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Audit: Independence issues and the definition of network firms
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Members are reminded that the International Federation of Accountants (IFAC) Code of Ethics for Professional Accountants was revised in June 2006 to amend the definition of a 'network firm'.  
 
The Accounting Professional and Ethical Standards Board (APESB), responsible for the setting of ethical standards in Australia, discussed the change to the definition of 'network firms' at its 13 February meeting. An exposure draft will soon be issued by the APESB, outlining proposed changes to the definition of 'network firms' in APES 110 Code of Ethics for Professional Accountants, to allow stakeholder comment on this issue. 
 
Revised IFAC definition 
The revised IFAC definition would impact on the audits of firms that are part of a co-operative network that:

  • Is aimed at profit or cost sharing; or
  • Shares common ownership, control or management; or
  • Has common quality control policies and procedures; or
  • Has common business strategy; or
  • Uses a common brand name or common initials; or
  • Shares a significant part of professional resources.
Processes and procedures 
Under the IFAC revisions, network firms will have to establish processes and procedures to address auditor independence requirements for all partners and other personnel within that network. Please note - the obligations to assess, maintain and monitor independence across the network apply should any one of the above criteria apply. 
 
For more information: 
 
Last updated: 1 March 2007