Network Firm Analysis

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Register to read the introduction… The Independence requirements in this section that apply to a Network Firm apply to any entity, such as a consulting practice or professional law practice, that meets the definition of a Network Firm irrespective of whether the entity itself meets the definition of a Firm.
290.14 To enhance their ability to provide Professional Services, Firms frequently form larger structures with other Firms and entities. Whether these larger structures create a Network depends on the particular facts and circumstances and does not depend on whether the Firms and entities are legally separate and distinct. For example, a larger structure may be aimed only at facilitating the referral of work, which in itself does not meet the criteria necessary to constitute a Network. Alternatively, a larger structure might be such that it is aimed at co-operation and the Firms share a common brand name, a common system of quality control, or significant professional resources and consequently is deemed to be a Network.
290.15 The judgment as to whether the larger structure is a Network shall be made in
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290.114 The holding by a Firm, or a member of the Audit Team, or a member of that individual‘s Immediate Family, of a Direct Financial Interest or a material Indirect
Financial Interest in the Audit Client as a trustee creates a self-interest threat.
Similarly, a self-interest threat is created when (a) a partner in the Office in which the lead Engagement Partner practices in connection with the audit, (b) other partners and managerial employees who provide non-assurance services to the
Audit Client, except those whose involvement is minimal, or (c) their Immediate
Family members, hold a Direct Financial Interest or a material Indirect Financial
Interest in the Audit Client as trustee. Such an interest shall not be held unless:

Neither the trustee, nor an Immediate Family member of the trustee, nor the
Firm are beneficiaries of the trust;


The interest in the Audit Client held by the trust is not material to the trust;


The trust is not able to exercise significant influence over the Audit

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