
or engaged by, a component auditor firm outside the group auditor firm’s network
shall notify the component auditor firm about any relationship or circumstance the
individual knows, or has reason to believe, might create a threat to the individual’s
independence in the context of the group audit.
405.7 A1 Examples of relationships or circumstances involving the individual or any of the
individual’s immediate family members, as applicable, that are relevant to the in-
dividual’s consideration when complying with paragraph R405.7 include:
• A direct or material indirect financial interest in an entity that has control over
the group audit client if the group audit client is material to that entity (see
Section 510).
• A loan or guarantee involving: (see Section 511)
o An entity that is not a bank or similar institution unless the loan or guaran-
tee is immaterial; or
o A bank or similar institution unless the loan or guarantee is made under
normal lending procedures, terms and conditions.
• A business relationship that is significant or involves a material financial in-
terest (see Section 520).
ET – 122 SAICA Student Handbook 2023/2024

• An immediate family member who is: (see Section 521)

o A director or officer of an entity; or
o An employee in a position to exert significant influence over the preparation
of an entity’s accounting records or financial statements.
• The individual serving as, or having recently served as: (see Section 522 and
Section 523)
o A director or officer of an entity; or
o An employee in a position to exert significant influence over the preparation
of an entity’s accounting records or financial statements.
R405.8 Upon receiving the notification as set out in paragraph R405.7, the component
auditor firm shall evaluate and address any threats to independence created by the
individual’s relationship or circumstance.
Independence Considerations Applicable to a Group Auditor Firm
R405.9 A group auditor firm shall be independent of the group audit client in accordance
with the requirements of this Part that are applicable to a firm.
Independence Considerations Applicable to Network Firms of a Group Auditor Firm
R405.10 A network firm of the group auditor firm shall be independent of the group audit
client in accordance with the requirements of this Part that are applicable to a net-
work firm.
Independence Considerations Applicable to Component Auditor Firms outside a Group
Auditor
Firm’s Network
All Group Audit Clients
R405.11 A component auditor firm outside the group auditor firm’s network shall:
(a) Be independent of the component audit client in accordance with the require-
ments set out in this Part that are applicable to a firm with respect to all audit
clients;
(b) Apply the relevant requirements in paragraphs R510.4(a), R510.7 and
R510.9 with respect to financial interests in the entity on whose group finan-
cial statements the group auditor firm expresses an opinion; and
(c) Apply the relevant requirements in Section 511 with respect to loans and
guarantees involving the entity on whose group financial statements the
group auditor firm expresses an opinion.
R405.12 When a component auditor firm outside the group auditor firm’s network knows,
or has reason to believe, that a relationship or circumstance involving the group
audit client, beyond those addressed in paragraph R405.11(b) and (c), is relevant
to the evaluation of the component auditor firm’s independence from the compo-
nent audit client, the component auditor firm shall include that relationship or cir-
cumstance when identifying, evaluating and addressing threats to independence.
R405.13 When a component auditor firm outside the group auditor firm’s network knows,
or has reason to believe, that a relationship or circumstance of a firm within the
component auditor firm’s network with the component audit client or the group
audit client creates a threat to the component auditor firm’s independence, the
component auditor firm shall evaluate and address any such threat.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 123

Period During which Independence is Required

405.14 A1 The references to the financial statements and the audit report in paragraphs
R400.30 and 400.30 A1 mean the group financial statements and the audit report
on the group financial statements, respectively, when applied in this section.
Group Audit Clients that are Not Public Interest Entities
R405.15 When the group audit client is not a public interest entity, a component auditor
firm outside the group auditor firm’s network shall be independent of the compo-
nent audit client in accordance with the requirements set out in this Part that are
applicable to audit clients that are not public interest entities for the purposes of
the group audit.
405.15 A1 Where a component auditor firm outside the group auditor firm’s network also
performs an audit engagement for a component audit client that is a public interest
entity for reasons other than the group audit, for example, a statutory audit, the in-
dependence requirements that are relevant to audit clients that are public interest
entities apply to that engagement.
Group Audit Clients that are Public Interest Entities
Non-Assurance Services
R405.16 Subject to paragraph R405.17, when the group audit client is a public interest
entity, a component auditor firm outside the group auditor firm’s network shall
comply with the provisions in Section 600 that are applicable to public interest
entities with respect to the provision of non-assurance services to the component
audit client.
405.16 A1 Where the group audit client is a public interest entity, a component auditor firm
outside the group auditor firm’s network is prohibited from, for example:
• Providing accounting and bookkeeping services to a component audit client
that is not a public interest entity (see Subsection 601).
• Designing the information technology system, or an aspect of it, for a compon-
ent audit client that is not a public interest entity where such information tech-
nology system generates information for the component audit client’s account-
ing records or financial statements (see Subsection 606).
• Acting in an advocacy role for a component audit client that is not a public in-
terest entity in resolving a dispute or litigation before a tribunal or court (see
Subsection 608).
405.16 A2 The financial information on which a component auditor firm outside the group
auditor firm’s network performs audit procedures is relevant to the evaluation of
the self-review threat that might be created by the component auditor firm’s provi-
sion of a non-assurance service, and therefore the application of Section 600. For
example, if the component auditor firm’s audit procedures are limited to a specific
item such as inventory, the results of any non-assurance service that form part of
or affect the accounting records or the financial information related to the account-
ing for, or the internal controls over, inventory are relevant to the evaluation of the
self-review threat.
R405.17 As an exception to paragraph R405.16, a component auditor firm outside the
group auditor firm’s network may provide a non-assurance service that is not pro-
hibited under Section 600 to a component audit client without communicating in-
formation about the proposed non assurance service to those charged with
governance of the group audit client or obtaining their concurrence regarding the
provision of that service as addressed by paragraphs R600.21 to R600.24.
ET – 124 SAICA Student Handbook 2023/2024

Key Audit Partners

R405.18 The group engagement partner shall determine whether an audit partner who
performs audit work at a component for purposes of the group audit is a key audit
partner for the group audit. If so, the group engagement partner shall:
(a) Communicate that determination to that individual; and
(b) Indicate:
(i) In the case of all group audit clients, that the individual is subject to
paragraph R411.4, and
(ii) In the case of group audit clients that are public interest entities, that
the individual is also subject to paragraphs R524.6, R540.5(c) and
R540.20.
405.18 A1 A key audit partner makes key decisions or judgments on significant matters with
respect to the audit of the group financial statements on which the group auditor
firm expresses an opinion in the group audit.
Changes in Components
All Group Audit Clients
R405.19 When an entity that is not a related entity becomes a component within the group
audit client, the group auditor firm shall apply paragraphs R400.71 to R400.76.
Changes in Component Auditor Firms
All Group Audit Clients
405.20 A1 There might be circumstances in which the group auditor firm requests another
firm to perform audit work as a component auditor firm during or after the period
covered by the group financial statements, for example due to a client merger or
acquisition. A threat to the component auditor firm’s independence might be cre-
ated by:
(a) Financial or business relationships of the component auditor firm with the
component audit client during or after the period covered by the group fi-
nancial statements but before the component auditor firm agrees to perform
the audit work; or
(b) Previous services provided to the component audit client by the component
auditor firm.
405.20 A2 Paragraphs 400.31 A1 to A3 set out application material that is applicable for a
component auditor firm’s assessment of threats to independence if a non-
assurance service was provided by the component auditor firm to the component
audit client during or after the period covered by the group financial statements,
but before the component auditor firm begins to perform the audit work for the
purposes of the group audit, and the service would not be permitted during the en-
gagement period.
405.20 A3 Paragraph 400.31 A4 sets out application material that is applicable for a compo-
nent auditor firm’s assessment of threats to independence if a non-assurance ser-
vice was provided by the component auditor firm to the component audit client
prior to the period covered by the group financial statements.
Group Audit Clients that are Public Interest Entities
405.21 A1 Paragraphs R400.32 and 400.32 A1 are applicable when a component auditor firm
agrees to perform audit work for group audit purposes in relation to a group audit
client that is a public interest entity if the component auditor firm has previously
provided a non-assurance service to the component audit client.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 125

405.21 A2 Paragraphs R600.25 and 600.25 A1 are applicable in relation to a non-assurance

service provided, either currently or previously, by a component auditor firm to a
component audit client when the group audit client subsequently becomes a public
interest entity.
Breach of an Independence Provision at a Component Auditor Firm
405.22 A1 A breach of a provision of this section might occur despite a component auditor
firm having a system of quality management designed to address independence
requirements. Paragraphs R405.23 to R405.29 are relevant to a group auditor
firm’s determination as to whether it would be able to use a component auditor
firm’s work if a breach has occurred at the component auditor firm.
405.22 A2 In the case of a breach at a component auditor firm within the group auditor firm’s
network, paragraphs R400.80 to R400.89 also apply to the group auditor firm in
relation to the group audit, as applicable.
When a Component Auditor Firm Identifies a Breach
R405.23 If a component auditor firm concludes that a breach of this section has occurred,
the component auditor firm shall:
(a) End, suspend or eliminate the interest or relationship that created the breach
and address the consequences of the breach;
(b) Evaluate the significance of the breach and its impact on the component
auditor firm’s objectivity and ability to perform audit work for the purposes
of the group audit;
(c) Depending on the significance of the breach, determine 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; and
(d) Promptly communicate in writing the breach to the group engagement part-
ner, including the component auditor firm’s assessment of the significance
of the breach and any actions proposed or taken to address the consequences
of the breach.
405.23 A1 Paragraphs 400.80 A2 and A3 set out application material relevant to the compo-
nent auditor firm’s evaluation of the significance and impact of the breach on the
component auditor firm's objectivity and ability to issue an opinion or conclusion
on the audit work performed at the component for purposes of the group audit, and
its consideration of any actions that might be taken to address the consequences of
the breach satisfactorily.
R405.24 Upon receipt of the component auditor firm’s communication of the breach, the
group engagement partner shall:
(a) Review the component auditor firm’s assessment of the significance of the
breach and its impact on the component auditor firm’s objectivity, and any
action that can be or has been taken to address the consequences of the
breach;
(b) Evaluate the group auditor firm’s ability to use the work of the component
auditor firm for the purposes of the group audit; and
(c) Determine the need for any further action.
R405.25 In applying paragraph R405.24, the group engagement partner shall exercise pro-
fessional judgment and take into account whether a reasonable and informed third
party would be likely to conclude that the component auditor firm’s objectivity is
ET – 126 SAICA Student Handbook 2023/2024

compromised, and therefore, the group auditor firm is unable to use the work of
the component auditor firm for the purposes of the group audit.
405.25 A1 If the group engagement partner determines that the consequences of the breach
have been satisfactorily addressed by the component auditor firm and does not
compromise the component auditor firm’s objectivity, the group auditor firm may
continue to use the work of the component auditor firm for the group audit. In cer-
tain circumstances, the group engagement partner might determine that additional
actions are needed to satisfactorily address the breach in order to use the compo-
nent auditor firm’s work. Examples of such action include the group auditor firm
performing specific procedures on the areas impacted by the breach or requesting
the component auditor firm to perform appropriate remedial work on the affected
areas.
405.25 A2 ISA 600 (Revised) sets out that if there has been a breach by a component auditor
and the breach has not been satisfactorily addressed, the group auditor cannot use
the work of that component auditor. In those circumstances, the group engagement
partner might find other means to obtain the necessary audit evidence on the com-
ponent audit client’s financial information. Examples of such means include the
group auditor firm performing the necessary audit work on the component audit
client’s financial information or requesting another component auditor firm to per-
form such audit work.
Discussion with Those Charged with Governance of the Group Audit Client
405.26 A1 With respect to breaches by a component auditor firm within the group auditor
firm’s network, paragraph R400.84 applies.
R405.27 With respect to breaches by a component auditor firm outside the group auditor
firm’s network, the group auditor firm shall discuss with those charged with gov-
ernance of the group audit client:
(a) The component auditor firm’s assessment of the significance and impact of
the breach on the component auditor firm’s objectivity, including the nature
and duration of the breach, and the action that can be or has been taken; and
(b) Whether:
(i) The action will satisfactorily address, or has addressed, the conse-
quences of the breach; or
(ii) The group auditor firm will use other means to obtain the necessary
audit evidence on the component audit client’s financial information.
Such discussion shall take place as soon as possible unless an alternative timing is
specified by those charged with governance for reporting less significant breaches.
R405.28 The group auditor firm shall communicate in writing to those charged with govern-
ance of the group audit client all matters discussed in accordance with paragraph
R405.27 and obtain the concurrence of those charged with governance that the
action can be or has been taken to satisfactorily address the consequences of the
breach.
R405.29 If those charged with governance do not concur that the action that can be or has
been taken would satisfactorily address the consequences of the breach at the com-
ponent auditor firm, the group auditor firm shall not use the work performed by
the component auditor firm for the purposes of the group audit.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 127

Section 410
Fees
Introduction
410.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
410.2 Section 330 sets out a requirement and application material relevant to applying
the conceptual framework where the level and nature of fee and other remuneration
arrangements might create a self-interest threat to compliance with one or more of
the fundamental principles. This section sets out specific requirements and appli-
cation material relevant to applying the conceptual framework to identify, evaluate
and address threats to independence arising from fees charged to audit clients.

Requirements and Application Material

General
410.3 A1 Fees for professional services are usually negotiated with and paid by an audit
client and might create threats to independence. This practice is generally recog-
nized and accepted by intended users of financial statements.
410.3 A2 When the audit client is a public interest entity, stakeholders have heightened
expectations regarding the firm’s independence. As transparency can serve to better
inform the views and decisions of those charged with governance and a wide range
of stakeholders, this section provides for disclosure of fee-related information to
both those charged with governance and stakeholders more generally for audit
clients that are public interest entities.
410.3 A3 For the purposes of this section, audit fees comprise fees or other types of remuner-
ation for an audit or review of financial statements. Where reference is made to
the fee for the audit of the financial statements, this does not include any fee for an
audit of special purpose financial statements or a review of financial statements.
(Ref: Para. R410.23(a), 410.25 A1 and R410.31(a))

Fees Paid by an Audit Client

410.4 A1 When fees are negotiated with and paid by an audit client, this creates a self-
interest threat and might create an intimidation threat to independence.
410.4 A2 The application of the conceptual framework requires that before a firm or net-
work firm accepts an audit or any other engagement for an audit client, the firm
determines whether the threats to independence created by the fees proposed to the
client are at an acceptable level. The application of the conceptual framework also
requires the firm to re-evaluate such threats when facts and circumstances change
during the engagement period for the audit.
410.4 A3 Factors that are relevant in evaluating the level of threats created when fees for an
audit or any other engagement are paid by the audit client include:
• The level of the fees and the extent to which they have regard to the resources
required, taking into account the firm’s commercial and market priorities.
• Any linkage between fees for the audit and those for services other than audit
and the relative size of both elements.
• The extent of any dependency between the level of the fee for, and the outcome
of, the service.
ET – 128 SAICA Student Handbook 2023/2024

• Whether the fee is for services to be provided by the firm or a network firm.
• The level of the fee in the context of the service to be provided by the firm or a
network firm.
• The operating structure and the compensation arrangements of the firm and net-
work firms.
• The significance of the client, or a third party referring the client, to the firm,
network firm, partner or office.
• The nature of the client, for example whether the client is a public interest
entity.
• The relationship of the client to the related entities to which the services other
than audit are provided, for example when the related entity is a sister entity.
• The involvement of those charged with governance in appointing the auditor
and agreeing fees, and the apparent emphasis they and client management
place on the quality of the audit and the overall level of the fees.
• Whether the level of the fee is set by an independent third party, such as a
regulatory body.
• Whether the quality of the firm’s audit work is subject to the review of an in-
dependent third party, such as an oversight body.
410.4 A4 The conditions, policies and procedures described in paragraph 120.15 A3 (par-
ticularly a system of quality management designed, implemented and operated by
the firm in accordance with quality management standards issued by the IAASB)
might also impact the evaluation of whether the threats to independence are at an
acceptable level.
410.4 A5 The requirements and application material that follow identify circumstances which
might need to be further evaluated when determining whether the threats are at an
acceptable level. For those circumstances, application material includes examples
of additional factors that might be relevant in evaluating the threats.

Level of Audit Fees

410.5 A1 Determining the fees to be charged to an audit client, whether for audit or other
services, is a business decision of the firm taking into account the facts and cir-
cumstances relevant to that specific engagement, including the requirements of
technical and professional standards.
410.5 A2 Factors that are relevant in evaluating the level of self-interest and intimidation
threats created by the level of the audit fee paid by the audit client include:
• The firm’s commercial rationale for the audit fee.
• Whether undue pressure has been, or is being, applied by the client to reduce
the audit fee.
410.5 A3 Examples of actions that might be safeguards to address such threats include:
• Having an appropriate reviewer who does not take part in the audit engage-
ment assess the reasonableness of the fee proposed, having regard to the scope
and complexity of the engagement.
• Having an appropriate reviewer who did not take part in the audit engagement
review the work performed.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 129

Impact of Other Services Provided to an Audit Client

R410.6 Subject to paragraph R410.7, a firm shall not allow the audit fee to be influenced
by the provision of services other than audit to an audit client by the firm or a
network firm.
410.6 A1 The audit fee ordinarily reflects a combination of matters, such as those identified
in paragraph 410.23 A1. However, the provision of other services to an audit
client is not an appropriate consideration in determining the audit fee.
R410.7 As an exception to paragraph R410.6, when determining the audit fee, the firm
may take into consideration the cost savings achieved as a result of experience de-
rived from the provision of services other than audit to an audit client.

Contingent Fees
410.8 A1 Contingent fees are fees calculated on a predetermined basis relating to the out-
come of a transaction or the result of the services performed. A contingent fee
charged through an intermediary is an example of an indirect contingent fee. In
this section, a fee is not regarded as being contingent if established by a court or
other public authority.
R410.9 A firm shall not charge directly or indirectly a contingent fee for an audit engage-
ment.
R410.10 A firm or network firm shall not charge directly or indirectly a contingent fee for a
non-assurance service provided to an audit client, if:
(a) The fee is charged by the firm expressing the opinion on the financial state-
ments and the fee is material or expected to be material to that firm;
(b) The fee is charged by a network firm that participates in a significant part of
the audit and the fee is material or expected to be material to that firm; or
(c) The outcome of the non-assurance service, and therefore the amount of the
fee, is dependent on a future or contemporary judgement related to the audit
of a material amount in the financial statements.
410.10 A1 Paragraphs R410.9 and R410.10 preclude a firm or a network firm from entering
into certain contingent fee arrangements with an audit client. Even if a contingent
fee arrangement is not precluded when providing a non-assurance service to an
audit client, it might still impact the level of the self-interest threat.
410.10 A2 Factors that are relevant in evaluating the level of such a threat include:
• The range of possible fee amounts.
• Whether an appropriate authority determines the outcome on which the contin-
gent fee depends.
• Disclosure to intended users of the work performed by the firm and the basis
of remuneration.
• The nature of the service.
• The effect of the event or transaction on the financial statements.
410.10 A3 Examples of actions that might be safeguards to address such a self-interest threat
include:
• Having an appropriate reviewer who was not involved in performing the non-
assurance service review the work performed by the firm.
• Obtaining an advance written agreement with the client on the basis of re-
muneration.
ET – 130 SAICA Student Handbook 2023/2024

Total Fees – Proportion of Fees for Services Other than Audit to Audit Fee
410.11 A1 The level of the self-interest threat might be impacted when a large proportion of
fees charged by the firm or network firms to an audit client is generated by pro-
viding services other than audit to the client, due to concerns about the potential
loss of either the audit engagement or other services. Such circumstances might
also create an intimidation threat. A further consideration is a perception that the
firm or network firm focuses on the non-audit relationship, which might create a
threat to the auditor’s independence.
410.11 A2 Factors that are relevant in evaluating the level of such threats include:
• The ratio of fees for services other than audit to the audit fee.
• The length of time during which a large proportion of fees for services other
than audit to the audit fee has existed.
• The nature, scope and purposes of the services other than audit, including:
o Whether they are recurring services.
o Whether law or regulation mandates the services to be performed by the
firm.
410.11A3 Examples of actions that might be safeguards to address such self-interest or
intimidation threats include:
• Having an appropriate reviewer who was not involved in the audit or the ser-
vice other than audit review the relevant audit work.
• Reducing the extent of services other than audit provided to the audit client.

