EY Canada Independence Policy CA-P1101 December 2014 Canada... · 2015-08-17 · EY CANADA INDEPENDENCE POLICY • DECEMBER 2014 4 Canada Independence Policy as indicated (Refer to

EY Canada Independence Policy CA-P1101

December 2014

1 E Y C A N A D A I N D E P E N D E N C E P O L I C Y • D E C E M B E R 2 0 1 4

TABLE OF CONTENTS

STRUCTURE OF THIS POLICY 3

EY Canada Independence Policy 10

Section 000 Introduction 10 Section 001 EYG Independence Policy 10 Section 002 Independence roles and responsibilities 12 Section 003 Independence consultation and documentation 17

Part 1: Matters relating to Professionals 25

Section 100 Introduction 25 Section 101 Financial Interests 25 Section 102 Employment relationships and personal appointments 34 Section 103 Pension, insurance and other similar investment products 45 Section 104 Trusts, estates, intermediary investment vehicles and

other controlling ownerships 47 Section 105 Loans, guarantees and deposits 49 Section 106 Brokerage accounts 54 Section 107 Business relationships 55

Part 2 Matters relating to EY Member Practices 60

Section 200 Introduction 60 Section 201 EY Member Practices, practice acquisitions and practice

separations 60 Section 202 Financial Interests 61 Section 203 EY Member Practice pension plans 61 Section 204 Loans, guarantees and deposits 62 Section 205 Brokerage accounts 65 Section 206 Insurance policies 66 Section 207 Business relationships 66 Section 208 Actual or threatened litigation with an Audit Client 71 Section 209 Fee dependency 73 Section 210 Evaluation and Compensation of Audit Engagement Team

Members 73

Part 3 Matters relating to audit and non-audit engagements 75

Section 300 Introduction 75 Section 301 Initiating and ceasing audit relationships 77 Section 302 Communication with audit committees or those charged

with governance 84 Section 303 Rotation of Audit Engagement Team members 86 Section 304 Not subject to audit exception 89 Section 305 Acting as management 90 Section 306 Corporate secretarial services 93 Section 307 Accounting, bookkeeping, payroll services and

preparation of statutory accounts 94 Section 308 Tax services 99 Section 309 Internal audit services 109 Section 310 Information technology systems services 113

E Y C A N A D A I N D E P E N D E N C E P O L I C Y • D E C E M B E R 2 0 1 4 2

Section 311 Temporary or loaned staff assignments 116 Section 312 Litigation support services 117 Section 313 Legal services 119 Section 314 Recruitment of management and other human resources

services 123 Section 315 Corporate finance services 124 Section 316 Valuation services 126 Section 317 Prospective financial information 129 Section 318 Fees and commissions 130 Section 319 Legal protection clauses 134 Section 320 Lobbying, legislative and similar services 134 Section 321 Corporate recovery and insolvency 135

Part 4 Assurance engagements other than financial audits 139

Section 400 Introduction 139 Section 401 Matters relating to Professionals 140 Section 402 Matters relating to Country Practices and Regions 143 Section 403 Matters related to services to Assurance Clients 145

Part 5 Financial audit and review engagements that are restricted for use and distribution 147

Section 500 Introduction 147 Section 501 Applicability 147 Section 502 Engagement requirements 148 Section 503 Modified independence 148

GLOSSARY 150


STRUCTURE OF THIS POLICY

The EY Canada Independence Policy presents the fundamental information Professional Employees and Partners need to know about independence and, in particular, source and reference standards and regulations as well as responsibilities of Professionals, Region, sub-regions, Country Practices, and EYG. In Parts 1 to 5 of this EY Canada Independence Policy there are two columns: • The left column is the EYG Independence Policy (“EYG Policy”); and • The right column contains additional Canadian policies.

The EY Canada Independence Policy is comprised of the EYG Policy, and additional Canadian policies required to comply with the Rules of Professional Conduct of each Canadian provincial Institute/Ordre of Chartered Professional Accountants and to meet certain business and practice risk management requirements of EY Canada. The proper way to read the EY Canada Independence Policy is to read both columns of the entire Section addressing a topic. Throughout the EY Canada Independence Policy, the term “Audit Clients” includes “Affiliates” as defined in the Glossary. Determination of applicable Independence Standards for an Audit Client EY Canada’s independence policies are generally comprised of three layers: • Requirements for Canadian Audit Clients subject to minimum independence standards; • Requirements for Canadian Audit Clients subject to CRI independence standards; and • Requirements for Canadian Audit Clients subject to US SEC independence standards.

With the introduction of Public Interest Entities (PIEs) to the EYG and EY Canada Independence Policy in 2010 certain sections of the EY Canada Independence Policy apply to PIE Audit Clients as defined in the Glossary. For purposes of determining which independence standards must be applied to a Canadian Audit Client refer to the following table: For a Canadian client that is a: Apply the following definition of Audit

Client and Affiliates in the Glossary Non public interest entity audit client (non-PIE)

Audit Clients and Affiliates - subject to Minimum independence standards

Non-listed public interest entity audit client (non-listed PIE)

Audit Clients and Affiliates - subject to Minimum independence standards

Listed public interest entity audit client (listed PIE) (Non CRI/Non-SEC)

Audit Clients and Affiliates - subject to CRI independence standards

Public interest entity – CRI (PIE-CRI) Audit Clients and Affiliates - subject to CRI independence standards

Public interest entity – SEC (PIE-US SEC) Audit Clients and Affiliates - US SEC Once the entities comprising the Canadian Audit Client (including Affiliates) have been determined using the applicable definition in accordance with the chart above apply the EY


Canada Independence Policy as indicated (Refer to “Application of Independence Standards to an Audit Client” below). Affiliate definitions in the EYG Policy and Supplementary Guidance G600.1 are used by other EY Member Firms but should not be used for Canadian Audit or Review Clients. It is the responsibility of the Lead Audit Partner to determine which of the three layers of independence standards to apply to the Audit Client:

1. Determine whether the entity itself is a PIE or a non-PIE. For PIEs also determine whether the Audit Client is a CRI, a US SEC registrant, or a Listed PIE (non-CRI/non-SEC) and apply the corresponding requirements. If the entity is neither a CRI, a US SEC registrant, or a Listed PIE (non-CRI / non-SEC) apply the minimum standards.

2. Additional independence requirements apply in the following situations:

a. If the audited entity is not a US SEC registrant, it will be subject to US SEC

independence standards if it is: i) an affiliate of a US SEC registrant audited by any Country Practice; or ii) a material subsidiary or material significant-influence investee of a US

SEC registrant audited by another firm. (Where EY performs multiple Audit Engagements, materiality should be considered on an aggregate basis); or

iii) an immaterial subsidiary or immaterial significant-influence investee of a US SEC registrant audited by another firm, and the other firm requests EY Canada to meet SEC independence requirements; however, consultation is required with Canada Independence before complying with the other auditor’s request; or

iv) an SEC registered broker/dealer, or an unregistered investment fund or pooled investment vehicle audit client advised by an SEC registered investment advisor (“RIA) that relies on EY’s audit report to satisfy the requirements under the SEC Custody Rules, including their Affiliates; or

v) an entity audited by any Country Practice, including their Affiliates, that is subject to SEC independence rules as required by a US regulator (e.g. the FDIC with respect to certain deposit-taking institutions, the Department of Labour with respect to certain US pension plans); or

vii) an entity that EY provides a security count examination, Type II SSAE 16 or ISAE 3402 report or report that meets the requirements on AT601 Compliance Attestation reports in order to satisfy SEC Custody Rule requirements.;

vii) a non-issuer whose audited financial statements are included or incorporated by reference in a non-audit client’s filing with the SEC under Rule 3-09 or Rule 3-10; or

viii) an entity that voluntarily files with the SEC.

b. If the audited entity is a non-CRI or a non-Listed PIE Audit Client, it will be subject to CRI independence requirements if it is:


i) an affiliate of a CRI Audit Client or a Listed PIE (non-CRI) Audit Client audited by any Country Practice; or

ii) a material subsidiary of, or material investee subject to significant-influence by a CRI or a Listed PIE (non-CRI / non-SEC) Audit Client audited by another firm. (Where EY performs multiple Audit Engagements, materiality should be considered on an aggregate basis); or

iii) an immaterial subsidiary of, or immaterial investee subject to significant-influence by a CRI or a Listed PIE (non-CRI / non-SEC) Audit Client audited by another firm, and the other firm requests EY Canada to meet CRI independence requirements; however, consultation is required with Canada Independence before complying with the other auditor’s request.

c. Audit Clients may also be subject to additional independence requirements

where the client audited by EY Canada, or any affiliate of the client, is subject to independence rules set by foreign jurisdictions or applicable regulatory authorities. The Audit Engagement Team must determine any additional foreign requirements on a client-by-client basis, generally through consultation with the Country Independence Leader of the applicable EY Country Practice. The EY Canada Independence Policy Supplementary Guidance sets out currently available independence requirements applicable to foreign Audit Clients and entities Controlling or Controlled by the foreign Audit Clients.

Where a CRI or a Listed PIE (non-CRI) is also an SEC registrant, apply the more restrictive of the policies applicable to CRI or US SEC Audit Clients.

Where a client is listed on a foreign stock exchange outside of Canada and the United States (e.g., the AIM market of the London Stock Exchange) and the Audit Client is subject to SEC independence requirements, apply the policies in the EY Canada Independence Policy applicable to the Audit Client (SEC) together with any additional independence requirements set by the foreign jurisdiction. Where a client listed on a foreign stock exchange outside of Canada and the United States is not a Canadian reporting issuer, we apply the policies in the EY Canada Independence Policy applicable to a CRI, together with any additional independence requirements set by the foreign jurisdiction. Communication of Independence Requirements to other Auditors When EY Canada relies on the work of other auditors (whether another EY Canada team, another EYG member firm or another firm), EY Canada Audit Engagement Teams must require those auditors to meet the independence requirements of the entity audited by EY Canada. Such requirements must be assessed on a client-by-client basis and communicated to the other auditors. Application of Independence Standards to an Audit Client: Throughout the EY Canada Independence Policy, tables have been added to assist in understanding how the requirements of the EY Canada Independence Policy apply to


different types of Audit Clients. For example, if the policy section is applicable to an Audit Client subject to minimum standards and also applicable to an Audit Client subject to CRI independence standards, but is not applicable to an Audit Client subject to SEC independence, the table indicates the following:

Policies apply to an Audit Client subject to

the following independence requirements:

Minimum CRI SEC

See policies for clients requiring SEC

independence in XXXS

In some areas of the policy there may be additional policies on a specific topic that are applicable to the Audit Client. For example, if a section of the policy is applicable to an Audit Client requiring all three layers of independence standards (Minimum, CRI and SEC) and there are additional policies which apply to Audit Clients subject to SEC independence standards, the table indicates the following:

Policies apply to an Audit Client subject to


Minimum CRI SEC *

* See additional policies for clients

requiring SEC independence in XXXS

Certain sections throughout the policy are applicable to all PIE Audit Clients. These sections are not separately indicated in the tables but restrictions for PIEs are contained in the policy text for applicable sections. If there is any uncertainty in how these restrictions apply, consultation with Canada Independence is encouraged.


Overview of the EY Canada Independence Policy The EY Canada Independence Policy includes the Introduction, Parts 1 to 5 and the Glossary.

EY Canada Independence Policy

The Introduction presents the fundamental information you need to know about independence, and particular source and reference standards and regulations as well as responsibilities of Professionals, Areas, Sub-Areas, Country Practices and EYG. Parts 1, 2, and 3 of the EY Canada Independence Policy provide for independence policy requirements for Professionals and EY Member practices, and also restrictions with respect to audit and non-audit services provided to Audit and Review Clients. Some paragraphs are presented in bold letters to add emphasis to significant independence requirements or prohibitions. Additional independence requirements that must be followed for Audit Clients that are US SEC registrants or subsidiaries, divisions or Affiliates of US SEC registrants are developed in each section of this policy in subsections marked with an “S”. These subsections are also presented in grey shading for easier access. For instance, US SEC considerations in relation to the topic developed in Section 101 is numbered Section 101S. When applying the independence rules to Audit Clients subject to SEC independence, the appropriate way to read the Policy is to read the applicable primary policy section in addition to the same section denoted with an “S”, to ensure all requirements are captured. The requirements in the section marked with an “S” are often incremental to the primary section and by no means comprehensive on a standalone basis. Where such SEC requirements apply to non-SEC Canadian clients, this is indicated in the “Additional Canadian Policies” column, usually through use of a table as discussed above. Part 4 provides for independence policy requirements in relation to Assurance Engagements other than Audit or Review Engagements with clients that are not also Audit or Review Clients. Refer to the definition of Assurance Engagement in the Glossary as certain Non-Assurance Engagements are, for purposes of the EY Canada Independence Policy, included in the Assurance Engagement definition and therefore such Clients are subject to the independence requirements of Part 4.

Part 5 provides for the EY Global independence policy requirements in relation to financial Audit and Review Engagements that are restricted for use and distribution. However, this section is not applicable in Canada as the requirements of Part 1 to 3 must be applied for such clients/engagements for all Canadian Audit or Review Clients.

The Glossary provides definitions of independence words and concepts consistently used within the EY Canada Independence Policy in an alphabetical order. Defined terms are generally capitalized throughout the EY Canada Independence Policy. Where the Canadian definitions are more rigorous than the EYG definition (usually to meet the requirements of the Rules of Professional Conduct of each Canadian provincial Institute/Ordre of Chartered Professional Accountants), use the Additional Canadian Policies definitions and guidance.


Supplementary Guidance EY Canada has adopted the Supplementary Guidance of the EYG Independence Policy which can be found through the Risk Management CHS. Although the EYG Supplementary Guidance is applicable to EY Canada, the EYG Independence Policy itself should NOT be used for Canadian Audit or Assurance Clients. The EY Canada Independence Policy should continue to be applied instead as it not only incorporates the EYG Independence policy but also contains additional Canadian policies required to comply with the Rules of Professional Conduct of each Canadian provincial Institute of Chartered Professional Accountants and to meet certain business and practice risk management requirements of EY Canada.

A table of concordance that indicates how the EYG Supplementary Guidance applies to Canadian Audit Clients and Assurance Clients subject to minimum, CRI or SEC independence requirements is available in the Americas Area Policies and Practices Repository. Professionals should refer to this document when applying the EYG Supplementary Guidance to Canadian Audit Clients and Assurance Clients. The EY Canada Independence Policy does not address additional independence requirements for non-SEC companies that EY Canada audits using US generally accepted auditing standards. For this information, see the EY US Independence Policy (Score CA7528). The following independence resources are available for service line consultation: Tax: Karen Nixon (403-206-5326, EY Comm: 1656496): TAS: Carolyn Kerr (416-943-5486, EY Comm: 1625379); Advisory: Paul O’Donnell (416-943-3651, EY Comm: 1676036) Petar Nikolic (416-943-3114, EY Comm: 1676459); and Audit Engagement Team/Partner Rotation Matters: Gord Briggs (416-943-3257, EY Comm: 8624673). Throughout the EY Canada Independence Policy, there may be references to consult with the Regional Independence Leader, Rich Huesken (Cleveland Office: 216-583-2400, EY Comm:2574837). Before contacting the Area Independence Leader, contact the Canada Independence Leader, Ross Pearman (416-943-3176, EY Comm: 8677677).


EY Canada Independence Policy CA-P1101

December 2014

Parts 1 to 5


EY CANADA POLICY EYG Policy Additional EY Canada Policies

The proper way to read the Policy is to read both columns of the entire Section addressing a topic.

EY Canada Independence Policy

Parts 1 to 5

Section 000 Introduction

Independence is a concept fundamental to the audit profession and is pervasive in all dealings between EY Member Practices and their Audit and Assurance Clients. Independence means that EY Member Practices and their Professionals should be (in fact) and should appear to be (in appearance) free from interests that might be regarded as being incompatible with objectivity, integrity, and impartiality.

Independence therefore requires:

• independence of mind—the ability to provide an opinion without being affected by influences that compromise professional judgment, to act with integrity, and to exercise objectivity and professional scepticism; and

• independence in appearance—the avoidance of facts and circumstances that would lead a reasonable and informed third party to conclude that the integrity, objectivity or professional scepticism of a EY Member Practice or their Professionals had been compromised.

Assurance Engagements include specified auditing procedures engagements. See Part 4 in this Policy.

Section 001 EYG Independence Policy

The EYG Independence Policy establishes mandatory requirements and prohibitions with respect to the most common independence matters related to EY Member Practices and their Professionals.

The EYG Independence Policy is designed to comply with the elements of the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (the IESBA Code) that deal with independence, objectivity and integrity.

This column in the EY Canada Independence Policy indicates additional requirements to comply with the Rules of Professional Conduct of each Canadian provincial Institute/Ordre of Chartered Professional Accountants and to meet certain business and practice risk management requirements of EY Canada.




In addition, US SEC independence requirements must be followed with respect to Audit Clients and entities that are subject to US SEC and PCAOB independence rules globally. Because of the extraterritorial reach of the US SEC requirements and the risk associated with non-compliance, the additional US SEC requirements are included where applicable and should be considered part of EYG Independence Policy.

More stringent independence rules than those contained in this policy may be required by country regulatory or standard-setting bodies. EY Member Practices sometimes adopt country independence policies that are more stringent than the EYG Independence Policy in order to align to local regulatory requirements and to efficiently communicate those requirements to their personnel. If an EY Member Practice adopts stricter policy requirements than those contained in this policy or required by local regulation, the Member Practice will inform the Region Independence leader, the Region and Area Risk Management Leaders and the Global Vice Chair – Independence of such requirements.

To be independent pursuant to the Canadian independence rules, Audit Engagement Teams must identify threats to independence, evaluate the significance of those threats and, if the threats are other than clearly insignificant, identify and apply safeguards to reduce them to an acceptable level.

Independence is potentially affected by self-interest, self-review, advocacy, familiarity, and intimidation threats. Safeguards fall into three broad categories: (i) safeguards created by the profession, legislation, or regulator, (ii) safeguards within the client entity and (iii) safeguards within EY Canada’s own systems and procedures.

Where safeguards are not available to reduce threats to an acceptable level, Audit Engagement Teams must eliminate the activity, interest, or relationship creating the threats or refuse to accept, or continue, the engagement. Consult with Canada Independence if such threats are identified or if the assessment of the adequacy of safeguards requires significant judgment. It is the responsibility of the Lead Audit Engagement Partner to make this determination and to ensure threats and safeguards are adequately documented for each engagement in the engagement file. See documentation requirements throughout the EY Canada Independence Policy and in Section 003.4.

When any EY Canada Audit Engagement Team is relying on the work of other auditors, (whether another EY Canada team, EYG member firm or another firm) that conduct other than an insignificant part of the audit of an Audit Client (which includes Affiliates, see definitions in the Glossary):

the EY Canada Audit Engagement Team is required to communicate its independence requirements to the other auditors; and




the EY Canada Audit Engagement Team is required to obtain written confirmation of independence from any other EYG member firm or any other audit firm.

An overview of the Canadian independence requirements is provided in the Country Supplement CA001.

Throughout this policy subsections marked with an “S” may also apply to Canadian Audit Clients, other than US SEC Audit Clients. Refer to the tables throughout the Canadian column of this policy to determine to which clients the subsections marked with an “S” apply.

Section 002 Independence roles and responsibilities

002.1 Responsibilities of Regions and Country Practices

Each EY Member Practice shall operate within and conduct engagements in accordance with that country’s professional standards, the EYG Independence Policy, all local/national independence requirements, and independence rules required by another country’s professional standards where applicable.

Accordingly, Regions and Country Practices are required to put in place appropriate resources and procedures to accomplish the following. Within a Region, these responsibilities can be assigned as appropriate between the Region and its Country Practices:

• Appoint qualified Region and Country Practice independence leaders;




• Comply with the EYG Independence Policy and any stricter local requirements and make the independence policies available to Professionals;

• Provide independence training to Professionals, including globally deployed independence training, and monitor compliance therewith;

• Implement appropriate disciplinary actions based on the global Risk Management guidance in relation to violations of professional/regulatory rules and the EYG Independence Policy (and any stricter Country Practice independence requirements);

• Record regulatory independence violations and breaches of the IESBA Code of Ethics and local professional standards in the Global Independence Incident Reporting System;

• Use the Global Monitoring System (or equivalent) and Global Independence List for verifying permitted investments and for reporting Financial Interests of the Region and Country Practice including all associated entities;

• Maintain current entity and affiliate information in the Global Independence System;

• Require Partners and other Professionals to use the Global Monitoring System (or equivalent) and Global Independence List for verifying permitted investments, reporting Financial Interests and periodic confirmation purposes according to their rank and individual requirements;




• Enable compliance with applicable partner rotation requirements in collaboration with the Assurance Practice;

• Implement required global independence processes, including PCIPs, BRET requirements, and GIS family tree maintenance and validation;

• Carry out the EY Global Personal Independence Compliance Testing program in accordance with instructions distributed by the Independence Executive;

• Maintain a process for evaluating independence matters, including financial relationships and employment relationships with Audit Clients, related to new employees at the executive level or new admissions (direct or internal) to partnership within the EY Member Practice, prior to hiring the individual as a Professional Employee or admitting the individual as a Partner;

• Provide Professionals with appropriate independence resources for consultations, and request support for such consultations from the Independence Executive as needed;

• Respond timely to specific requests from the Independence Executive; and

• Monitor that the above requirements are complied with and annually provide an independence confirmation for the Region or Country Practice to the Independence Executive.




002.2 Responsibilities of Professionals

Professionals are required to:

• Be knowledgeable of the EYG Independence Policy and applicable local independence requirements;

• Comply fully with EYG Independence Policy and applicable local independence requirements, including discussion or consultation where necessary and appropriate;

• Complete independence training provided by the Independence Executive in addition to any EY Member Practice provided training;

• Use the Global Independence System to check clients’ status with respect to independence requirements;

• Use the Global Monitoring System (or equivalent) and Global Independence List for verifying permitted investments, reporting Financial Interests and periodic confirmation purposes, according to their rank and individual requirements;

• Comply with the EY Global Personal Independence Compliance testing program; and

• Monitor applicable partner rotation requirements.

Professionals are also required to comply with the documentation requirements in Section 003.4




002.3 Responsibilities of the Independence Executive

The Independence Executive shall:

• Develop, maintain and communicate the EYG Independence Policy and Supplementary Guidance;

• Maintain global processes for monitoring and compliance with independence requirements, including BRET, PCIP, GIS and monitoring systems;

• Provide global independence training material;

• Manage the EY Global Personal Independence Compliance Testing program and maintain and deploy associated work programs;

• Engage the Global Internal Audit function to perform the independence compliance testing program;

• Provide infrastructure and resources for independence systems;

• Advise Regions and Country Practices of significant independence changes and developments as appropriate;

• Inform the Risk Management Executive Committee and, as appropriate, the Global Executive of any significant independence matters and their resolution;

• Support Region and Country Practice independence consultations; and

• Perform periodic reviews of the efficiency and effectiveness of the Independence function as it operates in the Regions, and provide recommendations for improvement.




Section 003 Independence consultation and documentation

It is impossible to define every situation that creates threats to independence and specify the appropriate mitigating action that should be taken. EY Member Practices and their Professionals should, therefore, be alert to identify, evaluate, address and document threats to independence not covered by these policies and procedures in accordance with the framework set out in the IESBA Code. Independence consultation or discussion is encouraged for these situations.

003.1 Independence Consultation

Every EY professional is responsible for being knowledgeable of and compliant with applicable independence policies, including the requirement to consult when necessary, and to implement the conclusions reached as a result of the independence consultation process described herein. Consultation on matters of independence is an essential element of providing quality services to our clients. The organizational structure of EY Independence consists of a distributed network of independence professionals assigned to the Executive, Regions and country practices.

The Lead Audit Engagement Partner has the ultimate responsibility for determining that the appropriate conclusions are reached and the proper course of action is taken with respect to engagement related independence matters, including consulting with Independence when necessary. Engagement Partners performing non-audit services are also responsible for discussing independence matters with the Lead Audit Engagement Partner and for consulting with Independence when appropriate.

Refer also to Section 003.4 regarding documentation requirements for independence matters, including consultations.




A consultation between an engagement team or other Professionals and Independence is intended to reach an appropriate conclusion on independence matters. Depending on the matter, informal interaction between Professionals or engagement team and Independence or other relevant resources could be sufficient. Other independence matters that are complex, difficult, sensitive or contentious typically require a formal consultation process.

