R200.8 The relationships or circumstances that a member encounters in various engagements and work assignments or positions will often create different threats to complying with the rules. When a member encounters a relationship or circumstance that is not specifically addressed by a rule, fundamental principle or an interpretation, under this approach, the member shall determine whether the relationship or circumstance creates one or more threats, such as those identified in paragraphs .07–.12 that follow. The existence of a threat does not mean that the member is not in compliance with the rules and fundamental principles; however, the member should evaluate the significance of the threat.
200.8 A1 Threats to compliance with the rules and fundamental principles might be created by a broad range of facts and circumstances. Many threats fall into one or more of the following six broad categories: adverse interest, advocacy, familiarity, self-interest, self-review, and undue influence (also referred to as “intimidation threat”).
200.8 A2 Examples of threats associated with a specific relationship or circumstance are identified in the interpretations of the Code. Paragraphs 200.7 A3 – 200.7 A12 of this section define and provide examples, which are not all inclusive, of each of these threat categories.
200.8 A3 Adverse interest threat. The threat that a member will not act with objectivity, because the member’s interests are opposed to the interests of the employing organisation. Examples of adverse interest threats include the following:
(a) A member has charged, or expressed an intention to charge, the employing organisation with violations of law.
(b) A member or the member’s immediate family or close family has a financial or another relationship with a vendor, customer, competitor, or potential acquisition of the employing organisation.
(c) A member has sued or expressed an intention to sue the employing organisation or its officers, directors, or employees.
200.8 A4 Advocacy threat. The threat that a member will promote an organisation’s interests or position to the point that their objectivity is compromised. Examples of advocacy threats include the following:
(a) Obtaining favourable financing or additional capital is dependent upon the information that the member includes in, or excludes from, a prospectus, an offering, a business plan, a financing application, or a regulatory filing.
(b) The member gives or fails to give information that the member knows will unduly influence the conclusions reached by an external service provider or other third party
200.8 A5 Familiarity threat. The threat that, due to a long or close relationship with a person or an employing organisation, a member will become too sympathetic to their interests or too accepting of the person’s work or organisation’s product or service. Examples of familiarity threats include the following:
(a) A member uses an immediate family’s or close family’s company as a supplier to the employing organisation.
(b) A member accepts an individual’s work product with little or no review because the individual has been producing an acceptable work product for an extended period of time.
(c) A member’s immediate family or close family is employed as a member’s subordinate.
200.8 A6 Self-interest threat. The threat that a member could benefit, financially or otherwise, from an interest in, or relationship with, the employing organisation or persons associated with the employing organisation. Examples of self-interest threats include the following:
(a) A member’s immediate family or close family has a financial interest in the employing organisation.
(b) A member holds a financial interest (for example, shares or share options) in, or receives a loan or guarantee from, the employing organisation, and the value of that financial interest is directly affected by the Member’s decisions.
(c) A member is eligible for a profit or other performance-related bonus, and the value of that bonus is directly affected by the Member’s decisions.
(d) A member being offered a gift or special treatment from a supplier of the employing organisation.
200.8 A7 Self-review threat. The threat that a member will not appropriately evaluate the results of a previous judgment made or service performed or supervised by the member, or an individual in the employing organisation, and that the member will rely on that service in forming a judgment as part of another service. Examples of self-review threats include the following:
(a) When performing an internal audit procedure, an internal auditor accepts work that they previously performed in a different position.
(b) The member accepts the work previously performed by the member, alone or with others that will be the basis for providing another professional service.
200.8 A8 Undue influence threat (also referred to as “intimidation threat”). The threat that a member will subordinate their judgment to that of an individual associated with the employing organisation or any relevant third party due to that individual’s position, reputation or expertise, aggressive or dominant personality, or attempts to coerce or exercise excessive influence over the member. Examples of undue influence threats include the following:
(a) A member is pressured to become associated with misleading information.
(b) A member is pressured to deviate from a company policy.
(c) A member is pressured to change a conclusion regarding an accounting or a tax position.
(d) A member is pressured to hire an unqualified individual.