Total Fees – Overdue Fees

410.12 A1 The level of the self-interest threat might be impacted if fees payable by an audit
client for the audit or services other than audit are overdue during the period of the
audit engagement.
410.12 A2 It is generally expected that the firm will obtain payment of such fees before the
audit report is issued.
410.12 A3 Factors that are relevant in evaluating the level of such a self-interest threat
include:
• The significance of the overdue fees to the firm.
• The length of time the fees have been overdue.
• The firm’s assessment of the ability and willingness of the audit client to pay
the overdue fees.
410.12 A4 Examples of actions that might be safeguards to address such a threat include:
• Obtaining partial payment of overdue fees.
• Having an appropriate reviewer who did not take part in the audit engagement
review the audit work.
R410.13 When a significant part of the fees due from an audit client remains unpaid for a
long time, the firm shall determine:
(a) Whether the overdue fees might be equivalent to a loan to the client, in which
case the requirements and application material set out in section 511 are
applicable; and
(b) Whether it is appropriate for the firm to be re-appointed or continue the audit
engagement.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 131

Total Fees – Fee Dependency

All Audit Clients
410.14 A1 When the total fees generated from an audit client by the firm expressing the audit
opinion represent a large proportion of the total fees of that firm, the dependence
on, and concern about the potential loss of, fees from audit and other services from
that client impact the level of the self-interest threat and create an intimidation
threat.
410.14 A2 In calculating the total fees of the firm, the firm might use financial information
available from the previous financial year and estimate the proportion based on
that information if appropriate.
410.14 A3 Factors that are relevant in evaluating the level of such self-interest and intimi-
dation threats include:
• The operating structure of the firm.
• Whether the firm is expected to diversify such that any dependence on the
audit client is reduced
410.14 A4 Examples of actions that might be safeguards to address such threats include:
• Having an appropriate reviewer who is not a member of the firm review the
audit work.
• Reducing the extent of services other than audit provided to the audit client.
• Increasing the client base of the firm to reduce dependence on the client.
• Increasing the extent of services provided to other clients.
410.14 A5 A self-interest or intimidation threat is created when the fees generated by a firm
from an audit client represent a large proportion of the revenue of one partner or
one office of the firm.
410.14 A6 Factors that are relevant in evaluating the level of such threats include:
• The qualitative and quantitative significance of the audit client 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 client.
410.14 A7 Examples of actions that might be safeguards to address such self-interest or inti-
midation threats include:
• Having an appropriate reviewer who was not involved in the audit engagement
review the audit work.
• Ensuring that the compensation of the partner is not significantly influenced by
the fees generated from the client.
• Reducing the extent of services other than audit provided by the partner or
office to the audit client.
• Increasing the client base of the partner or the office to reduce dependence on
the client.
• Increasing the extent of services provided by the partner or the office to other
clients.
Audit Clients that are Not Public Interest Entities
R410.15 When for each of five consecutive years total fees from an audit client that is not a
public interest entity represent, or are likely to represent, more than 30% of the total
fees received by the firm, the firm shall determine whether either of the following
ET – 132 SAICA Student Handbook 2023/2024

actions might be a safeguard to reduce the threats created to an acceptable level,

and if so, apply it:
(a) Prior to the audit opinion being issued on the fifth year’s financial statements,
have a professional accountant, who is not a member of the firm expressing
the opinion on the financial statements, review the fifth year’s audit work; or
(b) After the audit opinion on the fifth year’s financial statements has been
issued, and before the audit opinion is issued on the sixth year’s financial
statements, have a professional accountant, who is not a member of the firm
expressing the opinion on the financial statements, or a professional body
review the fifth year’s audit work.
R410.16 If the total fees described in paragraph R410.15 continue to exceed 30%, the firm
shall each year determine whether either of the actions in paragraph R410.15
applied to the relevant year’s engagement might be a safeguard to address the
threats created by the total fees received by the firm from the client, and if so, apply
it.
R410.17 When two or more firms are engaged to conduct an audit of the client’s financial
statements, the involvement of the other firm in the audit may be regarded each
year as an action equivalent to that in paragraph R410.15 (a), if:
(a) The circumstances addressed by paragraph R410.15 apply to only one of the
firms expressing the audit opinion; and
(b) Each firm performs sufficient work to take full individual responsibility for
the audit opinion.
Audit Clients that are Public Interest Entities
R410.18 When for each of two consecutive years the total fees from an audit client that is a
public interest entity represent, or are likely to represent, more than 15% of the
total fees received by the firm, the firm shall determine whether, prior to the audit
opinion being issued on the second year’s financial statements, a review, consistent
with the objective of an engagement quality review, performed by a professional
accountant who is not a member of the firm expressing the opinion on the finan-
cial statements (“pre-issuance review”) might be a safeguard to reduce the threats
to an acceptable level, and if so, apply it.
R410.19 When two or more firms are engaged to conduct an audit of the client’s financial
statements, the involvement of the other firm in the audit may be regarded each
year as an action equivalent to that in paragraph R410.18, if:
(a) The circumstances addressed by paragraph R410.18 apply to only one of the
firms expressing the audit opinion; and
(b) Each firm performs sufficient work to take full individual responsibility for
the audit opinion.
R410.20 Subject to paragraph R410.21, if the circumstances described in paragraph R410.18
continue for five consecutive years, the firm shall cease to be the auditor after the
audit opinion for the fifth year is issued.
R410.21 As an exception to paragraph R410.20, the firm may continue to be the auditor
after five consecutive years if there is a compelling reason to do so having regard
to the public interest, provided that:
(a) The firm consults with a regulatory or professional body in the relevant juris-
diction and it concurs that having the firm continue as the auditor would be
in the public interest; and
(b) Before the audit opinion on the sixth and any subsequent year’s financial
statements is issued, the firm engages a professional accountant, who is not a
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 133

member of the firm expressing the opinion on the financial statements, to

perform a pre-issuance review.
410.21 A1 A factor which might give rise to a compelling reason is the lack of viable alter-
native firms to carry out the audit engagement, having regard to the nature and
location of the client’s business.
Transparency of Information Regarding Fees for Audit Clients that are Public Interest
Entities
Communication About Fee-related Information with Those Charged with Governance
410.22 A1 Communication by the firm of fee-related information (for both audit and services
other than audit) with those charged with governance assists in their assessment of
the firm’s independence. Effective communication in this regard also allows for a
two-way open exchange of views and information about, for example, the expect-
ations that those charged with governance might have regarding the scope and
extent of audit work and impact on the audit fee.
Fees for the Audit of the Financial Statements
R410.23 Subject to paragraph R410.24, the firm shall communicate in a timely manner with
those charged with governance of an audit client that is a public interest entity:
(a) Fees paid or payable to the firm or network firms for the audit of the finan-
cial statements on which the firm expresses an opinion; and
(b) Whether the threats created by the level of those fees are at an acceptable
level, and if not, any actions the firm has taken or proposes to take to reduce
such threats to an acceptable level.
410.23 A1 The objective of such communication is to provide the background and context to
the fees for the audit of the financial statements on which the firm expresses an
opinion to enable those charged with governance to consider the independence of
the firm. The nature and extent of matters to be communicated will depend on the
facts and circumstances and might include for example:
• Considerations affecting the level of the fees such as:
o The scale, complexity and geographic spread of the audit client’s operations.
o The time spent or expected to be spent commensurate with the scope and
complexity of the audit.
o The cost of other resources utilized or expended in performing the audit.
o The quality of record keeping and processes for financial statements prep-
aration.
• Adjustments to the fees quoted or charged during the period of the audit, and
the reasons for any such adjustments.
• Changes to laws and regulations and professional standards relevant to the audit
that impacted the fees.
410.23 A2 The firm is encouraged to provide such information as soon as practicable and
communicate proposed adjustments as appropriate.
R410.24 As an exception to paragraph R410.23, the firm may determine not to communi-
cate the information set out in paragraph R410.23 to those charged with govern-
ance of an entity that is (directly or indirectly) wholly-owned by another public
interest entity provided that:
(a) The entity is consolidated into group financial statements prepared by that
other public interest entity; and
ET – 134 SAICA Student Handbook 2023/2024

(b) The firm or a network firm expresses an opinion on those group financial
statements.
Fees for Other Services
R410.25 Subject to paragraph R410.27, the firm shall communicate in a timely manner with
those charged with governance of an audit client that is a public interest entity:
(a) The fees, other than those disclosed under paragraph R410.23 (a), charged to
the client for the provision of services by the firm or a network firm during
the period covered by the financial statements on which the firm expresses
an opinion. For this purpose, such fees shall only include fees charged to the
client and its related entities over which the client has direct or indirect con-
trol that are consolidated in the financial statements on which the firm will
express an opinion; and
(b) As set out in paragraph 410.11 A1, where the firm has identified that there is
an impact on the level of the self-interest threat or that there is an intimi-
dation threat to independence created by the proportion of fees for services
other than audit relative to the audit fee:
(i) Whether such threats are at an acceptable level; and
(ii) If not, any actions that the firm has taken or proposes to take to
reduce such threats to an acceptable level.
410.25 A1 The objective of such communication is to provide the background and context to
the fees for other services to enable those charged with governance to consider the
independence of the firm. The nature and extent of matters to be communicated
will depend on the facts and circumstances and might include for example:
• The amount of fees for other services that are required by law or regulation.
• The nature of other services provided and their associated fees.
• Information on the nature of the services provided under a general policy
approved by those charged with governance and associated fees.
• The proportion of fees referred to in paragraph R410.25(a) to the aggregate of
the fees charged by the firm and network firms for the audit of the financial
statements on which the firm expresses an opinion.
R410.26 The firm shall include in the communication required by paragraph R410.25(a) the
fees, other than those disclosed under paragraph R410.23(a), charged to any other
related entities over which the audit client has direct or indirect control for the
provision of services by the firm or a network firm, when the firm knows, or has
reason to believe, that such fees are relevant to the evaluation of the firm’s inde-
pendence.
410.26 A1 Factors the firm might consider when determining whether the fees, other than
those disclosed under paragraph R410.23(a), charged to such other related entities,
individually and in the aggregate, for the provision of services by the firm or a
network firm are relevant to the evaluation of the firm’s independence include:
• The extent of the audit client’s involvement in the appointment of the firm or
network firm for the provision of such services, including the negotiation of
fees.
• The significance of the fees paid by the other related entities to the firm or a
network firm.
• The proportion of fees from the other related entities to the fees paid by the
client.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 135

R410.27 As an exception to paragraph R410.25, the firm may determine not to communi-
cate the information set out in paragraph R410.25 to those charged with govern-
ance of an entity that is (directly or indirectly) wholly-owned by another public
interest entity provided that:
(a) The entity is consolidated into group financial statements prepared by that
other public interest entity; and
(b) The firm or a network firm expresses an opinion on those group financial
statements.
Fee Dependency
R410.28 Where the total fees from an audit client that is a public interest entity represent,
or are likely to represent, more than 15% of the total fees received by the firm, the
firm shall communicate with those charged with governance:
(a) That fact and whether this situation is likely to continue;
(b) The safeguards applied to address the threats created, including, where rele-
vant, the use of a pre-issuance review (Ref: Para R410.18); and
(c) Any proposal to continue as the auditor under paragraph R410.21.
Public Disclosure of Fee-related Information
410.29 A1 In view of the public interest in the audits of public interest entities, it is beneficial
for stakeholders to have visibility about the professional relationships between the
firm and the audit client which might reasonably be thought to be relevant to the
evaluation of the firm’s independence. In a wide number of jurisdictions, there
already exist requirements regarding the disclosure of fees by an audit client for
both audit and services other than audit paid and payable to the firm and network
firms. Such disclosures often require the disaggregation of fees for services other
than audit into different categories.
R410.30 If laws and regulations do not require an audit client to disclose audit fees, fees for
services other than audit paid or payable to the firm and network firms and infor-
mation about fee dependency, the firm shall discuss with those charged with gov-
ernance of an audit client that is a public interest entity:
(a) The benefit to the client’s stakeholders of the client making such disclosures
that are not required by laws and regulations in a manner deemed appropri-
ate, taking into account the timing and accessibility of the information; and
(b) The information that might enhance the users’ understanding of the fees paid
or payable and their impact on the firm’s independence.
410.30 A1 Examples of information relating to fees that might enhance the users’ understand-
ing of the fees paid or payable and their impact on the firm’s independence in-
clude:
• Comparative information of the prior year’s fees for audit and services other
than audit.
• The nature of services and their associated fees as disclosed under paragraph
R410.31(b).
• Safeguards applied when the total fees from the client represent or are likely to
represent more than 15% of the total fees received by the firm.
R410.31 After the discussion with those charged with governance as set out in paragraph
R410.30, to the extent that the audit client that is a public interest entity does not
make the relevant disclosure, subject to paragraph R410.32, the firm shall publicly
disclose:
ET – 136 SAICA Student Handbook 2023/2024

(a) Fees paid or payable to the firm and network firms for the audit of the finan-
cial statements on which the firm expresses an opinion;
(b) Fees, other than those disclosed under (a), charged to the client for the pro-
vision of services by the firm or a network firm during the period covered by
the financial statements on which the firm expresses an opinion. For this
purpose, such fees shall only include fees charged to the client and its related
entities over which the client has direct or indirect control that are consoli-
dated in the financial statements on which the firm will express an opinion;
(c) Any fees, other than those disclosed under (a) and (b), charged to any other
related entities over which the audit client has direct or indirect control for
the provision of services by the firm or a network firm when the firm knows,
or has reason to believe, that such fees are relevant to the evaluation of the
firm’s independence; and
(d) If applicable, the fact that the total fees received by the firm from the audit
client represent, or are likely to represent, more than 15% of the total fees
received by the firm for two consecutive years, and the year that this situ-
ation first arose.
410.31 A1 The firm might also disclose other information relating to fees that will enhance
the users’ understanding of the fees paid or payable and the firm’s independence,
such as the examples described in paragraph 410.30 A1.
410.31 A2 Factors the firm might consider when making the determination required by para-
graph R410.31(c) are set out in paragraph 410.26 A1.
410.31 A3 When disclosing fee-related information in compliance with paragraph R410.31,
the firm might disclose the information in a manner deemed appropriate taking
into account the timing and accessibility of the information to stakeholders, for
example:
• On the firm’s website.
• In the firm’s transparency report.
• In an audit quality report.
• Through targeted communication to specific stakeholders, for example a letter
to the shareholders.
• In the auditor’s report.
R410.32 As an exception to paragraph R410.31, the firm may determine not to publicly dis-
close the information set out in paragraph R410.31 relating to:
(a) A parent entity that also prepares group financial statements provided that
the firm or a network firm expresses an opinion on the group financial state-
ments; or
(b) An entity (directly or indirectly) wholly-owned by another public interest
entity provided that:
(i) The entity is consolidated into group financial statements prepared by
that other public interest entity; and
(ii) The firm or a network firm expresses an opinion on those group fin-
ancial statements.
Considerations for Review Clients
R410.33 This section sets out requirements for a firm to communicate fee-related infor-
mation of an audit client that is a public interest entity and to disclose publicly fee-
related information to the extent that the client does not disclose such information.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 137

As an exception to those requirements, the firm may determine not to communicate

or pursue disclosure of such information where a review client is not also an audit
client.

Section 411
Compensation and Evaluation Policies
Introduction
411.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
411.2 A firm’s evaluation or compensation policies might create a self-interest threat.
This section sets out specific requirements and application material relevant to ap-
plying the conceptual framework in such circumstances.

Requirements and Application Material

General
411.3 A1 When an audit team member for a particular audit client is evaluated on or com-
pensated 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.
411.3 A2 Examples of actions that might eliminate such a self-interest threat include:
• Revising the compensation plan or evaluation process for that individual.
• Removing that individual from the audit team.
411.3 A3 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 mem-
ber.
R411.4 A firm shall not evaluate or compensate a key audit partner based on that partner’s
success in selling non-assurance services to the partner’s audit client. This require-
ment does not preclude normal profit-sharing arrangements between partners of a
firm.

Section 420
Gifts and Hospitality
Introduction
420.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
ET – 138 SAICA Student Handbook 2023/2024

420.2 Accepting gifts and hospitality from an audit client might create a self-interest,
familiarity or intimidation threat. This section sets out a specific requirement and
application material relevant to applying the conceptual framework in such cir-
cumstances.

Requirement and Application Material

R420.3 A firm, network firm or an audit team member shall not accept gifts and hospitality
from an audit client, unless the value is trivial and inconsequential.
420.3 A1 Where a firm, network firm or audit team member is offering or accepting an in-
ducement to or from an audit client, the requirements and application material set
out in Section 340 apply and non-compliance with these requirements might create
threats to independence.
420.3 A2 The requirements set out in Section 340 relating to offering or accepting induce-
ments do not allow a firm, network firm or audit team member to accept gifts and
hospitality where the intent is to improperly influence behaviour even if the value
is trivial and inconsequential.

Section 430
Actual or Threatened Litigation
Introduction
430.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
430.2 When litigation with an audit client occurs, or appears likely, self-interest and
intimidation threats are created. This section sets out specific application material
relevant to applying the conceptual framework in such circumstances.

Application Material
General
430.3 A1 The relationship between client management and audit team members must be
characterised by complete candour and full disclosure regarding all aspects of a
client’s operations. Adversarial positions might result from actual or threatened
litigation between an audit client and the firm, a network 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.
430.3 A2 Factors that are relevant in evaluating the level of such threats include:
• The materiality of the litigation.
• Whether the litigation relates to a prior audit engagement.
430.3 A3 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 indi-
vidual from the audit team.
430.3 A4 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 per-
formed.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 139

Section 510
Financial Interests
Introduction
510.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
510.2 Holding a financial interest in an audit client might create a self-interest threat.
This section sets out specific requirements and application material relevant to ap-
plying the conceptual framework in such circumstances.

Requirements and Application Material

General
510.3 A1 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 de-
cisions, the Code defines that financial interest to be direct. Conversely, when a
beneficial owner has no control over the intermediary or ability to influence its in-
vestment decisions, the Code defines that financial interest to be indirect.
510.3 A2 This section contains references to the “materiality” of a financial interest. In
determining whether such 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.
510.3 A3 Factors that are relevant in evaluating the level of a self-interest threat created by
holding a financial interest in an audit 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.
Financial Interests Held by the Firm, a Network Firm, Audit Team Members and Others
R510.4 Subject to paragraph R510.5, a direct financial interest or a material indirect finan-
cial interest in the audit client shall not be held by:
(a) The firm or a network firm;
(b) An audit team member, or any of that individual’s immediate family;
(c) Any other partner in the office in which an engagement partner practices in
connection with the audit engagement, or any of that other partner’s imme-
diate family; or
(d) Any other partner or managerial employee who provides non-audit services
to the audit client, except for any whose involvement is minimal, or any of
that individual’s immediate family.
510.4 A1 The office in which the engagement partner practices in connection with an audit
engagement is not necessarily the office to which that partner is assigned. When
the engagement partner is located in a different office from that of the other en-
gagement team members, professional judgement is needed to determine the office
in which the partner practices in connection with the engagement.
ET – 140 SAICA Student Handbook 2023/2024

R510.5 As an exception to paragraph R510.4, an immediate family member identified in

subparagraphs R510.4(c) or (d) may hold a direct or material indirect financial in-
terest in an audit client, provided that:
(a) The family member received the financial interest because of employment
rights, for example through pension or share option plans, and, when neces-
sary, the firm addresses the threat created by the financial interest; and
(b) The family member disposes of or forfeits the financial interest as soon as
practicable when the family member has or obtains the right to do so, or in
the case of a stock option, when the family member obtains the right to exer-
cise the option.
Financial Interests in an Entity Controlling an Audit Client
R510.6 When an entity has a controlling interest in an audit client and the client is material
to the entity, neither the firm, nor a network firm, nor an audit team member, nor
any of that individual’s immediate family shall hold a direct or material indirect
financial interest in that entity.
Financial Interests Held as Trustee
R510.7 Paragraph R510.4 shall also apply to a financial interest in an audit client held in a
trust for which the firm, network firm or individual acts as trustee, unless:
(a) None of the following is a beneficiary of the trust: the trustee, the audit team
member or any of that individual’s immediate family, the firm or a network
firm;
(b) The interest in the audit client held by the trust is not material to the trust;
(c) The trust is not able to exercise significant influence over the audit client;
and
(d) None of the following can significantly influence any investment decision
involving a financial interest in the audit client: the trustee, the audit team
member or any of that individual’s immediate family, the firm or a network
firm.
Financial Interests in Common with the Audit Client
R510.8 (a) A firm, or a network firm, or an audit team member, or any of that individ-
ual’s immediate family shall not hold a financial interest in an entity when
an audit client also has a financial interest in that entity, unless:
(i) The financial interests are immaterial to the firm, the network firm,
the audit team member and that individual’s immediate family mem-
ber and the audit client, as applicable; or
(ii) The audit client cannot exercise significant influence over the entity.
(b) Before an individual who has a financial interest described in paragraph
R510.8(a) can become an audit team member, the individual or that individ-
ual’s immediate family member shall either:
(i) Dispose of the interest; or
(ii) Dispose of enough of the interest so that the remaining interest is no
longer material.
Financial Interests Received Unintentionally
R510.9 If a firm, a network firm or a partner or employee of the firm or a network firm, or
any of that individual’s immediate family, receives a direct financial interest or a
material indirect financial interest in an audit client by way of an inheritance, gift,
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 141

as a result of a merger or in similar circumstances and the interest would not

otherwise be permitted to be held under this section, then:
(a) If the interest is received by the firm or a network firm, or an audit team
member or any of that individual’s immediate family, 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) (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, the finan-
cial interest shall be disposed of as soon as possible, or enough of an
indirect financial interest shall be disposed of so that the remaining
interest is no longer material; and
(ii) Pending the disposal of the financial interest, when necessary the firm
shall address the threat created.

Financial Interests – Other Circumstances

Immediate Family
510.10 A1 A self-interest, familiarity, or intimidation threat might be created if an audit team
member, or any of that individual’s immediate family, or the firm or a network
firm has a financial interest in an entity when a director or officer or controlling
owner of the audit client is also known to have a financial interest in that entity.
510.10 A2 Factors that are relevant in evaluating the level of such threats include:
• The role of the individual on the audit team.
• Whether ownership of the entity is closely or widely held.
• Whether the interest allows the investor to control or significantly influence
the entity.
• The materiality of the financial interest.
510.10 A3 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.
510.10 A4 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.

Close Family
510.10 A5 A self-interest threat might be created if an audit team member knows that a close
family member has a direct financial interest or a material indirect financial in-
terest in the audit client.
510.10 A6 Factors that are relevant in evaluating the level of such a threat include:
• The nature of the relationship between the audit 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.
510.10 A7 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.
ET – 142 SAICA Student Handbook 2023/2024

510.10 A8 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.

Other Individuals
510.10 A9 A self-interest threat might be created if an audit team member knows that a finan-
cial interest in the audit client is held by individuals such as:
• Partners and professional employees of the firm or network firm, apart from
those who are specifically not permitted to hold such financial interests by
paragraph R510.4, or their immediate family members.
• Individuals with a close personal relationship with an audit team member.
510.10 A10 Factors that are relevant in evaluating the level of such a threat include:
• The firm’s organisational, operating and reporting structure.
• The nature of the relationship between the individual and the audit team mem-
ber.
510.10 A11 An example of an action that might eliminate such a self-interest threat is remov-
ing the audit team member with the personal relationship from the audit team.
510.10 A12 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 con-
cerning the audit engagement.
• Having an appropriate reviewer review the work of the audit team member.

Retirement Benefit Plan of a Firm or Network Firm

510.10 A13 A self-interest threat might be created if a retirement benefit plan of a firm or a
network firm holds a direct or material indirect financial interest in an audit client.

Section 511
Loans and Guarantees
Introduction
511.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
511.2 A loan or a guarantee of a loan with an audit client might create a self-interest
threat. This section sets out specific requirements and application material relevant
to applying the conceptual framework in such circumstances.

Requirements and Application Material

General
511.3 A1 This section contains references to the “materiality” of a loan or guarantee. In
determining whether such a loan or guarantee is material to an individual, the
combined net worth of the individual and the individual’s immediate family mem-
bers may be taken into account.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 143

Loans and Guarantees with an Audit Client

R511.4 A firm, a network firm, an audit team member, or any of that individual’s im-
mediate family shall not make or guarantee a loan to an audit client or any direct-
ors or officer of an audit client, unless the loan or guarantee is immaterial to:
(a) The firm, the network firm or the individual making the loan or guarantee, as
applicable; and
(b) The client, or the director or officer of the client,

Loans and Guarantees with an Audit Client that is a Bank or Similar Institution
R511.5 A firm, a network firm, an audit team member, or any of that individual’s imme-
diate family shall not accept a loan, or a guarantee of a loan, from an audit client
that is a bank or a similar institution unless the loan or guarantee is made under
normal lending procedures, terms and conditions.
511.5 A1 Examples of loans include mortgages, bank overdrafts, car loans, and credit card
balances.
511.5 A2 Even if a firm or network firm receives a loan from an audit client 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 audit client or firm receiv-
ing the loan.
511.5 A3 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 network firm that is not a beneficiary of the loan.