A consultation process is deemed “formal” when:

• Consultation with Independence on a specific matter is explicitly required under the EYG Independence Policy or advance approval from Independence is required in SORT;

• Independence documentation is required (see section on Documentation);

• The consultation involves the resolution of a difference of professional opinions within the engagement team or with those consulted

• The independence matter is intended to be discussed with regulators; or

• Request for a waiver or exemption to the EYG Independence Policy is granted.

Differences of professional opinion among the engagement partner, engagement personnel or other professionals, and members of Independence are resolved by elevating the matter to the Leader of the Global IFAC Independence Center or Global SEC Independence Center as appropriate. After giving appropriate consideration to all relevant facts and circumstances and discussing the differing views with those involved in the consultation, the Center Leader will evaluate relevant facts and develop a recommendation. In circumstances where differences of professional opinion remain unresolved after consultation with the Center Leader, those involved may consult with Global Vice Chair,




Independence, who will involve others as appropriate to resolve the matter.

Independence consultants who currently serve or in the last 24 month period have served as a member of the engagement team or an engagement quality reviewer for an audit client must recuse themselves from participating in a consultation with respect to that same client. See PPS 13-03 Recusal protocol: Consultation and risk management duties and responsibilities.

003S.1 Independence consultation – US SEC audit clients

Formal consultations relating to US SEC independence matters should involve Global SEC Independence Center consultants.

In addition, a Global SEC independence center consultant who currently is, or within the last seven years has been, an Audit Engagement Team member or an Engagement Quality Reviewer for a US SEC Audit Client cannot provide concurrence or approval on US SEC independence matters with respect to that US SEC Audit Client.

003.2 Exemptions

When an EY Member Practice or Professional believes that compliance with one or more provisions of the EYG Independence Policy which are not mandated by any regulatory requirement would create undue hardship, an exemption may be requested from the Region Independence Leader and may be granted with concurrence of the Global Vice Chair – Independence. The Global Vice Chair – Independence will evaluate the request and determine the appropriate course of action, which may include further consultation with Risk Management and other leadership.

When compliance with one or more provisions of the EY Canada Independence Policy that is more restrictive than both the EYG Policy and applicable external independence rules would create undue hardship, the Canada Independence Leader may grant an exemption from the EY Canada Independence Policy.




003.3 EYG Independence Policy Violations

Any violations of the EYG Independence Policy by Professionals, other than violations that are inadvertent and are timely reported and corrected, can have severe consequences to the Professional, including dismissal without notice or payment in lieu of notice.

Violations of the EY Canada Independence Policy have the same consequences as violations of the EYG Policy.

When EYG Independence Policy violations are identified, consultation with independence is required to determine whether the matter is also a breach of the IESBA Code of Ethics, or of local independence regulations or professional standards, in which case it is subject to the communication requirements of Section 302. See also Supplementary Guidance G302.1.

Refer to Section 003.4 for independence reporting requirements including addressing and reporting independence violations.

003.4 Documentation

Conclusions of formal independence consultations and discussion supporting those conclusions should be documented.

Independence documentation is also required for all of the following situations:

• All independence violations;

• All situations when it is concluded that specific action steps and safeguards need to be implemented to address the independence issue;

• All situations where threats to independence require significant analysis and interaction to reach the conclusion, even if ultimately it is concluded that there is no independence issue or that no safeguard or action is necessary.

Policies apply to an Audit Client subject to the

following independence requirements:

Minimum CRI SEC

Consultations regarding independence with Canada Independence or the service line Quality Leaders are to be documented in writing. It is the responsibility of the individual, who initiates the consultation, to document the consultation. That individual should forward a copy of the consultation memo to the Lead Audit Engagement Partner, as well as the individual in Canada Independence consulted. Documentation of the threats and safeguards is to be maintained in the related engagement file.

The documentation should include a description of all relevant facts and circumstances including the applicable independence policies and regulations, the substance of the analysis, the action steps and safeguards to be implemented, if any, the conclusion reached and the confirmation that EY Independence agrees with the conclusion. Independence documentation

1. Analysis of threats and safeguards:

Where EY Canada has identified a threat to independence that is not clearly insignificant, documentation is required supporting the decision to accept or continue the engagement affected by the threat to independence.




can be achieved through any written material, including emails, but preferably in the format of an independence memorandum or an entry in a documentation database when available.

When a formal consultation with Independence is initiated, it is the responsibility of the team or individual initiating the consultation to document the issue, with the support of Independence.

However, the absence of documentation is not a determinant of whether a particular matter was considered or whether independence has been impaired.

The following documentation is required in each particular engagement file, in addition to any matters discussed elsewhere in the EY Canada Independence Policy:

a description of the nature of the engagement;

the threat identified;

the safeguard(s) identified and applied to eliminate the threat or reduce it to an acceptable level; and

an explanation of how the safeguard(s) eliminate the threat or reduce it to an acceptable level.

A threat to independence that is not clearly insignificant is to be documented in writing, and communicated to the Lead Audit Engagement Partner. The Lead Audit Engagement Partner has the responsibility to ensure that the file includes appropriate documentation.

For clients requiring audit committee pre-approval, only after the proper audit committee pre-approval has been obtained, and the Lead Audit Engagement Partner or his/her designee confirms audit committee pre-approval has been obtained may the engagement proceed. A best practice would be to obtain written confirmation or an email from the Lead Audit Engagement Partner that audit committee approval has been obtained.

Independence considerations for Audit Clients are required to be documented at least annually in accordance with Canadian Policy CA-P3119 Public Company Independence Procedures Policy and Practice Statement.

2. Consultation with Canada Independence:

Refer to section 003.1 and above noted requirements.




3. Independence reporting requirements:

a. Identifying and reporting violations of EY Canada Independence Policy:

There are two sources to identify independence threats and violations:

(i) The results of independence procedures carried out by the engagement team, including the procedures required by Canadian Policy CA-P3119 Public Company Independence Procedures Policy and Practice Statement.

(ii) Matters reported in EY Canada’s centralized independence databases such as GMS (primarily personal independence matters) and GIIRS.

Any threat to independence that is not “clearly insignificant” must be communicated to the Lead Audit Engagement Partner.

Immediately upon discovery, Professionals must report:

All known violations of the EY Canada Independence Policy for personal independence requirements in GMS; and

All other known violations of the EY Canada Independence Policy to the Lead Audit Engagement Partner of the entity to which such infraction occurred, as well as the parent of such entity, in writing, and copy Canada Independence.

b. Reporting Financial Interests – GMS

All Partners through managers must update their Publicly Available Financial Interests in GMS within 10 business days of the purchase, inheritance, sale or acquisition/disposition by any other means, of any Financial Interest of the Professional or their Immediate Family Members, including securities over which the




professional or their Immediate Family Members act as trustee or executor, or act under a power of attorney. The GMS website address is https://gms.iweb.ey.com.

Professional Employees below manager are to report a Financial Interest held by the Professional Employee or their Immediate Family Member in an Audit Client or any proscribed entity as a general exception in GMS.

c. Confirming compliance with the EY Canada Independence Policy

New hire Professionals must document compliance with EY Canada’s independence policy as part of the orientation process.

At least annually, all Professionals must electronically sign their independence confirmation of compliance with EY Canada’s independence policies.

Managers and above must also sign quarterly independence confirmations.

d. Reporting Relationships with Audit Clients

All Professionals must document and report the nature of family relationships with persons associated with Audit Clients (which includes Affiliates, see definitions in the Glossary) as described in Section 102.5, Family members of Professionals accepting employment with an Audit client.

All Professionals who have been assigned to an engagement team for an Audit Engagement or Assurance Engagement shall advise the Lead Audit Engagement Partner and Canada Independence in writing of any interest, relationship or activity that would, under the EY Canada Independence Policy, preclude that person from being on the engagement team.




e. Updating Audit Client family trees – GIS

It is the responsibility of the Lead Audit Engagement Partner to:

Ensure GIS accurately and completely reflects the Audit Client and its Affiliates and the GIS markups are correct.

Ensure the GIL includes all Audit Clients and Affiliates of Audit Clients with Publicly Available Financial Interests.

It is the responsibility of the Global Client Service Partner, or his/her designated audit executive, to re-approve the GIS family tree for each of their clients, at a minimum, on an annual basis.

003.5 Materials containing Independence guidance

It is expected that documents and materials containing authoritative independence guidance or considerations, such as policies, information releases, service line guidance, training or other materials, will be discussed with Independence for review, evaluation, and approval prior to issuance.




Part 1: Matters relating to Professionals


These policies set out the independence requirements applicable to Partners and Professional Employees (collectively referred to as “Professionals”). These requirements, as they relate to Audit Clients, apply throughout the Audit and Professional Engagement Period. The Independence requirements vary among differing categories of Professionals, so it is important that all Professionals carefully read the policies to determine which of the requirements apply to them. In some EY Member Practices these policies may be supplemented by additional local independence requirements. Professionals have a responsibility to determine what additional local requirements, if any, are in place.

Use definitions of Partners and Professional Employees in the Glossary.

Professionals are also to comply with the documentation requirements in Section 003.4. Additional requirements are also outlined throughout Section 000, Introduction.

Section 101 Financial Interests

101.1 Partners and Professionals Employees



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* See additional policies for clients requiring SEC

independence in Section 101S.1

Partners are prohibited from holding a Financial Interest in an Audit Client of any EY Member Practice. However, Financial Interests in a permitted mutual fund that is an Audit Client may be held by Partners who are not Covered Persons for that mutual fund Audit Client.

Professional Employees are prohibited from holding a Financial Interest in an Audit Client of any EY Member Practice for which they are a Covered Person.

Financial Interests include both Direct and Material Indirect Financial Interests.

The EY Canada Independence Policy is more restrictive. Partners and Professional Employees (whether or not they are Covered Persons) are prohibited from holding a Financial Interest in any Audit Client of any EY Member Practice or in any other entity on the GIL, except as provided for below:

a) Certain non-client funds, included on the GIL or GIS marked up as proscribed for Covered Persons, are prohibited investments for Covered Persons only. Professionals, who are not Covered




Prohibited Financial Interests are to be disposed immediately except as follows.

Disposition of interests received as a result of an unsolicited gift or inheritance or interests owned as result of a merger/acquisition of an entity, when prohibited, should occur generally no later than 30 days after the person has knowledge of, and the right to dispose of, the Financial Interest. Such 30 day allowance is not available where such interests are held by Professionals on the Audit Engagement team or Always Covered Persons (Category 1 and 2 Covered Persons). If there are legal restrictions on the ability to sell a prohibited financial interest, consult with Independence to determine an appropriate course of action.

See also Supplementary Guidance G101.1 related to prohibited financial interests, and G101.2 related to disposition of prohibited financial interests.

Persons, are permitted to hold a Financial Interest in these non-client funds.

b) Investments held via variable life/variable annuity insurance policies are prohibited only for Professionals who are Covered Persons to either (a) the investment vehicle itself or (b) the underlying investments held via the investment vehicle (refer to Sections 103 and 103S).

c) If the Audit Client is a co-operative, credit union or caisse populaire; a social club such as a golf club or curling club; or similar organization, Professionals who are not covered persons are permitted to hold such financial interests as long as such financial interests are restricted to the minimum amount that is a pre-requisite of membership. However, there are certain restrictions outlined in Section 204.4 (2.1) of the Canadian Harmonized Rules of Professional Conduct that must be followed including that such professionals may not exercise their right to vote.

d) The EY Canada Independence Policy requires:

1) external contractors who charge time to clients; or

2) part-time Professional Employees (including co-operative students) expecting to work less than 1,560 standard hours in a standard work year or a period not to exceed nine months in a twelve month period; and

3) former or retired partners on contract or who otherwise maintain Close Association with the Firm,

to fully comply with the EY Canada Independence Policy. However, for these external contractors, part-time Professional Employees and former or retired partner contractors, Sections 101.1 and 101.2




apply only where they are a Covered Person.

e) For Professionals Financial Interests held as a trustee or executor, refer to restrictions for such appointments in Section 104.

Underlying Financial Interests held via an intermediary, Non-Diversified Management Investment Company, Pooled Investment Vehicles, mutual fund, etc., can be deemed to be Direct Financial Interests. Refer to the Glossary for the definition of Direct Financial Interests.

The prohibition in 101.1 also applies equally to Financial Interests of Immediate Family Members. – See Section 101.2.

This prohibition in 101.1 also includes any Financial Interests over which Partners and Covered Person Professional Employees act under a power of attorney

In addition:

All Professionals, including their Immediate Family Members, may not themselves, or engage others to, establish a trust or other vehicle to hold investments in Audit Clients for their own personal benefit, or direct others to hold investments on their behalf as nominee, regardless of whether or not they are Covered Persons.

In Canada, apply the EYG Policy in 101.1 with respect to Financial Interests received as a result of unsolicited gift or inheritance or interests owned as result of a merger/acquisition of an entity.

Delegating investment authority does not relieve Professionals and their Immediate Family Members from abiding by the applicable Financial Interest rules and reporting such underlying investments, as required.

Refer to Section 107.2 for restrictions applicable to Covered Persons and non-Covered Person




Partners with respect to joint investments and alliances.

101S.1 Partners and professional employees – US SEC Audit Clients

Partners may hold a Financial Interest in a component of a US SEC Investment Company Complex for which they are not Covered Persons.



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EY Canada Independence Policy is more restrictive.

Partners are prohibited from holding a Financial Interest in any Audit Client of any EY Member Practice or in any other entity on the GIL except for certain non-client affiliates in an Investment Company Complex included on the GIL or indicated in GIS as proscribed only for Covered Persons or investments subject to Sections 103, 103S and 106.

Professionals who are not covered persons are prohibited from owning more than 5% of the securities in a US SEC Audit Client of any EY Member Practice, either individually or as part of a group acting together.

EY Canada Independence Policy is more restrictive.

As per Section 101.1, in Canada, there is no diminimus, all Professionals and their Immediate Family Members, whether or not they are Covered Persons are prohibited from holding a Financial Interest in any Audit Client of any EY Member Practice or in any other entity on the GIL. Refer to Section 101.1.

In Canada, do not apply Supplementary Guidance G101.1 related to Financial Interests. Instead, apply the definitions of Audit Client and Affiliates in the Glossary and the policy restrictions as provided for in Section 101.1.



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101.2 Immediate Family – Partners and Professional Employees

All provisions and exceptions in Section 101.1, which cover Partners and Professional Employees, also extend to their Immediate Family Members.

However, Immediate Family Members of Partners who are not Covered Persons may hold an employment related Financial Interest in an Audit Client for as long as they remain employed by the Audit Client. The interest must be disposed once employment has ended, as soon as there is the ability to sell.



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The EY Canada Independence Policy is more restrictive than the EYG Independence Policy. Immediate Family Members of Partners and Professional Employees (regardless of whether they are a Covered Person) are prohibited from holding a Financial Interest in any Audit Client of any EY Member Practice or any other entity on the GIL, with the exception only for certain employment-related Financial Interests as described below and other exceptions specifically provided for as referenced in Section 101.1.

Under no circumstance can an Immediate Family Member hold an employment-related Financial Interest in an Audit Client for which the Professional is a Category 1 or Category 2 Covered Person.

Immediate Family Members of Partners and Professional Employees who are Covered Persons

Immediate Family Members of Category 3 or Category 4 Covered Persons may also hold an employment related Financial Interest in an Audit Client, but must dispose of the interest as soon as they have the ability to sell, even if they are still employed by the Audit Client. When the Immediate Family Member has the possibility to select investment options within an employment benefit plan, they should select investment options for which the Professional is not a Covered Person whenever available.

Where there are legal or similar restrictions on an Immediate Family Member’s right to dispose of a Financial Interest, the Immediate Family Member need not dispose of the interest until the restrictions have lapsed.

Policies apply to a Financial Interest in an Audit

Client offered through the employer of an Immediate Family Member, and that Audit Client

is subject to the following independence requirements:

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Apply the EYG restrictions in Canada.

For clarity, this section applies to Professionals who are Category 3 or Category 4 Covered Persons with respect to the investment selection offered by the employer of their Immediate Family Member whether or not the employer is an Audit Client.

If the employment-related benefit plan offers the Immediate Family Member a selection of investments that includes Audit Clients the Immediate Family Member is not permitted to




select an investment for which the Professional is a Covered Person. However, if the investment alternatives available to the Immediate Family Member consist entirely of investments for which the Professional is a Covered Person, the Immediate Family Member is permitted to select the alternatives for which the Professional is a Category 3 or Category 4 Covered Person. Under no circumstances can an Immediate Family Member hold a Financial Interest in an Audit Client for which the Professional is a Category 1 or Category 2 Covered Person.

Immediate Family Members of Partners who are not Covered Persons




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Immediate Family Members of Partners who are not Covered Persons may hold an employment-related Financial Interest in an Audit Client for as long as they remain employed by the Audit Client. The interest must be disposed once employment has ended, as soon as there is the ability to sell.

This exception applies whether or not the Immediate Family Member is employed at an Audit Client.

For clarity, if the employment-related benefit plan offers the Immediate Family Member a selection of investments that includes Audit Clients, then the Immediate Family Member is permitted to select any investment for which the Partner is not a Covered Person.

Once employment has ended such employment-related Financial Interests must be sold as soon as there is the ability to sell.




Immediate Family Members of Professional Employees who are not Covered Persons




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The following exception regarding an employment-related Financial Interest applies whether or not the Immediate Family Member is employed at an Audit Client.

Immediate Family Members of Professional Employees who are not Covered Persons may hold an employment-related Financial Interest in an Audit Client (which includes Affiliates, see definitions in the Glossary) (e.g., participate in stock options, stock purchase programs, stock compensation plans and employer-sponsored retirement plans) for as long as they remain employed with that employer. Once employment has ended, such employment-related Financial Interests must be sold as soon as there is the ability to sell.

For clarity, if the employment-related benefit plan offers the Immediate Family Member a selection of investments that includes Audit Clients, then the Immediate Family Member is permitted to select any investment for which the Professional Employee is not a Covered Person. Where the Professional Employee is a Covered Person for that investment selection, the guidance with respect to Covered Persons in the Section above is applicable. The following chart is intended to assist Professionals in understanding the requirements of Sections 101.2 as applicable.

Can a Financial Interest in an Audit Client be held by an Immediate Family Member?




Covered Persons with respect to the

employment-related Financial Interest

Immediate Family

Member of:

Engag-ement Team

Chain of

Com-mand

≥10 Hrs. Non

Audit Services

Office of Lead Audit

Engagement Partner Others

Partners No No Yes 1, Yes 1, Yes 2 Professional Employees

No No Yes 1, N/A Yes 2

1 Only if the Financial Interest was obtained as a result of employment rights. However, such Financial Interests must be disposed as soon as they have the right/ability to sell, even if they are still employed by the entity. If the employment-related benefit plan offers a selection of investments that includes Audit Clients, the Immediate Family Member cannot select an investment for which the Professional is a Covered Person. However, if the only available investments consist entirely of investments for which the Professional is a Covered Person, then the Immediate Family Member can select those investments for which the Professional is a Category 3 or Category 4 Covered Person.

2 Only if obtained as a result of employment rights. Once employment ends, the Financial Interest must be sold as soon as there is an ability to sell.

101.3 Close family – Partners and Professional Employees



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A Professional may not be a member of the Audit Engagement Team if the Professional has knowledge that a Close Family Member holds a Material Financial Interest in the Audit Client.

EY Canada Independence Policy is more restrictive. A Professional Employee or Partner may not be a Category 1 Covered Person or in the Chain of Command with respect to an Audit Client (which includes Affiliates, see definitions in the Glossary) if the Professional has knowledge that the Close Family Member holds a Material Financial Interest in the Audit Client.

To the extent the Professional does not have such knowledge there is no requirement to inquire about such Financial Interests.




101S.3 Close family - Partners and Professional Employees - US SEC Audit Clients

• Close Family Members of any Partner, including those Partners who are not Covered Persons, may not have control over a US SEC Audit Client. (For SEC purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting shares, by contract or otherwise.)

• Partners and Professionals may not be Covered Persons with respect to a US SEC Audit Client if they have knowledge that a Close Family Member owns (or has beneficial ownership of) more than 5% of the securities in (or otherwise controls) the US SEC Audit Client, either individually or as part of a group acting together.



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To the extent the Professional does not have such knowledge there is no requirement to inquire about such Financial Interests.




Section 102 Employment relationships and personal appointments

102.1 Employment discussions with an Audit Client



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*

* See additional policies for clients requiring SEC independence in Section 102S.1

A member of the Audit Engagement Team (Category 1 Covered Person) who enters into employment discussions with the Audit Client must notify the Lead Audit Engagement Partner (or the EY Member Practice PPD if the individual is the Lead Audit Engagement Partner), and should not have any further involvement with or participate in further audit work for the client until the employment discussion is resolved.

For clarity, submitting a resume or making an application intended for any position at the Audit Client is considered to be “entering into employment discussions”.

In such cases, the Lead Audit Engagement Partner (or EY Member Practice PPD) should give consideration as to whether it is necessary or appropriate to adjust any aspects of the audit plan for any actual or perceived risk arising from the employment discussions, and may apply additional safeguards, such as a review of the individual’s work. The nature and extent of the procedures to be undertaken will vary depending on the individual’s role in the firm, the position being considered with the Audit Client and the timing of the decision to leave the EY Member Practice.

The positions that may be taken by members of the Audit Engagement Team joining either a CRI, SEC, or Listed PIE (non-CRI / non-SEC) Audit Client (which includes Affiliates, see definitions in the Glossary) are limited by the cooling off rules as discussed in Section 102.2.

An Area, Region or Country Practice Managing Partner may not enter into employment discussions for a Significant Accounting or Financial Reporting Oversight Role with a Public Interest Entity Audit Client from their own Area, Region or Country Practice, respectively, while functioning as an Area, Region or Country Practice Managing Partner.

In Canada, the restrictions applicable to the Country Managing Partner extend to discussions related to any Accounting Role.

If a Professional becomes aware that an Immediate Family Member is about to or has entered into employment negotiations concerning a Significant Accounting or Financial Reporting Oversight Role with an Audit Client for which the Professional is a member

In Canada, the notification requirements apply equally to Immediate and Close Family Members and include employment negotiations concerning any Accounting Role.




of the Audit Engagement Team, the Professional should notify the Lead Audit Engagement Partner (or EY Member Practice PPD).

102S.1 Employment discussions with an Audit Client - US SEC Audit Clients

The notification requirement above extends to all Partners and all Covered Persons and applies to both Immediate and Close Family Members, when the family member is considering joining a US SEC Audit Client as a director or as an employee in an Accounting Role or Financial Reporting Oversight Role.



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102.2 Cooling-off period prior to accepting employment with an Audit Client



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* *

* See additional policies for clients requiring CRI or SEC independence in Section 102S.2

A Key Audit Partner may not join his/her PIE Audit Client in a Significant Accounting or Financial Reporting Oversight Role until, subsequent to the partner ceasing to be a Key Audit Partner, the EY Member Practice has completed an audit covering a period of at least 12 months, and the Partner was not involved in any capacity with respect to the audit of those financial statements.

Area, Region and Country Managing Partners may not join a PIE Audit Client from their own Area, Region and Country Practice, respectively, in a Significant Accounting or Financial Reporting Oversight Role until 12 months have elapsed since leaving the EY Member Practice or ceasing to be a Managing Partner.

For clarity, the Global Policy in this section does not apply to non-PIEs.

If either a Key Audit Partner or an Area, Region or Country Practice Managing Partner joins a PIE Audit Client in a Significant Accounting or Financial Reporting Oversight Role before the respective specified periods above have elapsed, the Country Practice must resign from the Audit Engagement.




See also Supplementary Guidance G102.1 related to Retired Partners and employing Retired Partners.

In Canada, refer also to CA-P3113 Retired Partners and employing Retired Partners.

102S.2 Cooling-off period prior to accepting employment with an audit client - US SEC Audit Clients

The cooling off requirement above extends to all members of the Audit Engagement Team who are joining an US SEC Issuer Audit Client in a Financial Reporting Oversight Role. It applies to all Professionals who participated in the audit, during the last annual reporting period preceding the commencement of the audit period started after joining the client. The one-year “cooling off” starts on the first day after the US SEC Issuer Audit Client files its periodic report and ends when the US SEC Issuer Audit Client files its next annual report. The cooling off period calculation can be complex and could be up to a two-year period.

See also Supplementary Guidance G102S.1.



