Section 5410: Fees

Section 5410: Fees · Complied AI

5410.4 A1 When fees are negotiated with and paid by a sustainability assurance client, this creates a self- interest threat and might create an intimidation threat to independence. 5410.4 A2 The application of the conceptual framework requires that before a firm or network firm accepts a sustainability assurance engagement, or any other engagement for a sustainability assurance 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 sustainability assurance engagement. 5410.4 A3 Factors that are relevant in evaluating the level of threats created when fees for a sustainability assurance engagement, or any other engagement, are paid by the sustainability assurance 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 sustainability assurance engagement and those for services other than the sustainability assurance engagement 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. • 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 network firms. • The significance of the client, or a third party referring the client, to the firm, network firm, engagement leader 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 the sustainability assurance engagement are provided, for example when the related entity is a sister entity. • The involvement of those charged with governance in appointing the firm providing the sustainability assurance service and agreeing fees, and the apparent emphasis they and client management place on the quality of the sustainability assurance engagement 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 sustainability assurance work is subject to the review of the Institute . 5410.4 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.

5410.11 A0 Where a firm performs both an audit engagement and a sustainability assurance engagement for a sustainability assurance client, paragraphs 410.11 A1 to 410.11 A3 in Part 4A apply in the context of the fees charged by the firm and network firms to the sustainability assurance client. Where the firm is not engaged to perform an audit engagement for the client, paragraphs 5410.11 A1 to A3 apply. 5410.11 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 a sustainability assurance client is generated by providing services other than the sustainability assurance engagement to the client, due to concerns about the potential loss of either the sustainability assurance 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-sustainability assurance relationship, which might create a threat to the sustainability assurance provider’s independence. 5410.11 A2 Factors that are relevant in evaluating the level of such threats include: • The ratio of fees for services other than the sustainability assurance engagement to the sustainability assurance fee. • The length of time during which a large proportion of fees for services other than the sustainability assurance engagement to the sustainability assurance fee has existed. • The nature, scope and purposes of the services other than the sustainability assurance engagement, including: o Whether they are recurring services. o Whether law or regulation mandates the services to be performed by the firm. 5410.11 A3 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 sustainability assurance engagement or the service other than the sustainability assurance engagement review the relevant sustainability assurance work. • Reducing the extent of services other than the sustainability assurance engagement provided to the sustainability assurance client.