Deposits or Brokerage Accounts

R511.6 A firm, a network firm, an audit team member, or any of that individual’s imme-
diate family shall not have deposits or a brokerage account with an audit 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 Audit Client that is Not a Bank or Similar Institution
R511.7 A firm, a network firm, an audit team member, or any of that individual’s imme-
diate family shall not accept a loan from, or have a borrowing guaranteed by, an
audit client that is not a bank or similar institution, or any directors or officer of
an audit client ,unless the loan or guarantee is immaterial to:
(a) The firm, the network firm, or the individual receiving the loan or guarantee,
as applicable; and
(b) The client, or the director or officer of the client.

Section 520
Business Relationships
Introduction
520.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
520.2 A close business relationship with an audit client or its management might create a
self-interest or intimidation threat. This section sets out specific requirements and
application material relevant to applying the conceptual framework in such cir-
cumstances.
ET – 144 SAICA Student Handbook 2023/2024

Requirements and Application Material

General
520.3 A1 This section contains references to the “materiality” of a financial interest and the
“significance” of a business relationship. In determining whether such a financial
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.
520.3 A2 Examples of a close business relationship arising from a commercial relationship
or common financial interest include:
• Having a financial interest in a joint venture with either the client or a con-
trolling owner, director or officer or other individual who performs senior
managerial activities for that client.
• Arrangements to combine one or more services or products of the firm or a
network firm with one or more services or products of the client and to market
the package with reference to both parties.
• Distribution or marketing arrangements under which the firm or a network
firm distributes or markets the client’s products or services, or the client dis-
tributes or markets the firm or a network firm’s products or services.

Firm, Network Firm, Audit Team Member or Immediate Family Business Relationships
R520.4 A firm, a network firm or an audit team member shall not have a close business
relationship with an audit client or its management unless any financial interest is
immaterial and the business relationship is insignificant to the client or its man-
agement and the firm, the network firm or the audit team member, as applicable.
520.4 A1 A self-interest or intimidation threat might be created if there is a close business
relationship between the audit client or its management and the immediate family
of an audit team member.

Common Interests in Closely-Held Entities

R520.5 A firm, a network firm, an audit team member, or any of that individual’s imme-
diate family shall not have a business relationship involving the holding of an in-
terest in a closely-held entity when an audit client or a director or officer of the
client, or any group thereof, also holds an interest in that entity, unless:
(a) The business relationship is insignificant to the firm, the network firm, or the
individual as applicable, and the client;
(b) The financial interest is immaterial 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.

Buying Goods or Services

520.6 A1 The purchase of goods and services from an audit client by a firm, a network firm,
an audit team member, or any of that individual’s immediate family does not usu-
ally 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 na-
ture and magnitude that they create a self-interest threat.
520.6 A2 Examples of actions that might eliminate such a self-interest threat include:
• Eliminating or reducing the magnitude of the transaction.
• Removing the individual from the audit team.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 145

Section 521
Family and Personal Relationships
Introduction
521.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
521.2 Family or personal relationships with client personnel might create a self-interest,
familiarity or intimidation threat. This section sets out specific requirements and
application material relevant to applying the conceptual framework in such cir-
cumstances.

Requirements and Application Material

General
521.3 A1 A self-interest, familiarity or intimidation threat might be created by family and
personal relationships between an audit team member and a director or officer or,
depending on their role, certain employees of the audit client.
521.3 A2 Factors that are relevant in evaluating the level of such threats include:
• The individual’s responsibilities on the audit team.
• The role of the family member or other individual within the client, and the
closeness of the relationship.

Immediate Family of an Audit Team Member

521.4 A1 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 sig-
nificant influence over the client’s financial position, financial performance or
cash flows.
521.4 A2 Factors that are relevant in evaluating the level of such threats include:
• The position held by the immediate family member.
• The role of the audit team member.
521.4 A3 An example of an action that might eliminate such a self-interest, familiarity or
intimidation threat is removing the individual from the audit team.
521.4 A4 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.
R521.5 An individual shall not participate as an audit team member when any of that
individual’s immediate family:
(a) Is a director or officer of the audit client;
(b) Is an employee in a position to exert significant influence over the prepar-
ation of the client’s accounting records or the financial statements on which
the firm will express an opinion; or
(c) Was in such position during any period covered by the engagement or the
financial statements.
ET – 146 SAICA Student Handbook 2023/2024

Close Family of an Audit Team Member

521.6 A1 A self-interest, familiarity or intimidation threat is created when a close family
member of an audit team member is:
(a) A director or officer of the audit client; or
(b) 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
firm will express an opinion.
521.6 A2 Factors that are relevant in evaluating the level of such threats include:
• The nature of the relationship between the audit team member and the close
family member.
• The position held by the close family member.
• The role of the audit team member.
521.6 A3 An example of an action that might eliminate such a self-interest, familiarity or
intimidation threat is removing the individual from the audit team.
521.6 A4 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 close family member.

Other Close Relationships of an Audit Team Member

R521.7 An audit team member shall consult in accordance with firm policies and pro-
cedures if the audit team member has a close relationship with an individual who
is not an immediate or close family member, but who is:
(a) A director or officer of the audit client; or
(b) 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
firm will express an opinion.
521.7 A1 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 individual and the audit team mem-
ber.
• The position the individual holds with the client.
• The role of the audit team member.
521.7 A2 An example of an action that might eliminate such a self-interest, familiarity or
intimidation threat is removing the individual from the audit team.
521.7 A3 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 individual with whom the audit team member has a close
relationship.

Relationships of Partners and Employees of the Firm

R521.8 Partners and employees of the firm shall consult in accordance with firm policies
and procedures if they are aware of a personal or family relationship between:
(a) A partner or employee of the firm or network firm who is not an audit team
member; and
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 147

(b) A director or officer of the audit client or an employee of the audit client in a
position to exert significant influence over the preparation of the client’s
accounting records or the financial statements on which the firm will express
an opinion.
521.8 A1 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 partner or employee of the firm and
the director or officer or employee of the client.
• The degree of interaction of the partner or employee of the firm with the audit
team.
• The position of the partner or employee within the firm.
• The position the individual holds with the client.
521.8 A2 Examples of actions that might be safeguards to address such self-interest, famili-
arity or intimidation threats include:
• Structuring the partner’s or employee’s responsibilities to reduce any potential
influence over the audit engagement.
• Having an appropriate reviewer review the relevant audit work performed.

Section 522
Recent Service with an Audit Client
Introduction
522.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
522.2 If an audit team member has recently served as a director or officer, or employee
of the audit client, a self-interest, self-review or familiarity threat might be cre-
ated. This section sets out specific requirements and application material relevant
to applying the conceptual framework in such circumstances.

Requirements and Application Material

Service During Period Covered by the Audit Report
R522.3 The audit team shall not include an individual who, during the period covered by
the audit report:
(a) Had served as a director or officer of the audit client; or
(b) Was an employee in a position to exert significant influence over the prepar-
ation of the client’s accounting records or the financial statements on which
the firm will express an opinion.
Service Prior to Period Covered by the Audit Report
522.4 A1 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 the audit client; or
(b) Was an employee in a position to exert significant influence over the prepar-
ation of the client’s accounting records or financial statements on which the
firm will express an opinion.
ET – 148 SAICA Student Handbook 2023/2024

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 client, is to be evaluated
in the current period as part of the current audit engagement.
522.4 A2 Factors that are relevant in evaluating the level of such threats include:
• The position the individual held with the client.
• The length of time since the individual left the client.
• The role of the audit team member.
522.4 A3 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 audit team member.

Section 523
Serving as a Director or Officer of an Audit Client
Introduction
523.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
523.2 Serving as a director or officer of an audit client creates self-review and self-
interest threats. This section sets out specific requirements and application materi-
al relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

Service as Director or Officer
R523.3 A partner or employee of the firm or a network firm shall not serve as a director or
officer of an audit client of the firm.

Service as Company Secretary

R523.4 A partner or employee of the firm or a network firm shall not serve as Company
Secretary for an audit client of the firm, unless:
(a) This practice is specifically permitted under local law, professional rules or
practice;
(b) Management makes all relevant decisions; and
(c) The duties and activities performed are limited to those of a routine and
administrative nature, such as preparing minutes and maintaining statutory
returns.
523.4 A1 The position of Company Secretary has different implications in different jurisdic-
tions. Duties might range from: administrative duties (such as personnel manage-
ment 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 asso-
ciation with the entity. Therefore, a threat is created if a partner or employee of the
firm or a network firm serves as Company Secretary for an audit client. (More
information on providing non-assurance services to an audit client is set out in
Section 600, Provision of Non-assurance Services to an Audit Client.)
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 149

Section 524
Employment with an Audit Client
Introduction
524.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
524.2 Employment relationships with an audit client might create a self-interest, famili-
arity or intimidation threat. This section sets out specific requirements and appli-
cation material relevant to applying the conceptual framework in such circum-
stances.

Requirements and Application Material

All Audit Clients
524.3 A1 A familiarity or intimidation threat might be created if any of the following indi-
viduals have been an audit team member or partner of the firm or a network firm:
• A director or officer of the audit client.
• 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 firm
will express an opinion.

Former Partner or Audit Team Member Restrictions

R524.4 The firm shall ensure that no significant connection remains between the firm or a
network firm and:
(a) A former partner who has joined an audit client of the firm; or
(b) A former audit team member who has joined the audit client, if either has
joined the audit client as:
(i) A director or officer; or
(ii) An employee in a position to exert significant influence over the
preparation of the client’s accounting records or the financial state-
ments on which the firm will express an opinion.
A significant connection remains between the firm or a network firm and the indi-
vidual, unless:
(a) The individual is not entitled to any benefits or payments from the firm or
network firm that are not made in accordance with fixed pre-determined
arrangements;
(b) Any amount owed to the individual is not material to the firm or the network
firm; and
(c) The individual does not continue to participate or appear to participate in the
firm’s or the network firm’s business or professional activities.
524.4 A1 Even if the requirements of paragraph R524.4 are met, a familiarity or intimida-
tion threat might still be created.
524.4 A2 A familiarity or intimidation threat might also be created if a former partner of the
firm or network firm has joined an entity in one of the positions described in para-
graph 524.3 A1 and the entity subsequently becomes an audit client of the firm.
ET – 150 SAICA Student Handbook 2023/2024

524.4 A3 Factors that are relevant in evaluating the level of such threats include:
• The position the individual has taken at the client.
• 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
the firm or network firm.
• The former position of the individual within the audit team, firm or network
firm. An example is whether the individual was responsible for maintaining
regular contact with the client’s management or those charged with govern-
ance.
524.4 A4 Examples of actions that might be safeguards to address such familiarity or intim-
idation threats include:
• Modifying the audit plan.
• Assigning to the audit team individuals who have sufficient experience relative
to the individual who has joined the client.
• Having an appropriate reviewer review the work of the former audit team
member.
Audit Team Members Entering Employment with a Client
R524.5 A firm or network firm shall have policies and procedures that require audit team
members to notify the firm or network firm when entering employment negoti-
ations with an audit client.
524.5 A1 A self-interest threat is created when an audit team member participates in the
audit engagement while knowing that the audit team member will, or might, join
the client at some time in the future.
524.5 A2 An example of an action that might eliminate such a self-interest threat is remov-
ing the individual from the audit team.
524.5 A3 An example of an action that might be a safeguard to address such a self-interest
threat is having an appropriate reviewer review any significant judgements made
by that individual while on the team.
Audit Clients that are Public Interest Entities
Key Audit Partners
R524.6 Subject to paragraph R524.8, if an individual who was a key audit partner with
respect to an audit client that is a public interest entity joins the client as:
(a) A director or officer; or
(b) 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
firm will express an opinion,
independence is compromised unless, subsequent to the individual ceasing to be a
key audit partner:
(i) The audit client has issued audited financial statements covering a
period of not less than twelve months; and
(ii) The individual was not an audit team member with respect to the
audit of those financial statements.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 151

Senior or Managing Partner (Chief Executive or Equivalent) of the Firm

R524.7 Subject to paragraph R524.8, if an individual who was the Senior or Managing
Partner (Chief Executive or equivalent) of the firm joins an audit client that is a
public interest entity as:
(a) A director or officer; or
(b) 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
firm will express an opinion,
independence is compromised, unless twelve months have passed since the indi-
vidual was the Senior or Managing Partner (Chief Executive or equivalent) of the
firm.

Business Combinations
R524.8 As an exception to paragraphs R524.6 and R524.7, independence is not compro-
mised if the circumstances set out in those paragraphs arise as a result of a busi-
ness 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 the firm or a
network firm have been settled in full, unless made in accordance with fixed
pre-determined arrangements and any amount owed to the partner is not ma-
terial to the firm or network firm as applicable;
(c) The former partner does not continue to participate or appear to participate
in the firm’s or network firm’s business or professional activities; and
(d) The firm discusses the former partner’s position held with the audit client
with those charged with governance.

Section 525
Temporary Personnel Assignments
Introduction
525.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
525.2 The loan of personnel to an audit client might create a self-review, advocacy or
familiarity threat. This section sets out specific requirements and application ma-
terial relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

General
525.3 A1 Examples of actions that might be safeguards to address threats created by the
loan of personnel by a firm or a network firm to an audit client include:
• Conducting an additional review of the work performed by the loaned person-
nel might address a self-review threat.
• Not including the loaned personnel as an audit team member might address a
familiarity or advocacy threat.
ET – 152 SAICA Student Handbook 2023/2024

• Not giving the loaned personnel audit responsibility for any function or activ-
ity that the personnel performed during the loaned personnel assignment might
address a self-review threat.
525.3 A2 When familiarity and advocacy threats are created by the loan of personnel by a
firm or a network firm to an audit client, such that the firm or the network firm
becomes too closely aligned with the views and interests of management, safe-
guards are often not available.
R525.4 A firm or network firm shall not loan personnel to an audit client unless the firm
or network firm is satisfied that:
(a) Such assistance is provided only for a short period of time;
(b) Such personnel will not assume management responsibilities and the audit
client will be responsible for directing and supervising the activities of such
personnel;
(c) Any threat to the independence of the firm or network firm arising from the
professional services undertaken by such personnel is eliminated or safe-
guards are applied to reduce such threat to an acceptable level; and
(d) Such personnel will not undertake or be involved in professional services
that the firm or network firm is prohibited from performing by the Code

Section 540
Long Association of Personnel (including Partner Rotation) with an
Audit Client
Introduction
540.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
540.2 When an individual is involved in an audit engagement over a long period of time,
familiarity and self-interest threats might be created. This section sets out require-
ments and application material relevant to applying the conceptual framework in
such circumstances.

Requirements and Application Material10

All Audit Clients
540.3 A1 Although an understanding of an audit client and its environment is fundamental
to audit quality, a familiarity threat might be created as a result of an individual’s
long association as an audit team member with:
(a) The audit client and its operations;
(b) The audit client’s senior management; or
(c) The financial statements on which the firm will express an opinion or the
financial information which forms the basis of the financial statements.

________________________

10 To be read in conjunction with the Section 92 of the South African Companies Act, 2008 (Act No 71of 2008) for the
audits of companies in South Africa.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 153

540.3 A2 A self-interest threat might be created as a result of an individual’s concern about

losing a longstanding client or an interest in maintaining a close personal relation-
ship with a member of senior management or those charged with governance.
Such a threat might influence the individual’s judgement inappropriately.
540.3 A3 Factors that are relevant to evaluating the level of such familiarity or self-interest
threats include:
(a) In relation to the individual:
• The overall length of the individual’s relationship with the client, includ-
ing if such relationship existed while the individual was at a prior firm.
• How long the individual has been an engagement team member, and the
nature of the roles performed.
• The extent to which the work of the individual is directed, reviewed and
supervised by more senior personnel.
• The extent to which the individual, due to the individual’s seniority, has
the ability to influence the outcome of the audit, for example, by making
key decisions or directing the work of other engagement team members.
• The closeness of the individual’s personal relationship with senior
management or those charged with governance.
• The nature, frequency and extent of the interaction between the individu-
al and senior management or those charged with governance.
(b) In relation to the audit client:
• The nature or complexity of the client’s accounting and financial report-
ing issues and whether they have changed.
• Whether there have been any recent changes in senior management or
those charged with governance.
• Whether there have been any structural changes in the client’s organ-
isation which impact the nature, frequency and extent of interactions the
individual might have with senior management or those charged with
governance.
540.3 A4 The combination of two or more factors might increase or reduce the level of the
threats. For example, familiarity threats created over time by the increasingly
close relationship between an individual and a member of the client’s senior man-
agement would be reduced by the departure of that member of the client’s senior
management.
540.3 A5 An example of an action that might eliminate the familiarity and self-interest
threats created by an individual being involved in an audit engagement over a long
period of time would be rotating the individual off the audit team.
540.3 A6 Examples of actions that might be safeguards to address such familiarity or self-
interest threats include:
• Changing the role of the individual on the audit team or the nature and extent
of the tasks the individual performs.
• Having an appropriate reviewer who was not an audit team member review the
work of the individual.
• Performing regular independent internal or external quality reviews of the en-
gagement.
ET – 154 SAICA Student Handbook 2023/2024

R540.4 If a firm decides that the level of the threats created can only be addressed by
rotating the individual off the audit team, the firm shall determine an appropriate
period during which the individual shall not:
(a) Be a member of the engagement team for the audit engagement;
(b) Perform an engagement quality review, or a review consistent with the
objective of an engagement quality review, for the engagement; or
(c) Exert direct influence on the outcome of the audit engagement.
The period shall be of sufficient duration to allow the familiarity and self-interest
threats to be addressed. In the case of a public interest entity, paragraphs R540.5
to R540.20 also apply.

Audit Clients that are Public Interest Entities

R540.5 Subject to paragraphs R540.7 to R540.9, in respect of an audit of a public interest
entity, an individual shall not act in any of the following roles, or a combination
of such roles, for a period of more than seven cumulative years (the “time-on”
period):
(a) The engagement partner;
(b) The individual appointed as responsible for performing the engagement
quality control review; or
(c) Any other key audit partner role.
After the time-on period, the individual shall serve a “cooling-off” period in
accordance with the provisions in paragraphs R540.11 to R540.19.
R540.6 In calculating the time-on period, the count of years shall not be restarted unless
the individual ceases to act in any one of the roles in paragraph R540.5(a) to (c)
for a minimum period. This minimum period is a consecutive period equal to at
least the cooling-off period determined in accordance with paragraphs R540.11 to
R540.13 as applicable to the role in which the individual served in the year imme-
diately before ceasing such involvement.
540.6 A1 For example, an individual who served as engagement partner for four years fol-
lowed by three years off can only act thereafter as a key audit partner on the same
audit engagement for three further years (making a total of seven cumulative
years). Thereafter, that individual is required to cool off in accordance with para-
graph R540.14.
R540.7 As an exception to paragraph R540.5, key audit partners whose continuity is
especially important to audit quality may, in rare cases due to unforeseen circum-
stances outside the firm’s control, and with the concurrence of those charged with
governance, be permitted to serve an additional year as a key audit partner as long
as the threat to independence can be eliminated or reduced to an acceptable level.
540.7 A1 For example, a key audit partner may remain in that role on the audit team for up
to one additional year in circumstances where, due to unforeseen events, a required
rotation was not possible, as might be the case due to serious illness of the intended
engagement partner. In such circumstances, this will involve the firm discussing
with those charged with governance the reasons why the planned rotation cannot
take place and the need for any safeguards to reduce any threat created.
R540.8 If an audit client becomes a public interest entity, a firm shall take into account the
length of time an individual has served the audit client as a key audit partner
before the client becomes a public interest entity in determining the timing of the
rotation. If the individual has served the audit client as a key audit partner for a
period of five cumulative years or less when the client becomes a public interest
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 155

entity, the number of years the individual may continue to serve the client in that
capacity before rotating off the engagement is seven years less the number of
years already served. As an exception to paragraph R540.5, if the individual has
served the audit client as a key audit partner for a period of six or more cumulative
years when the client becomes a public interest entity, the individual may continue
to serve in that capacity with the concurrence of those charged with governance
for a maximum of two additional years before rotating off the engagement.
R540.9 When a firm has only a few people with the necessary knowledge and experience
to serve as a key audit partner on the audit of a public interest entity, rotation of
key audit partners might not be possible. As an exception to paragraph R540.5,
if an independent regulatory body in the relevant jurisdiction has provided an ex-
emption from partner rotation in such circumstances, an individual may remain a
key audit partner for more than seven years, in accordance with such exemption.
This is provided that the independent regulatory body has specified other require-
ments which are to be applied, such as the length of time that the key audit partner
may be exempted from rotation or a regular independent external review10.
Other Considerations Relating to the Time-on Period
R540.10 In evaluating the threats created by an individual’s long association with an audit
engagement, a firm shall give particular consideration to the roles undertaken and
the length of an individual’s association with the audit engagement prior to the in-
dividual becoming a key audit partner.
540.10 A1 There might be situations where the firm, in applying the conceptual framework,
concludes that it is not appropriate for an individual who is a key audit partner to
continue in that role even though the length of time served as a key audit partner is
less than seven years.
Cooling-off Period
R540.11 If the individual acted as the engagement partner for seven cumulative years, the
cooling-off period shall be five consecutive years.
R540.12 Where the individual has been appointed as responsible for the engagement
quality control review and has acted in that capacity for seven cumulative years,
the cooling-off period shall be three consecutive years.
R540.13 If the individual has acted as a key audit partner other than in the capacities set out
in paragraphs R540.11 and R540.12 for seven cumulative years, the cooling-off
period shall be two consecutive years.
540.13 A1 The partner rotation requirements in this section are distinct from, and do not
modify, the cooling-off period required by ISQM 2 as a condition for eligibility
before the engagement partner can assume the role of engagement quality reviewer
(see paragraph 325.8 A4).
Service in a combination of key audit partner roles
R540.14 If the individual acted in a combination of key audit partner roles and served as
the engagement partner for four or more cumulative years, the cooling-off period
shall be five consecutive years.
ET – 156 SAICA Student Handbook 2023/2024

R540.15 Subject to paragraph R540.16(a), if the individual acted in a combination of key

audit partner roles and served as the key audit partner responsible for the engage-
ment quality review for four or more cumulative years, the cooling-off period
shall be three consecutive years.
R540.16 If an individual has acted in a combination of engagement partner and engagement
quality review roles for four or more cumulative years during the time-on period,
the cooling-off period shall:
(a) As an exception to paragraph R540.15, be five consecutive years where the
individual has been the engagement partner for three or more years; or
(b) Be three consecutive years in the case of any other combination.
R540.17 If the individual acted in any combination of key audit partner roles other than
those addressed in paragraphs R540.14 to R540.16, the cooling-off period shall be
two consecutive years.