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For clarity, cooling-off rules also apply to all Professionals who provide audit, review or attest services to a US SEC Audit Client whether or not those services are related to the audit of the financial statements. For CRI and Listed PIEs (non-CRI / non-SEC) Audit Clients the cooling-off rules only apply to members of the Audit Engagement Team.

The CRI independence rules are similar to the SEC independence rules in this area and therefore the guidance in G102S.1 applies to CRI Audit Clients (which includes Affiliates, see definitions in the Glossary), except that the “cooling off period” for CRI and Listed PIEs (non-CRI / non-SEC) Audit Clients ends one year after the financial statements were filed with the relevant securities regulator.

102.3 Other Independence considerations upon accepting employment with an Audit Client

In all cases, where a Partner, former Partner or member of the Audit Engagement Team accepts a Significant Accounting or Financial Reporting Oversight Role at an Audit Client, such former Professionals should not receive benefits or payments from an EY Member Practice unless these are made in accordance with fixed pre-determined arrangements and the amounts owed to the individual are not significant to the EY Member Practice. In addition, once joining an Audit Client, the former Professional may not retain any other business or professional relationship with the EY Member Practice that would be prohibited under the requirements related to Business Relationships.

Policies apply to an Audit Client subject to the following independence requirements:

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*

* See policies for clients requiring SEC independence in Section 102S.3

For clarity, a former Partner may not have a Close Association with the Firm if the individual is in an Accounting Role or Financial Reporting Oversight Role.

In addition, a former Partner or Professional cannot continue to participate or appear to participate in the Firm’s business or professional activities if the individual is in a Significant




See also Section 107 related to Business Relationships.

Accounting or Financial Reporting Oversight Role at an Audit Client.

102S.3 Other independence considerations upon accepting employment with an audit client - US SEC Audit Client

Any former Professional who joins a US SEC Audit Client in an Accounting Role or Financial Reporting Oversight Role must sever or re-structure certain financial relationships with, and cease any other relationships or influence over, any EY Member Practice. See also Supplementary Guidance G102S.2.



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In addition to the EYG Policy requirements, any former Partner in an employment relationship with a US SEC Audit Client (which includes Affiliates, see definitions in the Glossary) may not maintain Close Association with the Firm.

102.4 Professionals previously employed by an Audit Client

A Professional previously employed in a Significant Accounting or Financial Reporting Oversight Role at an Audit Client may not be assigned to the Audit Engagement Team for the audit of the financial



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*


statements covering any period during which they were employed at or associated with the Audit Client.

For those Professionals who were previously employed by an Audit Client prior to joining EY Canada, arrangements must be made to dispose of any financial interests held in the former employer audit client (e.g., stock, stock options, restricted stock units, carried interests must be sold, and retirement plan investments must be rolled into another plan with allowable investment alternatives). All financial interests that can be disposed of would be required to be disposed prior to starting at the EY Member Practice. If certain benefits cannot be divested of (e.g., defined benefit plan that is not portable) the Professional may not become an Audit Engagement Team member or be in the Chain of Command for the Audit Client unless these benefits are first forfeited.




102S.4 Professionals previously employed by an Audit Client - US SEC Audit Client

A Professional previously employed by a US SEC Audit Client in an Accounting or Financial Reporting Oversight Role must not participate in, or be in a position to influence, the Audit Engagement of the former employer for a three-year period ending on the date of their third anniversary of leaving the US SEC Audit Client.

A Professional previously employed by a US SEC Audit Client in any position other than Accounting or Financial Reporting Oversight Roles, must not participate, or be in a position to influence, the Audit Engagement for their former employer covering any period during which he or she was employed by or associated with that US SEC Audit Client.



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For those Professionals who were previously employed by an Audit Client, prior to joining EY Canada, arrangements must be made to dispose of any Financial interests held in the former employer audit client (e.g., stock, stock options, restricted stock units, carried interests must be sold, and retirement plan investments must be rolled into another plan with allowable investment alternatives). All Financial Interests that can be disposed of would be required to be disposed prior to starting at the EY Member Practice. If certain benefits cannot be divested of (e.g., defined benefit plan that is not portable) the Professional may not become an Audit Engagement Team member or be in the Chain of Command for the Audit Client unless these benefits are first forfeited.

102.5 Family members of Professionals accepting employment with an Audit Client

Family and personal relationships between EY Partners or Professional Employees and persons holding a Significant Accounting or Financial Reporting Oversight Role at an Audit Client may create threats to independence, including in situations not described in the following paragraphs. Consultation with Independence is encouraged if EY Partners or other Professional Employees believe such circumstances apply.



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*


In Canada, independence threats may apply also to a person holding any Accounting Role and not just a Significant Accounting Role.




Immediate Family Members of Covered Persons

A Professional may not be a Category 1 or 2 Covered Person when an Immediate Family Member holds a Significant Accounting or Financial Reporting Oversight Role at the Audit Client or held such a position during the Audit and Professional Engagement Period.



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For Audit Clients subject to CRI independence restrictions, the EY Canada

Independence Policy is more restrictive. A Professional may not be a member of the Audit Engagement Team or in the Chain of Command with respect to a CRI or Listed PIEs (non-CRI / non-SEC) Audit Client (which includes Affiliates, see definitions in the Glossary) if an Immediate Family Member is employed by, or holds an Accounting Role or Financial Reporting Oversight Role at, the Audit Client (which includes Affiliates, see definitions in the Glossary). The restriction applies to any Accounting Role and not just a Significant Accounting Role.

Refer to notification requirements in 102.1 if an Immediate Family Member is about to or has entered into employment discussions with the Audit Client.

Any Professional who has an Immediate Family Member employed by, or holding an Accounting Role or Financial Reporting Oversight Role at an Audit Client must report such a relationship as directed below:

1. Partners through managers must report any such relationship at any Audit Client (which includes Affiliates, see definitions in the Glossary).

2. Professional Employees below manager level must report any such relationship at an Audit Client (which includes Affiliates, see definitions in the Glossary) within their Office.




The above-noted Professionals must complete the “Employment of Immediate Family Member Template” available from the Canadian Independence website, under the “Family Relationships” link.

Professionals must update and resubmit this information each year or when new facts arise during the year.

Immediate Family Member of Professionals who are not Covered Persons



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*


Any Professional who has an Immediate Family Member employed by, or holding an Accounting Role or Financial Reporting Oversight Role at an Audit Client must report such a relationship as directed below:



The above-noted Professionals must complete the “Employment of Immediate Family Member Template” available from the Canadian Independence website, under the “Family Relationships” link.





Close Family Members of Category 1 or 2 Covered Persons

Category 1 and 2 Covered Persons are responsible for identifying whether a Close Family Member holds a Significant Accounting or Financial Reporting Oversight Role at the Audit Client, and are encouraged to consult with Independence to assess the significance of the independence threat that could be created. Appropriate action may be required depending on the closeness of and the function held by the family member, and the role of the Covered Person.



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*


The EY Canada Independence Policy is more restrictive. A Professional Employee or Partner may not be a member of the Audit Engagement Team or in the Chain of Command with respect to an Audit Client (which includes Affiliates, see definitions in the Glossary) if a Close Family Member holds a Significant Accounting Role or Financial Reporting Oversight Role at the Audit Client. For Audit Clients subject to CRI independence requirements the restriction also applies to any Accounting Role and not just a Significant Accounting Role.

Refer to the notification requirements in 102.1 if a Close Family Member is about to or has entered employment discussions with the Audit Client.

In addition, any Professional who has a Close Family Member employed by, or holding an Accounting Role or Financial Reporting Oversight Role at an Audit Client (which includes Affiliates, see definitions in the Glossary) must report such a relationship as directed below:






The above-noted Professionals must complete the “Employment of a Close Family Member Template” available from the Canadian Independence website, under the “Family Relationships” link.


Close Family Members of Professionals who are not Covered Persons and Category 3 or Category 4 Covered Persons



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*


Any Professional who has a Close Family Member employed by, or holding an Accounting Role or Financial Reporting Oversight Role at an Audit Client (which includes Affiliates, see definitions in the Glossary) must report such a relationship as directed below:



The above noted Professionals must complete the “Employment of a Close Family Member Template” available from the Canadian Independence website, under the “Family Relationships” link.





Close relationships of Category 1 or 2 Covered Persons

Threats to independence may be created when a Category 1 or 2 Covered Person has a close relationship with an individual, other than an



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Immediate or Close Family Member, who is in a Significant Accounting or Financial Reporting Oversight Role at an Audit Client. The Lead Audit Engagement Partner should evaluate the significance of such threats and apply appropriate safeguards as necessary. Consultation with Independence is encouraged.

Professionals are required to consult the Lead Audit Engagement Partner in these situations.

102S.5 Family members accepting employment with an Audit Client – US SEC Audit Clients

A Professional may not be a Covered Person with respect to a US SEC Audit Client if an Immediate or Close Family Member is employed in an Accounting or Financial Reporting Oversight Role.


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The EY Canada Independence Policy is more restrictive, A Professional also cannot be a member of the Audit Engagement Team or in the Chain of Command with respect to a US SEC Audit Client (which includes Affiliates, see definitions in the Glossary) if an Immediate Family Member is employed in any position.

Any Professional who has an Immediate or Close Family Member employed by, or holding any position at a US SEC Audit Client must report such a relationship as directed below:

1. Partners through managers must report any such relationship at a US SEC Audit Client (which includes Affiliates, see definitions in the Glossary).

2. Professional Employees below manager level must report any such relationship at a US SEC Audit Client (which includes Affiliates, see definitions in the Glossary) within their Office.

The above noted Professionals should complete the employment of an Immediate or Close




Family Member template available from the Canadian Independence website, under the “Family Relationships” link.


102.6 Personal appointments



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Professionals are not permitted to serve as a director, officer, promoter, underwriter, general partner, voting trustee or in any other capacity equivalent to a member of management or an employee of an Audit Client. Refer also to the Serving as Director, Officer or Trustee of an Organization Global Policy.

Refer also to Section 104.2 for restrictions on accepting personal appointments for non-Audit Clients, including appointments as an officer, director or equivalent position at a not-for profit organization, as restrictions may apply when the organization has Financial Interests or financing arrangements with our Audit Clients.

External contractors and consultants who provide professional services to clients may not act as an officer or director of any Audit Client (which includes Affiliates, see definitions in the Glossary) but may act as an employee or contractor of an Audit Client for which they are not a Covered Person.

Part-time Professional Employees (including co-operative students) below the rank of manager expecting to work less than 1,560 standard hours, or a period not to exceed nine months in a twelve month period in a standard work year may be employed by an Audit Client for which they are not a covered person provided all of the following conditions are met:

a) the Professional is on unpaid leave;

b) the position is not an Accounting Role or a Financial Reporting Oversight Role; and

c) prior to accepting such employment, pre-approval from Canada Independence must be obtained.

Upon their return from unpaid leave, they must comply with Section 102.4 or 102S.4




“Professionals previously employed by an Audit Client”.

Professionals acting in teaching roles at universities or colleges support the training of the accounting and auditing profession and other professional organizations with which EY Canada is associated. Accordingly, serving as a part-time teacher, teacher assistant, or marker at a university or college that is an Audit Client for up to one course per semester is not considered to be serving as an employee of that university or college for the purposes of the EY Canada Independence Policy, whether or not the institution issues a T4 or other tax form to the Professional.

Professionals in such permitted teaching roles must not participate on the Audit Engagement for the particular university or college. Further, consultation with Canada Independence is required for more extensive teaching-related roles at universities and colleges that are Audit Clients. Any roles other than teaching or marking accounting, auditing, or other professional courses are not permitted.

Section 103 Pension, insurance and other similar investment products



Minimum CRI SEC

See policies for clients requiring SEC independence in Section 103S

Pension funds, insurance and similar pension investment products often have a complicated structure requiring consideration of various types of entities: (1) the issuer of the investment product; (2) the product or fund itself; and (3) the underlying investments held in the product or fund. Independence requirements apply to each of these types of entities as follows:

The rules applicable to pension, insurance and investment products also apply to situations where Covered Persons or their Immediate Family Members act as trustee or executor but not where a Professional acts under a power of attorney.

(1) purchase pension products, including annuities, insurance policies, or other similar investment products from the Audit Client provided that the policy or product was obtained under normal commercial terms.

For clarity, investments in Audit Clients held via an otherwise permitted pension or other similar insurance products (e.g. variable life/variable annuity insurance policies) are prohibited for all Professionals who are Covered Persons to the




(2) If EY issues an Audit opinion for the product or fund itself, Covered Persons and their Immediate Family Members are prohibited from investing in the pension, insurance or similar investment product

(3) Depending on the structure of the product or fund, the underlying investments within (and the payouts from) pension funds, insurance policies and other similar investment products may be subject to the independence requirements in Sections 101 and 101S. The structure of the product or fund determines

underlying investments that is an Audit Client. This restriction also applies to the Immediate Family Members of all Professionals who are Covered Persons to the Audit Client.

whether the underlying investment is a Direct or material Indirect Financial Interest. This is the case whether the Professional has the ability to select investment choices within a pension product, or the investment choices are managed on a discretionary basis by others on behalf of the Professional or Immediate Family Members.

There are many different types of pension, investment and insurance products available, and the nature of the investment may be very fact-specific. Some situations can involve a complex and judgmental analysis in which case consultation with Independence is encouraged.

103S Pension, insurance and investment products — US SEC Audit Clients

Covered Persons, including their Immediate Family Members, are prohibited from obtaining an individual insurance policy from a US SEC Audit Client, subject to the following exceptions:

• Insurance policies held by Covered Persons at 7 May 2001 are permitted regardless of the subsequent financial condition of the insurer.

• Insurance policies (including policies obtained by the Professional’s Immediate Family Members) obtained after 7 May 2001 but before the Professional became a Covered Person are permitted provided that the likelihood of the insurer becoming insolvent is remote.



Minimum CRI SEC

The rules applicable to pension, insurance and investment products also apply to situations where Covered Persons or their Immediate Family Members act as trustee or executor, but not where a Professional acts under a power of attorney.

For clarity, investments in Audit Clients held via an otherwise permitted insurance policy or insurance product are prohibited for all Professionals who are Covered Persons to either (a) the insurance provider or (b) the




See also Supplementary Guidance G103S.1 related to Covered Persons and insurance products.

underlying investments held via the insurance policy/product. This restriction also applies to the Immediate Family Members of all Professionals who are Covered Persons to the Audit Client.

Section 104 Trusts, estates, intermediary investment vehicles and other controlling ownerships


Minimum CRI SEC

104.1 Beneficiaries and controlling owners

Underlying investments held in a trust or estate are considered Direct Financial Interests when:

• A Professional or an Immediate Family Member is a beneficiary of a trust or estate that holds a Financial Interest in an Audit Client, and the Professional has control over or has the ability to influence the investment decisions of the trust or estate; or

• A Professional or an Immediate Family Member owns more than 50% of a general or limited partnership, corporation, joint venture, or pool that holds a Financial Interest in an Audit Client.

Partners and their Immediate Family Members are prohibited from having such Direct Financial Interests and Material Indirect Financial Interests in any EY Audit Client (including Affiliates) regardless of whether the Partner is a Covered Person.

Professional Employees and their Immediate Family Members are prohibited from having such Direct Financial Interests and Material Indirect Financial Interests for which the Professional Employee is a Covered Person.

In Canada, all Professionals, including their Immediate Family Members, may not

Underlying investments held in a trust or estate are considered Indirect Financial Interests when:

• A Professional or an Immediate Family Member is a beneficiary of a trust and has no current rights to the income or assets; or

• A Professional or an Immediate Family Member is a beneficiary of a trust or estate that holds a Financial Interest in an Audit Client and the Professional does not have control or the ability to influence the investment decisions of the trust or estate.

themselves, or engage others to, establish a trust or other vehicle to hold investments in Audit Clients for their own personal benefit, or direct others to hold investments on their behalf as nominee, regardless of whether or not they are Covered Persons.

See also Section 101 for requirements governing Direct and Indirect Financial Interests.

In all cases, the trust, estate or intermediary investment vehicle itself is considered a Direct Financial Interest of its beneficiaries and Controlling Owners.




104.2 Appointment as directors, officers, trustees, executors or administrators of a trust, estate, non-profit organization or similar vehicle



Minimum CRI SEC

The reference above to Minimum, CRI and SEC Audit

Clients in this section apply to the investments held in an

Audit Client by the trust, estate or similar vehicle.

Partners and employees, whether a Professional or non-Professional Employee, should never serve as a director, officer, trustee, executor or administrator (hereby referred to as “trustee”) of any Audit Client trust, estate, non-profit organization or similar entity.

For clarity, the EYG restriction also applies to such appointments for estates, entities, trusts, etc. involving persons associated with an Audit Client in a decision-making capacity such as officers, directors, or Controlling Owners.

External contractors and consultants who provide professional services to Audit Clients may not act as an officer or director of any Audit Client (which includes affiliates, see definitions in the Glossary) but may act as an employee or contractor of an Audit Client for which they are not a Covered Person.

Serving in a personal capacity as a trustee of a non-Audit Client trust, estate or similar vehicle may create an independence issue if the estate or trust has a prohibited financial interest in, or any prohibited relationship with, an Audit Client for which the Professional is a Covered Person. In such situations, accepting or continuing the appointment is permitted only when all the following requirements are met:

• The trust or estate does not hold a Financial Interest in the audit client exceeding 10% of the total assets of the trust or estate, or 10% of the Audit Client’s equity or other ownership interests;

The EY Canada Independence Policy is more restrictive:

Appointment as a Trustee, Executor or Administrator of a trust, estate or similar vehicle:

Partners and Professional Employees, including their Immediate Family Members, are prohibited from accepting appointments for a trust, estate, or similar vehicle (i.e. it is not a non-profit organization) of a non-Audit Client that holds a Financial Interest in an Audit Client for which they are a Covered Person.

• The Professional is not a beneficiary of the trust; and

• The Professional does not have any authority over investment decisions with respect to the Audit Client and recuses in writing any authority to control the trust or to supervise or participate in investment decisions for the trust with respect to the Audit Client.

Appointment at a non-profit organization

Apply the EYG Independence Policy in situations which involve an appointment at a non-profit organization.

For appointments at a non-profit organization holding a financial interest in an Audit Client for which the Professional is a Covered Person: a




See also Section 102, provisions relating to appointments of Immediate Family Members.

recusal letter is required to be signed in this regard. However, recusal is not required when a Professional ceases to be a Covered Person.

Section 105 Loans, guarantees and deposits

The following requirements regarding loans, guarantees, deposits and overdrafts apply equally whether the loan is contracted directly or through a controlled intermediary such as a general or limited partnership, corporation, trust, joint venture, or pool that is more than 50% owned.

105.1 Loans to and from Audit Clients other than banks or similar financial institutions



Minimum CRI SEC

*

*See policies for clients requiring SEC

independence in Section 105S.1.

Professionals and their Immediate Family Members may not borrow, or guarantee borrowings from, or make loans or guarantees of a loan to, an Audit Client that is not a bank or a similar financial institution. However, Professionals and their Immediate Family Members may have employment-related loans from an Audit Client for which they are not a Covered Person, or for which they are a Category 3 or Category 4 Covered Person.

Any loans or guarantees with persons associated with an Audit Client in a decision making capacity such as officers, directors or Controlling Owners are also prohibited, unless the loan is between a non-Covered Person Professional and a family member.

The EY Canada Independence Policy is more restrictive. The prohibition on loans extends beyond controlling owners to shareholders who own greater than 10 percent of the equity securities of the Audit Client unless the shareholder is a bank or similar financial institution and the loan or guarantee is made under normal commercial terms and conditions.




105S.1 Loans to and from Audit Clients other than banks or similar financial institutions – US SEC Audit Clients

The exception for employment-related loans from US SEC Audit Clients only applies to non-Covered Persons. In addition, the prohibition on loans with Controlling Owners of an Audit Client extends to beneficial owners of greater than 10 percent of US SEC Audit Clients.



Minimum CRI SEC

The remainder of the policies in Section 105 Loans from financial institutions, credit cards and deposits apply only to Covered Persons. For Professionals other than Covered Persons, there are no restrictions in the following areas.

105.2 Loans from a bank or other similar financial institution Audit Client



Minimum CRI SEC



Covered Persons and their Immediate Family Members are permitted to hold or guarantee a loan from an Audit Client that is a bank or other similar financial institution, provided it is made under normal lending procedures, terms and conditions.

Examples of such loans include home mortgages, bank overdrafts, car loans and credit card balances. Similar institutions may include various credit and financing institutions including mortgage finance, retail stores lending entities or leasing companies.

Prior to becoming a Covered Person, Professionals must ensure that their loans and guarantees comply with the above requirements.

All such permitted loans for Covered Persons must be kept current. A Professional cannot be on the Audit Engagement Team if they have a loan to or from, or guarantee of a loan by or for, an officer, director or Substantial Stockholder of the Audit Client unless the Substantial Stockholder is also a bank or other similar financial institution subject to any additional independence restrictions applicable to that entity.

A student loan is considered to be a loan.

The rules applying to loans from financial institutions also apply to situations where Covered Persons or their Immediate Family Members act as trustee or executor, or act under a power of attorney.




105S.2 Loans from a bank or other similar financial institution – US Audit Client

Covered Persons and their Immediate Family Members may only hold or guarantee the following types of personal secured loans with a US SEC Audit Client bank or financial institution:

1. Automobile loans and leases collateralized by the automobile;

2. Loans fully collateralized by the cash surrender value of an insurance policy;

3. Loans fully collateralized by cash deposits at the same financial institution; and

4. A mortgage loan collateralized by the borrower`s primary residence provided the loan was not obtained while the individual was a Covered Person.

Such loans must be obtained under the financial institution`s normal lending procedures, terms, and requirements available to the general public, and at all times must be kept current as to all terms.

Covered Persons and their Immediate Family Members may have a credit card issued by a US SEC Audit Client, including a retail store charge account, provided any outstanding balance on the card is kept current each month, and does not exceed US $10,000.

The requirements of this Section extend to loans with entities that are beneficial owners of greater than 10 percent of US SEC audit clients.

The rules applying to loans from financial institutions also apply to situations where Covered Persons or their Immediate Family Members act as trustee or executor, or act under a power of attorney.

A home equity line of credit that is fully secured by the borrower`s primary residence is a permissible loan if obtained prior to becoming a Covered Person.

A Covered Person is prohibited from renewing or renegotiating the terms of a mortgage loan or home equity line of credit secured by their primary residence once they become a Covered Person.

For clarity, if the residence securing a permitted mortgage or home equity line cases to be the Covered Person`s primary residence, the loan is no longer permitted and must be terminated immediately.


Minimum CRI SEC

105.3 Deposits with a bank or other similar financial institution



Minimum CRI SEC






Covered Persons and their Immediate Family Members are permitted to hold deposits at an Audit Client that is a bank, broker or similar institution, provided the depository account is held under normal commercial terms, procedures and conditions. Depository accounts include checking, money market and saving accounts, and certificates of deposit.

The rules applying to deposits with financial institutions also apply to situations where Covered Persons or their Immediate Family Members act as trustee or executor, or act under a power of attorney.

Depository accounts also include Guaranteed Investment Certificates (GICs).

For clarity, money market funds are considered Financial Interests and must comply with restrictions in Sections 101 and 101S and must be reported in GMS as applicable.

Professionals with permitted deposit accounts should ensure that any funds held in an associated sweep account are not invested in Financial Interests that are prohibited under Section 101.1 (Financial Interests) or Section 106 (Brokerage accounts).

For clarity such sweep accounts are prohibited for all Professionals if the mutual fund/money market fund, etc., is an Audit Client of any EY Member Practice.

105S.3 Deposits with a bank or other similar Financial Institution - US SEC Audit Clients


Minimum CRI SEC

Covered Persons and their Immediate Family Members may have depository accounts with US SEC Audit Clients that are fully insured at all times by a governmental agency which is equivalent to the Federal Deposit Insurance Corporation (FDIC) in the US, which guarantees the return of, or otherwise ensures the safety of, the deposits in the event of the failure of the financial institution.

The EY Canada Independence Policy is more restrictive. Partners who are Covered Persons may not have personal or joint depository accounts at a US SEC financial institution Audit Client (which includes Affiliates, see definitions in the Glossary).

For Covered Persons, the following individuals may have depository accounts with restrictions as outlined in the EYG Policy:

a) Professional Employees who are Covered Persons and their Immediate Family Members;

b) Immediate Family Members of Partners who are Covered Persons.

