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if a client firm is listed, and when we provide non audit service(NAS), we can only provide NAS if it is not material and have safeguards.
However, how do we determine whether it is material in amount or nature ? for example, how do we know whether payroll service is considered to be material ? isn’t abit speculative ? when the firm is large payroll can be immaterial isn’t ?
The basic rule on payroll services (also accounting and bookkeeping services) is that this is NOT allowed for a PIE.
The exception is services “of a routine nature for divisions or related entities” if the personnel providing the services are not members of the audit team AND
i) the divisions or related entities are collectively immaterial to the financial statements (on which the auditor will express an opinion) OR
ii) the services relate to matters that are collectively immaterial to the financial
statements of the division or related entity.Assessing materiality is not ‘speculative’ – but a matter of judgement (one of the things that makes audit a profession rather than a trade). An auditor of a group would assess the materiality of related entities (subsidiaries, etc) as part of the audit strategy in planning the audit – so there’s really nothing different about the principle of assessing materiality when considering ethical issues.
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