Service at a Prior Firm

R540.18 In determining the number of years that an individual has been a key audit partner
as set out in paragraph R540.5, the length of the relationship shall, where relevant,
include time while the individual was a key audit partner on that engagement at a
prior firm.

Shorter Cooling-off Period Established by Law or Regulation

R540.19 Where a legislative or regulatory body (or organisation authorised or recognised
by such legislative or regulatory body) has established a cooling-off period for an
engagement partner of less than five consecutive years, the higher of that period or
three years may be substituted for the cooling-off period of five consecutive years
specified in paragraphs R540.11, R540.14 and R540.16(a) provided that the applic-
able time-on period does not exceed seven years.

Restrictions on Activities During the Cooling-off Period

R540.20 For the duration of the relevant cooling-off period, the individual shall not:
(a) Be an engagement team member or perform an engagement quality review,
or a review consistent with the objective of an engagement quality review
for the audit engagement;
(b) Consult with the engagement team or the client regarding technical or
industry-specific issues, transactions or events affecting the audit engage-
ment (other than discussions with the engagement team limited to work
undertaken or conclusions reached in the last year of the individual’s time-
on period where this remains relevant to the audit);
(c) Be responsible for leading or coordinating the professional services provided
by the firm or a network firm to the audit client, or overseeing the relation-
ship of the firm or a network firm with the audit client; or
(d) Undertake any other role or activity not referred to above with respect to the
audit client, including the provision of non-assurance services that would
result in the individual:
(i) Having significant or frequent interaction with senior management or
those charged with governance; or
(ii) Exerting direct influence on the outcome of the audit engagement.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 157

540.20 A1 The provisions of paragraph R540.20 are not intended to prevent the individual
from assuming a leadership role in the firm or a network firm, such as that of the
Senior or Managing Partner (Chief Executive or equivalent).

Section 600
Provision of Non-Assurance Services to an Audit Client
Introduction
600.1 Firms are required to comply with the fundamental principles, be independent, and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
600.2 Firms and network 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 and threats to independence.
600.3 This section sets out requirements and application material relevant to applying the
conceptual framework to identify, evaluate and address threats to independence
when providing non-assurance services to audit clients. The subsections that follow
set out specific requirements and application material relevant when a firm or net-
work firm provides certain non-assurance services to audit clients and indicate the
types of threats that might be created as a result.
600.4 Some of the subsections include requirements that expressly prohibit a firm or
network firm from providing certain services to an audit client because the threats
created cannot be eliminated and safeguards are not capable of being applied to
reduce the threats to an acceptable level.
600.5 New business practices, the evolution of financial markets and changes in technol-
ogy are some developments that make it impossible to draw up an all-inclusive list
of non-assurance services that firms and network firms might provide to an audit
client. The conceptual framework and the general provisions in this section apply
when a firm proposes to a client to provide a non-assurance service for which
there are no specific requirements and application material.

Requirements and Application Material

General
Non-Assurance Services Provisions in Laws or Regulations
600.6 A1 Paragraphs R100.6 to 100.7 A1 set out requirements and application material
relating to compliance with the Code. If there are laws and regulations in a juris-
diction relating to the provision of non-assurance services to audit clients that dif-
fer from or go beyond those set out in this section, firms providing non-assurance
services to which such provisions apply need to be aware of those differences and
comply with the more stringent provisions.
Risk of Assuming Management Responsibilities when Providing a Non-Assurance Service
600.7 A1 When a firm or a network firm provides a non-assurance service to an audit client,
there is a risk that the firm or network firm will assume a management responsibil-
ity unless the firm or network firm is satisfied that the requirements in paragraph
R400.14 have been complied with.
ET – 158 SAICA Student Handbook 2023/2024

Accepting an Engagement to Provide a Non-Assurance Service

R600.8 Before a firm or a network firm accepts an engagement to provide a non-assurance
service to an audit client, the firm shall apply the conceptual framework to iden-
tify, evaluate and address any threat to independence that might be created by pro-
viding that service.

Identifying and Evaluating Threats

All Audit Clients
600.9 A1 A description of the categories of threats that might arise when a firm or a network
firm provides a non-assurance service to an audit client is set out in paragraph
120.6 A3.
600.9 A2 Factors that are relevant in identifying the different threats that might be created
by providing a non-assurance service to an audit client, and evaluating the level of
such threats include:
• The nature, scope, intended use and purpose of the service.
• The manner in which the service will be provided, such as the personnel to be
involved and their location.
• The legal and regulatory environment in which the service is provided.
• Whether the client is a public interest entity.
• The level of expertise of the client’s management and employees with respect
to the type of service provided.
• The extent to which the client determines significant matters of judgment.
(Ref: Para. R400.13 to R400.14).
• Whether the outcome of the service will affect the accounting records or mat-
ters reflected in the financial statements on which the 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 nature and extent of the impact of the service, if any, on the systems that
generate information that forms a significant part of the client’s:
o Accounting records or financial statements on which the firm will express
an opinion.
o Internal controls over financial reporting.
• The degree of reliance that will be placed on the outcome of the service as part
of the audit.
• The fee relating to the provision of the non-assurance service.
600.9 A3 Subsections 601 to 610 include examples of additional factors that are relevant in
identifying threats to independence created by providing certain non-assurance
services, and evaluating the level of such threats.

Materiality in relation to financial statements

600.10 A1 Materiality is a factor that is relevant in evaluating threats created by providing a
non-assurance service to an audit client. Subsections 601 to 610 refer to material-
ity in relation to an audit client’s financial statements. The concept of materiality
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 159

in relation to an audit is addressed in ISA 320, Materiality in Planning and Per-

forming an Audit, and in relation to a review in ISRE 2400 (Revised), Engage-
ments to Review Historical Financial Statements. The determination of materiality
involves the exercise of professional judgment and is impacted by both quantita-
tive and qualitative factors. It is also affected by perceptions of the financial in-
formation needs of users.
600.10 A2 Where the Code expressly prohibits the provision of a non-assurance service to an
audit client, a firm or a network firm is not permitted to provide that service, re-
gardless of the materiality of the outcome or results of the non-assurance service
on the financial statements on which the firm will express an opinion.

Providing advice and recommendations

600.11 A1 Providing advice and recommendations might create a self-review threat. Whether
providing advice and recommendations creates a self-review threat involves mak-
ing the determination set out in paragraph R600.14. Where the audit client is not a
public interest entity and a self-review threat is identified, the firm is required to
apply the conceptual framework to evaluate and address the threat. If the audit cli-
ent is a public interest entity, paragraphs R600.16 and R600.17 apply.
Multiple non-assurance services provided to the same audit client
R600.12 When a firm or a network firm provides multiple non-assurance services to an
audit client, the firm shall consider whether, in addition to the threats created by
each service individually, the combined effect of such services creates or impacts
threats to independence.
600.12 A1 In addition to paragraph 600.9 A2, factors that are relevant in a firm’s evaluation
of the level of threats to independence created where multiple non-assurance ser-
vices are provided to an audit client might include whether:
• The combined effect of providing multiple services increases the level of threat
created by each service assessed individually.
• The combined effect of providing multiple services increases the level of any
threat arising from the overall relationship with the audit client.
Self-review threats
600.13 A1 When a firm or a network firm provides a non-assurance service to an audit client,
there might be a risk of the firm auditing its own or the network firm’s work,
thereby giving rise to a self-review threat. A self-review threat is the threat that a
firm or a network firm will not appropriately evaluate the results of a previous
judgment made or an activity performed by an individual within the firm or net-
work firm as part of a non-assurance service on which the audit team will rely
when forming a judgment as part of an audit.
R600.14 Before providing a non-assurance service to an audit client, a firm or a network
firm shall determine whether the provision of that service might create a self-
review threat by evaluating whether there is a risk that:
(a) The results of the service will form part of or affect the accounting records,
the internal controls over financial reporting, or the financial statements on
which the firm will express an opinion; and
(b) In the course of the audit of those financial statements on which the firm will
express an opinion, the audit team will evaluate or rely on any judgments
made or activities performed by the firm or network firm when providing the
service.
ET – 160 SAICA Student Handbook 2023/2024

Audit Clients that are Public Interest Entities

600.15 A1 When the audit client is a public interest entity, stakeholders have heightened
expectations regarding the firm’s independence. These heightened expectations
are relevant to the reasonable and informed third party test used to evaluate a self-
review threat created by providing a non-assurance service to an audit client that is
a public interest entity.
600.15 A2 Where the provision of a non-assurance service to an audit client that is a public
interest entity creates a self-review threat, that threat cannot be eliminated, and
safeguards are not capable of being applied to reduce that threat to an acceptable
level.
Self-review threats
R600.16 A firm or a network firm shall not provide a non-assurance service to an audit
client that is a public interest entity if the provision of that service might create a
self-review threat in relation to the audit of the financial statements on which the
firm will express an opinion. (Ref: Para. 600.13 A1 and R600.14).
Providing advice and recommendations
R600.17 As an exception to paragraph R600.16, a firm or a network firm may provide
advice and recommendations to an audit client that is a public interest entity in
relation to information or matters arising in the course of an audit provided that
the firm:
(a) Does not assume a management responsibility (Ref: Para. R400.13 and
R400.14); and
(b) Applies the conceptual framework to identify, evaluate and address threats,
other than self-review threats, to independence that might be created by the
provision of that advice.
600.17 A1 Examples of advice and recommendations that might be provided in relation to
information or matters arising in the course of an audit include:
• Advising on accounting and financial reporting standards or policies and finan-
cial statement disclosure requirements.
• Advising on the appropriateness of financial and accounting control and the
methods used in determining the stated amounts in the financial statements and
related disclosures.
• Proposing adjusting journal entries arising from audit findings.
• Discussing findings on internal controls over financial reporting and processes
and recommending improvements.
• Discussing how to resolve account reconciliation problems.
• Advising on compliance with group accounting policies.
Addressing Threats
All Audit Clients
600.18 A1 Paragraphs R120.10 to 120.10 A2 include a requirement and application material
that are relevant when addressing threats to independence, including a description
of safeguards.
600.18 A2 Threats to independence created by providing a non-assurance service or multiple
services to an audit client vary depending on the facts and circumstances of the
audit engagement and the nature of the service. Such threats might be addressed
by applying safeguards or by adjusting the scope of the proposed service.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 161

600.18 A3 Examples of actions that might be safeguards to address such threats include:
• Using professionals who are not audit team members to perform the service.
• Having an appropriate reviewer who was not involved in providing the service
review the audit work or service performed.
• Obtaining pre-clearance of the outcome of the service from an appropriate
authority (for example, a tax authority).
600.18 A4 Safeguards might not be available to reduce the threats created by providing a
non-assurance service to an audit client to an acceptable level. In such a situation,
the application of the conceptual framework requires the firm or network firm to:
(a) Adjust the scope of the proposed service to eliminate the circumstances that
are creating the threats;
(b) Decline or end the service that creates the threats that cannot be eliminated
or reduced to an acceptable level; or
(c) End the audit engagement.

Communication with Those Charged With Governance Regarding Non-Assurance Services

All Audit Clients
600.19 A1 Paragraphs 400.40 A1 and 400.40 A2 are relevant to a firm’s communication with
those charged with governance in relation to the provision of non-assurance ser-
vices.
Audit Clients that are Public Interest Entities
600.20 A1 Paragraphs R600.21 to R600.23 require a firm to communicate with those charged
with governance of a public interest entity before the firm or network firm pro-
vides non-assurance services to entities within the corporate structure of which the
public interest entity forms part that might create threats to the firm’s independ-
ence from the public interest entity. The purpose of the communication is to ena-
ble those charged with governance of the public interest entity to have effective
oversight of the independence of the firm that audits the financial statements of
that public interest entity.
600.20 A2 To facilitate compliance with such requirements, a firm might agree with those
charged with governance of the public interest entity a process that addresses
when and with whom the firm is to communicate. Such a process might:
• Establish the procedure for the provision of information about a proposed non-
assurance service which might be on an individual engagement basis, under a
general policy, or on any other agreed basis.
• Identify the entities to which the process would apply, which might include
other public interest entities within the corporate structure.
• Identify any services that can be provided to the entities identified in paragraph
R600.21 without specific approval of those charged with governance if they
agree as a general policy that these services are not prohibited under this sec-
tion and would not create threats to the firm’s independence or, if any such
threats are created, they would be at an acceptable level.
• Establish how those charged with governance of multiple public interest en-
tities within the same corporate structure have determined that authority for
approving services is to be allocated.
• Establish a procedure to be followed where the provision of information neces-
sary for those charged with governance to evaluate whether a proposed service
ET – 162 SAICA Student Handbook 2023/2024

might create a threat to the firm’s independence is prohibited or limited by pro-

fessional standards, laws or regulations, or might result in the disclosure of
sensitive or confidential information.
• Specify how any issues not covered by the process might be resolved.
R600.21 Before a firm that audits the financial statements of a public interest entity, or a
network firm accepts an engagement to provide a non-assurance service to:
(A) That public interest entity;
(B) Any entity that controls, directly or indirectly, that public interest entity; or
(C) Any entity that is controlled directly or indirectly by that public interest
entity,
the firm shall, unless already addressed when establishing a process agreed with
those charged with governance:
(a) Inform those charged with governance of the public interest entity that the
firm has determined that the provision of the service:
(i) Is not prohibited; and
(ii) Will not create a threat to the firm’s independence as auditor of the
public interest entity or that any identified threat is at an acceptable
level or, if not, will be eliminated or reduced to an acceptable level;
and
(b) Provide those charged with governance of the public interest entity with
information to enable them to make an informed assessment about the im-
pact of the provision of the service on the firm’s independence.
600.21 A1 Examples of information that might be provided to those charged with governance
of the public interest entity in relation to a particular non-assurance service in-
clude:
• The nature and scope of the service to be provided.
• The basis and amount of the proposed fee.
• Where the firm has identified any threats to independence that might be cre-
ated by the provision of the proposed service, the basis for the firm’s assess-
ment that the threats are at an acceptable level or, if not, the actions the firm or
network firm will take to eliminate or reduce any threats to independence to an
acceptable level.
• Whether the combined effect of providing multiple services creates threats to
independence or changes the level of previously identified threats.
R600.22 A firm or a network firm shall not provide a non-assurance service to any of the
entities referred to in paragraph R600.21 unless those charged with governance of
the public interest entity have concurred either under a process agreed with those
charged with governance or in relation to a specific service with:
(a) The firm’s conclusion that the provision of the service will not create a
threat to the firm’s independence as auditor of the public interest entity, or
that any identified threat is at an acceptable level or, if not, will be eliminat-
ed, or reduced to an acceptable level; and
(b) The provision of that service.
R600.23 As an exception to paragraphs R600.21 and R600.22, where a firm is prohibited
by applicable professional standards, laws or regulations from providing infor-
mation about the proposed non-assurance service to those charged with govern-
ance of the public interest entity, or where the provision of such information
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 163

would result in disclosure of sensitive or confidential information, the firm may

provide the proposed service provided that:
(a) The firm provides such information as it is able without breaching its legal
or professional obligations;
(b) The firm informs those charged with governance of the public interest entity
that the provision of the service will not create a threat to the firm’s inde-
pendence from the public interest entity, or that any identified threat is at an
acceptable level or, if not, will be eliminated or reduced to an acceptable
level; and
(c) Those charged with governance do not disagree with the firm’s conclusion
in (b).
R600.24 The firm or the network firm, having taken into account any matters raised by
those charged with governance of the audit client that is a public interest entity or
by the entity referred to in paragraph R600.21 that is the recipient of the proposed
service, shall decline the non-assurance service or the firm shall end the audit en-
gagement if:
(a) The firm or the network firm is not permitted to provide any information to
those charged with governance of the audit client that is a public interest en-
tity, unless such a situation is addressed in a process agreed in advance with
those charged with governance; or
(b) Those charged with governance of an audit client that is a public interest
entity disagree with the firm’s conclusion that the provision of the service
will not create a threat to the firm’s independence from the client or that any
identified threat is at an acceptable level or, if not, will be eliminated or re-
duced to an acceptable level.
Audit Client that Later Becomes a Public Interest Entity
R600.25 A non-assurance service provided, either currently or previously, by a firm or a
network firm to an audit client compromises the firm’s independence when the
client becomes a public interest entity unless:
(a) The previous non-assurance service complies with the provisions of this
section that relate to audit clients that are not public interest entities;
(b) Non-assurance services currently in progress that are not permitted under
this section for audit clients that are public interest entities are ended before
or, if that is not possible, as soon as practicable after, the client becomes a
public interest entity; and
(c) The firm and those charged with governance of the client that becomes a
public interest entity agree and take further actions to address any threats to
independence that are not at an acceptable level.
600.25 A1 Examples of actions that the firm might recommend to the audit client include
engaging another firm to:
• Review or re-perform the affected audit work to the extent necessary.
• Evaluate the results of the non-assurance service or re-perform the non-
assurance service to the extent necessary to enable the other firm to take re-
sponsibility for the service.
Considerations for Certain Related Entities
R600.26 This section includes requirements that prohibit firms and network firms from pro-
viding certain non-assurance services to audit clients. As an exception to those
ET – 164 SAICA Student Handbook 2023/2024

requirements and the requirement in paragraph R400.13, a firm or a network firm

may assume management responsibilities or provide certain non-assurance services
that would otherwise be prohibited to the following related entities of the client on
whose financial statements the firm will express an opinion:
(a) An entity that has direct or indirect control over the client;
(b) An entity with a direct financial interest in the client if that entity has signifi-
cant influence over the client and the interest in the client is material to such
entity; or
(c) An entity which is under common control with the client, provided that all of
the following conditions are met:
(i) The firm or a network firm does not express an opinion on the finan-
cial statements of the related entity;
(ii) The firm or a network firm does not assume a management respon-
sibility, directly or indirectly, for the entity on whose financial state-
ments the firm will express an opinion;
(iii) The services do not create a self-review threat; and
(iv) The firm addresses other threats created by providing such services
that are not at an acceptable level.

Documentation
600.27 A1 Documentation of the firm’s conclusions regarding compliance with this section in
accordance with paragraphs R400.60 and 400.60 A1 might include:
• Key elements of the firm’s understanding of the nature of the non-assurance
service to be provided and whether and how the service might impact the
financial statements on which the firm will express an opinion.
• The nature of any threat to independence that is created by providing the ser-
vice to the audit client, including whether the results of the service will be sub-
ject to audit procedures.
• The extent of management’s involvement in the provision and oversight of the
proposed non-assurance service.
• Any safeguards that are applied, or other actions taken to address a threat to
independence.
• The firm’s rationale for determining that the service is not prohibited and that
any identified threat to independence is at an acceptable level.
• In relation to the provision of a proposed non-assurance service to the entities
referred to in paragraph R600.21, the steps taken to comply with paragraphs
R600.21 to R600.23.

Subsection 601 – Accounting and Bookkeeping Services

Introduction
601.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27 A1 are
relevant to applying the conceptual framework when providing accounting and
bookkeeping services to an audit client.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 165

Requirements and Application Material

General
601.2 A1 Management is responsible for the preparation and fair presentation of the finan-
cial 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.
• Determining or approving the account classifications of transactions.

Description of Service11
601.3 A1 Accounting and bookkeeping services comprise a broad range of services includ-
ing:
• Preparing accounting records or financial statements.
• Recording transactions.
• Providing payroll services.
• Resolving account reconciliation problems.
• Converting existing financial statements from one financial reporting frame-
work to another.

Potential Threats Arising from the Provision of Accounting and Bookkeeping Services
All Audit Clients
601.4 A1 Providing accounting and bookkeeping services to an audit client creates a self-
review threat when there is a risk that the results of the services will affect the
accounting records or the financial statements on which the firm will express an
opinion
Audit Clients that are Not Public Interest Entities
R601.5 A firm or a network firm shall not provide to an audit client that is not a public
interest entity accounting and bookkeeping services including preparing financial
statements on which the 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 firm addresses any threats that are created by providing such services
that are not at an acceptable level.

________________________

11 To be considered with the requirements of the South African Companies Act, 2008 (Act No 71 of 2008) Section
90(2).
ET – 166 SAICA Student Handbook 2023/2024

601.5 A1 Accounting and bookkeeping services that are routine or mechanical:

(a) Involve information, data or material in relation to which the client has made
any judgments or decisions that might be necessary; and
(b) Require little or no professional judgment.
601.5 A2 Examples of services that might be regarded as routine or mechanical include:
• Preparing payroll calculations or reports based on client-originated data for
approval and payment by the client.
• Recording recurring transactions for which amounts are easily determinable
from source documents or originating data, such as a utility bill where the client
has determined or approved the appropriate account classification.
• Calculating depreciation on fixed assets when the client determines the account-
ing policy and estimates of useful life and residual values.
• Posting transactions coded by the client to the general ledger.
• Posting client-approved entries to the trial balance.
• Preparing financial statements based on information in the client-approved trial
balance and preparing related notes based on client-approved records.
The firm or a network firm may provide such services to audit clients that are not
public interest entities provided that the firm or network firm complies with the
requirements of paragraph R400.14 to ensure that it does not assume a manage-
ment responsibility in connection with the service and with the requirement in
paragraph R601.5 (b).
601.5 A3 Examples of actions that might be safeguards to address a self-review threat cre-
ated when providing accounting and bookkeeping services of a routine and
mechanical nature to an audit client that is not a public interest include:
• Using professionals who are not audit team members to perform the service.
• Having an appropriate reviewer who was not involved in providing the service
review the audit work or service performed.