The rules applying to deposits with financial institutions also apply to situations where Professionals who are Covered Persons or their Immediate Family Members act as trustee or executor, or act under a power of attorney.




Canada Deposit Insurance Corporation (“CDIC”) is regarded as the Canadian equivalent of the FDIC. The account must be comprised of the type of assets covered by the CDIC and the account balance must never exceed (even for a day) the maximum amount of CDIC coverage (which currently is $100,000). Therefore, such Covered Persons may have to use another account at a non-proscribed financial institution for large transactions such as home sales.

It is the responsibility of the Covered Person to ensure the types of assets held are covered by the CDIC. http//www.cdic.ca. For example, CDIC coverage does not apply to:

mutual funds and stocks; foreign currency deposits (including US

dollar); and GIC’s with a term greater than five

years.

It is the responsibility of the Professional to understand whether their account provider is covered by CDIC.

In addition, sweep accounts are prohibited for all Professionals if the mutual fund/money market fund, etc., is an Audit Client of any EY Member Practice.

105.4 Overdrafts

Covered Persons and their Immediate Family Members may have an overdraft facility with an Audit Client that is a bank or other similar Financial Institution, provided it is made under normal lending procedures, terms, and conditions. All such permitted overdrafts for Covered

Persons must be kept current.


Minimum CRI SEC

*

*See additional policies for clients requiring SEC independence in 105S.4




105S.4 Overdrafts – US SEC Audit Clients

An overdraft facility with a US SEC Audit Client must also be kept current as to all terms, and be fully collateralized by the cash surrender value of an insurance policy or by other cash deposits at the same Financial Institution.



Minimum CRI SEC

Section 105S.4 applies to all Covered Persons and their Immediate Family Members.

Reminder: Partners who are Covered Persons may not have personal or joint deposit accounts at any US SEC Audit Client.

Section 106 Brokerage accounts Section 106 also applies to situations where Partners or Professional Employees and their Immediate Family Members act as trustee or executor, or act under a power of attorney.

All Professionals with permitted brokerage accounts should ensure “sweep” accounts and other investments held in the accounts are not invested in Audit Clients in accordance with Sections 101 and 101S.

Covered Persons and their Immediate Family Members are permitted to have a brokerage account at an Audit Client provided it is held under normal commercial terms, procedures and conditions.

However, all Professionals are responsible for ensuring that investments held in a brokerage account (including any related sweep account) are in compliance with the requirements set out in Section101 of this policy. This is the case even if the professional has delegated the management of the brokerage account, e.g. to a professional investment manager.



Minimum CRI SEC

See policies for clients requiring SEC independence in 106S

The EY Canada Independence Policy is more restrictive, sweep accounts are prohibited for all Professionals if the mutual fund/money market fund, etc., is an Audit Client of any EY Member Practice.

Cash deposits and margin brokerage accounts or similar extended lines of credit (which are considered loans, even if the deposit or margin feature is not used) should comply with Section 105 of this policy.




106S: Brokerage accounts—US SEC Audit Clients



Minimum CRI SEC

Covered Persons and their Immediate Family Members who have a brokerage account with a US SEC Audit Client must ensure that the amounts in the brokerage account do not exceed (even for a day) the maximum amount and type of assets covered by the Securities Investor Protection Corporation (SIPC) in the US (or equivalent insurance programs outside the US).

See also Supplementary Guidance G106S.1 related to SIPC coverage.

Professionals may not have futures, commodity or similar accounts with a Futures Commission Merchant that is a US SEC Audit Client for which they are a Covered Person.

A broker/dealer may be an “introducing broker” who uses a second broker to transact or clear transactions (i.e., a “clearing broker”). The name of the clearing broker normally may be identified from the account agreement with the introducing broker or from the statements (information in the header or the footer of the introducing broker’s statement). In this case, independence requirements must be met with both the introducing broker and the clearing broker.

A margin account (whether used or not) is also considered a loan and is not permitted for Covered Persons and their Immediate Family Members. Canadian Investor Protection Fund

(“CIPF”) is considered to be similar to the Securities Investor Protection Corporation (“SIPC”). The account must be comprised of the type of assets covered by CIPF and the account balance must never exceed (even for a day) the maximum amount of CIPF coverage. The CIPF coverage is currently CDN $1.0 million. http//www.cipf.ca.

It is the responsibility of the Professional to understand whether their account provider is covered by CDIC or CIPF coverage as applicable.

Section 107 Business relationships 107.1 Purchases and sales of goods and

services



Minimum CRI SEC

*


Purchases or sales of goods and services between Professionals and Audit Clients do not generally create a threat to independence if the transaction is in

Additional EY Canada Policies are set out in the Canadian Policy CA-P3112, Business Relationships and Maintaining our




the ordinary course of business and at arm’s length. Independence

However, the purchase of goods and services by any Professional from Audit Clients at special rates and terms available only because of our client relationship, or at rates and terms only available to employees of the Audit Client, are prohibited.

In addition, Covered Persons and their Immediate Family Members cannot enter into a material on-going sales agreement for goods and services with an Audit Client directly or through a family business. However, occasional sales of goods or real estate on an arm’s length basis, even if material, may be permitted subject to prior approval from the Lead Audit Engagement Partner.

Additional EY Canada Policies are set out in the Canadian Policy CA-P5196, Hospitality & Gifts Involving Clients.

For clarity, an Immediate Family Member of a non-Covered Person who is employed at an Audit Client is permitted to purchase goods and services at an employee discount.

Direct sales to Audit Clients by EY Professionals of any service which could be construed to be an EY service could raise significant independence issues. In such situations, consultation with Independence is encouraged.

107S.1 Purchases and sales of goods and services — US SEC Audit Clients

In addition to the ordinary course and arm’s length requirement, purchases of goods and services from a US SEC Audit Client is permitted only if it is determined that the transaction also involves acting as a “consumer in the ordinary course of business.” The US SEC “acting as consumer” concept requires the professional to consume the procured product or service. These requirements also extend to persons associated with the US SEC Audit Client in a decision making capacity, such as officers, directors and Substantial Stockholders. See Supplementary Guidance G207 for guidance on “consumer in the ordinary course of business.”


Minimum CRI SEC

If the transaction is material to the Partner or Covered Person’s family net worth, consultation with Independence is encouraged as the transaction may not be considered to be in the ordinary course of business.

Covered Persons and their Immediate Family Members should not enter into an agreement for the sale of goods and services to a US SEC Audit Client either directly or through a family business, regardless




of Materiality or duration of the sales agreement. Consultation with Independence is encouraged.

107.2 Joint Investments and alliances

Covered Persons and their Immediate Family Members are prohibited from entering into a Joint Investment or Alliance Arrangement with an Audit Client or persons associated with an Audit Client in a decision-making capacity, such as officers, directors, or Controlling Owners, regardless of Materiality.



Minimum CRI SEC

*

* See additional policies for clients requiring SEC independence in 107S.2.

For clarity, there are no restrictions for non-Partners who are not Covered Persons.

Non-Covered Person Partners and their Immediate Family Members may enter into:

• an immaterial Joint Investment or Alliance Arrangement with an Audit Client or associated persons, as long as neither party has the ability to control or exercise significant influence over the venture; or

• any such Joint Investment or alliance, regardless of Materiality, with a family member who is a person associated with an Audit Client in a decision-making capacity.

Professionals may not be a member of the Audit Engagement Team or in the Chain of Command, if the Professional has a Financial Interest in an entity in which the audited entity, or any of its directors, officers or Controlling Owners also have a Financial Interest or the Financial Interest is known to be material to either these parties or the Professional.

If the EY Partner or employee did not know, and could not reasonably be expected to know, that the Audit Client or associated persons also had a Financial Interest in an entity then, by presumption, there is no impairment of independence. However, if the Partner or employee becomes aware, after making an investment, that the Audit Client or associated persons also are investors, disposal of the investment may be required. In such situations consultation with Independence is encouraged.

107S.2 Joint Investments and alliances — US SEC Audit Clients

For US SEC Audit Clients, the requirements applicable to Covered Persons apply equally to all Partners (including non-Covered Person Partners) and their Immediate Family Members. In addition, the prohibition on Joint Investments and Alliance Arrangements with Controlling Owners of an Audit



Minimum CRI SEC

For clarity, all Partners and Covered Persons (including Immediate Family Members of such Partners or Covered Persons) are prohibited




Client extends to Substantial Stockholders of US SEC Audit Clients.

See also Supplementary Guidance G207.1 related to Activities with third parties in relation to the provision of professional services.

from entering into a Joint Investment or Alliance Arrangement with a US SEC Audit Client or persons associated with a US SEC Audit Client in a decision-making capacity, such as officers, directors, or Substantial Stockholders regardless of materiality.

107.3 Other Cooperative Business Relationships

Covered Persons and their Immediate Family Members may neither have nor enter into a Cooperative Business Relationship with an Audit Client, or with persons associated with the Audit Client in a decision-making capacity, such as officers, directors, or Controlling Owners, unless the relationship is immaterial and insignificant to both parties.



Minimum CRI SEC

*


107S.3 Other Cooperative Business Relationships — US SEC Audit Clients

Partners and Covered Persons (including their Immediate Family Members) are prohibited from having or entering into a Cooperative Business Relationship with a US SEC Audit Client, or its officers, directors or Substantial Stockholders regardless of Materiality or Significance.

However, Immediate Family Members of non-Covered Person Partners are not prohibited from entering into such business relationships, if the relationship is related to their employment or professional activity.



Minimum CRI SEC

107.4 Hospitality and gifts

Hospitality and gifts to and from Audit Clients that are not commensurate with the normal courtesies of business and social life should not be offered or accepted.

Any gifts accepted from an Audit Client and persons in an Accounting or Financial Reporting Oversight Role at the client should be of nominal value. Nominal value will vary with the culture of the country of the giver and the receiver of the gift or benefits. Gifts in the form of cash are not permitted, except in certain



Minimum CRI SEC

Additional EY Canada Policies are set out in the Canadian Policy CA- P5196, Hospitality & Gifts Involving Clients and CA-P5195 Policy on Charitable Contributions.




countries where the practice is customary. In such circumstances, modest gifts in cash to and from Audit Clients are acceptable only for personal gifts for family events such as weddings, birthdays, anniversaries, or local country festivals.

Refer also to the “Hospitality and Gifts” Global Policy.

107.5 Leisure time and vacations with audit clients

Leisure time spent with persons in a Financial Reporting Oversight Role (FRORs) and members of the audit committees of audit clients by Partners, Principals, Executive Directors and Directors on audit engagements should be limited in duration and frequency so as to appear appropriate to a reasonable and informed third party.

Vacations by Partners, Principals, Executive Directors and Directors who are defined as a covered person with audit clients are not allowed.



Minimum CRI SEC

The EYG restriction applies also to Associate Partners.




Part 2 Matters relating to EY Member Practices


These policies set out the independence requirements with which all EY Member Practices, including associated entities within the EY network, must comply in the course of their business operations. These requirements, as they relate to Audit Clients, apply throughout the Audit and Professional Engagement Period. In some EY Member Practices these policies may be supplemented by additional local independence requirements.



Minimum CRI SEC

Section 201 EY Member Practices, practice acquisitions and practice separations

EY Member Practice and the related concept of Country Practices are defined in the Glossary. See also Supplementary Guidance G201 related to the EY network and network firms.

201.1 EY Member Practice acquisitions

When an entity is targeted for acquisition to become part of an EY Member Practice or to become a new EY Member Practice, potential independence matters must be identified and resolved prior to entering into an agreement.

See also Supplementary Guidance G201.1, G201.1(a) and G201.1(b) related to recommended independence due diligence procedures.

201.2 EY Member Practice separations

In situations involving the separation or disposition of entities within the EY network, certain separation procedures must be followed so that the entity or network firm is no longer to be considered associated with EY and is not bound by our policies, including those related to independence. Failure to follow these requirements could jeopardize the effectiveness of the separation, possibly impairing the firm’s independence




if services are provided by the former EY Member Practice to an Audit Client of the firm or restricting the activities of the former EY Member Practice.

See also Supplementary Guidance G201.2 and G201.2(a) related to recommended independence separation procedures.

Section 202 Financial Interests EY Member Practices are prohibited from holding a Financial Interest in an Audit Client of any EY Member Practice.

Financial Interests include both Direct and Material Indirect Financial Interests. Financial interests of EY Member Practices, including those that become prohibited because of a new client win or an acquisition, merger, demutualization or similar situation must be disposed immediately. If there are legal restrictions on the ability to sell a prohibited financial interest, consult with Independence to determine an appropriate course of action.

See also Supplementary Guidance G101.1 related to Financial Interests.



Minimum CRI SEC

EY Canada is prohibited from holding a Financial Interest in any Audit Client of any EY Member Practice and any other entity on the GIL.

In addition:

EY Canada and other EY Member Practices cannot have a Financial Interest in:

a investee subject to Significant-Influence by an entity audited by EY Canada (regardless of whether the entity is an Affiliate of the audited entity); or

an entity in which an entity audited by EY Canada, or any of the audited entity’s directors, officers or Controlling Owners also have a Financial Interest and the Financial Interest is known to be material to these parties or the firm.

For Canadian Audit and Review Clients, do not apply Supplementary Guidance G101.1 related to Financial Interests. Instead, apply the definitions of Audit Client and Affiliates in the Glossary.

Section 203 EY Member Practice pension plans

An EY pension plan or any benefit plan of any EY Member Practice is considered associated with EY and is subject to all independence requirements applicable to an EY Member Practice, including requirements related to Financial Interests (Section 202).



Minimum CRI SEC

*

*See additional policies for clients requiring SEC independence in Section 203S




Pension funds, insurance and similar pension investment products often have a complicated structure requiring consideration of various types of entities: (1) the issuer of the investment product; (2) the product or fund itself; and (3) the underlying investments held in the product or fund. The following independence requirements apply:

(a) An EY Member Practice may engage an Audit Client to act as investment manager for its pension plan provided the investment account and related services are held under normal commercial terms.

(b) An EY Member Practice may purchase pension products or other similar investment products from an Audit Client provided that the products were obtained under normal commercial terms.

(c) If EY issues an audit opinion on the product or fund itself, all EY Member Practices are prohibited from investing in the pension or similar investment product.

(d) The underlying investments within (and the payouts from) funds and other similar investment products are subject to the independence requirements in Section 202 applicable to Direct and Material Indirect Financial Interests.

203S EY Member Practice pension plans - US SEC Audit Clients

In addition to the requirements above, EY Member Practices may not engage a US SEC Audit Client to act as investment manager for its pension plan or any benefit plan.



Minimum CRI SEC

Section 204 Loans, guarantees and deposits

The following requirements regarding loans, guarantees, deposits and overdrafts apply equally whether the loan is contracted directly or through an intermediary.




204.1 Loans to and from Audit Clients other than a bank or similar financial institution

An EY Member Practice may not borrow, or guarantee borrowings from, or make loans or guarantees of a loan to, an Audit Client that is not a bank or a similar financial institution, or persons associated with an Audit Client in a decision-making capacity such as officers, directors or Controlling Owners.



Minimum CRI SEC

* * *

*See additional policies for clients requiring minimum, CRI and/or SEC independence in

Section 204S.1

The EY Canada Independence Policy is more restrictive. The prohibition on loans extends beyond controlling owners to shareholders who own greater than10 percent of the equity securities of the Audit Client unless the shareholder is a bank or similar financial institution and the loan or guarantee is made under normal commercial terms and conditions.

204S.1 Loans to and from Audit Clients other than a bank or similar financial institution – US SEC Audit Clients

The prohibition on loans with Controlling Owners of an Audit Client extends to beneficial owners of greater than 10 percent of US SEC Audit Clients.



Minimum CRI SEC

204.2 Loans from a bank or other similar financial institution Audit Client



Minimum CRI SEC

See policies for clients requiring SEC independence in Section 204S.2.

An EY Member Practice is permitted to hold or guarantee a loan from an Audit Client that is a bank or other similar financial institution, provided it is made under normal lending procedures, terms and conditions. Similar institutions may include various credit and financing institutions including mortgage finance, retail stores lending entities or leasing companies.

However, EY Canada may have such permitted loans only if such loan is immaterial to EY Canada and the Audit Client. All such permitted loans must be kept current.

EY Canada may not have a loan to or from, or a loan guarantee by or for:

1. An officer or director of an audit client; or

2. Shareholders who own greater than 10 percent of the equity securities of the Audit Client unless the shareholder is a




bank or similar financial institution and the loan or guarantee is made under normal commercial terms and conditions.

204S.2 Loans from a bank or other similar financial institution — US SEC Audit Clients

An EY Member Practice may only hold or guarantee the following types of secured loans with a US SEC Audit Client bank or financial institution:



Minimum CRI SEC

1. Automobile loans and leases collateralized by the automobile;

2. Loans fully collateralized by the cash surrender value of an insurance policy;

3. Loans fully collateralized by cash deposits at the same financial institution.

Such loans must be obtained under the Financial Institution’s normal lending procedures, terms, and requirements available to the general public, and at all times must be kept current as to all terms.

An EY Member Practice may have a credit card issued by a US SEC Audit Client, including a retail store charge account, provided any outstanding balance is kept current each month, and does not exceed US$10,000.

The requirements of this Section extend to loans with entities that are beneficial owners of greater than 10 percent of US SEC audit clients.

204.3 Deposits with a bank or other similar financial institution Audit Client

An EY Member Practice is permitted to hold deposits at an Audit Client that is a bank, broker or similar institution provided the depository account is held under normal commercial terms, procedures and conditions. Depository accounts include checking, money market and saving accounts, as well as certificates of deposit.

The EY Member Practice should ensure that any funds held in an associated sweep account are not invested in Financial Interests that are prohibited



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See policies for clients requiring SEC independence in Section 204S.3.




under Section 202 (Financial Interests) or Section 205 (Brokerage accounts).

204S.3 Deposits with a bank or other similar financial institution - US SEC Audit Clients

An EY Member Practice may have depository accounts with a US SEC Audit Client that are in excess of the Federal Deposit Insurance Corporation (or equivalent) insurance coverage, provided that the likelihood of the Audit Client experiencing financial difficulties is remote.



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204.4 Overdrafts

An EY Member Practice may have an overdraft facility with an Audit Client that is a bank or other similar financial institution, provided it is made under normal lending procedures, terms and conditions.



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See additional policies for clients requiring SEC independence in Section 204S.4.

All such permitted overdrafts must be kept current.

204S.4 Overdrafts – US SEC Audit Clients

An overdraft facility, with a US SEC Audit Client must also be kept current as to all terms, and be fully collateralized by the cash surrender value of an insurance policy or by other cash deposits at the same financial institution.



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Section 205 Brokerage accounts

EY Member Practices are permitted to hold a brokerage account with an Audit Client provided it is held under normal commercial terms, procedures and conditions.

However, the EY Member Practice is responsible for ensuring that investments held in a brokerage account (including any related sweep account) are in compliance with the requirements related to Financial Interests in Section 202. This is the case even if the EY Member Practice has delegated the management of the brokerage account, e.g. to a professional



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See policies for clients requiring SEC independence in Section 205S




investment manager. As a result, discretionary accounts with an Audit Client are prohibited.

Cash deposits and margin brokerage accounts or similar extended lines of credit (which are considered loans, even if the deposit or margin feature is not used) should comply with the requirements related to loans in Section 204. EY Member Practices may have sweep accounts in which excess cash is swept into money market funds or mutual funds, provided the funds are not Audit Clients.

205S Brokerage accounts — US SEC Audit Clients

An EY Member Practice may not hold a brokerage or a Futures Commission Merchant account with a US SEC Audit Client.



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Section 206 Insurance policies

An EY Member Practice may purchase insurance from an Audit Client provided that the policy was obtained under normal commercial terms.



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Section 207 Business relationships

The provision of professional services to clients is not considered to be a business relationship (unless the client is re-selling EY products or services to a third party). Independence requirements related to the performance of professional services are addressed in Part 3.

EY Member Practices and personnel proposing business relationships on behalf of EY Member Practices must determine whether a formal independence assessment and approval by Independence is required by using the Business Relationship Evaluation and Tracking (BRET) Criteria. When a proposed business relationship requires a formal independence assessment and conclusion, it should be processed through the BRET tool prior to committing to the relationship

See also Supplementary Guidance G207.




207.1 Business relationships with persons associated with audit clients in a decision-making capacity

EY member practices should not enter into business relationships (formal or informal) with the following attributes, unless the relationship is immaterial and insignificant to both parties:

(a) Relationships directly with persons associated with any Audit Client in a decision-making capacity, such as officers, directors or Controlling Owners; or

(b) Relationships with an entity controlled by an individual who is associated in a decision-making capacity with any Audit Client.



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Additional EY Canada Policies are set out in the Canadian Policy CA-P3112, Business Relationships and Maintaining our Independence. The Partner, Associate Partner or Director who is committing the firm to a business relationship is responsible to determine whether BRET pre-approval is required and to obtain such approval prior to entering into the business relationship on behalf of the firm. The BRET criteria is contained in the above noted policy and also within the BRET tool itself.

207S.1 Business relationships with persons associated with audit clients in a decision making capacity – US SEC audit clients

The relationships described at 207.1(a) and (b) above are prohibited if the relationship is with an officer, director or Substantial Stockholder of a US SEC audit client, except procurements as a consumer in the ordinary course of business, as described at Section 207S.2 below.



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207.2 Procurement of goods and services

Procurement of goods and services from an Audit Client by an EY Member Practice is permitted if the transaction is in the ordinary course of business and at an arm’s length.

However, EY Member Practices should consider whether the magnitude of the transaction creates a self-interest threat. If the relationship is significant, consultation with Independence is encouraged to determine whether the relationship is permissible. To assess the Significance of the relationship, consider the size of the Audit Client and the EY



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Additional EY Canada Policies are set out in the Canadian Policy CA-P3112, Business Relationships and Maintaining our Independence. The Partner, Associate Partner or Director who is committing the firm to a business relationship is responsible to




Member Practice, and the nature of the purchase, among other quantitative and qualitative factors. A procurement arrangement with an audit client may be significant if the procurement activity exceeds 10 percent of either party’s revenues (assessed annually); in such cases, consultation with Independence is required to determine whether the relationship is significant.

Leasing agreements in the ordinary course of business are considered similar to procurement for independence purposes. However, some leasing arrangements may represent a cooperative business relationship (for example, a sublease or long-term arrangement) or may be considered a finance or capital lease and hence a loan. Refer to Section 204 (Loans) or 207.4 as relevant. Subleasing of excess space is not a procurement activity and should be evaluated under Section 207.4. Similarly, managed service and outsourcing arrangements also require additional analysis.

See also the Global Procurement Policy.

determine whether BRET pre-approval is required and to obtain such approval prior to entering into the business relationship on behalf of the firm. The BRET criteria are contained within the BRET tool itself.

207S.2 Procurement of goods and services – US SEC Audit Clients

In addition to the requirements above, the following provisions apply to US SEC Audit Clients:

• Procurement of goods and services from a US SEC Audit Client or from persons associated with the Audit Client in a decision-making capacity, such as the Audit Client’s officers, directors, or Substantial Stockholders is permitted only if it is determined that the transaction also involves EY acting as a “consumer in the ordinary course of business.” The US SEC “acting as consumer” concept requires EY to consume the procured product or service. If a procurement activity with an Audit Client (or persons associated with the audit client in a decision making capacity, such as an officer, director or Substantial Stockholder) exceeds 10 percent of either party’s revenue, the procurement may not be in the “ordinary course of



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Additional EY Canada Policies are set out in the Canadian Policies: CA-P3112, Business Relationships and Maintaining our Independence; CA-P5186, Process for Creating Strategic Relationships; and CA-P5189, EY in Consortia and Sub-Contracting Arrangements.




business.” See also Supplementary Guidance G207 related to “consumer in the ordinary course of business.”

• Immaterial landlord-tenant leasing arrangements are permitted under a specific exemption in the US SEC regulations (discussion with the Global SEC Independence Center is encouraged).

• EY Member Practices may not have or enter into a capital lease with a US SEC audit client, unless the lease is in compliance with the requirements of Section 204S applicable to loans.

207.3 Joint Investments and alliances

An EY Member Practice may not enter into a Joint Investment or Alliance Arrangement with an Audit Client. See 207.1 above for such relationships with persons associated with an Audit Client in a decision-making capacity such as officers, directors or Controlling Owners.

However, if the EY Member Practice does not know, and could not reasonably be expected to know, that the Audit Client or associated persons also have a Financial Interest in an entity then, by presumption, there is no impairment of independence. If an EY Member Practice becomes aware after making an



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Additional EY Canada Policies are set out in the Canadian Policy CA-P5186, Process for Creating Strategic Relationships.

investment that the Audit Client or associated person also is an investor in the Joint Investment, disposal of the investment may be required. In such situations consultation with Independence is encouraged.

Any joint investment, alliance, strategic relationship or similar activity should be considered for Independence approval prior to committing to the relationship. All such agreements should contain contractual provisions that allow EY to exit the arrangement if necessary to comply with professional standards.

Alliance Arrangements with any third party entity may result in the allied entity being deemed an EY network firm. See also Supplementary Guidance G201 related to network firms.




207S.3 Joint Investments and alliances — US SEC Audit Clients

Joint Investments with US SEC Audit Clients (or persons associated with the Audit Client in a decision-making capacity, such as officers, directors or Substantial Stockholders) represent an impairment of independence regardless of whether the EY Member Practice has prior knowledge of the US SEC Audit Client’s or associated person’s investment.



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207.4 Other Cooperative Business Relationships

An EY Member Practice may neither have nor enter into a direct or indirect Cooperative Business Relationship with an Audit Client, unless the relationship is immaterial and insignificant to both parties. See the definitions of Materiality and Significance in the Glossary. See 207.1 above for such relationships with persons associated with the Audit Client in a decision-making capacity, such as the Audit Client’s officers, directors, or Controlling Owners.



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* See policies for clients requiring SEC independence in 207S.3

Additional EY policies are set out in the Canadian Policy CA-P5189, EY in Consortia and Sub-Contracting Arrangements.

In addition, a former Partner or Professional cannot continue to participate or appear to participate in the Firm’s business or professional activities if the individual is in a Significant Accounting or Financial Reporting Oversight Role at an Audit Client.

207S.4 Other Cooperative Business Relationships – US SEC Audit Clients

Any direct Cooperative Business Relationship with a US SEC Audit Client (or persons in a decision-making capacity, such as officers, directors and Substantial Stockholders) is prohibited, regardless of Materiality. Immaterial indirect relationships may be permissible; however, determination of whether a relationship is indirect requires judgment and could be complex. For such situations, consultation with Independence is encouraged.



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Prime contractor/subcontractor relationships, joint or shared liability or contractual obligations, and supervision of or by a US SEC audit client are considered prohibited direct business relationships.

Sponsorship of events organized by US SEC audit clients is generally prohibited, and certain marketplace activities with US SEC audit clients may be considered prohibited direct business relationships. See Supplementary Guidance G207 and G207.1

207.5 Hospitality, gifts or other benefits

Hospitality and gifts to and from Audit Clients that are not commensurate with the normal courtesies of business and social life should not be offered or accepted.



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Any gifts accepted from an Audit Client should be of nominal value except for gifts in the form of cash, which are never permitted. Nominal value will vary with the culture of the country of the giver and the receiver of the gift or benefits.

An EY Member Practice should not accept benefits from an Audit Client except on business terms no more favourable than those available to other parties. Benefits include being able to purchase goods or services from Audit Clients at special rates or terms, such as buying at discounts available only to employees of the Audit Client.

See also the Hospitality and Gifts Global Policy.

Additional EY Canada policies are set out in Canadian policy CA-P5196, Hospitality & Gifts Involving Clients and CA-P5195, Policy on Charitable Contributions.

Section 208 Actual or threatened litigation with an Audit Client



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* See additional policies for clients requiring SEC independence in 208S

A threat to independence is created when litigation takes place or is likely to occur between an EY Member Practice and an Audit Client. Litigation or the possibility of litigation could place the EY Member Practice and the Audit Client in a significant

Actual, threatened or prospective litigation between EY Canada, or a Category 1 or Category 2 Covered Person, and an Audit Client (which includes Affiliates, see definitions in the Glossary) or a shareholder or creditor of the client may create an independence threat.




adversarial position, which may affect management’s willingness to make complete disclosures.

The Lead Audit Engagement Partner is responsible for assessing the Significance of the threat to independence and should consider potential safeguards, taking into account such factors as the Materiality of the litigation, the timing of the litigation, the nature of the services to which the litigation relates, and whether the litigation relates to a prior Audit Engagement.

The nature of the relationship between the Audit Client’s management (which includes Affiliates, see definitions in the Glossary) and client-serving personnel assigned to an engagement should be characterized by complete candour and full disclosure regarding all aspects of the client’s business operations and all matters relevant to the client’s financial statements. EY Canada and the client’s management may be placed in adversarial positions by actual, threatened, or prospective

In instances of actual or threatened litigation, the Region Independence Leader must be informed.

litigation, which could impair complete candour and full disclosure, and in this, or other ways, EY Canada may face a self-interest threat or an intimidation threat. An analysis regarding the nature and significance of the threat relating to actual threatened or prospective litigation involving an Audit Client is required. At a minimum, document the nature of the safeguards applied to reduce it to an acceptable level. If safeguards do not reduce the threat to an acceptable level, EY Canada should not accept or continue the engagement.

Immediately notify the Canada Managing Partner, the Assurance Managing Partner, the Canadian Director of Independence, the Canada Assurance Professional Practice Director, and the General Counsel’s Office of such litigation or threatened litigation so they can determine what action is to be taken and whether EY Canada’s independence is threatened.

208S Actual or threatened litigation with a US SEC Audit Client

Consultation with Independence is required when litigation, or the expressed intention to commence litigation, that involves an EY Member Practice is either:

• Brought by a US SEC Audit Client, its officers, directors, security holders or other parties; or



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• Brought by a third party and involves either a US SEC Audit Client, its officers, directors and Substantial Stockholders, or an EY Member Practice.

Section 209 Fee dependency EY Member Practices are responsible for monitoring the proportionate fee income from individual Audit Clients sufficiently to be able to identify when a large proportion of the total fee income of an EY Member Practice is derived from one single Audit Client. EY Member Practices must also maintain appropriate policies and procedures to implement and monitor quality control processes for such engagements.

See also Section 318.2 for specific requirements when fee dependency situations are identified.

Policies apply to an Audit Client su ject to the


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Section 210 Evaluation and Compensation of Audit Engagement Team Members



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* See additional policies for clients requiring SEC independence in Section 210S

210.1 Key Audit Partners

EY Member Practices are prohibited from evaluating and compensating a Key Audit Partner based on that Audit Partner’s success in selling non-assurance services to an Audit Client for which the Audit Partner is a Key Audit Partner. This provision applies to all Audit Clients including those that are not PIEs. For example, the signing Audit Partner of a statutory audit is a Key Audit Partner for that client and the provisions of this section must be complied with.

See also Supplementary Guidance G210.1 related to Key Audit Partners.

In Canada, the EYG Policy should be applied to audit and review engagements.

Additional EY Canada policies are set out in Canadian policy CA-P5209, Serving our clients, including the supplemental guidance.




210.2 Other partners and staff members of the Audit Engagement Team

Other members of the Audit Engagement Team, including other partners may be evaluated or compensated for selling non-assurance services to their own Audit Client provided the work of the individual associated with the audit is subject to review in accordance with firm policies and procedures. If it is not feasible or practical for the work of the Audit Engagement Team member’s to be reviewed, the individual should be removed from the Audit Engagement Team.

This section is effective for evaluations and compensation set for the Fiscal Year commencing 1 July 2011.



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210S Audit Partner compensation – US SEC Audit Clients

For US SEC Audit Clients, all audit partners are prohibited from being goaled, evaluated or compensated for selling non-attest (as defined by the AICPA) services to their US SEC Audit Client.



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Part 3 Matters relating to audit and non-audit engagements


Before any engagement to perform professional services for Audit Clients is agreed to, the GCSP, or Lead Audit Engagement Partner if different from GCSP, or a designee must be consulted and approve the services to be provided.

It is impossible to develop an all-inclusive list of all situations involving the provision of professional services to an Audit Client. When specific guidance on a particular service is not included in this section, independence threats must be addressed.



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* See additional policies for clients requiring CRI or SEC independence in Section 300S

These policies in Part 3 apply throughout the Audit and Professional Engagement Period.

EY Canada requires the Lead Audit Engagement Partner be consulted with respect to non-audit services to be provided to an Audit Client before an engagement to perform such services is accepted or committed to.

In addition, the Lead Audit Engagement Partner or his/her designee should consult with Canada Independence if there is uncertainty with respect to the permissibility of services that can be provided to an Audit Client (which includes Affiliates, see definitions in the Glossary) or if there is a likelihood that a non-SEC Audit Client will become a SEC registrant or otherwise subject to US SEC independence rules in the foreseeable future.

300S Audit committee pre-approval required – US SEC Audit Clients



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Pre-approval by the audit committee of a US SEC Issuer Audit Client is required for all audit and non-audit services performed for the US SEC Issuer and its subsidiaries prior to an EY Member Practice being engaged to provide such services. This should be obtained through the GCSP, either by:

The guidance for US SEC Issuer Audit Clients and their subsidiaries in Section 300S also applies to CRI and Listed PIEs (non-CRI / non-SEC) Audit Clients and their subsidiaries.




1) The client’s audit committee pre-approving the specific audit or non-Audit Engagement to be rendered, or

2) The engagement to render services being entered into pursuant to pre-approval policies and procedures established by the audit committee, provided that:

a) The policies and procedures are detailed as to the particular service;

b) The audit committee is informed on a timely basis of each service that is rendered; and

c) Such policies and procedures do not include delegation of the audit committee’s responsibility to management.

The US SEC’s pre-approval and non-audit service disclosure rules are not applicable to services to be provided to upstream Affiliates, such as parents or investors, nor to downstream investees that are not controlled by the US SEC Issuer. (For SEC purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting shares, by contract or otherwise.) Additional PCAOB pre-approval requirements for tax and non-audit services related to internal controls over financial reporting systems are discussed at Sections 308S.1 and 309S.3. See also Supplementary Guidance G300S.1 and G300S.2.

300.1 Scope of Application

The status of the entity EY audits – non PIE or PIE (non-listed and listed, including US SEC Audit Clients) – determines the other entities for which independence is required and the nature of the independence prohibitions, restrictions or limitations that apply. In particular, independence requirements and prohibitions applicable to the provision of non-audit services are generally stricter for PIE audit clients to recognize the higher degree of public



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* See additional policies for clients requiring CRI or SEC independence in Section 304 and

304S




interest in such entities and perception of potential independence threats.

When EY audits several entities within the same group, generally the stricter requirements are followed and applied to all Affiliates within the group. For instance, if EY audits a PIE entity, the PIE independence requirements must be implemented for the entire group, including all Affiliates, even if the Affiliates are not themselves PIEs.

However, in certain situations, when EY audits a non-PIE entity, the stricter independence requirements applicable for its PIE parent or investor company, when the parent or investor is audited by another firm, may also apply. This may be the case when the parent’s auditor uses or relies on the work of the subsidiary auditor and refers to the subsidiary’s opinion for its own opinion. There may be other regulatory reasons why the parent company auditor needs to ensure that the subsidiary auditor is independent under the requirements applicable to the parent company and requests confirmation of such independence.

These situations can involve a complex and judgmental analysis, and consultation with Canada Independence is encouraged.

Section 301 Initiating and ceasing audit relationships

301.1 Independence evaluation of audit relationships

At the commencement of a proposal process to be selected as auditor of an entity, whether it is a non-PIE or a PIE (listed or non-listed), the engagement or pursuit team must evaluate independence and identify any independence threats resulting from any financial or business relationships with, or non-audit services provided to, the prospective Audit Client. An independence evaluation also must take place when the independence requirements applicable to an existing Audit Client are likely to change due to an initial listing (IPO), or because of a transaction that results in the client becoming a PIE.



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*See additional policies for clients requiring SEC independence in Section 301S.1

Additional Policies and documentation requirements are set out in the Canadian Policy CA–P3119, Public Company Independence Procedures Policy and Practice Statement.

For a new Audit Client that will be subject to CRI or SEC independence or for an existing Audit Client that initiates an IPO, all permitted services currently being provided to the audit client and its subsidiaries require audit committee pre-approval.




Where a proposal is for a non-PIE, engagement teams are encouraged to consult with Independence. In situations involving non-US listed entities, completion of the Global Public Company Independence Procedures (GPCIP) in consultation with independence is required. In addition, if independence matters are identified as part of the evaluation, engagement teams are encouraged to discuss these independence matters with the client’s audit committee or equivalent body. For entities subject to US SEC independence, see Section 301S.1.

For a new Audit Client, the Audit and Professional Engagement Period begins on the earliest date of:

the beginning of the fiscal year to be audited; or

the date EY Canada signs an initial engagement letter; or

The date EY Canada begins audit procedures, including planning procedures.

301S.1 Independence evaluation – New US SEC Audit Clients and US IPOs

Before accepting a new US SEC Audit Client, a new US SEC Registrant or Foreign Private Issuer; before an existing Audit Client undergoes an initial public offering in the US; and in certain other situations, EY Member Practices must perform the applicable US SEC Public Company Independence Procedures (PCIP) program.

The US SEC PCIP programs have been designed to identify, resolve, and document the independence conclusions regarding acceptance of new US SEC audit clients and/or client continuance of an existing audit client undergoing an initial public offering.

Engagement and pursuit teams must carry out the US SEC PCIP process with the assistance and support of the PCIP support center in the Global SEC Independence Center. The Engagement Team should contact the support center at the commencement of the process.

Prior to accepting an initial Audit Engagement with a US SEC Issuer, pursuant to PCAOB standards, EY must:

1. Describe, in writing, to the audit committee of the US SEC Issuer, all relationships with the potential Audit Client or persons in FRORs that, as of the date of the communication, may reasonably be thought to bear on independence;



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When an existing Audit Client becomes a US SEC Registrant, compliance with SEC independence rules is required retroactively as follows:

If the Audit Client qualifies as a Foreign Private Issuer (“FPI”), EY must be independent under SEC rules from the beginning of the most recent audited fiscal year included in the initial registration statement or any earlier confidential submission to the SEC;

If the Audit Client does not qualify as an FPI, EY must be independent under SEC rules from the beginning of the earliest audited fiscal year included in the initial registration statement or any earlier confidential submission to the SEC.

For Canadian SEC Audit Clients requiring PCIP, contact Canada Independence.

For acceptance of new SEC Audit Clients, there are generally no safeguards that can be applied where EY has provided a prohibited service during the Audit Period but before the beginning of the Professional Engagement Period and EY will therefore be precluded from accepting the




2. Discuss with the Audit Committee the potential effects of those relationships on independence should the firm be appointed the US SEC Issuer’s auditor; and

3. Document the substance of that discussion.

Audit Engagement. Consultation with Canada Independence is required.

Audit committee pre-approval requirements must be met in all such circumstances including acquisition of subsidiaries through a merger or acquisition.

301.2 Acceptance of new Audit Clients

Independence from the Audit Client is required during both the Audit and Professional Engagement Periods.

However, there are situations where we are appointed as auditor after the beginning of the audit



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period. Having provided a prohibited service during the audit period but before the beginning of the professional audit engagement period would not necessarily preclude the acceptance of the new Audit Engagement provided the prohibited services are terminated or appropriately modified prior to the start of any audit procedures and safeguards are applied to eliminate or reduce the independence threats to an acceptable level. Appropriate safeguards may include:

• Immediately implementing the relevant EYG Independence Policy requirements, and any other regulatory requirements applicable to the type of services;

• Ensuring that no Professional who participated in the prohibited services will participate in the audit;

• Having the work reviewed by another EY Member Practice or another service provider;

• Having the work re-performed by another service provider; orHaving another auditor review the audit work at the entity where the prohibited services were performed.

Refer to Canadian Policy CA–P3119, Public Company Independence Procedures Policy and Practice Statement for documentation and review requirements for CRI Audit Clients.

For new CRI Audit Clients and Listed PIE Audit Clients (non-CRI / non-SEC), having provided a prohibited service during the Audit Period but before the beginning of the Professional Engagement Period may preclude EY from accepting the Audit Engagement. Consultation with Canada Independence is required.

With respect to prospective PIE Audit Clients, the independence evaluation and determination of which actions and safeguards are appropriate must be determined through consultation with Independence and must be thoroughly documented by the audit team. Consultation with Independence




is encouraged when evaluating independence for prospective non-PIE Audit Clients. Prior approval of the proposed safeguards by the Region Independence Leader is required for complex situations or when the independence threat is significant. In some cases no safeguards will be sufficient to eliminate or reduce significant independence threats and in this case, the audit engagement cannot be accepted.

301S.2 Acceptance of new Audit Clients – US SEC

See Section 301S.1 for requirements related to the acceptance of new US SEC Audit Clients.



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301.3 Existing Audit Client becoming a PIE

An existing Audit Client that is not a PIE could become a PIE through an initial listing or because of a change in the local regulatory environment. EY Member Practices are expected to anticipate such events related to existing Audit Clients, and to comply fully with the stricter independence requirements applicable to PIEs once they occur.

However, if prohibited services that are permitted for a non-PIE Audit Client cannot be terminated before the Audit Client becomes a PIE, it is acceptable to terminate as soon as practicable after the client becomes a PIE provided the independence threat can be eliminated or reduced by the application of safeguards.

The independence evaluation and determination of which actions and safeguards are appropriate must be determined through consultation with Independence and must be thoroughly documented by the audit team. Prior approval of the proposed safeguards by the Region Independence Leader is required for complex situations or when the independence threat is significant. In some cases no safeguards will be sufficient to eliminate or reduce significant independence threats and in this case, the audit engagement cannot be accepted.



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Refer to Policy CA-P3119, Public Company Independence Procedures Policy and Practice Statement for documentation and review requirements for CRI, SEC, and Listed PIE (non-CRI / non-SEC) Audit Clients. For clarity, when an Audit Client becomes a non-Listed PIE, an update to the form U603 – Annual Minimum Independence Procedures needs to be completed.

When an Audit Client becomes a CRI or Listed PIE as a result of an IPO, application of the CRI rules are retroactive and CRI rules should be applied commencing the beginning of the Audit Period during which the entity becomes a CRI or Listed PIE. Provision of prohibited services during the portion of the Audit Period prior to the Audit Client becoming a CRI or Listed PIE may not prohibit EY from continuing as auditor provided sufficient safeguards can be applied. In all such circumstances consultation with Canada Independence is required.




As the Lead Audit Engagement Partner is in the best position to determine the precise timing, the Lead Audit Engagement Partner is responsible to determine when an Audit Client is to be marked up in the Global Independence System.

301S.3 Existing Audit Client becoming a PIE – US SEC

See Section 301S.1 for requirements related to existing Audit Clients undergoing an initial public offering in the US.



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301.4 Mergers and Acquisitions

When, as a result of a merger or acquisition, an entity becomes an Affiliate of an Audit Client, engagement teams must as soon as practicable identify and evaluate previous and current Financial Interests, business relationships, and non-audit services related to the new Affiliate. All such prohibited interests, relationships and services must be terminated or modified to comply with the EYG independence policy by the effective date of the merger or acquisition.

However, in rare situations where the prohibited interests, relationships or services cannot reasonably be terminated by the effective date of the merger or acquisition, such as in circumstances where an orderly transition to a new service provider before the effective date would not be possible, it is acceptable to terminate as soon as reasonably possible. The transition should not extend beyond six months after the transaction date, with the implementation of transition measure agreed with Independence.



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* See policies for clients requiring SEC


For an entity that is becoming a subsidiary of a CRI or Listed PIE (non-CRI / non-SEC) Audit Client as a result of a merger or acquisition, all permitted services currently being provided to the subsidiary, or subsidiaries, require audit committee pre-approval prior to the completion of the merger or acquisition.

EY Canada is more restrictive. In all such situations related to a CRI Audit Client consultation with Canada Independence is required.

In a merger or acquisition situation where EY is asked by the client to continue as auditor:

• All reasonable and necessary steps to terminate the prohibited interest, relationship or services by the effective date of the transaction (and in all cases within six months of the effective date) should be taken as soon as the independence issue is identified;

In Canada consultation with Canada Independence is required if prohibited services cannot be terminated prior to the merger or acquisition in all cases where EY is asked to continue as auditor.




• Any professional involved with the prohibited interest, relationship or services cannot be a member of the Audit Engagement Team;

• Appropriate transitional safeguards must be applied as determined with Independence; and

• The situation, including the steps and safeguards taken must be discussed and agreed with the audit committee or equivalent body.

In Canada apply the EYG Policy also to Professionals who are in the Chain of Command.

n Canada, the audit committee must also request the EY Member Practice to complete the Audit or Review Engagement.

Examples of transitional measures could include specific reviews of the audit or the non-audit work as appropriate, or having another service provider re-perform the prohibited non-audit service.

In a merger or acquisition situation where EY is not expected to continue as auditor:

If a significant amount of work on the current audit engagement has already been completed prior to the effective date of the merger or acquisition, and the remaining audit procedures can be completed in a short period of time, the current audit engagement may be completed without having to terminate the prohibited interest, relationship or services, provided all of the following additional requirements are met:

• The audit committee or equivalent body requests that EY complete the audit engagement;

• Appropriate safeguards and transitional measures are identified in consultation with Independence and are applied to mitigate the independence threat; and

• The situation, including the steps and safeguards taken, must be discussed and agreed with the audit committee or equivalent body.

In certain situations the independence threat created by the prohibited interest or relationship cannot be eliminated or reduced to an acceptable level even through the transitional measures outlined in this Section. In such situations, the audit relationship must be terminated prior to the effective date of the merger or acquisition.




301S.4 Mergers and Acquisitions – US SEC Audit Clients

See Section 301S.1 for requirements related to US SEC Audit Clients. The limited transition provision for prohibited relationships and services discussed above does not apply in merger and acquisition situations involving US SEC Audit Clients.



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301.5 Ceasing audit relationships

See Supplementary Guidance G301S.1 related to Former US SEC Audit Clients



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The Audit and Professional Engagement Period ends with the notification by the client or the firm that the professional relationship has terminated or the issuance of the final audit report, whichever is later. In the case of an Audit Engagement for an SEC or CRI Audit Client, the period ends when the Audit Client or the firm notifies the relevant Securities Commission that the Audit Client is no longer an Audit Client of the firm.

When EY Canada ceases to be the auditor, consider the guidance at G301S.1. The Audit Partner should make the appropriate adjustment to GIS.

When a former Audit Client subsequently requests:

a) only a consent to the use of our auditor’s report, we are not re-engaged, only Professionals involved in completing the required procedures must be independent of the former Audit Client; or

b) EY to audit a restatement (i.e., a change to any item in the financial statements, including the notes), we are re-engaged and full client acceptance procedures and full independence requirements apply (including the completion of event-driven client acceptance PCIP before




the commencement of the new professional engagement period. Refer to Sections 301.1 and 301S.1 for SEC Audit Clients and Sections 301.1 and 301.2 for all other Audit Clients.). Typically this situation results in a new split-date audit report.

Section 302 Communication with audit committees or those charged with governance

For all Audit Clients, all breaches of the IESBA Code of Ethics and local independence regulations and professional standards must be reported to the Audit Committee (or equivalent) of clients to whom the breach relates. See Supplementary Guidance Section G302.1.

There should be regular communications, orally and in writing at least annually, between EY and the audit committee (or other governance body if there is no audit committee) of Public Interest Entity Audit Clients regarding relationships and other matters that might reasonably be thought to bear on independence. Matters to be communicated will vary in each circumstance but should generally address the relevant matters set out in this policy. Oral communications should be documented and included in the audit work papers. Communication is also encouraged with audit committees or equivalent bodies of non-PIE Audit Clients.



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* *

* See additional requirements for clients requiring

CRI and SEC independence in Section 302S.

Breaches should be communicated to the audit committee as soon as practical.

302S Communication with audit committees—US SEC Audit Clients

For Audit Clients that are US SEC Issuers, the PCAOB provides specific mandatory requirements for Audit Committee communications.



Minimum CRI SEC

In accordance with PCAOB Rule 3526(b), we must perform the following at least annually;

1. Describe, in writing, to the audit committee of the US SEC Issuer, all relationships with the Audit Client or persons in FRORs that, as of the date of the communication, may

Canadian Auditing Standard 260, Communications with those charged with governance requires that the auditors of listed entities at least annually communicate certain matters relating to the auditor’s independence in a letter to the audit committee or to an




reasonably be thought to bear on independence.

equivalent body having oversight responsibility for the financial reporting process.

2. Discuss with the audit committee the potential effects of those relationships on independence.

3. Affirm to the audit committee, in writing, that as of the date of the communication, the firm is independent in compliance with the PCAOB Rule 3526.