Audit Clients that are Public Interest Entities

R601.6 A firm or a network firm shall not provide accounting and bookkeeping services
to an audit client that is a public interest entity.
R601.7 As an exception to paragraph R601.6, a firm or network firm may prepare statu-
tory financial statements for a related entity of a public interest entity audit client
included in subparagraph (c) or (d) of the definition of a related entity provided
that:
(a) The audit report on the group financial statements of the public interest
entity has been issued;
(b) The firm or network firm does not assume management responsibility and
applies the conceptual framework to identify, evaluate and address threats to
independence;
(c) The firm or network firm does not prepare the accounting records underlying
the statutory financial statements of the related entity and those financial
statements are based on client approved information; and
(d) The statutory financial statements of the related entity will not form the basis
of future group financial statements of that public interest entity.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 167

Subsection 602 – Administrative Services

Introduction
602.1 In addition to the specific application material in this subsection, the requirements
and application material in paragraphs 600.1 to R600.27A1 are relevant to apply-
ing the conceptual framework when providing administrative services.

Application Material
Description of Service
602.2 A1 Administrative services involve assisting clients with their routine or mechanical
tasks within the normal course of operations.
602.2 A2 Examples of administrative services include:
• 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.

Potential Threats Arising from the Provision of Administrative Services

All Audit Clients
602.3 A1 Providing administrative services to an audit client does not usually create a threat
when such services are clerical in nature and require little to no professional
judgment.

Subsection 603 – Valuation Services

Introduction
603.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27A1 are
relevant to applying the conceptual framework when providing valuation services
to an audit client.

Requirements and Application Material

Description of Service
603.2 A1 A valuation comprises the making of assumptions with regard to future develop-
ments, the application of appropriate methodologies and techniques, and the com-
bination of both to compute a certain value, or range of values, for an asset, a
liability or for the whole or part of an entity.
603.2 A2 If a firm or network firm is requested to perform a valuation to assist an audit
client with its tax reporting obligations or for tax planning purposes and the results
of the valuation have no effect on the accounting records or the financial state-
ments other than through accounting entries related to tax, the requirements and
application material set out in paragraphs 604.17 A1 to 604.19 A1, relating to such
services, apply.
ET – 168 SAICA Student Handbook 2023/2024

Potential Threats Arising from the Provision of Valuation Services

All Audit Clients
603.3 A1 Providing a valuation service to an audit client might create a self-review threat
when there is a risk that the results of the service will affect the accounting records
or the financial statements on which the firm will express an opinion. Such a ser-
vice might also create an advocacy threat.
603.3 A2 Factors that are relevant in identifying self-review or advocacy threats created by
providing valuation services to an audit client, and evaluating the level of such
threats include:
• The use and purpose of the valuation report.
• Whether the valuation report will be made public.
• The extent to which the valuation methodology is supported by law or regu-
lation, other precedent or established practice.
• The extent of the client’s involvement in determining and approving the valu-
ation methodology and other significant matters of judgment.
• The degree of subjectivity inherent in the item for valuations involving stand-
ard or established methodologies.
• Whether the valuation will have a material effect on the financial statements.
• The extent of the disclosures related to the valuation in the financial statements.
• The volatility of the amounts involved as a result of dependence on future
events.
When a self-review threat for an audit client that is a public interest entity has been
identified, paragraph R603.5 applies.
Audit Clients that are Not Public Interest Entities
603.3 A3 Examples of actions that might be safeguards to address self-review or advocacy
threats created by providing a valuation service to an audit client that is not a pub-
lic interest entity include:
• Using professionals 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.
R603.4 A firm or a network firm shall not provide a valuation service to an audit client
that is not a public interest 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
which the firm will express an opinion.
603.4 A1 Certain valuations do not involve a significant degree of subjectivity. This is likely
to be the case when the underlying assumptions are either established by law or
regulation or when the techniques and methodologies to be used are based on gen-
erally 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.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 169

Audit Clients that are Public Interest Entities

Self-review Threats
R603.5 A firm or a network firm shall not provide a valuation service to an audit client
that is a public interest entity if the provision of such valuation service might cre-
ate a self-review threat. (Ref: Para. R600.14 and R600.16).
Advocacy Threats
603.5 A1 An example of an action that might be a safeguard to address an advocacy threat
created by providing a valuation service to an audit client that is a public interest
entity is using professionals who are not audit team members to perform the ser-
vice.

Subsection 604 – Tax Services

Introduction
604.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27A1 are
relevant to applying the conceptual framework when providing a tax service to an
audit client.

Requirements and Application Material

Description of Service
604.2 A1 Tax services comprise a broad range of services. This subsection deals specifically
with:
• Tax return preparation.
• Tax calculations for the purpose of preparing the accounting entries.
• Tax advisory services.
• Tax planning services.
• Tax services involving valuations.
• Assistance in the resolution of tax disputes.
604.2 A2 It is possible to consider tax services under broad headings, such as tax planning
or compliance. However, such services are often interrelated in practice and might
be combined with other types of non-assurance services provided by the firm such
as corporate finance services. It is, therefore, impracticable to categorise generic-
ally the threats to which specific tax services give rise.

Potential Threats Arising from the Provision of Tax Services

604.3 A1 Providing tax services to an audit client might create a self-review threat when
there is a risk that the results of the services will affect the accounting records or
the financial statements on which the firm will express an opinion. Such services
might also create an advocacy threat.
604.3 A2 Factors that are relevant in identifying self-review or advocacy threats created by
providing any tax service to an audit client and evaluating the level of such threats
include:
• The particular characteristics of the engagement.
• The level of tax expertise of the client’s employees.
ET – 170 SAICA Student Handbook 2023/2024

• The system by which the tax authorities assess and administer the tax in ques-
tion and the role of the firm or network firm in that process.
• The complexity of the relevant tax regime and the degree of judgement neces-
sary in applying it.
All Audit Clients
R604.4 A firm or a network firm shall not provide a tax service or recommend a trans-
action to an audit client if the service or transaction relates to marketing, planning,
or opining in favour of a tax treatment that was initially recommended, directly or
indirectly, by the firm or network firm, and a significant purpose of the tax treat-
ment or transaction is tax avoidance, unless the firm is confident that the proposed
treatment has a basis in applicable tax law or regulation that is likely to prevail.
604.4 A1 Unless the tax treatment has a basis in applicable tax law or regulation that the
firm is confident is likely to prevail, providing the non-assurance service described
in paragraph R604.4 creates self-interest, self-review and advocacy threats that
cannot be eliminated and safeguards are not capable of being applied to reduce
such threats to an acceptable level.

A. Tax Return Preparation

Description of Service
604.5 A1 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 standardised forms)
required to be submitted to the applicable tax authorities.
• Advising on the tax return treatment of past transactions.
• Responding on behalf of the audit client to the tax authorities’ requests for add-
itional information and analysis (for example, providing explanations of and
technical support for the approach being taken).

Potential Threats Arising from the Provision of Tax Return Preparation Services
All Audit Clients
604.6 A1 Providing tax return preparation services does not usually create a threat because:
(a) Tax return preparation services are based on historical information and prin-
cipally involve analysis and presentation of such historical information un-
der existing tax law, including precedents and established practice; and
(b) Tax returns are subject to whatever review or approval process the tax
authority considers appropriate.

B. Tax Calculations for the Purpose of Preparing Accounting Entries

Description of Service
604.7 A1 Tax calculation services involves the preparation of calculations of current and
deferred tax liabilities or assets for the purpose of preparing accounting entries
supporting tax assets or liabilities in the financial statements of the audit client.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 171

Potential Threats Arising from the Provision of Tax Calculation Services

All Audit Clients
604.8 A1 Preparing tax calculations of current and deferred tax liabilities (or assets) for an
audit client for the purpose of preparing accounting entries that support such bal-
ances creates a self-review threat.

Audit Clients that are Not Public Interest Entities

604.9 A1 In addition to the factors in paragraph 604.3 A2, a factor that is relevant in evalu-
ating the level of self-review threat created when preparing such calculations for
an audit client is whether the calculation might have a material effect on the finan-
cial statements on which the firm will express an opinion.
604.9 A2 Examples of actions that might be safeguards to address such a self-review threat
when the audit client is not a public interest entity include:
• Using professionals who are not audit team members to perform the service.
• Having an appropriate reviewer who was not involved in providing the service
review the audit work or service performed.

Audit Clients that are Public Interest Entities

R604.10 A firm or a network firm shall not prepare tax calculations of current and deferred
tax liabilities (or assets) for an audit client that is a public interest entity. (Ref:
Para. R600.14 and R600.16).

C. Tax Planning and Other Tax Advisory Services

Description of Service
604.11 A1 Tax advisory and tax planning services comprise a broad range of services, such
as advising the client how to structure its affairs in a tax efficient manner or advis-
ing on the application of a new tax law or regulation.

Potential Threats Arising from the Provision of Tax Advisory and Tax Planning Services
All Audit clients
604.12 A1 Providing tax advisory and tax planning services to an audit client might create a
self-review threat when there is a risk that the results of the services will affect the
accounting records or the financial statements on which the firm will express an
opinion. Such services might also create an advocacy threat.
604.12 A2 Providing tax advisory and tax planning services will not create a self-review
threat if such services:
(a) Are supported by a tax authority or other precedent;
(b) Are based on an established practice (being a practice that has been com-
monly used and has not been challenged by the relevant tax authority); or
(c) Have a basis in tax law that the firm is confident is likely to prevail.
604.12 A3 In addition to paragraph 604.3 A2, factors that are relevant in identifying self-
review or advocacy threats created by providing tax planning services to audit
clients, and evaluating the level of such threats include:
• The degree of subjectivity involved in determining the appropriate treatment
for the tax advice in the financial statements.
ET – 172 SAICA Student Handbook 2023/2024

• 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 state-
ments.
• The extent to which the outcome of the tax advice might have a material effect
on the financial statements.
When a self-review threat for an audit client that is a public interest entity has
been identified, paragraph R604.15 applies.
When Effectiveness of Tax Advice Is Dependent on a Particular Accounting Treatment or
Presentation
R604.13 A firm or a network firm shall not provide tax advisory and tax planning services
to an audit client when:
(a) The effectiveness of the tax advice depends on a particular accounting treat-
ment or presentation in the financial statements and:
(b) The audit team has doubt as to the appropriateness of the related accounting
treatment or presentation under the relevant financial reporting framework
Audit Clients that are Not Public Interest Entities
604.14 A1 Examples of actions that might be safeguards to address self-review or advocacy
threats created by providing tax advisory and tax planning services to an audit
client that is not a public interest entity include:
• Using professionals 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 ser-
vice, 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.
Audit Clients that are Public Interest Entities
Self-review Threats
R604.15 A firm or a network firm shall not provide tax advisory and tax planning services
to an audit client that is a public interest entity if the provision of such services
might create a self-review threat. (Ref: Para. R600.14, R600.16, 604.12 A2).
Advocacy Threats
604.15 A1 Examples of actions that might be safeguards to address an advocacy threat created
by providing tax advisory and tax planning services to an audit client that is a pub-
lic interest entity include:
• Using professionals who are not audit team members to perform the service.
• Obtaining pre-clearance from the tax authorities.

D. Tax Services Involving Valuations

Description of Service
604.16 A1 The provision of tax services involving valuations might arise in a range of cir-
cumstances including:
• Merger and acquisition transactions.
• Group restructurings and corporate reorganisations.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 173

• Transfer pricing studies.

• Stock-based compensation arrangements.

Potential Threats Arising from the Provision of Tax Services involving Valuations
All Audit Clients
604.17 A1 Providing a valuation for tax purposes to an audit client might create a self-review
threat when there is a risk that the results of the service will affect the accounting
records or the financial statements on which the firm will express an opinion. Such
a service might also create an advocacy threat.
604.17 A2 When a firm or a network firm performs a valuation for tax purposes to assist an
audit client with its tax reporting obligations or for tax planning purposes, the
result of the valuation might:
(a) Have no effect on the accounting records or the financial statements other
than through accounting entries related to tax. In such situations, the require-
ments and application material set out in this subsection apply.
(b) Affect the accounting records or the financial statements in ways not limited
to accounting entries related to tax, for example, if the valuation leads to a
revaluation of assets. In such situations, the requirements and application
material set out in subsection 603 relating to valuation services apply.
604.17 A3 Performing a valuation for tax purposes for an audit client will not create a self-
review threat if:
(a) The underlying assumptions are either established by law or regulation, or
are widely accepted; or
(b) The techniques and methodologies to be used are based on generally accepted
standards or prescribed by law or regulation, and the valuation is subject to
external review by a tax authority or similar regulatory authority.

Audit Clients that are Not Public Interest Entities

604.18 A1 A firm or a network firm might perform a valuation for tax purposes for an audit
client that is not a public interest entity where the result of the valuation only
affects the accounting records or the financial statements through accounting en-
tries related to tax This would not usually create threats if the effect on the finan-
cial statements is immaterial or the valuation, as incorporated in a tax return or
other filing, is subject to external review by a tax authority or similar regulatory
authority.
604.18 A2 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 para-
graph 604.3 A2, the following factors are relevant in evaluating the level of self-
review or advocacy threats created by providing those services to an audit client
that is not a public interest entity, and evaluating the level of such threats:
• The extent to which the valuation methodology is supported by tax law or regu-
lation, other precedent or established practice.
• The degree of subjectivity inherent in the valuation.
• The reliability and extent of the underlying data.
604.18 A3 Examples of actions that might be safeguards to address such threats for an audit
client that is not a public interest entity include:
• Using professionals who are not audit team members to perform the service
might address self-review or advocacy threats.
ET – 174 SAICA Student Handbook 2023/2024

• 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.

Audit Clients that are Public Interest Entities

Self-review Threats
R604.19 A firm or a network firm shall not perform a valuation for tax purposes for an
audit client that is a public interest entity if the provision of that service might cre-
ate a self-review threat. (Ref: Para. R600.14, R600.16, 604.17 A3).
Advocacy Threats
604.19 A1 Examples of actions that might be safeguards to address an advocacy threat cre-
ated by providing valuation for tax purposes for an audit client that is a public in-
terest entity include:
• Using professionals who are not audit team members to perform the service.
• Obtaining pre-clearance from the tax authorities.

E. Assistance in the Resolution of Tax Disputes

Description of Service
604.20 A1 A non-assurance service to provide assistance to an audit client in the resolution of
tax disputes might arise from a tax authority’s consideration of tax calculations and
treatments. Such a service might include, for example, providing assistance when
the tax authorities have notified the client that arguments on a particular issue have
been rejected and either the tax authority or the client refers the matter for deter-
mination in a formal proceeding before a tribunal or court.

Potential Threats Arising from the Provision of Assistance in the Resolution of Tax
Disputes
All Audit Clients
604.21 A1 Providing assistance in the resolution of tax disputes to an audit client might
create a self-review threat when there is a risk that the results of the service will
affect the accounting records or the financial statements on which the firm will
express an opinion. Such a service might also create an advocacy threat.
604.22 A1 In addition to those identified in paragraph 604.3 A2, factors that are relevant in
identifying self-review or advocacy threats created by assisting an audit client in
the resolution of tax disputes, and evaluating the level of such threats 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 financial statements on which the firm will express an opinion.
• Whether the firm or network firm provided the advice that 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.
When a self-review threat for an audit client that is a public interest entity has
been identified, paragraph R604.24 applies.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 175

Audit Clients that are Not Public Interest Entities

604.23 A1 Examples of actions that might be safeguards to address self-review or advocacy
threats created by assisting an audit client that is not a public interest entity in the
resolution of tax disputes include:
• Using professionals 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 the service performed might address a self-review
threat.
Audit Clients that are Public Interest Entities
Self-review Threats
R604.24 A firm or a network firm shall not provide assistance in the resolution of tax dis-
putes to an audit client that is a public interest entity if the provision of that assist-
ance might create a self-review threat. (Ref: Para. R600.14 and R600.16).
Advocacy Threats
604.24 A1 An example of an action that might be a safeguard to address an advocacy threat
for an audit client that is a public interest entity is using professionals who are not
audit team members to perform the service.

Resolution of Tax Matters Including Acting as An Advocate Before a Tribunal or Court

Audit Clients that are Not Public Interest Entities
R604.25 A firm or a network firm shall not provide tax services that involve assisting in the
resolution of tax disputes to an audit client that is not a public interest entity if:
(a) The services involve acting as an advocate for the audit client before a tri-
bunal or court in the resolution of a tax matter; and
(b) The amounts involved are material to the financial statements on which the
firm will express an opinion.
Audit Clients that are Public Interest Entities
R604.26 A firm or a network firm shall not provide tax services that involve assisting in the
resolution of tax disputes to an audit client that is a public interest entity if the ser-
vices involve acting as an advocate for the audit client before a tribunal or court.
604.27 A1 Paragraph R604.25 and R604.26 do not preclude a firm or network firm from
having a continuing advisory role in relation to the matter that is being heard be-
fore a tribunal or court, for example:
• Responding to specific requests for information.
• Providing factual accounts or testimony about the work performed.
• Assisting the client in analysing the tax issues related to the matter.
604.27 A2 What constitutes a “tribunal or court” depends on how tax proceedings are heard
in the particular jurisdiction.

Subsection 605 – Internal Audit Services

Introduction
605.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27 A1 are
relevant to applying the conceptual framework when providing an internal audit
service to an audit client.
ET – 176 SAICA Student Handbook 2023/2024

Requirements and Application Material

All Audit Clients
605.2 A1 Internal audit services comprise a broad range of activities and might involve
assisting the audit client in the performance of one or more aspects 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 finan-
cial 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.
605.2 A2 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 those
charged with governance as well as the needs and expectations of management.
As they might involve matters that are operational in nature, they do not necessar-
ily relate to matters that will be subject to consideration in relation to the audit of
the financial statements.

Risk of Assuming Management Responsibility When Providing an Internal Audit Service

R605.3 Paragraph R400.13 precludes a firm or a network firm from assuming a manage-
ment responsibility when providing an internal audit service to an audit client, the
firm shall be satisfied that:
(a) The client designates an appropriate and competent resource, who reports to
those charged with governance 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 client reviews, assesses and approves the scope, risk and frequency of
the internal audit services;
(c) The client evaluates the adequacy of the internal audit services and the find-
ings resulting from their performance;
(d) The client evaluates and determines which recommendations resulting from
internal audit services to implement and manages the implementation pro-
cess; and
(e) The client reports to those charged with governance the significant findings
and recommendations resulting from the internal audit services.
605.3 A1 Performing part of the client’s internal audit activities increases the possibility that
individuals within the firm or network firm providing internal audit services will
assume a management responsibility.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 177

605.3 A2 Examples of internal audit services that involve assuming management responsi-
bilities include:
• Setting internal audit policies or the strategic direction of internal audit activi-
ties.
• Directing and taking responsibility for the actions of the entity’s internal audit
employees.
• Deciding which recommendations resulting from internal audit activities to
implement.
• Reporting the results of the internal audit activities to those charged with gov-
ernance 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 maintain-
ing internal control.
• Performing outsourced internal audit services, comprising all or a substantial
portion of the internal audit function, where the firm or network firm is re-
sponsible for determining the scope of the internal audit work; and might have
responsibility for one or more of the matters noted above.
Potential Threats Arising from the Provision of Internal Audit Services
All Audit Clients
605.4 A1 Providing internal audit services to an audit client might create a self-review threat
when there is a risk that the results of the services impact the audit of the financial
statements on which the firm will express an opinion.
605.4 A2 When a 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 firm or network firm accepts an engagement to provide internal
audit services to an audit client, the results of those services might be used in con-
ducting the external audit. This might create a self-review threat because it is pos-
sible that the engagement 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 scepticism as would be exercised
when the internal audit work is performed by individuals who are not mem-
bers of the firm.
605.4 A3 Factors that are relevant in identifying a self-review threat created by providing
internal audit services to an audit client, and evaluating the level of such a threat,
include:
• The materiality of the related financial statements amounts.
• The risk of misstatement of the assertions related to those financial statement
amounts.
• The degree of reliance that the engagement team will place on the work of the
internal audit service.
When a self-review threat for an audit client that is a public interest entity has
been identified, paragraph R605.6 applies.
ET – 178 SAICA Student Handbook 2023/2024

Audit Clients that are Not Public Interest Entities

605.5 A1 An example of an action that might be a safeguard to address a self-review threat
created by the provision of an internal audit service to an audit client that is not a
public interest entity is using professionals who are not audit team members to
perform the service.
Audit Clients that are Public Interest Entities
R605.6 A firm or a network firm shall not provide internal audit services to an audit client
that is a public interest entity, if the provision of such services might create a self-
review threat. (Ref: Para. R600.14 and R600.16).
605.6 A1 Examples of the services that are prohibited under paragraph R605.6 include
internal audit services relate to:
• The internal controls over financial reporting.
• Financial accounting systems that generate information for the client’s
accounting records or financial statements on which the firm will express an
opinion.
• Amounts or disclosures that relate to the financial statements on which the
firm will express an opinion.

Subsection 606 – Information Technology Systems Services

Introduction
606.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27 A1 are
relevant to applying the conceptual framework when providing an information
technology (IT) systems service to an audit client.

Requirements and Application Material

Description of Service
606.2 A1 Services related to IT systems include the design or implementation of hardware
or software systems. The IT systems might:
(a) Aggregate source data;
(b) Form part of the internal control over financial reporting; or
(c) Generate information that affects the accounting records or financial state-
ments, 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 finan-
cial statements.

Risk of Assuming Management Responsibility When Providing an IT Systems Service

R606.3 Paragraph R400.13 precludes a firm or a network firm from assuming a manage-
ment responsibility. When providing IT systems services to an audit client, the
firm or network firm shall be satisfied that:
(a) The client acknowledges its responsibility for establishing and monitoring a
system of internal controls;
(b) The client 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;
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 179

(c) The client makes all management decisions with respect to the design and
implementation process;
(d) The client evaluates the adequacy and results of the design and implemen-
tation of the system; and
(e) The client is responsible for operating the system (hardware or software) and
for the data it uses or generates.

Potential Threats Arising from the Provision of IT Systems Services

All Audit Clients
606.4 A1 Providing IT systems services to an audit client might create a self-review threat
when there is a risk that the results of the services will affect the audit of the finan-
cial statements on which the firm will express an opinion.
606.4 A2 Providing the following IT systems services to an audit client does not usually cre-
ate a threat as long as individuals within the firm or network firm do 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 part of the accounting records or financial statements; and
(c) Implementing “off-the-shelf” accounting or financial information reporting
software that was not developed by the firm or network firm, if the custom-
isation required to meet the client’s needs is not significant.
606.4 A3 Factors that are relevant in identifying a self-review threat created by providing IT
systems services to an audit client, and evaluating the level of such a threat
include:
• The nature of the service.
• The nature of IT systems and the extent to which the IT systems service
impacts or interacts with the client’s accounting records, internal controls over
financial reporting or financial statements.
• The degree of reliance that will be placed on the particular IT systems as part
of the audit.
When a self-review threat for an audit client that is a public interest entity has
been identified, paragraph R606.6 applies.