4. Document the substance of the discussion with the audit committee.

See also Section 300S and Supplementary Guidance G302S.1 related to PCAOB Rule 3526, communication with audit committees concerning independence.

For audit clients that are US SEC Non-Issuer Registrants, and for Audit Clients described in the definition of US SEC Audit Client, under categories 2, 3, 4 and 5 of that definition, annual communication to the audit committee (or the Board of Directors if no audit committee) is required under Independence Standards Board Standard No. 1 (“ISB No. 1”), that:

1. Discloses in writing all relationships between the auditor and its related entities and the company and its related entities that in the auditor’s professional judgment may reasonably be thought to bear on independence;

2. Confirms in the letter that, in its professional judgment, it is independent of the company within the meaning of the Acts administered by US Securities and Exchange Commission; and

3. Discusses the auditor's independence with the audit committee.

EY Canada reports all breaches of the IESBA Code of Ethics and all known violations of applicable external independence rules to the audited entity, including the independence rules issued by each Canadian provincial Institute/ Ordre of Chartered Professional Accountants and the PCAOB/US SEC.

There is a requirement to report business relationships to the audit committee. Refer to AABS Policy and Practice Statement CA-P4102 - "Communication of Business Relationships to Audit Committees".

For Audit Clients that require both PCAOB and Canadian independence, EY Canada’s independence communications letter should address both the PCAOB 3526 and the Canadian Independence letter requirements (issue either separate communications or one combined communication).

EY Canada’s policies and guidance for these communications is included in section C06_2, “Communications with those charged with governance”, of the EY GAM in Canada.




Section 303 Rotation of Audit Engagement Team members

It is expected that the partner rotation requirements in the EYG Independence Policy will be followed for all PIE Audit Clients in all respects by all EY Member Practices. Many countries have locally enacted rules with respect to required rotation of Audit Engagement Team members. Where local requirements are more restrictive than the policy described below, local country rules must be followed. Where rotation of Audit Engagement Team members is not mandated by local regulation or is less restrictive than the IESBA Code, the rotation requirements of the EYG Independence Policy must be implemented.



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* *

* See policies for clients requiring CRI or SEC independence in Section 303S

Practical situations could be challenging when local requirements applicable to a country practice are significantly different from the EYG Independence Policy. In such cases, consultation with Independence is required to determine appropriate application of the rules, including the possibility of specific transition agreements according to facts and circumstances.

See also Supplementary Guidance G303.1 related to Partner Rotation FAQs.

Public Interest Entities – Listed PIEs

For fiscal year ends beginning after 15 December 2011, a Key Audit Partner on the audit engagement of a listed PIE may serve a maximum of seven years in that role.

For the purpose of counting the prior years of service as Key Audit Partner, there is no “fresh start” and all prior years of service as Key Audit Partner must be included in the years of service calculation for the purposes of partner rotation.



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* *


The EYG guidance only applies to (non-SEC and non-CRI) Non-Listed PIEs. For Listed PIE Audit Clients, follow the rotation requirements for CRIs in Section 303S below.

Public Interest Entities – Non listed PIEs

For fiscal year ends beginning after 15 December 2012, a Key Audit Partner on the audit engagement of a non-listed PIE may serve a maximum of seven years in that role.




For the purpose of counting the prior years of service as Key Audit Partner, there is no “fresh start” and all prior years of service as Key Audit Partner must be included in the years of service calculation for the purposes of partner rotation.

Cooling-off period

A Key Audit Partner may not be a member of the Audit Engagement Team or be a Key Audit Partner for the Audit Client for two years after rotation. During that period, the partner may not participate in the audit of the Audit Client, provide quality control for the Audit Engagement, consult with the Audit Engagement Team or the client regarding technical or industry-specific issues, transactions or events or otherwise directly influence the outcome of the audit.

Exceptions

• When an Audit Client becomes a PIE, a Key Audit Partner having served six or more years may continue to serve the client in the same capacity for a maximum of two additional years before rotating off the engagement.

• In rare cases due to unforeseen circumstances outside EY’s control, and with the an approved exemption under Section 003.2, a Key Audit Partner whose continuity is especially important to audit quality may serve an additional year on the audit team. The implementation of additional safeguards may be necessary in such circumstances.

Other Situations

The Lead Audit Engagement Partner should consider independence threats created by long association of partners or senior professional employees with an Audit Client (including partners not subject to the above mandatory rotation requirements with a PIE Audit Client), in particular when the Audit Client’s management team has been consistent for a long period of time. In such situations where the length of time the partner or the senior professional employee


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Client Relationship Partner and Public Offering Review Partner included in the definition of “Other Audit Engagement Team Partners” in G303S.1 are not applicable to CRI and Listed




has been associated with the client, their role in the audit, and the nature, frequency and extent of their interaction with the Audit Client could raise independence concerns, consultation with Independence is encouraged.

PIE (non-CRI / non-SEC) Audit Clients that are not subject to SEC independence.

303S Rotation of Audit Engagement Team Members – US SEC Audit Clients

For US SEC Audit Clients, the Lead Audit Engagement Partner and the engagement quality review partner are permitted to serve a maximum of five consecutive years with a minimum five-year time out before resuming an “audit partner” role. Other Audit Engagement Team Partners as defined in G303S.1 are permitted to serve a maximum of seven consecutive years with a minimum two-year time out.

Any audit partner who has rotated off an Audit Client, may not participate in any client related activities during the time out period as specified above.

See also Supplementary Guidance G303S.1 and G303S.1(a) related to US SEC partner rotation requirements.



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Rotation requirements applicable to CRI Audit Clients and Listed PIEs (non-CRI / non-SEC) that are not also subject to SEC independence will require a seven year on and five year off rule for the Lead Audit Engagement Partner and the Engagement Quality Review Partner. Refer to Canadian Policy CA-P3121 "Rotation of partners and other personnel on audits, reviews and attestation engagements of SEC Issuers including Foreign Private Issuers (FPI), Canadian Reporting Issuers (CRI) and certain other clients".

Where an Associate Partner serves as the “lead audit partner” at a subsidiary of the issuer whose assets or revenues constitute 20% or more of the assets or revenues of the issuer’s respective consolidated assets or revenues, the Associate Partner is subject to rotation requirements as an “other” Audit Engagement Team partner.

It is a requirement of the Lead Audit Engagement Partner to review the rotation database and notify Canada Independence of any updates on an annual basis and to ensure rotation requirements are met.




Section 304 Not subject to audit exception

An EY Member Practice can provide certain otherwise-prohibited non-audit services to Affiliates of an Audit Client that are non-audit clients themselves, such as parents, investors and entities under common control (“upstream affiliates”), provided that the EY Member Practice does not perform management activities (see Section 305) and the work product would not be a prohibited service if directly provided to the Audit Client.



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*


However, the “not subject to audit” exception does not apply to “downstream” Affiliates, e.g. subsidiaries and material investees, even if they are audited by another accounting firm because these entities, or the results of their operations, are included in the consolidated financial statements of the Audit Client.

The exception applies to the following services:

• Bookkeeping and payroll services (Section 307), • Tax provisioning services (Section 308.4), • Internal audit services (Section 309), • Information technology systems services (Section

310), and • Valuation (including actuarial) services (Section

316).

304S Not subject to audit exception — US SEC Audit Clients

In addition to the prohibition on “acting as management,” it is also prohibited to act in the capacity of an employee for an upstream affiliate of a US SEC Audit Client when using the “not subject to audit” exception. In addition, the services may not affect the financial statements of the entity being audited or result in a work product that will be used in any way by the audit client in connection with its financial statements or as support for the audit. See also Section 305S.

The “not subject to audit” exception is also generally available within an Investment Company Complex for upstream Affiliates of US SEC Audit Clients that are not themselves Audit Clients. For example, it would be reasonable to conclude that the results of our service would not be subject to audit procedures where EY



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audits a mutual fund and these services are provided to upstream non-audit client entities in an Investment Company Complex.

Although the US SEC pre-approval requirements discussed in Section 300S do not apply to services provided to upstream Affiliates, before proposing to provide services to such Affiliates pursuant to the “not subject to audit” exception, GCSPs should discuss this issue with and obtain the views of the US SEC Audit Client’s audit committee.

Section 305 Acting as management

305.1 Management activities

Management activities generally involve leading and directing an entity, including making significant decisions regarding the acquisition, deployment and control of human, financial, physical and intangible resources in the best interests of stakeholders in the entity.



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*

* See additional policies for clients requiring SEC independence in Section 305S.1.

An EY Member Practice may not perform management activities for an Audit Client. Any engagement to perform services for an Audit Client, whether Tax, TAS, Advisory or Assurance, should be structured so as not to involve EY acting in the role as management. In executing the engagement, care should be taken to make sure the EY Member Practice is not performing management activities such as having custody of client assets (except in the limited circumstances described below at Section 305.3), or exercising authority on behalf of the client (by, for example, signing checks or making policy decisions) or performing any decision-making, supervisory or ongoing monitoring function for the Audit Client.

To avoid assuming a management responsibility, an EY Member Practice should only provide services for an Audit Client if it is satisfied that the Audit Client:

1. Makes all management decisions and performs all management activities;

2. Designates an appropriate and competent resource to be responsible at all times for the client’s decisions and to oversee and acknowledge responsibility over




the services (i.e., one that understands sufficiently the services to be performed);

3. Evaluates the adequacy and results of the services performed;

4. Determines which recommendations to implement and manages the implementation process; and

5. Accepts responsibility for the results of the services.

Some activities would not be considered management activities because they are routine and administrative and involve matters that are clearly insignificant or do not otherwise represent a management responsibility or function.

Supplementary Guidance G305.1 provides detail and examples of prohibited management activities as well as permitted activities that would not be considered acting as management. See Also Supplementary Guidance G305.2 related to cash handling and check handling.

305S.1 Management activities – US SEC Audit Clients

For US SEC Audit Clients, in addition to the prohibition to perform management activities, the performance of any activity that would be considered acting as an employee of the Audit Client is prohibited. Detail and examples of activities that would be considered acting as an employee are provided at G305.1.



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305.2 Appointment as trustees, executors or administrators of a trust or estate

No services may be performed which involve an EY Member Practice, or a Partner or Professional Employee on behalf of an EY Member Practice, being appointed or serving as director, officer or trustee, executor or administrator of an Audit Client. See also the Serving as a Director, Officer or Trustee of an Organization Global Policy for requirements applicable to non-audit clients.



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See Section 321 for Policies relating to Corporate Recovery and Insolvency engagements.

Refer to the Scope of Services – Global Policy for further guidance – CA-P5155.




305.3 Temporary custody of client assets

Generally, having custody of client assets is considered a management activity.

However, an EY member practice (or individual on behalf of an EY member practice) may temporarily assume custody of audit client monies or other assets in relation to certain regulated statutory functions, specifically, acting as civil or public notary or liquidator in solvent liquidations in certain jurisdictions. All the following conditions must exist:

• Such function must be a public interest role, regulated under local law and subject to state supervision, disciplinary authority and a specific code of ethics;

• The use of a dedicated bank account(s) is a requirement;

• The bank account(s) must be operated in accordance with applicable regulations, and subject to the right of an external regulator or supervisory board to inspect the account or require submission of account(s) for review;

• Holding such function by the accounting firm must be permitted under local independence laws and regulations; and

• The temporary custody of assets is approved by the lead audit engagement partner.

In addition, the EY member practice (or individual on behalf of the EY member practice) must ensure the following safeguards are in place:

• The audit client assets are kept separately from personal or firm assets;

• Such assets are used only for the purpose for which they are intended;



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* See policies for clients requiring SEC





• The member practice must at all times be ready to account for those assets and any income, dividends, or gains generated, to any persons entitled to such accounting; and

• The member practice must comply with all relevant laws and regulations relevant to the holding of and accounting for such assets.

For services involving custody of assets, other than acting as civil or public notary or liquidator in solvent liquidations in certain jurisdictions, consultation with Independence is required.

See also Supplementary Guidance G305.2 related to Cash handling and check handling; G318.1 related to Reimbursable client disbursements; and Scope of Services Global Policy, Appendix 1, Section B.

305S.3 Temporary custody of client assets – US SEC audit clients

Temporary custody of a US SEC audit client’s assets is prohibited under any circumstances.



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Section 306 Corporate secretarial services

An EY Member Practice, or a Partner or Professional Employee on behalf of an EY Member Practice, may not hold the formal appointment of company secretary, serve as registrar, transfer agent, officer, or director or act as nominee shareholder, or hold any other appointment or position for an Audit Client that involves performing management functions.

See also Section 305, Acting as management.



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* *


Administrative services to assist an Audit Client’s company secretary are permitted, only if the services do not involve acting as management or signing any document on behalf of the Audit Client. Examples of such permitted administrative services include the following, provided the client reviews and takes full responsibility for any document drafted:

These and other administrative services, including acting as a registered address for an Audit Client, are not permitted under the policy CA-P5155 – Scope of Services.




• Drafting of minutes relating to corporate meetings;

• Drafting of documents related to decisions taken in board, general assembly and similar meetings;

• Sending out notices for annual and other meetings.

Advisory and consultation services related to company secretarial matters are also permitted.

See also the Scope of Services Global Policy.

306S Corporate secretarial services – US SEC Audit Clients

Corporate secretarial services (including administrative services or services provided on an ancillary basis) cannot be provided to US SEC Audit Clients. Advisory and consultation services related to company secretarial matters, such as advising on filing dates, are permitted only to the extent that they are not legal services (see 313S Legal services – US SEC Audit Clients) or considered management activities (see 305S.1 Management activities – US SEC Audit Client or the related guidance in US G302.1).



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Section 307 Accounting, bookkeeping, payroll services and preparation of statutory accounts



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307.1 Accounting services

Activities that are a normal part of the audit process, such as assisting an Audit Client in resolving account reconciliation problems, analyzing and accumulating information for financial and regulatory reporting, drafting financial statement disclosures and proposing adjusting journal entries, are permitted. Accounting services or related activities where an EY Member Practice would be acting in the capacity of management are prohibited for all Audit Clients.

An EY Member Practice may offer advice to an Audit Client with respect to the maintenance of its accounting records as long as the Professionals providing the services are not involved in making management decisions on behalf of the Audit Client




and maintenance of accounting records is the client’s responsibility.

See also Supplementary Guidance G307.2 related to IFRS conversion engagements and G307.3 related to language translation services.

In Canada refer also to policies CA-P5185 IFRS conversion services – Independence Considerations for the preparation of Technical Accounting Memoranda and CA-P5175 IFRS Conversion Services – Scope of Services and other Considerations.

307.2 Audit adjustments

To avoid the risk of performing management functions, audit adjustments may be prepared by an EY Member Practice only when:



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• The Audit Client’s personnel, not EY, record any audit adjustments proposed by an EY Member Practice and agreed to by the client;

• Audit Client personnel review the underlying details in sufficient depth to ensure that all pertinent factors have been considered and they accept the same degree of responsibility as if the work had been performed by the Audit Client’s personnel; and

• The Audit Client has the responsibility for retaining the supporting details.

307.3 Bookkeeping and payroll services – Non-PIE Audit Clients

An EY Member Practice may provide certain accounting, bookkeeping and payroll assistance to a non-PIE audit client only if it is of a routine or mechanical nature and does not involve management activities or outsourcing. See Section 305 Acting as management for further detail.


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* *

* See policies for clients requiring CRI or SEC independence in Section 307.4

Large bookkeeping and payroll engagements are more likely to constitute an outsourcing engagement. In addition a Lead Audit Engagement Partner may want to consider whether threats to independence in appearance would be significant depending on the magnitude of the engagement, as well as the nature of the client, and therefore decide to apply stricter restrictions such as allowing bookkeeping services

For clarity, an EY Member Practice may not perform an audit or review engagement if it prepares a source document or originating data or makes a change to such document or data underlying the financial statements.




only to immaterial subsidiaries and divisions. Consultation with Independence is encouraged.

In all cases, the following conditions must be met:

• The Audit Client must be in a position to understand and accept full responsibility for the work that has been undertaken;

• The Audit Client designates a competent employee, preferably within senior management, to be responsible for bookkeeping and payroll activities;

• Professionals assigned to the Audit Engagement Team may not be involved in providing the permitted bookkeeping or payroll services; and

• The provision of such bookkeeping or payroll services by the external auditor must be customary in the country.

See Supplementary Guidance G307.1 for detail and examples of prohibited and permitted bookkeeping and payroll activities.

307.4 Bookkeeping and payroll services –PIE Audit Clients

All bookkeeping and payroll services are prohibited for PIE Audit Clients, including all Affiliates regardless of the Materiality of the division or subsidiary for which such services are performed unless the “not subject to audit” exception is applied.



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Subject to conformity with local independence rules, an EY Member Practice may provide tax services related to the payroll with respect to expatriate and third-country national employees of Audit Clients.

See also Section 304 related to the “not subject to audit” exception. Refer to Supplementary Guidance G308.1 related to human capital payroll services.




307.5 Accounting advice and assistance in preparation of financial statements

The audit process involves extensive dialogue between the EY Member Practice and management of the Audit Client. During this process, management may request and receive technical input from the auditor regarding such matters as accounting principles, financial statement disclosures and the methods used in determining the recorded amounts of assets and liabilities. Technical assistance of this nature and advice on accounting principles for Audit Clients are an appropriate means to promote the fair presentation of the financial statements. For all Audit Clients, we may assist and advise in the preparation of consolidated financial statements (including the transformation of local statutory accounts to comply with group accounting policies and the transition to a different reporting framework such as US GAAP and IFRS), and assist and advise in the preparation of statutory financial statements of subsidiary entities. However an EY Member Practice may never take responsibility for the financial statements of an Audit Client. See also Supplementary Guidance G307.1 related to Independence issues in IFRS conversion engagements for Audit Clients.



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* *

* See additional policies for clients requiring CRI or SEC independence in Section 307S.5.

Additional guidance regarding IFRS conversion services for all clients is set out in Canadian policies: CA-P5185, IFRS Conversion Services – Independence Considerations for the Preparation of Technical Accounting Memoranda and CA-P5175 IFRS Conversion Services – Scope of Services and other Considerations.

307S.5 Accounting advice and assistance in preparation of financial statements – US SEC Audit Clients

In addition to the requirements above, preparing (including drafting, typing, binding, or otherwise producing) financial statements or disclosures for US SEC Audit Clients is prohibited. In addition, the Firm may not provide the US SEC Audit Client with financial statement templates that are not publicly available.



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Apply the additional requirements also to CRI and Listed PIEs (non-CRI / non-SEC) Audit Clients.

307.6 Preparation of statutory financial statements

If the Audit Client is not a PIE, subject to conformity with local independence rules, EY may prepare the statutory financial statements of the entity or its



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Affiliates only when all of the following conditions are met.

a) The underlying books and records are maintained by the client;

b) The final trial balance is prepared by the client and is complete;

c) There are financial personnel at the entity and/or subsidiary with sufficient financial competence who are able to challenge and review the completeness and accuracy of the statutory financial statements;

d) Financial management of the entity and/or subsidiary acknowledges in writing that it takes full responsibility for the completeness and accuracy of the statutory financial statements, including all matters of judgment; and

e) The preparation of the statutory financial statements for such clients is customary in the country.

Depending on the circumstances, an additional safeguard may be appropriate, requiring that the team providing the services are not members of the Audit Engagement Team.

If the Audit Client is a PIE, we may prepare the statutory financial statements of subsidiaries of PIE Audit Clients that are not material to the Overall Financial Statements, only when all of the following conditions are met:

a) Conditions (a) through (e) above are met;

b) The personnel providing the services are not members of the Audit Engagement Team; and

c) The statutory financial statements do not form the basis of the consolidated financial statements of the PIE Audit Client, for instance as filed with the relevant stock exchange and/or regulator.


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*

* See additional policies for clients requiring SEC





307S.6 Preparation of statutory financial statements – US SEC Audit Clients

In addition to all conditions and requirements applicable to PIEs above, preparation of statutory financial statements for immaterial Affiliates of a US SEC Audit Client is permitted only when:

• the statutory financial statements are prepared on a basis of accounting different from that of the consolidated financial statements of the listed audit client; or

• when the statutory financial statements are prepared after the completion of the audit of the consolidated financial statements of the listed audit client.



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Section 308 Tax services

308.1 Introduction and general principles

The requirements related to providing tax services to Audit Clients are addressed separately in the subsections below, each of which covers a specific type of tax service. When evaluating the permissibility of tax services, it is important to be aware that these various types of tax services are often interrelated and may be provided together in the course of a single engagement.



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*


When providing any tax services to an Audit Client, EY Member Practices must determine that the engagement is properly structured and executed to avoid acting as management.

See also Section 305 related to Acting as management. Detailed independence guidance on tax services is included in Supplementary Guidance G308.1 and G308S.1.

308S.1 Pre-approval requirement for tax services — US SEC Audit Clients

In addition to the general pre-approval requirements covered in Section 300S, PCAOB Rule 3524 requires the following in seeking audit committee pre-approval



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for tax services provided to US SEC Issuer Audit Clients:

1. Describe the scope of the proposed service in writing to the audit committee of the US SEC issuer;

2. Discuss the potential effect of the proposed service on independence with the audit committee; and

3. Document the discussion with the audit committee.

Furthermore, with respect to the pre-approval of tax services, describe in writing to the audit committee of the US SEC issuer:

1. The fee structure for the engagement;

2. Any side letters, amendments to the engagement letter or any other agreements, whether oral, written, or otherwise, relating to the service; and

3. Any compensation arrangements or other agreements between an EY Member Practice and any third party with respect to promoting, marketing, or recommending a transaction covered by the proposed tax service.

See also Supplementary Guidance G300S.2 and G308S.3 regarding PCAOB pre-approval requirements.

308.2 Tax compliance services

Tax compliance services generally involve assisting clients with their tax reporting obligations, including the preparation of tax returns (including forms, schedules, or other disclosure statements attached to the returns) and preparation of and assistance with resolution of routine tax administration matters (e.g. claims and elections, group relief, tax payments, etc.).



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* * *

* See additional policies for all clients in Section 308S.2

Tax compliance services may be provided to Audit Clients provided management takes responsibility for the tax returns and any significant judgments made regarding positions taken on such returns. When providing tax compliance services, EY may act in




various capacities such as tax preparer, tax advisor or tax representative of an Audit Client, including under a limited power of attorney, as long as it does not involve performing management activities or assuming liability for the Audit Client’s tax debts.

• When acting as tax preparer, tax advisor or tax representative on behalf of any Audit Client, it is permitted to make certain submissions related to enabling the agreement of tax returns, tax appeals and protests or making a case with the tax authorities for a claim for refund.

• When acting as tax preparer for any Audit Client, it is permitted to sign an Audit Client’s tax return as tax preparer.

• When acting as tax representative or tax advisor, EY may sign a non-PIE Audit Client’s tax return provided all of the following conditions are satisfied:

• It is impractical or impossible for the non-PIE Audit Client or its representative to sign the tax return directly;

• Signing the return does not involve EY in any liability for the client’s tax debts;

The Audit Client confirms in writing that EY is authorized to sign the tax return and to submit the tax return on behalf of the client; and

• The Audit Client acknowledges that accompanying schedules or statements are complete and accurate to the best of the Audit Client’s knowledge and belief.

EY Canada is more restrictive. EY Canada cannot sign a tax return for any Audit Client including Affiliates regardless of Materiality; However, EY can sign as a tax preparer.

Generally, signing any audit client document on its behalf (except signing tax returns as the preparer) would be regarded as “acting in a management capacity” and is prohibited. This prohibition applies even when the documents are required to be executed as part of a tax service provided by the firm such as international restructuring that requires the formation of newly incorporated subsidiaries.

The matters discussed in Section 305 must be considered to avoid prohibited management functions.

Other “acting as management” activities which are prohibited include:

1. Using the Firm’s office as a client location, or using a firm office to receive client mail from tax authorities;




If the Audit Client is a PIE, and EY is not acting as tax preparer but as a tax advisor or tax representative, a tax return may only be signed on behalf of an immaterial subsidiary (and only if the above conditions for non-PIEs are met).

2. Receiving negotiable third-party cheques or electronic funds transfers made payable to the client (including tax refund cheques);

3. Receiving negotiable client cheques or electronic funds transfers made payable to third parties (including cheques payable to tax authorities);

4. Preparing or approving a cheque request (even if the payment is to be made to a tax authority); or

5. Making a payment on behalf of the client to a tax authority.

EY Canada is more restrictive. EY Canada cannot sign a tax return for any Audit Client including Affiliates regardless of Materiality; However, EY can sign as a tax preparer.

308S.2 Tax compliance services – US SEC Audit Clients

When acting as a tax representative or tax advisor, EY may not sign a tax return or any document on behalf of a US SEC Audit Client or any affiliate regardless of materiality.

See also Supplemental Guidance G308.3 related to E-filing of tax returns.



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Apply the EYG restriction to all Canadian Audit Clients.

308.3 Tax planning and other tax advisory services

Tax planning and other tax advisory services comprise a broad range of services, such as advising the client how to structure its affairs in a tax efficient manner; advising on the application of tax laws or regulations to particular facts; conducting and reporting on tax due diligence matters; and issuing tax opinions related to a given transaction.



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*


Tax planning and other tax advisory services must be provided within the technical standards set out in the Global Tax Policy. Such services may be provided to an Audit Client, if:

The provision of tax advice or tax commentary in a prospectus or offering document is prohibited for CRI, SEC, and Listed PIEs (non-CRI / non-SEC).




• the advice is clearly supported by tax authority or other precedent, or by established practice; or

• has a basis in tax law that is likely to prevail.

Notwithstanding the above, it is prohibited to provide tax advice to an Audit Client when all of the following three conditions are met:

• The effectiveness of the tax advice depends on a particular accounting treatment or presentation in the financial statements;

• The outcome or consequences of the tax advice will have a material effect on the Overall Financial Statements; and

• The Audit Engagement Team has reasonable doubt as to the appropriateness of the related accounting treatment or presentation under the relevant financial reporting framework.

See Supplementary Guidance G308.4 for guidance on the application of these three conditions.

308S.3 Tax advisory services – US SEC Audit Clients

In addition to the provisions above, EY member firms are subject to the requirements of PCAOB Rule 3522, which prohibits recommending a transaction to a US SEC Audit Client, the sole business purpose of which is tax avoidance, and the tax treatment of which may not be supported in the governing tax regulations, regardless of materiality. Specifically, the following may not be provided to any US SEC Audit Client:

• tax planning and tax advisory services that represent “aggressive tax position transactions,” and

• tax advice provided under conditions of confidentiality preventing the client from disclosing the tax treatment or tax structure of the transaction.



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308.4 Tax provisioning

Tax provisioning refers to preparing calculations of current and deferred tax liabilities (or assets), prior year adjustments, reconciliations, disclosure figures or journal entries for the client to consider and approve for purposes of financial reporting. Such activities are generally considered to be routine and mechanical accounting activities.



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* *

* See additional policies for clients requiring CRI or SEC independence in Section 308S.4

The preparation of tax computations and calculations associated with tax compliance work, including preparing calculations for the client for the purposes of estimating tax payments, does not constitute tax provisioning, even if the client chooses to use aspects of these for the purpose of calculating its tax provision.

The fact that the Audit Client relies on our tax advice (including reports, studies, tax memoranda or opinions) to support its own preparation of the tax provision does not constitute tax provisioning. We can provide our Audit Clients with information on the tax treatment of certain items, e.g., rulings, court cases, and other information to assist the client in making appropriate tax-based accounting decisions.

To avoid the risk of performing management functions, when assisting the client to determine specific tax entries that are significant to the financial statements, such as the determination of the amount of tax reserves or total income tax expense, the appropriate involvement of and prior instruction by the audit client is required and all conditions in 308.3 should be met.

The “not subject to audit” exception discussed at Sections 304 and 304S applies to tax provisioning services.

If the Audit Client is not a PIE, tax provisioning services are permitted, provided all of the following conditions are met:

• The client understands and accepts responsibility for the financial statements as its own;



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• The client has prepared the source documents for all transactions;




• The client maintains accounting control over any data processed or recorded by EY; and

• EY is not acting in the role of management.

In general, professionals assigned to the Audit Engagement Team may not be involved in providing the tax provisioning services, or the tax provision should be reviewed in accordance with the Global Tax Policies, by a Partner or senior staff member who is not a member of the Audit Engagement Team.

If the Audit Client is a PIE, tax provisioning services are prohibited, unless the services are provided to an immaterial subsidiary of (or subsidiaries that are collectively immaterial to) the PIE Audit Client, and all of the above requirements applicable to non-PIE Audit Clients are met.



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* *

See additional policies for clients requiring CRI or SEC independence in Section 308S .4

The EYG guidance only applies to non-SEC and non-CRI and non-Listed PIE Audit Clients.

308S.4 Tax provisioning – US SEC Audit Clients

In addition to the requirements for PIE Audit Clients above, such services may be provided to an immaterial subsidiary of a US SEC Audit Client only if either:

• The subsidiary tax provisions are prepared on a basis of accounting different from that of the consolidated financial statements of the US SEC Audit Client, or

• The tax provisions are prepared after the consolidated financial statements are filed with the US SEC.


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308.5 Resolution of tax disputes including tax court proceedings

Representation of an Audit Client in an administrative proceeding of a revenue agency or other tax authority, such as an appeal to an audit or internal agency, is permitted.



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* *

* See additional policies for CRI and SEC Audit Clients in Section 308S.5




We may also represent an Audit Client before a court or public tribunal in a tax proceeding, provided that the amounts of tax involved are not, and are not expected to be, material to the Audit Client’s financial statements and the service does not include handling cash or having custody of assets.

For CRI and SEC Audit Clients, representation before a court or tribunal is prohibited regardless of Materiality. Refer to Section 308S.5.

It is prohibited to act as an advocate by representing an Audit Client before a court or a public tribunal when amounts involved are material to the Overall Financial Statements. However, even if the amounts are material, we are not precluded from having a continuing advisory role for the Audit Client in relation to the matter that is being heard before a public tribunal or court (e.g, responding to specific requests for information, providing factual accounts or testimony about the work performed or assisting the client in analyzing the tax issues).

See also Section 313.3 related to legal advocacy services.

308S.5 Tax court proceedings – US SEC Audit Clients

An EY Member Practice may not represent a US SEC Audit Client before a court or tribunal, even if the proceeding is a tax matter and we are not acting in a lawyer’s capacity. Representation before a tax court, district court or court of claim in a lawyer’s capacity is also prohibited. We also may not provide expert testimony in connection with such a proceeding (i.e., we will not appear as a witness for purposes other than to provide factual accounts or testimony describing work previously performed), nor may we act as an advisor in support of a US SEC Audit Client during the court proceedings.



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See also Supplementary Guidance G308S.4 for guidance on determining whether a particular forum is a tax court for purposes of this Section.




308.6 Valuation services related to tax compliance or tax reporting obligations

Valuation services in relation to tax matters (compliance, reporting, structuring) where the result of the valuation will have a direct effect on the overall Financial Statements of an audit client (other than through accounting entries related to tax) are addressed in Section 316.



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Refer to Section G316.2 for the definition of a tax-only valuation.

Valuation services performed solely to assist an Audit Client with its tax compliance and reporting obligations or for tax planning and implementation purposes that do not have a direct effect on the Audit Client’s financial statements (other than through accounting entries related to tax), are permitted if:

1. The tax effect of the valuation on the audit client’s Overall Financial Statements is immaterial; or

2. The valuation is subject to external review by a tax authority or regulatory body.

A valuation is subject to external review by a tax authority or regulatory body where a taxing jurisdiction has the authority to examine the type of tax filings that are supported by the valuation performed for the Audit Client, regardless of whether the tax authority chooses to do so or not. If the valuation is not subject to external review, for example in a jurisdiction where the tax authority does not have any organizational ability to review the type of tax filings supported by the valuation performed for the Audit Client, material valuations are prohibited unless Independence concludes alternative appropriate safeguards are effective in this specific jurisdiction.

Tax valuations performed to support intercompany transactions that are eliminated in consolidation (e.g., transfer pricing studies and cost segregation studies in intercompany transfers) with no direct effect on the Overall Financial Statements are permitted. This is the case even if one or more parties to the intercompany transaction is a statutory Audit Client whose financial statements are prepared consistently with its tax filings.




308.7 Tax services to individuals

Tax services delivered to an individual taxpayer, whether the client relationship is with that individual or through its employing organization generally do not impact auditor independence and are permitted. See also Supplementary Guidance G308.1.


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* *

* See additional policies for CRI and SEC Audit Clients in Section 308S.7

308S.7 Tax services to individuals who are restricted FRORs – US SEC Audit Clients

Pursuant to PCAOB Rule 3523, EY Member Practices may not provide tax services to an individual who is in a Restricted Financial Reporting Oversight Role (Restricted FROR) at a US SEC Issuer Audit Client, or to an Immediate Family Member of such individual. If there is uncertainty as to whether an individual is a Restricted FROR, consultation with Independence is encouraged.

This prohibition does not apply to:



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The PCAOB restrictions apply only to SEC Issuer Audit Clients. Additional guidance regarding Audit Committee pre-approval for permitted tax services is set out in Supplementary Guidance section G308S.3.

For audit clients requiring CRI independence

• A FROR of an affiliate of the US SEC Audit Client if the affiliate is not material to the consolidated financial statements of the audit client or is audited by another auditor;

• Persons who become a Restricted FROR through a hiring or promotion event while an individual tax services engagement is in process, as long as the engagement is completed on or before 180 days after the triggering event; or

• Services completed prior to acceptance of an initial engagement to perform an audit pursuant to US PCAOB standards.

(that do not also require SEC independence), tax services to a FROR or their Immediate Family Members are permitted. However, audit committee pre-approval is required if the CRI audit client engages EY to provide a tax service to any individual.

For audit clients requiring CRI or SEC independence, when a FROR or their Immediate Family Members engages EY to provide a permissible tax service audit committee pre-approval is not required. For such tax services where EY is engaged by the individual and not the Audit Client, prior EY Canada Independence policy required such service be disclosed in the annual independence letter to the audit committee.

Such disclosure is no longer required in the annual independence letter if the audit committee is informed in writing that such disclosure previously reported will no longer be provided.




Section 309 Internal audit services

309.1 Introduction and general principles

Internal audit services involve assisting the Audit Client in the performance of its internal audit activities. The scope and objectives of internal audit activities vary widely and may include some or all of the following activities:

• Conducting internal audit reviews on behalf of the client as part of the client’s internal audit plan;


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* **

* See additional policies for clients requiring CRI independence at Section 309S.4.

** See additional policies for clients requiring SEC independence at Sections 309S.1 and

309S.4.

• Conducting internal audit planning, risk assessment, execution and reporting with client oversight;

• Review of internal control including reviewing controls, monitoring their operation and recommending improvements;

• Examination of financial and operating information;

• Review of the economy, efficiency and effectiveness of operating activities including non-financial activities of an entity; and

• Review of compliance with laws, regulations and other external requirements, and with management policies and directives and other internal requirements.

Internal audit outsourcing services comprise the performance of all or a substantive portion of the internal audit function, where EY is responsible for determining the scope of the internal audit work and may have responsibility for one or more of the matters noted above.




See also Supplementary Guidance G309.1 for a description of internal audit functions and related activities.

309S.1 Pre-approval requirement for internal control related services — US SEC Audit Clients

In addition to the general pre-approval requirements covered in Section 300S, PCAOB Rule 3525 requires the following in seeking audit committee pre-approval for permitted non-audit services related to internal control over financial reporting systems provided to US SEC Issuer Audit Clients:



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1. Describe the scope of the proposed service in writing to the audit committee of the US SEC issuer;

2. Discuss the potential effect of the proposed service on independence with the audit committee; and

3. Document the discussion with the audit committee.

See also Supplementary Guidance G300S.2 related to PCAOB pre-approval requirements.

309.2 Internal audit activities - all Audit Clients

Internal audit outsourcing activities and activities where we would be assuming responsibility for an Audit Client’s internal audit function or acting in the capacity of management are prohibited for all Audit Clients. See also Section 305 Acting as management.

To avoid the risk of performing management functions when undertaking permitted internal audit activities, all of the following conditions should be met:

• The Audit Client is responsible for internal audit activities and acknowledges its responsibility for establishing maintaining and monitoring the system of internal controls;

• The Audit Client designates a competent employee, preferably within senior management, to be responsible for internal audit activities;



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* *

* See additional policies for clients requiring CRI or SEC independence at Section 309S.4

A Country Practice may, however, perform extended audit procedures to those required during the audit of a CRI, SEC or Listed PIE (non-CRI / non-SEC) Audit Client’s financial statements or perform non-recurring evaluations of discrete items or other programs, providing that the Country Practice is not assuming any responsibility for the Audit Client’s internal audit function or acting in the capacity of the Audit Client’s management or is, in substance, performing internal audit outsourcing.




• The Audit Client, the audit committee or supervisory body approves the scope, risk and frequency of internal audit work;

• The Audit Client is responsible for evaluating and determining which EY recommendations should be implemented;

• The Audit Client evaluates the adequacy of the internal audit procedures performed by EY and the findings resulting from the performance of those procedures; and

• The Audit Client appropriately reports findings and recommendations resulting from the EY internal audit activities to the client’s audit committee.

For example, performing procedures that generally are considered to be within the scope of the Audit Engagement for the audit of the Audit Client’s financial statements (such as confirming accounts receivable) would be consistent with auditor’s independence, even if the extent of the testing exceeds that required by generally accepted auditing standards. Thus, the expansion of the testing performed as part of the Audit Engagement at the request of the Audit Client is permissible.

For clients not subject to SEC independence restrictions, testing of controls is allowed. Refer to Canada Information Release CA-IR3319 Independence Guidance relating to our services to assist audit clients with implementing or continuing compliance with National Instrument 52-109.

For clients that are subject to SEC independence restrictions refer to Canada Policy CA-P5156 Independence guidance relating to our services to assist audit clients with implementing or continuing compliance with Section 404 or other similar internal control-related services.

309.3 Internal audit services – non PIE Audit Clients

Internal audit services other than outsourcing services and management functions are generally permitted for non-PIE Audit Clients.

However, consultation with independence is encouraged if the internal audit services involve the performance of internal audit activities that could result in a significant self-review threat. This would be the case when our activities relate to:

• A significant part of the internal controls over financial reporting;

• Financial accounting systems that generate information that is, separately or in the aggregate, significant to the audit client’s accounting records



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See policies for clients requiring CRI or SEC

independence at Section 309S.4

Providing internal audit services to an Audit Client (which includes Affiliates, see definitions in the Glossary) is a threat to independence.

Also do the following:

Obtain acknowledgement in writing that the client is responsible for internal audit activities and for establishing and maintaining and monitoring the system of internal controls;




or financial statements on which the firm will express an opinion; or

• Amounts or disclosures that are, separately or in the aggregate, material to the financial statements on which EY will express an opinion.

The internal audit services should be provided only by Professionals who are not involved in the Audit Engagement; and

Document this threat in the audit file and the additional safeguards considered and implemented.

309.4 Internal audit services – PIE Audit Clients

An EY Member Practice may not provide any internal audit services when it involves the performance of internal audit activities in relation to:

• A significant part of the internal controls over financial reporting;

• Financial accounting systems that generate information that is, separately or in the aggregate, significant to the Audit Client’s accounting records or financial statements on which EY will express an opinion; or

• Amounts or disclosures that are, separately or in the aggregate, material to the financial statements on which the firm will express an opinion.



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* *

* See policies for clients requiring CRI or SEC independence at Section 309S.4

For clarity, the Global Policy in this section applies to entities that are PIEs that are not also CRI, SEC or Listed PIEs (non-CRI / non-SEC) Audit Clients.

Refer to Section 309S.4 for PIEs that are also CRI, SEC or Listed PIEs (non-CRI / non-SEC) Audit Clients.

309S.4 Internal audit services – US SEC Audit Clients

Internal audit services that would directly or indirectly affect accounting records, financial statements or internal and risk management controls, are prohibited for US SEC Audit Clients, except when the “not subject to audit” exception applies.

Only services which are purely advisory in nature and non-recurring evaluations of discrete items or other programs that are not in substance the outsourcing of the internal audit function may be permissible for US SEC Audit Clients.

See also Supplementary Guidance G310S.1 related to assistance to our audit clients with Section 404 internal control reporting requirements. See also Section 304, “not subject to audit” exception.



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In Canada, apply the EYG prohibition also to CRI or Listed PIE (non-CRI / non-SEC) Audit Clients with the exception of the restriction in regard to operational audit services. For operational audit services for a CRI or Listed PIE (non-CRI / non-SEC) Audit Client refer instead to section 309.5.

For clients not subject to SEC independence restrictions, testing of controls is allowed. Refer to Canada Information Release CA-IR3319 Independence Guidance relating to our services to assist audit clients with implementing or continuing compliance with National Instrument




52-109.

For clients that are subject to SEC independence restrictions refer to Canada Policy CA-P5156 Independence guidance relating to our services to assist audit clients with implementing or continuing compliance with Section 404 or other similar internal control-related services.

309. 5 Operational internal audit - all Audit Clients

Operational audit services are those involving a review of internal functions within an enterprise, unrelated to the internal accounting controls, financial systems or financial statements to appraise the efficiency and economy of operations and the effectiveness with which those functions achieve their objectives and are generally permitted.

Although an EY Member Practice may provide internal audit services relating to operational matters for an Audit Client, it may not perform any function that is the responsibility of management.



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independence at Section 309S.5

309S.5 Operational internal audit services – US SEC Audit Clients

Operational audit services unrelated to the internal accounting controls, financial systems, or financial statements are permitted only provided the output from the engagement is in the form of an attestation report.



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Section 310 Information technology systems services

Services related to information technology (“IT”) systems include the design or implementation of hardware or software systems as well as advisory services related to IT systems. The IT systems may aggregate source data, form part of the internal controls over financial reporting or generate information that affects the accounting records or financial statements. Alternatively, the IT systems may be unrelated to the Audit Client’s accounting records, the internal control over financial reporting or financial statements.


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310.1 IT systems services - all audit clients

IT systems services where EY would be assuming responsibility for an Audit Client’s IT systems function or acting in the capacity of management are prohibited for all Audit Clients. See Section 305, Acting as Management for further detail.


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To avoid the performance of management function in relation to the provision of IT systems services, all of the following conditions should be met. The audit client should:

• Acknowledge its responsibility for establishing and monitoring a system of internal controls;

• Make all management decisions in respect of the design and implementation process;

• Designate a competent member of senior management to be responsible for decisions regarding the design and implementation of the hardware or software systems;

• Evaluate the adequacy and results of the design and implementation of the IT system; andAccept responsibility for the operations of the IT system (hardware and software) and the data it generates.


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See policies for clients requiring CRI or SEC independence at Section 310S.2

The following IT systems services are generally permitted to be provided to an Audit Client:

• Design or implementation of IT systems that are unrelated to internal control over financial reporting;


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• Implementation of “off-the-shelf” accounting or financial information reporting software that was not developed by EY provided the customization required to meet the client’s needs is not significant; and

• Evaluating and making recommendations with respect to an IT system designed, implemented or operated by another service provider of the Audit Client.

Providing this service to an Audit Client is a threat to Independence. Document this threat and the safeguards implemented in the audit file.

Also do the following:

• Obtain acknowledgement in writing that the client is responsible for establishing, maintaining, and monitoring the information technology system;




• The services should be provided only by Professionals who are not involved in the Audit Engagement; and

• Document in the audit file what additional safeguards were considered and implemented.

310.2 IT Services to a PIE Audit Client

An EY Member Practice may not provide IT systems services to a PIE Audit Client that involves the design or implementation of IT systems that:

• Form a significant part of the internal control over financial reporting, or



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See policies for clients requiring CRI or SEC independence at Section 310S.2

• Generate information that is significant to the Audit Client’s accounting records or financial statements on which EY will express an opinion.

For clarity this section applies to entities that are non-Listed PIEs that are not also CRI or SEC Audit Clients. Refer to section 310S.2 for PIEs that are also CRI, SEC or Listed PIEs (non-CRI / non-SEC) Audit Clients.

310S.2 IT Systems Services – US SEC Audit Clients

Due to further US SEC restrictions on “auditing your own work”, the US SEC rule essentially results in a full prohibition of IT systems services that would directly or indirectly affect accounting records, financial statements or internal and risk management controls, except for services which are purely advisory in nature or when the “not subject to audit” exception applies. For example an advisory engagement to make recommendations regarding improvements in internal accounting controls or risk management controls is generally permissible. Design services and advisory services related to IT implementation for systems that are totally unrelated to the financial systems (such as, for example, an access badge security system, or a statistical model for marketing purposes) are also permissible as long as EY does not act as management.

Operating or supervising the operation of an Audit Client’s information system or managing the Audit Client’s local area network is prohibited for all US SEC Audit Clients.



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For CRI Audit Clients not also requiring SEC independence, refer to guidance in CA-IR-3319 “Independence Guidance relating to our services to assist Audit Clients with implementing or continuing compliance with National Instrument 52-109.”




See Supplementary Guidance G310S.2 and G310S.3 for further information on IT systems services.

Section 311 Temporary or loaned staff assignments

Temporary staff assignments involve loaning personnel to a client on a temporary basis to assist with certain internal activities, where the loaned personnel are supervised by the client and the EY Member Practices assumes no responsibility for the client’s work or work product. Such arrangements may also be referred to within the firm as “loan staff”, “loaned staff”, “contract personnel”, “temporary staffing”, “secondment”, or other equivalent terminology.



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*

* See additional policies for clients requiring SEC independence at Section 311S

Partners, principals, executive directors, directors and senior managers may not perform services for Audit Clients as part of a temporary staff assignment. However, non-audit services that are permitted for Audit Clients under the EYG Independence Policy may be provided to an Audit Client by other EY personnel under a temporary staff assignment, provided the services are performed for a short period of time (a few weeks or less) and do not involve acting as management (see Section 305).

The EYG restriction also applies to Associate Partners. In addition to the EYG requirements, such assignments may only be accepted when client approval is obtained for the results of the service and provided the person on such assignment will not be involved in:

• approving or signing agreements or other similar client documents; or

• exercising discretionary authority to commit the client.

311S Temporary staff assignments — US SEC Audit Clients

Providing EY professionals or any EY staff to perform any service under a temporary staff assignment, including otherwise permitted services, to a US SEC Audit Client is prohibited, regardless of the duration of the assignment or the reason for the client’s need.

See Supplementary Guidance G311.1 for examples of characteristics of temporary staff assignments to assist in determining whether a particular arrangement is subject to the restrictions above.



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Section 312 Litigation support services

Litigation support services may include activities such as (i) expert services, acting as an expert witness, calculating estimated damages or other amounts that might become receivable or payable as the result of



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See policies for clients requiring CRI or SEC independence at Section 312S

litigation or other legal dispute; (ii) assistance with document management and retrieval in relation to a dispute or litigation; or (iii) assisting a client in an adversarial proceeding, litigation or in a regulatory or administrative proceeding or investigation.

An EY Member Practice may provide any of these litigation support services to an Audit Client, as long as such services do not include performing management activities. See Section 305. In addition, if litigation support services are being provided in a matter where an Audit Client is a counterparty, consultation with independence is encouraged.

The provision of litigation support services is prohibited to an Audit Client (which includes Affiliates, see definitions in the Glossary) in the resolution of a dispute or litigation in circumstances where the matters in dispute or subject to litigation are material to the Audit Client.

However, a Lead Audit Engagement Partner may want to consider whether threats to independence in appearance would be significant depending on the nature and magnitude of the litigation, and, therefore decide to apply stricter restrictions. Consultation with Independence is encouraged.

If the litigation support services involve estimating damages or other amounts, the provisions of Section 316 Valuation Services should be followed.

312S Litigation support services — US SEC Audit Clients

Litigation support services are prohibited for US SEC Audit Clients. Where services we are in the process of performing or that we have previously performed become relevant to litigation, we should not provide additional services relating to the matter. However, an EY Member Practice may be engaged by the audit committee or its legal counsel to perform internal investigations or other fact finding engagements and may provide factual testimony on positions taken or conclusions reached during the performance of any



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For US SEC Audit Clients the Firm may serve as an expert for a large group of plaintiffs/ defendants that includes one or more Audit Clients of the Firm if at the outset of the engagement all of the following requirements are satisfied:




service. If the proceeding is in a tax court or is related to a tax matter, see also Section 308S.5.