Audit Clients that are Not Public Interest Entities

606.5 A1 An example of an action that might be a safeguard to address a self-review threat
created by the provision of an IT systems service to an audit client that is not a
public interest entity using professionals who are not audit team members to per-
form the service.

Audit Clients that are Public Interest Entities

R606.6 A firm or a network firm shall not provide IT systems services to an audit client
that is a public interest entity if the provision of such services might create a self-
review threat (Ref: Para. R600.14 and R600.16) services involve designing or
implementing IT systems that:
ET – 180 SAICA Student Handbook 2023/2024

606.6 A1 Examples of services that are prohibited because they give rise to a self-review
threat include those involving designing or implementing IT systems that:
• Form a significant part of the internal control over financial reporting; or
• Generate information that is significant to the client’s accounting records or
financial statements on which the firm will express an opinion.

Subsection 607 – Litigation Support Services

Introduction
607.1 In addition to the specific requirements and application material in paragraphs
600.1 to R600.27 A1 are relevant to applying the conceptual framework when pro-
viding a litigation support service to an audit client.

Requirements and Application Material

Description of Service
607.2 A1 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.
• Forensic or investigative services.

Potential Threats Arising from the Provision of Litigation Support Services

All Audit Clients
607.3 A1 Providing litigation support services to an audit client might create a self-review
threat when there is a risk that the results of the services will affect the accounting
records or the financial statements on which the firm will express an opinion. Such
services might also create an advocacy threat.
607.4 A1 Factors that are relevant in identifying self-review or advocacy threats created by
providing litigation support services to an audit client, and evaluating the level of
such threats include:
• The legal and regulatory environment in which the service is provided.
• The nature and characteristics of the service.
• The extent to which the outcome of the litigation support service might involve
estimating, or might affect the estimation of, damages or other amounts that
might have a material effect on the financial statements on which the firm will
express an opinion.
When a self-review threat for an audit client that is a public interest entity has
been identified, paragraph R607.6 applies.
607.2 A2 If a firm or a network firm provides a litigation support service to an audit client
and the service might involve estimating, or might affect the estimation of, dam-
ages or other amounts that affect the financial statements on which the firm will
express an opinion, the requirements and application material set out in Subsection
603 related to valuation services apply.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 181

Audit Clients that are Not Public Interest Entities

607.5 A1 An example of an action that might be a safeguard to address a self-review or
advocacy threat created by providing a litigation support service to an audit client
that is not a public interest entity is using a professional who was not an audit
team member to perform the service.

Audit Clients that are Public Interest Entities

Self-review Threats
R607.6 A firm or a network firm shall not provide litigation support services to an audit
client that is a public interest entity if the provision of such services might create a
self-review threat. (Ref: Para. R600.14 and R600.16).
607.6 A1 An example of a service that is prohibited because it might create a self-review
threat is providing advice in connection with a legal proceeding where there is a
risk that the outcome of the service affects the quantification of any provision or
other amount in the financial statements on which the firm will express an opin-
ion.
Advocacy Threats
607.6 A2 An example of an action that might be a safeguard to address an advocacy threat
created by providing a litigation support service to an audit client that is a public
interest entity is using a professional who was not an audit team member to per-
form the service.

Acting as a Witness
All Audit Clients
607.7 A1 A professional within the firm or the network firm might give evidence to a tri-
bunal or court as a witness of fact or as an expert witness.
(a) A witness of fact is an individual who gives evidence to a tribunal or court
based on his or her direct knowledge of facts or events.
(b) An expert witness is an individual who gives evidence, including opinions
on matters, to a tribunal or court based on that individual’s expertise.
607.7 A2 A threat to independence is not created when an individual, in relation to a matter
that involves an audit client, acts as a witness of fact and in the course of doing so
provides an opinion within the individual’s area of expertise in response to a ques-
tion asked in the course of giving factual evidence.
607.7 A3 The advocacy threat created when acting as an expert witness on behalf of an audit
client is at an acceptable level if a firm or a network firm is:
(a) Appointed by a tribunal or court to act as an expert witness in a matter
involving a client; or
(b) Engaged to advise or act as an expert witness in relation to a class action (or
an equivalent group representative action) provided that:
(i) The firm’s audit clients constitute less than 20% of the members of
the class or group (in number and in value);
(ii) No audit client is designated to lead the class or group; and
(iii) No audit client is authorised by the class or group to determine the
nature and scope of the services to be provided by the firm or the
terms on which such services are to be provided.
ET – 182 SAICA Student Handbook 2023/2024

Audit Clients that are Not Public Interest Entities

607.8 A1 An example of an action that might be a safeguard to address an advocacy threat
for an audit client that is not a public interest entity is using a professional to per-
form the service who is not, and has not been, an audit team member.
Audit Clients that are Public Interest Entities
R607.9 A firm or a network firm, or an individual within a firm or a network firm, shall
not act for an audit client that is a public interest entity as an expert witness in a
matter unless the circumstances set out in paragraph 607.7 A3 apply.

Subsection 608 – Legal Services

Introduction
608.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27 A1 are
relevant to applying the conceptual framework when providing a legal service to
an audit client.

Requirements and Application Material

All Audit Clients
608.2 A1 Legal services are defined as any services for which the individual providing the
services 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.
608.2 A2 This subsection deals specifically with:
• Providing legal advice.
• Acting as general counsel.
• Acting in an advocacy role.

Potential Threats Arising from Providing Legal Services

All Audit Clients
608.3 A1 Providing legal services to an audit client might create a self-review threat when
there is a risk that the results of the services will affect the accounting records or
the financial statements on which the firm will express an opinion. Such services
might also create an advocacy threat.

A. Providing Legal Advice

Description of Service
608.4 A1 Depending on the jurisdiction, providing legal advice might include a wide and
diversified range of service areas including both corporate and commercial ser-
vices to audit clients, such as:
• Contract support.
• Supporting an audit client in executing a transaction.
• Mergers and acquisitions.
• Supporting and assisting an audit client’s internal legal department.
• Legal due diligence and restructuring.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 183

Potential Threats Arising from Providing Legal Advice

All Audit Clients
608.5 A1 Factors that are relevant in identifying self-review or advocacy threats created by
providing legal advice to an audit client, and evaluating the level of such threats
include:
• The materiality of the specific matter in relation to the client’s financial state-
ments.
• The complexity of the legal matter and the degree of judgement necessary to
provide the service.
When a self-review threat for an audit client that is a public interest entity has
been identified, paragraph R608.7 applies.
608.5 A2 Examples of legal advice that might create a self-review threat include:
• Estimating a potential loss arising from a lawsuit for the purpose of recording a
provision in the client’s financial statements.
• Interpreting provisions in contracts that might give rise to liabilities reflected
in the client’s financial statements.
608.5 A3 Negotiating on behalf of an audit client might create an advocacy threat or might
result in the firm or network firm assuming a management responsibility.
Audit Clients that are Not Public Interest Entities
608.6 A1 Examples of actions that might be safeguards to address self-review or advocacy
threats created by providing legal advice to an audit client that is not a public in-
terest entity include:
• Using professionals who are not audit team members to perform the service
might address a self-review or advocacy threat.
• 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.
Audit Clients that are Public Interest Entities
Self-review Threats
R608.7 A firm or a network firm shall not provide legal advice to an audit client that is a
public interest entity if the provision of such a service might create a self-review
threat. (Ref: Para. R600.14 and R600.16).
Advocacy Threats
608.8 A1 The considerations in paragraphs 608.5 A1 and 608.5 A3 to 608.6 A1 are also
relevant to evaluating and addressing advocacy threats that might be created by
providing legal advice to an audit client that is a public interest entity.

B. Acting as General Counsel

All Audit Clients
R608.9 A partner or employee of the firm or the network firm shall not serve as General
Counsel of an audit client.
608.9 A1 The position of General Counsel is usually a senior management position with
broad responsibility for the legal affairs of a company.
ET – 184 SAICA Student Handbook 2023/2024

C. Acting in an Advocacy Role

Potential Threats Arising from Acting in an Advocacy Role Before a Tribunal or Court
Audit Clients that are Not Public Interest Entities
R608.10 A firm or a network firm shall not act in an advocacy role for an audit client that is
not a public interest entity in resolving a dispute or litigation before a tribunal or
court when the amounts involved are material to the financial statements on which
the firm will express an opinion.
608.10 A1 Examples of actions that might be safeguards to address a self-review or advocacy
threat created when acting in an advocacy role for an audit client that is not a pub-
lic interest entity include:
• Using professionals who are not audit team members to perform the service.
• Having an appropriate reviewer who was not involved in providing the service
review the audit work or the service performed.
Audit Clients that are Public Interest Entities
R608.11 A firm or a network firm shall not act in an advocacy role for an audit client that is
a public interest entity in resolving a dispute or litigation before a tribunal or
court.

Subsection 609 – Recruiting Services

Introduction
609.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27 A1 are
relevant to applying the conceptual framework when providing a recruiting service
to an audit client.

Requirements and Application Material

Description of Service
609.2 A1 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.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 185

Risk of Assuming Management Responsibility When Providing a Recruiting Service

R609.3 Paragraph R400.13 precludes a firm or a network firm from assuming a manage-
ment responsibility. When providing a recruiting services to an audit client, the
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 decisions with respect to the hiring pro-
cess, including:
• Determining the suitability of prospective candidates and selecting suit-
able candidates for the position.
• Determining employment terms and negotiating details, such as salary,
hours and other compensation.

Potential Threats Arising from Providing Recruiting Services

All Audit Clients
609.4 A1 Providing recruiting services to an audit client might create a self-interest, famili-
arity or intimidation threat.
609.4 A2 Providing the following services does not usually create a threat as long as indi-
viduals within the firm or the network firm do not assume a management respon-
sibility:
• Reviewing the professional qualifications of a number of applicants and pro-
viding advice on their suitability for the position.
• Interviewing candidates and advising on a candidate’s competence for finan-
cial accounting, administrative or control positions.
609.4 A3 Factors that are relevant in identifying self-interest, familiarity or intimidation
threats created by providing recruiting services to an audit client, and evaluating
the level of such threats include:
• 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 candi-
dates and the firm providing the advice or service.
609.4 A4 An example of an action that might be a safeguard to address such a self-interest,
familiarity or intimidation threat is using professionals who are not audit team
members to perform the service.
Recruiting Services that are Prohibited
R609.5 When providing recruiting services to an audit client, the firm or the network firm
shall not act as a negotiator on the client’s behalf.
R609.7 A firm or a network firm shall not provide a recruiting service to an audit client if
the service relates to:
(a) Searching for or seeking out candidates;
(b) Undertaking reference checks of prospective candidates,
(c) Recommending the person to be appointed; or
ET – 186 SAICA Student Handbook 2023/2024

(d) Advising on the terms of employment, remuneration or related benefits of a

particular candidate,
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 state-
ments on which the firm will express an opinion.

Subsection 610 – Corporate Finance Services

Introduction
610.1 In addition to the specific requirements and application material in this subsection,
the requirements and application material in paragraphs 600.1 to R600.27 A1 are
relevant to applying the conceptual framework when providing a corporate finance
service to an audit client.

Requirements and Application Material

Description of Service
610.2 A1 Examples of corporate finance services include:
• Assisting an audit client in developing corporate strategies.
• Identifying possible targets for the audit client to acquire.
• Advising on disposal transactions.
• Assisting in finance raising transactions.
• Providing structuring advice.
• Providing advice on the structuring of a corporate finance transaction or on
financing arrangements.

Potential Threats Arising from the Provision of Corporate Finance Services

All Audit Clients
610.3 A1 Providing corporate finance services to an audit client might create a self-review
threat when there is a risk that the results of the services will affect the accounting
records or the financial statements on which the firm will express an opinion. Such
services might also create an advocacy threat.
610.4 A1 Factors that are relevant in identifying self-review or advocacy threats created by
providing corporate finance services to an audit client, and evaluating the level of
such threats include:
• The degree of subjectivity involved in determining the appropriate treatment
for the outcome or consequences of the corporate finance advice in the finan-
cial statements.
• The extent to which:
o The outcome of the corporate finance advice will directly affect amounts
recorded in the financial statements.
o The outcome of the corporate finance service might have a material effect
on the financial statements.
When a self-review threat for an audit client that is a public interest entity has
been identified, paragraph R610.8 applies.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 187

Corporate Finance Services that are Prohibited

R610.5 A firm or a network firm shall not provide corporate finance services to an audit
client that involve promoting, dealing in, or underwriting shares, debt or other fi-
nancial instruments issued by the audit client or providing advice on investment in
such shares, debt or other financial instruments.
R610.6 A firm or a network firm shall not provide advice in relation to corporate finance
services to an audit client where:
(a) The effectiveness of such advice depends on a particular accounting treat-
ment or presentation in the financial statements on which the firm will ex-
press an opinion; and
(b) The audit team has doubt as to the appropriateness of the related accounting
treatment or presentation under the relevant financial reporting framework.
Audit Clients that are Not Public Interest Entities
610.7 A1 Examples of actions that might be safeguards to address self-review or advocacy
threats created by providing corporate finance services to an audit client that is not
a public interest entity include:
• Using professionals 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.
Audit Clients that are Public Interest Entities
Self-review Threats
R610.8 A firm or a network firm shall not provide corporate finance services to an audit
client that is a public interest entity if the provision of such services might create a
self-review threat. (Ref: Para. R600.14 and R600.16).
Advocacy Threats
610.8 A1 An example of an action that might be a safeguard to address advocacy threats
created by providing corporate finance services to an audit client that is a public
interest entity is using professionals who are not audit team members to perform
the service.

Section 800
Reports on Special Purpose Financial Statements that include a
Restriction on Use and Distribution (Audit and Review Engagements)
Introduction
800.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
800.2 This section sets out certain modifications to Part 4A which are permitted in cer-
tain circumstances involving audits of special purpose financial statements where
the report includes a restriction on use and distribution. In this section, an engage-
ment to issue a restricted use and distribution report in the circumstances set out in
paragraph R800.3 is referred to as an “eligible audit engagement.”
ET – 188 SAICA Student Handbook 2023/2024

Requirements and Application Material

General
R800.3 When a firm intends to issue a report on an audit of special purpose financial
statements which includes a restriction on use and distribution, the independence
requirements set out in Part 4A shall be eligible for the modifications that are per-
mitted by this section, but only if:
(a) The 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.
800.3 A1 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
firm to communicate with intended users about independence matters, including
the circumstances that are relevant to applying the conceptual framework. It also
allows the firm to obtain the agreement of the intended users to the modified inde-
pendence requirements.
R800.4 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 firm shall subse-
quently make such users aware of the modified independence requirements agreed
to by their representative.
800.4 A1 For example, where the intended users are a class of users such as lenders in a
syndicated loan arrangement, the firm might describe the modified independence
requirements in an engagement letter to the representative of the lenders. The rep-
resentative might then make the firm’s engagement letter available to the members
of the group of lenders to meet the requirement for the firm to make such users
aware of the modified independence requirements agreed to by the representative.
R800.5 When the firm performs an eligible audit engagement, any modifications to Part
4A shall be limited to those set out in paragraphs R800.7 to R800.14. The firm
shall not apply these modifications when an audit of financial statements is
required by law or regulation.
R800.6 If the firm also issues an audit report that does not include a restriction on use and
distribution for the same client, the firm shall apply Part 4A to that audit engage-
ment.

Public Interest Entities

R800.7 When the firm performs an eligible audit engagement, the firm does not need to
apply the independence requirements set out in Part 4A that apply only to public
interest entity audit engagements.

Related Entities
R800.8 When the firm performs an eligible audit engagement, references to “audit client”
in Part 4A do not need to include its related entities. However, when the audit
team knows or has reason to believe that a relationship or circumstance involving
a related entity of the client is relevant to the evaluation of the firm’s independ-
ence of the client, the audit team shall include that related entity when identifying,
evaluating and addressing threats to independence.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 189

Networks and Network Firms

R800.9 When the firm performs an eligible audit engagement, the specific requirements
regarding network firms set out in Part 4A do not need to be applied. However,
when the firm knows or has reason to believe that threats to independence are cre-
ated by any interests and relationships of a network firm, the firm shall evaluate
and address any such threat.
Financial Interests, Loans and Guarantees, Close Business Relationships, and Family
and Personal Relationships
R800.10 When the firm performs an eligible audit engagement:
(a) The relevant provisions set out in Sections 510, 511, 520, 521, 522, 524 and
525 need apply only to the members of the engagement team, their immedi-
ate family members and, where applicable, close family members;
(b) The firm shall identify, evaluate and address any threats to independence
created by interests and relationships, as set out in Sections 510, 511, 520,
521, 522, 524 and 525, between the audit client and the following audit team
members:
(i) Those who provide consultation regarding technical or industry spe-
cific issues, transactions or events; and
(ii) Those who perform an engagement quality review, or a review con-
sistent with the objective of an engagement quality review, for the
engagement; and
(c) The firm shall evaluate and address any threats that the engagement team has
reason to believe are created by interests and relationships between the audit
client and others within the firm who can directly influence the outcome of
the audit engagement.
800.10 A1 Others within a firm who can directly influence the outcome of the audit engage-
ment 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 firm’s Senior or Managing Partner (Chief Executive or equivalent).
R800.11 When the firm performs an eligible audit engagement, the firm shall evaluate and
address any threats that the engagement team has reason to believe are created by
financial interests in the audit client held by individuals, as set out in paragraphs
R510.4(c) and (d), R510.5, R510.7 and 510.10 A5 and A9.
R800.12 When the firm performs an eligible audit engagement, the firm, in applying the
provisions set out in paragraphs R510.4(a), R510.6 and R510.7 to interests of the
firm, shall not hold a material direct or a material indirect financial interest in the
audit client.
Employment with an Audit Client
R800.13 When the firm performs an eligible audit engagement, the firm shall evaluate and
address any threats created by any employment relationships as set out in para-
graphs 524.3 A1 to 524.5 A3.

Providing Non-Assurance Services

R800.14 If the firm performs an eligible audit engagement and provides a non-assurance
service to the audit client, the firm shall comply with Sections 410 to 430 and Sec-
tion 600, including its subsections, subject to paragraphs R800.7 to R800.9.
ET – 190 SAICA Student Handbook 2023/2024

Page
PART 4B – INDEPENDENCE FOR ASSURANCE ENGAGEMENTS
OTHER THAN AUDIT AND REVIEW ENGAGEMENTS
Section 900 Applying the Conceptual Framework to Independence for Assurance
Engagements Other than Audit and Review Engagements ............................ 190
Section 905 Fees ................................................................................................................. 197
Section 906 Gifts and Hospitality ....................................................................................... 200
Section 907 Actual or Threatened Litigation ..................................................................... 200
Section 910 Financial Interests ........................................................................................... 201
Section 911 Loans and Guarantees ..................................................................................... 203
Section 920 Business Relationships ................................................................................... 205
Section 921 Family and Personal Relationships................................................................. 206
Section 922 Recent Service with an Assurance Client ....................................................... 208
Section 923 Serving as a Director or Officer of an Assurance Client ................................ 209
Section 924 Employment with an Assurance Client .......................................................... 210
Section 940 Long Association of Personnel with an Assurance Client ............................. 211
Section 950 Provision of Non-Assurance Services to Assurance Clients .......................... 213
Section 990 Reports that include a Restriction on Use and Distribution
(Assurance Engagements Other than Audit and Review Engagements)........ 216

PART 4B – INDEPENDENCE FOR ASSURANCE

ENGAGEMENTS OTHER THAN AUDIT AND REVIEW
ENGAGEMENTS
Section 900
Applying the Conceptual Framework to Independence for Assurance
Engagements other than Audit and Review Engagements
Introduction
General
900.1 This Part applies to assurance engagements other than audit engagements and review
engagements. Examples of such engagements 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 a public
sector body.
• Assurance on the effectiveness of an entity’s system of internal control.
• Assurance on an entity’s greenhouse gas statement.
• An audit of specific elements, accounts or items of a financial statement.
900.2 In this Part, the term “professional accountant” refers to individual professional
accountants in public practice and their firms.
900.3 ISQM 1 requires a firm to design, implement and operate a system of quality manage-
ment for assurance engagements performed by the firm. As part of this system of
quality management, ISQM 1 requires the firm to establish quality objectives that
address the fulfilment of responsibilities in accordance with relevant ethical require-
ments, including those related to independence. Under ISQM 1, relevant ethical
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 191

requirements are those related to the firm, its personnel and, when applicable, others
subject to the independence requirements to which the firm and the firm’s engagements
are subject. In addition ISAEs and ISAs establish responsibilities for engagement part-
ners and engagement teams at the level of the engagement. The allocation of respon-
sibilities within a firm will depend on its size, structure and organisation. Many of the
provisions of Part 4B do not prescribe the specific responsibility of individuals within
the firm for actions related to independence, instead referring to “firm” for ease of ref-
erence. A firm assigns operational responsibility for compliance with dependence
requirements to an individual(s) in accordance with ISQM 1. Additionally, an individ-
ual professional accountant remains responsible for compliance with any provisions
that apply to that professional accountant’s activities, interests or relationships.
900.4 Independence is linked to the principles of objectivity and integrity. It comprises:
(a) Independence of mind – the state of mind that permits the expression of a con-
clusion without being affected by influences that compromise professional
judgement, thereby allowing an individual to act with integrity, and exercise
objectivity and professional scepticism.
(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 firm’s or an assurance team member’s integrity, objectivity or
professional scepticism has been compromised.
In this Part, references to an individual or firm being “independent” mean that the
individual or firm has complied with the provisions of this Part.
900.5 When performing assurance engagements, the Code requires firms to comply with the
fundamental principles and be independent. This Part sets out specific requirements
and application material on how to apply the conceptual framework to maintain inde-
pendence when performing assurance engagements other than audit or review engage-
ments. The conceptual framework set out in Section 120 applies to independence as it
does to the fundamental principles set out in Section 110.
900.6 This Part describes:
(a) Facts and circumstances, including professional activities, interests and relation-
ships, 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 safe-
guards to reduce the threats to an acceptable level.

Description of Assurance Engagements

900.7 In an assurance engagement, the 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.
ISAE 3000 (Revised) describes the elements and objectives of assurance engagement
conducted under that Standard, and the Assurance Framework provides a general
description of assurance engagements. An assurance engagement might either be an
attestation engagement or a direct engagement.
900.8 In this Part the term ‘assurance engagement’ refers to assurance engagements other
than audit engagements or review engagement.
ET – 192 SAICA Student Handbook 2023/2024

Reports that Include a Restriction on Use and Distribution

900.9 An assurance report might include a restriction on use and distribution. If it does
and the conditions set out in Section 990 are met, then the independence require-
ments in this Part may be modified as provided in Section 990.

Audit and Review Engagements

900.10 Independence standards for audit and review engagements are set out in Part 4A –
Independence for Audit and Review Engagements. If a firm performs both an
assurance engagement and an audit or review engagement for the same client, the
requirements in Part 4A continue to apply to the firm, a network firm and the audit
or review team members.

Requirements and Application Material

General
R900.11 A firm performing an assurance engagement shall be independent of the assurance
client.
900.11.A1 For the purposes of this Part, the assurance client in an assurance engagement is
the responsible party and also, in an attestation engagement, the party taking re-
sponsibility for the subject matter information (who might be the same as the re-
sponsible party).
900.11.A2 The roles of the parties involved in an assurance engagement might differ and
affect the application of the independence provisions in this Part. 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 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 purposes of this Part.
900.11 A3 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 respon-
sibility for the subject matter information. In these circumstances, applying the con-
ceptual framework requires the professional accountant 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
Section 310.
R900.12 A firm shall apply the conceptual framework set out in Section 120 to identify,
evaluate and address threats to independence in relation to an assurance engagement.

Prohibition on Assuming Management Responsibilities

R900.13 A 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 firm. If the firm assumes a management
responsibility as part of any other service provided to the assurance client, the firm
shall ensure that the responsibility is not related to the underlying subject matter
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 193

and, in an attestation engagement, the subject matter information of the assurance

engagement provided by the firm.
900.13 A1 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.
900.13 A2 When a firm assumes a management responsibility related to the underlying subject
matter and, in an attestation engagement, the subject matter information of an
assurance engagement, self-review, self-interest and familiarity threats are created.
Assuming a management responsibility might create an advocacy threat because
the firm becomes too closely aligned with the views and interests of management.
900.13 A3 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.
• Directing and taking responsibility for the actions of employees in relation to
the employees’ work for the entity.
• Authorising transactions.
• Controlling or managing bank accounts or investments.
• Deciding which recommendations of the firm or other third parties to implement.
• Reporting to those charged with governance on behalf of management.
• Taking responsibility for designing, implementing, monitoring and maintaining
internal control.
900.13 A4 Subject to compliance with paragraph R900.14, providing advice and recommen-
dations to assist the management of an assurance client in discharging its respon-
sibilities is not assuming a management responsibility.
R900.14 When performing a professional activity for an assurance client that is related to
the underlying subject matter and, in an attestation engagement, the subject matter
information of the assurance engagement, the firm shall be satisfied that client
management makes all related judgments and decisions that are the proper respon-
sibility of management. This includes ensuring that the client’s management:
(a) Designates an individual who possesses suitable skill, knowledge and experi-
ence to be responsible at all times for the client’s decisions and to oversee the
activities. Such an individual, preferably within senior management, would
understand:
(i) The objectives, nature and results of the activities; and
(ii) The respective client and firm responsibilities.
However, the individual is not required to possess the expertise to perform
or re-perform the activities.
(b) Provides oversight of the activities and evaluates the adequacy of the results
of the activity performed for the client’s purpose; and
(c) Accepts responsibility for the actions, if any, to be taken arising from the
results of the activities.
Multiple Responsible Parties and Parties Taking Responsibility for the Subject Matter
Information
900.15 A1 In some assurance engagements, whether an attestation engagement or direct en-
gagement, there might be several responsible parties or, in an attestation engage-
ment, several parties taking responsibility for the subject matter information. In
ET – 194 SAICA Student Handbook 2023/2024

determining whether it is necessary to apply the provisions in this Part to each in-
dividual responsible party or each individual party taking responsibility for the
subject matter information in such engagements, the firm may take into account
certain matters. These matters include whether an interest or relationship between
the 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 in-
dependence that is not trivial and inconsequential in the context of the subject
matter information. This determination will take into account factors such as:
(a) 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.
(b) The degree of public interest associated with the assurance engagement.
If the firm determines that the threat created by any such interest or relationship
with a particular party would be trivial and inconsequential, it might not be neces-
sary to apply all of the provisions of this section to that party.

Network Firms
R900.16 When a firm knows or has reason to believe that interests and relationships of a
network firm create a threat to the firm’s independence, the firm shall evaluate and
address any such threat.
900.16 A1 Network firms are discussed in paragraphs 400.50 A1 to 400.54 A1.

Related Entities
R900.17 When the assurance team knows or has reason to believe that a relationship or cir-
cumstance involving a related entity of the assurance client is relevant to the evalu-
ation of the firm’s independence from the client, the assurance team shall include
that related entity when identifying, evaluating and addressing threats to inde-
pendence.
[Paragraphs 900.18 to 900.29 are intentionally left blank]

Period During which Independence is Required

R900.30 Independence, as required by this Part, shall be maintained during both:
(a) The engagement period; and
(b) The period covered by the subject matter information.
900.30 A1 The engagement period starts when the engagement team begins to perform assur-
ance 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.
R900.31 If an entity becomes an assurance client during or after the period covered by the
subject matter information on which the firm will express a conclusion, the firm
shall determine whether any threats to independence are created by:
(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.
R900.32 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 infor-
mation, but before the engagement team begins to perform assurance services, and
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 195

the service would not be permitted during the engagement period. In such circum-
stances, the firm shall evaluate and address any threat to independence created by
the service. If the threats are not at an acceptable level, the firm shall only accept
the assurance engagement if the threats are reduced to an acceptable level.
900.32 A1 Examples of actions that might be safeguards to address such threats include:
• Using professionals who are not assurance team members to perform the ser-
vice.
• Having an appropriate reviewer review the assurance and non-assurance work
as appropriate.
R900.33 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 assur-
ance engagement, the firm shall only accept the assurance engagement if:
(a) The 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 firm applies safeguards when necessary during the service period; and
(c) The firm discusses the matter with the party engaging the firm or those
charged with governance of the assurance client.

Communication with Those Charged With Governance

900.34 A1 Paragraphs R300.9 to 300.9 A2 set out requirements and application material that
is relevant to communications with a party engaging the firm or those charged
with governance of the assurance client.
900.34 A2 Communication with a party engaging the firm or those charged with governance
of the assurance client might be appropriate when significant judgments are made,
and conclusions reached, to address threats to independence in relation to an
assurance engagement because the subject matter information of that engagement
is the outcome of a previously performed non-assurance service.
[Paragraphs 900.35 to 900.39 are intentionally left blank]

General Documentation of Independence for Assurance Engagements

R900.40 A firm shall document conclusions regarding compliance with this Part, and the
substance of any relevant discussions that support those conclusions. In particular:
(a) When safeguards are applied to address a threat, the firm shall document the
nature of the threat and the safeguards in place or applied; and
(b) When a threat required significant analysis and the firm concluded that the
threat was already at an acceptable level, the firm shall document the nature
of the threat and the rationale for the conclusion.
900.40 A1 Documentation provides evidence of the firm’s judgements in forming conclusions
regarding compliance with this Part. However, a lack of documentation does not
determine whether a firm considered a particular matter or whether the firm is in-
dependent.
[Paragraphs 900.41 to 900.49 are intentionally left blank]
ET – 196 SAICA Student Handbook 2023/2024

Breach of an Independence Provision for Assurance Engagements

When a Firm Identifies a Breach
R900.50 If a firm concludes that a breach of a requirement in this Part has occurred, the
firm shall:
(a) End, suspend or eliminate the interest or relationship that created the breach;
(b) Evaluate the significance of the breach and its impact on the firm’s objectiv-
ity and ability to issue an assurance report; and
(c) Determine whether action can be taken that satisfactorily addresses the con-
sequences of the breach.
In making this determination, the firm shall exercise professional judgement and
take into account whether a reasonable and informed third party would be likely to
conclude that the firm’s objectivity would be compromised, and therefore, the
firm would be unable to issue an assurance report.
R900.51 If the firm determines that action cannot be taken to address the consequences of
the breach satisfactorily, the firm shall, as soon as possible, inform the party that
engaged the firm or those charged with governance, as appropriate. The 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.
R900.52 If the firm determines that action can be taken to address the consequences of the
breach satisfactorily, the firm shall discuss the breach and the action it has taken
or proposes to take with the party that engaged the firm or those charged with
governance, as appropriate. The firm shall discuss the breach and the proposed ac-
tion on a timely basis, taking into account the circumstances of the engagement
and the breach.
R900.53 If the party that engaged the firm does not, or those charged with governance do
not concur that the action proposed by the firm in accordance with paragraph
R900.50(c) satisfactorily addresses the consequences of the breach, the 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.

Documentation
R900.54 In complying with the requirements in paragraphs R900.50 to R900.53, the 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 firm or those
charged with governance.
R900.55 If the firm continues with the assurance engagement, it shall document:
(a) The conclusion that, in the firm’s professional judgement, objectivity has not
been compromised; and
(b) The rationale for why the action taken satisfactorily addressed the conse-
quences of the breach so that the firm could issue an assurance report.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 197

Section 905
Fees
Introduction
905.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
905.2 The nature and level of fees or other types of remuneration might create a self-
interest or intimidation threat. This section sets out specific requirements and
application material relevant to applying the conceptual framework to identify,
evaluate and address threats to independence arising from fees charged to assur-
ance clients.

Requirements and Application Material

Fees Paid by an Assurance Client
905.3 A1 When fees are negotiated with and paid by an assurance client, this creates a self-
interest threat and might create an intimidation threat to independence.
905.3 A2 The application of the conceptual framework requires that before a firm accepts an
assurance engagement for an assurance client, the firm determines whether the
threats to independence created by the fees proposed to the client are at an accept-
able level. The application of the conceptual framework also requires the firm to
re-evaluate such threats when facts and circumstances change during the engage-
ment period.
905.3 A3 Factors that are relevant in evaluating the level of threats created when fees are
paid by the assurance client include:
• The level of the fees for the assurance engagement and the extent to which
they have regard to the resources required, taking into account the firm’s com-
mercial and market priorities.
• The extent of any dependency between the level of the fee for, and the out-
come of, the service.
• The level of the fee in the context of the service to be provided by the firm or a
network firm.
• The significance of the client to the firm or partner.
• The nature of the client.
• The nature of the assurance engagement.
• The involvement of those charged with governance in agreeing fees.
• Whether the level of the fee is set by an independent third party, such as a
regulatory body.
905.3 A4 The conditions, policies and procedures described in paragraphs 120.15 A3 (par-
ticularly the existence of a quality management system designed and implemented
by a firm in accordance with quality management standards issued by the IAASB)
might also impact the evaluation of whether the threats to independence are at an
acceptable level.
905.3 A5 The requirements and application material that follow identify circumstances
which might need to be further evaluated when determining whether the threats
are at an acceptable level. For those circumstances, application material includes
examples of additional factors that might be relevant in evaluating the threats.
ET – 198 SAICA Student Handbook 2023/2024

Level of Fees for Assurance Engagements

905.4 A1 Determining the fees to be charged to an assurance client, whether for assurance
or other services, is a business decision of the firm taking into account the facts
and circumstances relevant to that specific engagement, including the require-
ments of technical and professional standards.
905.4 A2 Factors that are relevant in evaluating the level of self-interest and intimidation
threats created by the level of the fee for an assurance engagement when paid by
the assurance client include:
• The firm’s commercial rationale for the fee for the assurance engagement.
• Whether undue pressure has been, or is being, applied by the client to reduce
the fee for the assurance engagement.
905.4 A3 Examples of actions that might be safeguards to address such threats include:
• Having an appropriate reviewer who does not take part in the assurance en-
gagement assess the reasonableness of the fee proposed, having regard to the
scope and complexity of the engagement.
• Having an appropriate reviewer who did not take part in the assurance engage-
ment review the work performed.

Contingent Fees
905.5 A1 Contingent fees are fees calculated on a predetermined basis relating to the out-
come of a transaction or the result of the services performed. A contingent fee
charged through an intermediary is an example of an indirect contingent fee. In
this section, a fee is not regarded as being contingent if established by a court or
other public authority.
R905.6 A firm shall not charge directly or indirectly a contingent fee for an assurance
engagement.
R905.7 A 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 ser-
vice, and therefore, the amount of the fee, is dependent on a future or contempo-
rary judgement related to a matter that is material to the subject matter information
of the assurance engagement.
905.7 A1 Paragraphs R905.7 and R905.8 preclude a firm from entering into certain contin-
gent fee arrangements with an assurance client. Even if a contingent fee arrange-
ment is not precluded when providing a non-assurance service to an assurance
client, it might still impact the level of the self-interest threat.
905.7 A2 Factors that are relevant in evaluating the level of such a threat include:
• The range of possible fee amounts.
• Whether an appropriate authority determines the outcome on which the con-
tingent fee depends.
• Disclosure to intended users of the work performed by the firm and the basis
of remuneration.
• The nature of the service.
• The effect of the event or transaction on the subject matter information.
905.7 A3 Examples of actions that might be safeguards to address such a self-interest threat
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 remu-
neration.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 199

Total Fees – Overdue Fees

905.8 A1 The level of the self-interest threat might be impacted if fees payable by the assur-
ance client for the assurance engagement or other services are overdue during the
period of the assurance engagement.
905.8 A2 It is generally expected that the firm will obtain payment of such fees before the
assurance report is issued.
905.8 A3 Factors that are relevant in evaluating the level of such a self-interest threat
include:
• The significance of the overdue fees to the firm.
• The length of time the fees have been overdue.
• The firm’s assessment of the ability and willingness of the client or other rele-
vant party to pay the overdue fee.
905.8 A4 Examples of actions that might be safeguards to address such a threat include:
• Obtaining partial payment of overdue fees.
• Having an appropriate reviewer who did not take part in the assurance en-
gagement review the work performed.
R905.9 When a significant part of the fees due from an assurance client remains unpaid
for a long time, the firm shall determine:
(a) Whether the overdue fees might be equivalent to a loan to the client, in
which case the requirements and application material set out in Section 911
are applicable; and
(b) Whether it is appropriate for the firm to be re-appointed or continue the
assurance engagement.

Total Fees – Fee Dependency

905.10 A1 When the total fees generated from an assurance client by the firm expressing the
conclusion in an assurance engagement represent a large proportion of the total
fees of that firm, the dependence on, that client and concern about the potential
loss, of fees from that client impact the level of the self-interest threat and create
an intimidation threat.
905.10 A2 A self-interest and intimidation threat is created in the circumstances described in
paragraph 905.10 A1 even if the assurance client is not responsible for negotiating
or paying the fees for the assurance engagement.
905.10 A3 In calculating the total fees of the firm, the firm might use financial information
available from the previous financial year and estimate the proportion based on
that information if appropriate.
905.10 A4 Factors that are relevant in evaluating the level of such self-interest and intimi-
dation threats include:
• The operating structure of the firm.
• Where the firm is expected to diversify such that any dependence on the assur-
ance client is reduced.
905.10 A5 Examples of actions that might be safeguards to address such threats include:
• Reducing the extent of services other than assurance engagements provided to
the client.
• Increasing the client base of the firm to reduce dependence on the assurance
client.
ET – 200 SAICA Student Handbook 2023/2024

905.10 A6 A self-interest or intimidation threat is created when the fees generated by a firm
from an assurance client represent a large proportion of the revenue from an indi-
vidual partner’s clients.
905.10 A7 Factors that are relevant in evaluating the level of such threats include:
• The qualitative and quantitative significance of the assurance client to the part-
ner.
• The extent to which the compensation of the partner is dependent upon the fees
generated from the client.
905.10 A8 Examples of actions that might be safeguards to address such a self-interest or
intimidation threat include:
• Having an appropriate reviewer who was not an assurance team member
review the work.
• Ensuring that the compensation of the partner is not significantly influenced by
the fees generated from the assurance client.
• Increasing the client base of the partner to reduce dependence on the client.

Section 906
Gifts and Hospitality
Introduction
906.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
906.2 Accepting gifts and hospitality from an assurance client might create a self-
interest, familiarity or intimidation threat. This section sets out a specific require-
ment and application material relevant to applying the conceptual framework in
such circumstances.

Requirement and Application Material

R906.3 A firm or an assurance team member shall not accept gifts and hospitality from an
assurance client, unless the value is trivial and inconsequential.
906.3 A1 Where a firm or assurance team member is offering or accepting an inducement to
or from an assurance client, the requirements and application material set out in
Section 340 apply and non-compliance with these requirements might create
threats to independence.
906.3 A2 The requirements set out in Section 340 relating to offering or accepting induce-
ments do not allow a firm or assurance team member to accept gifts and hospital-
ity where the intent is to improperly influence behaviour even if the value is trivial
and inconsequential.

Section 907
Actual or Threatened Litigation
Introduction
907.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 201

907.2 When litigation with an assurance client occurs, or appears likely, self-interest and
intimidation threats are created. This section sets out specific application material
relevant to applying the conceptual framework in such circumstances.

Application Material
General
907.3 A1 The relationship between client management and assurance team members must
be characterised by complete candour 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 the firm or an assurance team member.
Such adversarial positions might affect management’s willingness to make com-
plete disclosures and create self-interest and intimidation threats.
907.3 A2 Factors that are relevant in evaluating the level of such threats include:
• The materiality of the litigation.
• Whether the litigation relates to a prior assurance engagement.
907.3 A3 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 indi-
vidual from the assurance team.
907.3 A4 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 per-
formed.

Section 910
Financial Interests
Introduction
910.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
910.2 Holding a financial interest in an assurance client might create a self-interest
threat. This section sets out specific requirements and application material relevant
to applying the conceptual framework in such circumstances.

Requirements and Application Material

General
910.3 A1 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 de-
cisions, the Code defines that financial interest to be direct. Conversely, when a
beneficial owner has no control over the intermediary or ability to influence its in-
vestment decisions, the Code defines that financial interest to be indirect.
910.3 A2 This section contains references to the “materiality” of a financial interest. In
determining whether such 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.
ET – 202 SAICA Student Handbook 2023/2024

910.3 A3 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.

Financial Interests Held by the Firm, Assurance Team Members and Immediate Family
R910.4 A direct financial interest or a material indirect financial interest in the assurance
client shall not be held by:
(a) The firm; or
(b) An assurance team member or any of that individual’s immediate family.

Financial Interests in an Entity Controlling an Assurance Client

R910.5 When an entity has a controlling interest in the assurance client and the client is
material to the entity, neither the firm, nor an assurance team member, nor any of
that individual’s immediate family shall hold a direct or material indirect financial
interest in that entity.

Financial Interests Held as Trustee

R910.6 Paragraph R910.4 shall also apply to a financial interest in an assurance client held
in a trust for which the firm or individual acts as trustee unless:
(a) None of the following is a beneficiary of the trust: the trustee, the assurance
team member or any of that individual’s immediate family, or the firm;
(b) The interest in the assurance client held by the trust is not material to the
trust;
(c) The trust is not able to exercise significant influence over the assurance
client; and
(d) None of the following can significantly influence any investment decision
involving a financial interest in the assurance client: the trustee, the assur-
ance team member or any of that individual’s immediate family, or the firm.

Financial Interests Received Unintentionally

R910.7 If a firm, an assurance team member, or any of that individual’s immediate family,
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 section, then:
(a) If the interest is received by the 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 by any of that
individual’s immediate family, 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.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 203

Financial Interests – Other Circumstances

Close Family
910.8 A1 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 assurance client.
910.8 A2 Factors that are relevant in evaluating the level of such a threat include:
• 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.
910.8 A3 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 assurance team.
910.8 A4 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 assurance team
member.
Other Individuals
910.8 A5 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 employees of the firm, apart from those who are
specifically not permitted to hold such financial interests by paragraph R910.4,
or their immediate family members.
• Individuals with a close personal relationship with an assurance team member.
910.8 A6 An example of an action that might eliminate such a self-interest threat is remov-
ing the assurance team member with the personal relationship from the assurance
team.
910.8 A7 Examples of actions that might be safeguards to address such a self-interest threat
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 mem-
ber.

Section 911
Loans and Guarantees
Introduction
911.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
911.2 A loan or a guarantee of a loan with an assurance client might create a self-interest
threat. This section sets out specific requirements and application material relevant
to applying the conceptual framework in such circumstances.
ET – 204 SAICA Student Handbook 2023/2024

Requirements and Application Material

General
911.3 A1 This section contains references to the “materiality” of a loan or guarantee. In
determining whether such a loan or guarantee is material to an individual, the
combined net worth of the individual and the individual’s immediate family mem-
bers may be taken into account.

Loans and Guarantees with an Assurance Client

R911.4 A firm, an assurance team member, or any of that individual’s immediate family
shall not make or guarantee a loan to an assurance client or any director or officer
of an assurance client, unless the loan or guarantee is immaterial to both:
(a) The firm or the individual making the loan or guarantee, as applicable; and
(b) The client, or the director or officer of the client.

Loans and Guarantees with an Assurance Client that is a Bank or Similar Institution
R911.5 A firm, an assurance team member, or any of that individual’s immediate family
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.
911.5 A1 Examples of loans include mortgages, bank overdrafts, car loans and credit card
balances.
911.5 A2 Even if a firm receives 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 self-interest threat if it is material to the assurance client or firm receiving
the loan.
911.5 A3 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 as-
surance team member, from a network firm that is not a beneficiary of the loan.
Deposit or Brokerage Accounts
R911.6 A firm, an assurance team member, or any of that individual’s immediate family
shall not have deposits or a brokerage account with an assurance client that is a
bank, broker, or similar institution, unless the deposit or account is held under nor-
mal commercial terms.

Loans and Guarantees with an Assurance Client that is not a Bank or Similar Institution
R911.7 A firm or an assurance team member, or any of that individual’s immediate fam-
ily, shall not accept a loan from, or have a borrowing guaranteed by, an assurance
client that is not a bank or similar institution, or any director or officer of an assur-
ance client, unless the loan or guarantee is immaterial to both:
(a) The firm, or the individual receiving the loan or guarantee, as applicable;
and
(b) The client, or the director or officer of the client.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 205

Section 920
Business Relationships
Introduction
920.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
920.2 A close business relationship with an assurance client or its management might
create a self-interest or intimidation threat. This section sets out specific require-
ments and application material relevant to applying the conceptual framework in
such circumstances.

Requirements and Application Material

General
920.3 A1 This section contains references to the “materiality” of a financial interest and the
“significance” of a business relationship. In determining whether such a financial
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.
920.3 A2 Examples of a close business relationship 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 client.
• Arrangements to combine one or more services or products of the firm with
one or more services or products of the client and to market the package with
reference to both parties.
• Distribution or marketing arrangements under which the firm distributes or
markets the client’s products or services, or the client distributes or markets the
firm’s products or services.

Firm, Assurance Team Member or Immediate Family Business Relationships

R920.4 A firm or an assurance team member shall not have a close business relationship
with an assurance client or its management unless any financial interest is imma-
terial and the business relationship is insignificant to the client or its management
and the firm or the assurance team member, as applicable.
920.4 A1 A self-interest or intimidation threat might be created if there is a close business
relationship between the assurance client or its management and the immediate
family of an assurance team member.

Buying Goods or Services

920.5 A1 The purchase of goods and services from an assurance client by a firm, or an
assurance team member, or any of that individual’s immediate family 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.
920.5 A2 Examples of actions that might eliminate such a self-interest threat include:
• Eliminating or reducing the magnitude of the transaction.
• Removing the individual from the assurance team.
ET – 206 SAICA Student Handbook 2023/2024

Section 921
Family and Personal Relationships
Introduction
921.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
921.2 Family or personal relationships with client personnel might create a self-interest,
familiarity or intimidation threat. This section sets out specific requirements and
application material relevant to applying the conceptual framework in such cir-
cumstances.

Requirements and Application Material

General
921.3 A1 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.
921.3 A2 Factors that are relevant in evaluating the level of such threats include:
• 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

921.4 A1 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 engage-
ment.
921.4 A2 Factors that are relevant in evaluating the level of such threats include:
• The position held by the immediate family member.
• The role of the assurance team member.
921.4 A3 An example of an action that might eliminate such a self-interest, familiarity or
intimidation threat is removing the individual from the assurance team.
921.4 A4 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 assurance
team so that the assurance team member does not deal with matters that are within
the responsibility of the immediate family member.
R921.5 An individual shall not participate as an assurance team member when any of that
individual’s immediate family:
(a) Is a director or officer of the assurance client;
(b) In an attestation engagement, is an employee in a position to exert signifi-
cant influence over the subject matter information of the assurance engage-
ment; or
(c) Was in such a position during any period covered by the engagement or the
subject matter information.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 207

Close Family of an Assurance Team Member

921.6 A1 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 significant influence over the subject matter information of the assur-
ance engagement.
921.6 A2 Factors that are relevant in evaluating the level of such threats include:
• The nature of the relationship between the assurance team member and the
close family member.
• The position held by the close family member.
• The role of the assurance team member.
921.6 A3 An example of an action that might eliminate such a self-interest, familiarity or
intimidation threat is removing the individual from the assurance team.
921.6 A4 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 assurance
team so that the assurance team member does not deal with matters that are within
the responsibility of the close family member.

Other Close Relationships of an Assurance Team Member

R921.7 An assurance team member shall consult in accordance with firm policies and pro-
cedures if the assurance team member has a close relationship with an individual
who is not an immediate or close family member, but who 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 at attestation engagement, an employee in a position to
exert significant influence over the subject matter information of the assur-
ance engagement.
921.7 A1 Factors that are relevant in evaluating the level of a self-interest, familiarity or
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 client.
• The role of the assurance team member.
921.7 A2 An example of an action that might eliminate such a self-interest, familiarity or
intimidation threat is removing the individual from the assurance team.
921.7 A3 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 assurance
team so that the assurance team member does not deal with matters that are within
the responsibility of the individual with whom the assurance team member has a
close relationship.

Relationships of Partners and Employees of the Firm

921.8 A1 A self-interest, familiarity or intimidation threat might be created by a personal or
family relationship between:
(a) A partner or employee of the firm who is not an assurance team member;
and
ET – 208 SAICA Student Handbook 2023/2024

(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 under-
lying subject matter or, in an attestation engagement, an employee in
a position to exert significant influence over the subject matter infor-
mation of the assurance engagement.
921.8 A2 Factors that are relevant in evaluating the level of such threats include:
• The nature of the relationship between the partner or employee of the firm and
the director or officer or employee of the client.
• The degree of interaction of the partner or employee of the firm with the assur-
ance team.
• The position of the partner or employee within the firm.
• The role of the individual within the client.
921.8 A3 Examples of actions that might be safeguards to address such self-interest, famili-
arity or intimidation threats include:
• 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.

Section 922
Recent Service with an Assurance Client
Introduction
922.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
922.2 If an assurance team member has recently served as a director or officer or em-
ployee of the assurance client, a self-interest, self-review or familiarity threat might
be created. This section sets out specific requirements and application material rele-
vant to applying the conceptual framework in such circumstances.

Requirements and Application Material

Service During the Period Covered by the Assurance Report
R922.3 The assurance team shall not include an individual 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 under-
lying subject matter or, in an attestation engagement, an employee in a posi-
tion to exert significant influence over the subject matter information of the
assurance engagement.
Service Prior to the Period Covered by the Assurance Report
922.4 A1 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
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 209

(b) was an employee in a position to exert significant influence over the under-
lying subject matter or, in an attestation engagement, an employee in a posi-
tion to exert significant influence over the subject matter information of the
assurance 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 client, is to be evaluated
in the current period as part of the current assurance engagement.
922.4 A2 Factors that are relevant in evaluating the level of such threats include:
• The position the individual held with the client.
• The length of time since the individual left the client.
• The role of the assurance team member.
922.4 A3 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.

Section 923
Serving as a Director or Officer of an Assurance Client
Introduction
923.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
923.2 Serving as a director or officer of an assurance client creates self-review and self-
interest threats. This section sets out specific requirements and application materi-
al relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

Service as Director or Officer
R923.3 A partner or employee of the firm shall not serve as a director or officer of an
assurance client of the firm.

Service as Company Secretary

R923.4 A partner or employee of the firm shall not serve as Company Secretary for an
assurance client of the firm unless:
(a) This practice is specifically permitted under local law, professional rules or
practice;
(b) Management makes all decisions; and
(c) The duties and activities performed are limited to those of a routine and
administrative nature, such as preparing minutes and maintaining statutory
returns.
923.4 A1 The position of Company Secretary has different implications in different jurisdic-
tions. Duties might range from: administrative duties (such as personnel manage-
ment 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 asso-
ciation with the entity. Therefore, a threat is created if a partner or employee of the
ET – 210 SAICA Student Handbook 2023/2024

firm serves as Company Secretary for an assurance client. (More information on

providing non-assurance services to an assurance client is set out in Section 950,
Provision of Non-assurance Services to an Assurance Client.)

Section 924
Employment with an Assurance Client
Introduction
924.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
924.2 Employment relationships with an assurance client might create a self-interest,
familiarity or intimidation threat. This section sets out specific requirements and
application material relevant to applying the conceptual framework in such cir-
cumstances.

Requirements and Application Material

General
924.3 A1 A familiarity or intimidation threat might be created if any of the following indi-
viduals have been an assurance team member or partner of the firm:
(a) A director or officer of the assurance client.
(b) 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 po-
sition to exert significant influence over the subject matter information of the
assurance engagement.
Former Partner or Assurance Team Member Restrictions
R924.4 If a former partner has joined an assurance client of the firm or a former assurance
team member has joined the assurance client as:
(a) A 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 assur-
ance engagement, the individual shall not continue to participate in the firm’s
business or professional activities.
924.4 A1 Even if one of the individuals described in paragraph R924.4 has joined the assur-
ance client in such a position and does not continue to participate in the firm’s
business or professional activities, a familiarity or intimidation threat might still be
created.
924.4 A2 A familiarity or intimidation threat might also be created if a former partner of the
firm has joined an entity in one of the positions described in paragraph 924.3 A1
and the entity subsequently becomes an assurance client of the firm.
924.4 A3 Factors that are relevant in evaluating the level of such threats include:
• The position the individual has taken at the client.
• Any involvement the individual will have with the assurance team.
• The length of time since the individual was an assurance team member or part-
ner of the firm.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 211

• The former position of the individual within the assurance team or firm. An
example is whether the individual was responsible for maintaining regular con-
tact with the client’s management or those charged with governance.
924.4 A4 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 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 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 client.
• Having an appropriate reviewer review the work of the former assurance team
member.
Assurance Team Members Entering Employment Negotiations with a Client
R924.5 A firm shall have policies and procedures that require assurance team members to
notify the firm when entering employment negotiations with an assurance client.
924.5 A1 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 client sometime in the future.
924.5 A2 An example of an action that might eliminate such a self-interest threat is remov-
ing the individual from the assurance engagement.
924.5 A3 An example of an action that might be a safeguard to address such a self-interest
threat is having an appropriate reviewer review any significant judgements made
by that assurance team member while on the team.

Section 940
Long Association of Personnel with an Assurance Client
Introduction
940.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
940.2 When an individual is involved in an assurance engagement of a recurring nature
over a long period of time, familiarity and self-interest threats might be created.
This section sets out requirements and application material relevant to applying
the conceptual framework in such circumstances.

Requirements and Application Material

General
940.3 A1 A familiarity threat might be created as a result of an individual’s long association
with:
(a) The assurance client;
(b) The assurance client’s senior management; or
ET – 212 SAICA Student Handbook 2023/2024

(c) The underlying subject matter or, in an attestation engagement subject

matter information of the assurance engagement.
940.3 A2 A self-interest threat might be created as a result of an individual’s concern about
losing a longstanding assurance client or an interest in maintaining a close person-
al relationship with a member of senior management or those charged with gov-
ernance. Such a threat might influence the individual’s judgement inappropriately.
940.3 A3 Factors that are relevant to evaluating the level of such familiarity or self-interest
threats include:
• The nature of the assurance engagement.
• How long the individual has been an assurance team member, the individual’s
seniority on the team, and the nature of the roles performed, including if such a
relationship existed while the individual was at a prior firm.
• The extent to which the work of the individual is directed, reviewed and super-
vised by more senior personnel.
• The extent to which the individual, due to the individual’s seniority, has the
ability to influence the outcome of the assurance engagement, for example, by
making key decisions or directing the work of other engagement team mem-
bers.
• The closeness of the individual’s personal relationship with the assurance
client or, if relevant, senior management.
• The nature, frequency and extent of interaction between the individual and the
assurance client.
• Whether the nature or complexity of the subject matter or subject matter infor-
mation has changed.
• Whether there have been any recent changes in the individual or individuals at
the assurance client who are responsible for the underlying subject matter or,
in an attestation engagement, the subject matter information or, if relevant,
senior management.
940.3 A4 The combination of two or more factors might increase or reduce the level of the
threats. For example, familiarity threats created over time by the increasingly
close relationship between an assurance team member and an individual at the
assurance client who is in a position to exert significant influence over the under-
lying subject matter or, in an attestation engagement, the subject matter infor-
mation, would be reduced by the departure of that individual from the client.
940.3 A5 An example of an action that might eliminate the familiarity and self-interest
threats in relation to a specific engagement would be rotating the individual off the
assurance team.
940.3 A6 Examples of actions that might be safeguards to address such familiarity or self-
interest threats include:
• Changing the role of the individual on the assurance team or the nature and
extent of the tasks the individual performs.
• Having an appropriate reviewer who was not an assurance team member
review the work of the individual.
• Performing regular independent internal or external quality reviews of the
engagement.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 213

R940.4 If a firm decides that the level of the threats created can only be addressed by
rotating the individual off the assurance team, the firm shall determine an appro-
priate period during which the individual shall not:
(a) Be a member of the engagement team for the assurance engagement;
(b) Perform an engagement quality review, or a review consistent with the
objective of an engagement quality review, for the engagement; or
(c) Exert direct influence on the outcome of the assurance engagement.
The period shall be of sufficient duration to allow the familiarity and self-interest
threats to be addressed.

Section 950
Provision of Non-Assurance Services to Assurance Clients
Introduction
950.1 Firms are required to comply with the fundamental principles, be independent, and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
950.2 Firms might provide a range of non-assurance services to their assurance clients,
consistent with their skills and expertise. Providing certain non-assurance services
to assurance clients might create threats to compliance with the fundamental prin-
ciples and threats to independence.
950.3 This section sets out requirements and application material relevant to applying
the conceptual framework to identify, evaluate and address threats to independ-
ence when providing non-assurance services to assurance clients.
950.4 New business practices, the evolution of financial markets and changes in tech-
nology are some developments that make it impossible to draw up an all-inclusive
list of non-assurance services that firms might provide to an assurance client. The
conceptual framework and the general provisions in this section apply when a firm
proposes to a client to provide a non-assurance service for which there are no spe-
cific requirements and application material.

Requirements and Application Material

General
Risk of Assuming Management Responsibilities When Providing a Non-Assurance Service
R950.5 A1 When a firm provides a non-assurance service to an assurance client, there is a
risk that a firm will assume a management responsibility in relation to the under-
lying subject matter and, in an attestation engagement, the subject matter infor-
mation of the assurance engagement unless the firm is satisfied that the require-
ments in paragraphs R900.13 and R900.14 have been complied with.

Accepting an Engagement to Provide a Non-Assurance Service

R950.6 Before a firm accepts an engagement to provide a non-assurance service to an
assurance client, the firm shall apply the conceptual framework to identify, evalu-
ate and address any threat to independence that might be created by providing that
service.
ET – 214 SAICA Student Handbook 2023/2024

Identifying and Evaluating Threats

950.7 A1 A description of the categories of threats that might arise when a firm provides a
non-assurance service to an assurance client is set out in paragraph 120.6 A3.
950.7 A2 Factors that are relevant in identifying and evaluating the different threats that
might be created by providing a non-assurance service to an assurance client in-
clude:
• The nature, scope, intended use and purpose of the service.
• The manner in which the service will be provided, such as the personnel to be
involved and their location.
• The legal and regulatory environment in which the service is provided.
• Whether the client is a public interest entity.
• The level of expertise of the client’s management and employees with respect
to the type of service provided.
• Whether the outcome of the service will affect the underlying subject matter
and, in an attestation engagement, matters reflected in the subject matter or
subject matter information of the assurance engagement, and, if so:
o The extent to which the outcome of the service will have a material effect
on the underlying subject matter and, in an attestation engagement, the sub-
ject matter information of the assurance engagement.
o The extent to which the assurance client determines significant matters of
judgement (Ref: Para. R900.13 to R900.14).
• The degree of reliance that will be placed on the outcome of the service as part
of the assurance engagement.
• The fee relating to the provision of the non-assurance service.
Materiality in Relation to an Assurance Client’s Information
950.8 A1 Materiality is a factor that is relevant in evaluating threats created by providing a
non-assurance service to an assurance client. 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 Engage-
ments other than Audits or Reviews of Historical Financial Information. The
determination of materiality involves the exercise of professional judgement and is
impacted by both quantitative and qualitative factors. It is also affected by percep-
tions of the financial or other information needs of users.
Multiple Non-assurance Services Provided to the Same Assurance Client
950.9 A1 A firm might provide multiple non-assurance services to an assurance client. In
these circumstances the combined effect of threats created by providing those ser-
vices is relevant to the firm’s evaluation of threats.
Self-Review Threats
950.10 A1 A self-review threat might be created if, in an attestation engagement, the firm is
involved in the preparation of subject matter information which subsequently be-
comes the subject matter information of an assurance engagement. Examples of
non-assurance services that might create such self-review threats when providing
services related to the subject matter information of an assurance engagement in-
clude:
(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.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 215

Assurance clients that are public interest entities

950.11 A1 Expectations about a firm’s independence are heightened when an assurance en-
gagement is undertaken by a firm for a public interest entity and the results of that
engagement will be:
(a) Made available publicly, including to shareholders and other stakeholders; or
(b) Provided to an entity or organisation established by law or regulation to
oversee the operation of a business sector or activity.
Consideration of these expectations forms part of the reasonable and informed
third party test applied when determining whether to provide a non-assurance ser-
vice to an assurance client.
950.11 A2 If a self-review threat exists in relation to an engagement undertaken in the cir-
cumstances described in paragraph 950.11 A1 (b), the firm is encouraged to dis-
close the existence of that self-review threat and the steps taken to address it to the
party engaging the firm or those charged with governance of the assurance client
and to the entity or organisation established by law or regulation to oversee the
operation of a business sector or activity to which the results of the engagement
will be provided.

Addressing Threats
950.12 A1 Paragraphs 120.10 to 120.10 A2 include a requirement and application material
that are relevant when addressing threats to independence, including a description
of safeguards.
950.12 A2 Threats to independence created by providing a non-assurance service or multiple
services to an assurance client vary depending on facts and circumstances of the
assurance engagement and the nature of the service. Such threats might be ad-
dressed by applying safeguards or by adjusting the scope of the proposed service.
950.12 A3 Examples of actions that might be safeguards to address such threats include:
• Using professionals who are not assurance team members to perform the ser-
vice.
• Having an appropriate reviewer who was not involved in providing the service
review the assurance work or service performed.
950.12 A4 Safeguards might not be available to reduce the threat created by providing a non-
assurance service to an assurance client to an acceptable level. In such a situation,
the application of the conceptual framework requires the firm to:
(a) Adjust the scope of the proposed service to eliminate the circumstances that
are creating the threat;
(b) Decline or end the service that creates the threat that cannot be eliminated or
reduced to an acceptable level; or
(c) End the assurance engagement.
ET – 216 SAICA Student Handbook 2023/2024

Section 990
Reports that include a Restriction on Use and Distribution
(Assurance Engagements other than Audit and Review Engagements)
Introduction
990.1 Firms are required to comply with the fundamental principles, be independent and
apply the conceptual framework set out in Section 120 to identify, evaluate and
address threats to independence.
990.2 This section sets out certain modifications to Part 4B which are permitted in cer-
tain circumstances involving assurance engagements where the report includes a
restriction on use and distribution. In this section, an engagement to issue a re-
stricted use and distribution assurance report in the circumstances set out in para-
graph R990.3 is referred to as an “eligible assurance engagement.”

Requirements and Application Material

General
R990.3 When a firm intends to issue a report on an assurance engagement which includes
a restriction on use and distribution, the independence requirements set out in Part
4B shall be eligible for the modifications that are permitted by this section, but
only if:
(a) The 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 appli-
cation of the modifications.
990.3 A1 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 firm to communicate with intended users about
independence matters, including the circumstances that are relevant to applying
the conceptual framework. It also allows the firm to obtain the agreement of the
intended users to the modified independence requirements.
R990.4 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 firm shall subse-
quently make such users aware of the modified independence requirements agreed
to by their representative.
990.4 A1 For example, where the intended users are a class of users such as lenders in a
syndicated loan arrangement, the firm might describe the modified independence
requirements in an engagement letter to the representative of the lenders. The rep-
resentative might then make the firm’s engagement letter available to the members
of the group of lenders to meet the requirement for the firm to make such users
aware of the modified independence requirements agreed to by the representative.
R990.5 When the firm performs an eligible assurance engagement, any modifications to
Part 4B shall be limited to those modifications set out in paragraphs R990.7 and
R990.8.
Code of Professional Conduct of the South African Institute of Chartered Accountants, 2023 Edition ET – 217

R990.6 If the firm also issues an assurance report that does not include a restriction on use
and distribution for the same client, the firm shall apply Part 4B to that assurance
engagement.

Financial Interests, Loans and Guarantees, Close Business, Family and Personal
Relationships
R990.7 When the firm performs an eligible assurance engagement:
(a) The relevant provisions set out in Sections 910, 911, 920, 921, 922 and 924
need apply only to the members of the engagement team, and their immedi-
ate and close family members;
(b) The firm shall identify, evaluate and address any threats to independence
created by interests and relationships, as set out in Sections 910, 911, 920,
921, 922 and 924, between the assurance client and the following assurance
team members;
(i) Those who provide consultation regarding technical or industry spe-
cific issues, transactions or events; and
(ii) Those who perform an engagement quality review, or a review
consistent with the objective of an engagement quality review, for the
engagement; and
(c) The 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 firm who can directly influence the
outcome of the assurance engagement, as set out in Sections 910, 911, 920,
921, 922 and 924.
990.7 A1 Others within the firm who can directly influence the outcome of the assurance
engagement include those who recommend the compensation, or who provide dir-
ect supervisory, management or other oversight, of the assurance engagement
partner in connection with the performance of the assurance engagement.
R990.8 When the firm performs an eligible assurance engagement, the firm shall not hold
a material direct or a material indirect financial interest in the assurance client.
ET – 218 SAICA Student Handbook 2023/2024

EFFECTIVE DATES
Except for the revisions relating to the definition of engagement team and group audits, the
Code is effective.
The revisions relating to the definition of engagement team and group audits, as published
on the IESBA website in April 2023, will be effective as follows:
• The changes to Section 400 relating to the revision to the definition of engagement team
and the new provisions in Section 405 relating to group audits (Chapter 1) will be effect-
ive for audits and reviews of the financial statements and audits of group financial state-
ments for periods beginning on or after December 15, 2023.
• The following conforming and consequential amendments will be effective as of Decem-
ber 15, 2023:
o The conforming amendments to Section 360 to align with ISA 600 (Revised) termin-
ology in Chapter 2.
o The conforming amendments to the revised non-assurance services provisions in
Section 400 in Chapter 3.
o The conforming amendments to Sections 300, 310, 320, 400, 510, 605 and 900 result-
ing from the revisions to the definitions of engagement team in Chapter 4.
o The quality management-related consequential amendments to Sections 540, 800,
940, and 990 in Chapter 5.
• The changes to the Glossary in Chapter 6 will be effective:
o For audits and reviews of financial statements and audits of group financial state-
ments for financial statement periods beginning on or after December 15, 2023.
o For assurance engagements other than audit and review engagements with respect to
underlying subject matter covering periods beginning on or after December 15, 2023;
otherwise, as of December 15, 2023.
Early adoption will be permitted.
TRANSITIONAL PROVISION RELATING TO THE PROVISIONS ADDRESSING
GROUP AUDITS
For non-assurance services engagements a component auditor firm outside the group auditor
firm’s network has entered into with a component audit client before December 15, 2023
and for which work has already commenced, the component auditor firm may continue such
engagements under the extant provisions of the Code until completed in accordance with the
original engagement terms.