1. The Firm’s Audit Clients constitute less than 20% of:

Additionally, an EY Member Practice may not be placed in an adversarial position with respect to a US SEC Audit Client. Therefore, independence and conflict considerations should be evaluated when litigation support services, including arbitration, mediation, etc. services, are being provided to a client and the counterparty is a US SEC Audit Client. Independence is available to assist engagement teams to determine if the engagement should be accepted from an independence perspective when the counterparty is a US SEC Audit Client.

a. The members of the group;

b. The voting interests of the group; and

c. The claim

1. No Audit Client within the group is designated as the “lead” plaintiff or defendant of the group; and

2. No Audit Client has the sole decision-making power to select or approve the expert witness.

Consultation with Canada Independence is required if the amount of the claim or percentage of the allocable claim has not been determined.

For CRI Audit Clients, consultation with Canada Independence is required where the Firm is considering an engagement to be an expert for a large group of plaintiffs/defendants that includes one or more Audit Clients of the firm.

For US SEC and CRI Audit Clients the Firm may act as a fact witness, which would generally relate to permissible services the Firm had performed prior to the commencement of litigation or a proceeding or investigation by a regulatory body.




Section 313 Legal services

313.1 Introduction

Legal services are usually defined as any service, other than tax services, which can only be legally provided by a person who is licensed or admitted to practice by, or registered with, a court, governmental body, or professional organization with responsibility for supervising the legal profession or otherwise qualified to practice law. Legal services may include a wide and diversified range of areas, including (but not limited to) regulatory, corporate and commercial services, but for the purpose of this independence policy are classified as either legal advisory or legal advocacy services.



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As jurisdictions throughout the world have varying definitions of what constitutes a legal service, for purposes of this policy within the EY organization, “legal services” means the provision of legal services whether under specific engagements with clients or as part of an engagement for Assurance, Advisory, Tax or TAS core service offerings.

Tax services in countries where such services are provided by lawyers are not considered a legal service, and are addressed in Section 308.

Legal services (as described above) are commonly provided by all or some of the following:

• A law firm registered with a Bar;

• Civil law notaries;

• An unregulated legal services firm;

• An accounting or consulting firm, if the service is generally considered in a jurisdiction as being ordinarily or typically provided by lawyers and generally involves the interpretation of law; and

• Individual lawyers.

Corporate secretarial work is generally not considered a legal service and is addressed in Section 306.




313.2 Legal advisory services Legal advisory services are permitted provided the Professionals involved in delivering such services are not also a member of the Audit Engagement Team for the Audit Client and the Professionals providing such services act only in an advisory capacity, do not act in the role of management and the service does not involve handling cash or having custody of assets.

When an Audit Client is a counterparty to the legal matter for which EY is providing legal advisory services, which situation may be identified in the conflicts process, consultation with Independence is encouraged. If the matter involves or becomes a legal dispute in the course of the engagement, and EY is asked to continue providing legal advisory services, consultation with Independence is required.

See Supplementary Guidance G313.1 for guidance related to these restrictions.



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The provision of legal advisory services is prohibited to an Audit Client (which includes Affiliates, see definitions in the Glossary) in the resolution of a dispute or litigation in circumstances where the matters in dispute or subject to litigation are material to the Audit Client. Refer to section 312 Litigation support services.

313.3 Legal advocacy services

An EY Member Practice and Professionals may only provide legal advocacy services to an Audit Client when the amounts involved are not, and are not expected to be either significant or material to the Overall Financial Statements of the Audit Client and the service does not involve handling cash or having custody of assets. However, professionals providing such services must not be members of the Audit Engagement Team.

Where an Audit Client is a counterparty to the legal matter for which EY is providing legal advocacy services, and the legal matter is quantitatively or qualitatively material or significant to the financial statements of the Audit Client counterparty, the service is prohibited. If the matter is not Material or Significant to the Audit Client counterparty, consultation with Independence is required.

Activities requiring the use of trust accounts, quality accounts or equivalent dedicated accounts, such as public civil law notary services in certain countries, are subject to certain conditions and safeguards for Audit



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Clients (see Section 305.3). To determine Significance and Materiality, both quantitative and qualitative factors must be taken into account.

Criminal litigation matters are considered significant and are prohibited except in limited situations where we represent an Audit Client in a permitted civil proceeding or litigation matters and it then escalates to criminal proceedings or litigation. Consultation with Independence is encouraged prior to accepting such engagements.

Because neither an EY Member Practice nor a Professional in such a practice may serve as part of management of an Audit Client, neither an EY Member Practice nor any Professional of such a practice may accept appointment, even on a temporary basis, to the position of General Counsel at, or act as General Counsel to, any Audit Client.

See Supplementary Guidance G313.1 for guidance related to these restrictions.

Section 313S Legal services – US SEC Audit Clients

US SEC rules strictly prohibit the provision of legal services to US SEC Audit Clients.

For US SEC independence purposes, legal services include advisory and advocacy services as described above and also any services, other than permitted tax services, that are:

(1) provided by an EY law practice,

(2) provided by an EY professional who is a lawyer, outside an EY law practice, holding him or herself out as a lawyer; or

(3) provided by a professional outside an EY law practice and which service can only be provided by someone licensed, admitted or otherwise qualified to practice law in a country or who meets specified legal education requirements.

Permitted tax services in countries where such services are provided by lawyers are not prohibited.



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Legal advocacy, arbitration or notary services are also prohibited when either party in a dispute, negotiation or transaction is a US SEC Audit Client, regardless of materiality or significance.

Exceptions

1. Internal support to other engagements.

Participation of an EY law practice or professionals as described above in (2) and (3), in certain engagements for Tax, TAS, Assurance or Advisory services is permitted when their involvement is to internally support the engagement team in the delivery of their services to fulfill their engagement responsibilities and any input is part of the work papers only and is not referenced nor inserted, partially or fully, in any work product provided to or shared with the US SEC Audit Client. The engagement team may further recommend their client engage an external Law firm to manage any identified legal issue, but cannot provide any legal input.

2. Limited participation to other engagements

Participation of Professionals, as described above in (2) and (3), to certain engagements for Tax, TAS, Assurance or Advisory services are also permitted when:

i. their involvement relates to compliance matters that are routine and immaterial;

ii. the client has no expectation that the service should necessarily involve a lawyer; and

iii. the component service does not differ in any way from other services provided by a non-lawyer (e.g. no client-attorney confidentiality or other lawyer specific elements).

However, opinions that certain systems or procedures meet the legal standards of a specific law or statutes (such as privacy law, etc.) are legal services, and therefore prohibited. As the determination that all of the above criteria are met may be complex, consultation with independence is encouraged.




3. Certain categories of service

In addition, limited exceptions may apply for certain specific types of service offering such as business immigration and international mobility in jurisdictions where the services are routinely provided by non-lawyers and the services do not differ in any way from other non-lawyer service providers. Any such limited exception for a category of service must be approved by Independence.

For clarity, business immigration services are prohibited for US SEC and CRI Audit Clients in jurisdictions where these services are provided by lawyers only and are treated as a legal service (for example in the US and Germany).

Section 314 Recruitment of management and other human resources services



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Although an EY Member Practice may assist an Audit Client with certain recruiting or other human resources functions, the following activities are prohibited for all Audit Clients:

• Searching for or seeking out prospective candidates for managerial, executive or director positions;

• Engaging in psychological testing, or other formal testing or evaluation programs;

• Undertaking reference checks of prospective candidates for an executive or director position;

• Acting as a negotiator on the Audit Client’s behalf in an employment matter, such as determining position, status or title, compensation, fringe benefits or other conditions of employment; or

• Recommending, or advising the Audit Client to hire a specific candidate for a specific job.

Permitted assistance to Audit Clients may include the following activities:

• Drafting a position description or candidate specifications;

• Assisting an Audit Client with reviewing applications;




• Interviewing candidates or advising the Audit Client on the candidate’s competence for financial, administrative or control positions; or

• Advising on issues relating to the hiring or compensation of employees.

Section 315 Corporate finance services

Corporate finance services include a wide range of activities including assistance in acquisitions and disposals, capital sourcing and developing corporate finance strategies. Corporate finance services do not include due diligence or valuations services. See also Section 316, Valuation services.



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*

* See additional policies for clients requiring SEC Independence in Section 315S

An EY Member Practice may provide corporate finance services to an Audit Client, provided the services are limited to advice and assistance and do not involve acting as management, acting as a broker-dealer (registered or unregistered) or performing any of the following activities:

• Promoting, dealing in or underwriting the Audit Client’s securities;

• Committing the Audit Client to the terms of a transaction;

• Executing a transaction on behalf of an Audit Client, including a transaction to buy or sell an Audit Client’s investment;

• Negotiating on behalf of an Audit Client;

• Making investment decisions on behalf of the Audit Client or otherwise having discretionary authority over an Audit Client’s investments;

• Having custody of assets, such as taking temporary possession of securities purchased by the Audit Client; and

• Acting as agent or intermediary for an Audit Client.




Corporate finance services where the effectiveness of the advice provided depends on a particular accounting treatment or presentation in the financial statements are prohibited for all Audit Clients if both of the following conditions exist:

• The outcome or consequences of the advice provided will have a material effect on such financial statements; and

• The audit engagement partner has reasonable doubt as to the appropriateness of the accounting treatment or presentation.

See Supplementary Guidance G315.1 for guidance on the application of these conditions.

Additional restrictions apply to otherwise permissible lead M&A advisory engagements when a US SEC Audit Client counterparty may be involved. See also Supplementary Guidance G315.2 and Global TAS Policies & Procedures Repository (5.07 Global M&A Counterparty Guidance). See also Supplementary Guidance G315.3 related to sell-side M&A engagements.

315S Corporate finance services – US SEC Audit Clients

While limited corporate finance advisory services may be permissible for US SEC Audit Clients, the US SEC's view of broker-dealer activities is very broad, which significantly limits the permissible scope of such services. In addition to the restrictions above, activities such as assisting in identification of potential counterparties to a transaction, approaching such counterparties, advising on negotiations, assisting in presentations to counterparties, and assisting with preparing an information memorandum are prohibited for US SEC Audit Clients. See also Supplementary Guidance G315S.1.



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Section 316 Valuation services 316.1 Introduction and general principles

Valuations involve making assumptions with regard to future developments, the application of appropriate methodologies and techniques, and the combination of both in order to compute a certain value, or range of values, for an asset (tangible or intangible), a liability or for part of a business or a business as a whole. Valuation services include, but are not limited to, the valuation of assets such as real estate, businesses acquired and stock options, actuarial valuations such as the valuation of pension liabilities and insurance policy loss reserves and valuations to test for the potential impairment of assets. Valuations conducted solely for tax purposes are addressed in Section 308.6.



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* *

*See additional policies for clients requiring CRI or SEC independence in Section 316S

When providing permitted valuation services to any Audit Client, EY Member Practices must determine that the engagement is properly structured and executed to avoid acting as management (see Section 305). Accordingly, management should provide and understand the data and other inputs used in the valuation. The valuation engagement team must ensure the Audit Client’s understanding and approval of the underlying assumptions and the methodology to be used. The Audit Client must also acknowledge responsibility for making an informed judgment in relation to the work performed by the EY Member Practice.

316.2 Valuations Services - non-PIE Audit Clients

An EY Member Practice may not perform a valuation service if:

• The valuation would have a material effect, separately or in the aggregate, on the Overall Financial Statements of an Audit Client that is not a PIE, and

• The valuation involves a significant degree of subjectivity.



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* *

*See policies for clients requiring CRI or SEC independence in Section 316S

When performing a permitted valuation, the following safeguards are to be applied and documented:

1. ensure the Professionals providing the valuation services are not involved in the Audit Engagement;




It is generally the case that valuation services involve a significant degree of subjectivity. Refer to Supplementary Guidance G316.1 for guidance on what constitutes a significant degree of subjectivity.

2. confirm with the client its understanding of the underlying assumptions of the valuation and the methodology to be used and obtain approval for their use;

3. obtain the client’s acknowledgement of responsibility for the results of the valuation work performed by EY Canada;

4. involve an additional Professional that was not a member of the valuations engagement team to review the valuation work;

5. ensure EY Canada does not act as management or make management decisions; and

6. ensure there is no possibility of the client becoming a CRI or US SEC registrant in the near term.

EY Canada may not do non-financial valuation (or valuation-like) studies such as fairness opinions, or collateral valuations for financing arrangements where EY Canada is engaged to value (or update valuations) support for existing or potential lending arrangement, where EY Canada is acting for the Audit Client and the Audit Client is acting in either a lender or borrower capacity.

It is permissible to assist the client in understanding the methods, models, assumptions, and input used in computing an amount.

Refer to Section G316.2 for the definition of a tax valuation.

316.3 Valuation Services - PIE Audit Clients

An EY Member Practice may not perform a valuation service if the valuation would have a material effect, separately or in the aggregate, on the Overall Financial Statements of an Audit Client that is a PIE.



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* *

*See policies for clients requiring CRI or SEC independence in Section 316S




See also Supplementary Guidance G316.2 related to the provision of various types of valuation services.

For clarity this section applies to entities that are PIEs that are not also CRI,SEC or Listed PIE (non-CRI / non-SEC) Audit Clients. For CRI, SEC or Listed PIE (non-CRI / non-SEC) Audit Clients refer to section 316S.

316S Appraisal, valuation and actuarial services — US SEC Audit Clients

An EY Member Practice may not provide any appraisal, valuation or actuarial service involving the amounts recorded in the financial statements or related accounts unless it is reasonable to conclude that the results of these services will not be subject to audit procedures, or any service involving a fairness opinion or contribution-in-kind report for a US SEC Audit Client, (see Section 304S).

In jurisdictions where auditors are legally required to issue fairness reports or contribution-in-kind (CIK) reports, EY Member Practices should consult with Independence before providing such services to US SEC Audit Clients. However, CIK reports issued as a result of an internal reorganization involving transfers solely among wholly-owned subsidiaries (e.g., a tax reorganization where there is no effect on an outside minority interest) are generally permitted.

With regard to actuarial services, EY Member Practices may assist US SEC Audit Clients in understanding the methods, models, assumptions, or inputs used in computing an amount. Actuarial services for non-financial reporting purposes, including actuarial work solely for tax purposes, are permitted provided such services comply with the requirements of Section 308.6.



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Refer to supplementary guidance in Section G316.2.




Section 317 Prospective financial information

An EY Member Practice may assist in the preparation of prospective financial information (including forecasts and projections and sensitivity analyses) for an Audit Client, provided the Audit Client takes responsibility for the prospective financial information, including the underlying assumptions and manner of presentation.



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*

* See policies for clients requiring SEC independence at Section 317S

The provision of permissible forecast and projection services to an Audit Client could impair independence if the client becomes a US SEC Audit Client, which precludes the EY Member Practice from reporting on financial statements relating to the whole of the period covered by the forecast or projection. Before performing such services, the likelihood of the client undergoing an initial public offering in the US or a transaction with an existing US SEC Audit Client should be assessed.

317S Prospective financial information — US SEC Audit Clients

EY Member Practices may not assist in the preparation or assembly of prospective financial information (including forecasts and projections and sensitivity analyses), or develop or operate a financial model for a US SEC Audit Client.

A financial model is either a manual analysis or a computer software tool that produces prospective financial statement information. A spreadsheet that prepares calculations or analyses to assist clients, for example, in evaluating covenant compliance issues that do not constitute prospective financial statement information, is not deemed to be a financial model.

EY Member Practices may advise a US SEC Audit Client in the development of their own financial model, but should not be associated with or responsible for the underlying assumptions. If the client prepares a meaningful initial forecast or projection, assistance can be given in refining the assumptions and presentation.



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However, EY Member Practices may not formulate assumptions, process data or otherwise provide assembly services with respect to the US SEC Audit Client’s prospective financial information.

Notwithstanding the above, EY Member Practices may perform assurance services for US SEC Audit Clients with respect to forecasts and projections.

Section 318 Fees and commissions

318.1 Unpaid fees

An EY Member Practice should carefully consider whether independence has been impaired if fees (audit and non-audit) due from an Audit Client for professional services remain unpaid for an extended period of time, especially if a substantial part is not paid before issuing the audit report for the following year. Fees should be required to be paid before the report is issued and no substantial part of the fees should remain unpaid before the next audit engagement commences. In client-sensitive situations, Independence might determine whether appropriate safeguards are available in order to continue the audit engagement.



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*

* See policies for clients requiring SEC independence in Section 318S

Additional EY Canada Policies regarding fees for all clients are set out in the Canadian Policy CA-P3105, Professional Fees.

318S.1 Unpaid fees – US SEC Audit Clients

For a US SEC Audit Client, an audit engagement generally must not be commenced until all fees related to the following are paid in full:

• Fees related to the prior year EY Member Practice audit engagement; and

• Any outstanding fees for non-audit services performed more than one year before the date of the prior-year EY Member Practice audit report.



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318.2 Fee dependency

Where a large proportion of the total fee income of an EY Member Practice, audit practice, individual office or individual Partner is derived from one single Audit Client, the EY Member Practice should ensure that it has put in place appropriate policies and procedures to implement and monitor quality control processes for such engagements.



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PIE Audit Clients

In situations where, for two consecutive years, the total fee income from a PIE Audit Client represents more than 15% of the total fee income of the EY Member Practice or audit practice issuing the audit opinion, the most appropriate of the two following safeguards should be applied and the situation, including the chosen safeguard, should be discussed with the audit committee or equivalent body:

• A pre-issuance review of the audit engagement, equivalent to a quality control review, to be performed by another EY Member Practice prior to the issuance of the audit opinion on the second year’s financial statements; or

• A post-issuance review of the audit engagement, equivalent to a quality control review, to be performed by another EY Member Practice prior to the issuance of the audit opinion on the third year’s financial statements.

Alternatively, such review could be performed by a local regulatory authority or professional institute.

This mandatory review should continue to be performed annually until such time as the total fees from the client no longer exceed 15% of the total fees of the EY Member Practice or the audit practice.

In situations where the total fee income from an Audit Client is significantly higher than 15% of the total fee income of the EY Member Practice or audit practice issuing the audit opinion, only the pre-issuance review would constitute an appropriate safeguard.




318.3 Pricing

An EY Member Practice may not obtain an Audit Engagement at a significantly lower fee level than that charged by the predecessor firm, or quoted by other firms, unless the EY Member Practice is able to demonstrate that:



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• Appropriate time and qualified staff are assigned to the task; and

• All applicable assurance standards, guidelines, and quality control procedures are being complied with.

318.4 Fee structures



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*


Hourly-based fees or fixed fees with no phases or contingencies are acceptable for all engagements with Audit Clients.

EY cannot perform an Audit or Review Engagement for no fee or as an in-kind service as part of a sponsorship or donation to any entity.

Contingent fee arrangements are prohibited for all audit and assurance engagements.

Additional EY Canada Policies regarding fees for all clients are set out in the Canadian Policy CA-P3105, Professional Fees.

Contingent fee arrangements for non-assurance services provided to Audit Clients are prohibited where:

See also Supplementary Guidance at G318.1.

• The fee is charged by the EY Member Practice issuing the audit report and the fee is material or expected to be material to that EY Member Practice; or

• The fee is charged by an EY Member Practice that participates in a significant part of the audit and the fee is material or expected to be material to that EY Member Practice; or

• The outcome of the non-assurance service and therefore the amount of the fee is dependent on a future or contemporary

For a non-US SEC Audit Client, if the audit is performed pursuant to US GAAS, the AICPA independence rules are also applicable. Therefore, for such clients contingent fee arrangements are prohibited for all services. In limited circumstances findings-based fee arrangements may be permitted. Consultation with Canada Independence is encouraged.




judgment related to the audit of a material amount in the financial statements.

An EY Member Practice will generally be considered to have participated in a significant part of the audit if it is responsible for the audit of a material subsidiary, or it is responsible for the audit of material accounts.

The fact that a non-assurance service is related to a material item in the audit client’s financial statements does not necessarily mean that the outcome of the service and therefore the amount of the fee is dependent on a significant future or contemporary audit judgment.

Other types of performance-based fee arrangements, such as value-added or finding-based fees, and contingent fees not prohibited above, are generally acceptable provided the Lead Audit Engagement Partner has granted prior approval. In determining whether to approve the performance-based fee, the lead assurance partner should consider:

• The range of possible fee amounts,

• The nature of the service,

• The effects of the event or transaction on the financial statements, and

• As deemed necessary, the implementation of safeguards such as not using Audit Engagement Team personnel in the provision of the service, seeking additional advice or the performance of a review of the work done.

Phased fee structures are permissible when carefully designed to ensure that such arrangements are not in form or substance a contingent fee.

318S.4 Fee structures – US SEC Audit Clients

Performance-based fees, including contingent fees, value-added fees and finding-based fees, are prohibited for any US SEC Audit Client for all audit and non-audit services.

See also Supplementary Guidance at G318.1 and G318S.1.



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318.5 Commissions

An EY Member Practice shall not accept a payment or commission for referring the products or services of a third party to an Audit Client, or for referring an Audit Client’s products or services to a third party.



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Section 319 Legal protection clauses

There are no global independence restrictions on the use of legal protection clauses in engagement agreements for services provided to Audit Clients.



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* See policies for clients requiring SEC independence in Section 319S

Section 319S Legal protection clauses—US SEC Audit Clients

Legal protection provisions for Audit and Assurance Engagements are generally prohibited for US SEC Audit Clients. See also Supplementary Guidance G319S.1.



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Section 320 Lobbying, legislative and similar services

Acting as a lobbyist for an audit client may create an advocacy threat and, depending on the nature of the matter, create a threat to independence in appearance. As such, consultation with Independence and approval of the lead audit engagement partner are required before engaging in such services.



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* *


Section 320S Lobbying, legislative and similar services – US SEC Audit Clients

A member practice or its professionals should not communicate with an elected or an appointed government official or their staff for the purpose of influencing the development or modification of laws, legislation or regulations on behalf of a US SEC audit client without first obtaining advance approval from the Region Independence Leader, who will involve the Global SEC Independence Center.



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Before performing such services for an entity that is not listed in the US, the likelihood of the client undergoing an initial public offering in the US should be assessed.

See Supplementary Guidance at G320S.1.

Section 321 Corporate recovery and insolvency

Section 321.1: Corporate recovery and insolvency engagements


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Refer also to supplementary guidance in section G315S.1 for such services to CRI or SEC Audit Clients.

Restructuring engagements are subject to unique statutory and professional requirements. Professional Employees outside the restructuring practice should consult with a Partner or Associate Partner in the restructuring practice before undertaking any type of mandate to advise a distressed organization on restructuring or reorganizing its financial or business affairs.

The Rules of Professional Conduct of each Canadian provincial Institute/Ordre of Chartered Accountants, the Canadian Institute of Restructuring Professionals Rules of Professional Conduct and the Bankruptcy and Insolvency Act and the Regulations thereto, collectively, require a Professional Employee or firm who engages in an engagement to act in

any aspect of restructuring or insolvency practice to be free of any influence, interest or relationship which impairs (or, in the view of a reasonable observer, would be perceived to impair) the professional judgment or objectivity of EY Canada or Professional Employee in respect of the engagement.




Consult with a Partner or Associate Partner in the restructuring practice for guidance as to these requirements and their interpretation.

To facilitate compliance with EY Canada’s independence requirements and the statutory and professional requirements specific to the Restructuring practice, EY Canada and the other EY member firms have developed engagement acceptance and internal

communications guidance regarding engagements, specifically:

• approved service offerings and service offering restrictions in SORT; and

• guidance contained in the Conflicts of Interest Policy - CA-P3104.

Consult SORT for independence guidance with respect to service offerings as follows:

1) Bankruptcy and Receivership Engagements:

• EY Canada may not accept an engagement as trustee in bankruptcy, receiver, receiver-manager, agent for a secured creditor, or liquidator, or any appointment under the Bankruptcy and Insolvency Act of an organization for which we complete an audit or review engagement or have completed such an engagement at any time during a two-year period commencing at the date of the last audit report or the last review engagement report.

2) Court Appointment to Act as Monitor:

• EY Canada may not, without the permission of the Court, accept a Court appointment to act as Monitor for an organization for which we complete an audit or review engagement or have completed such an engagement at any time during a two-year period commencing at the date of the last audit report or the last review engagement report. For US SEC audit




clients this prohibition also extends to Affiliates of the audit client unless it can be established, through consultation with Independence, that a break in control has occurred. Documentation of such consultation and conclusion is the responsibility of the restructuring Partner for such proposed engagement.

3) All Engagements involving Audit Clients as

Creditors:

• Consultation with the Canada Independence Leader is required before EY Canada accepts an engagement as privately-appointed receiver where the appointing creditor is an Audit Client (which includes Affiliates, see definitions in the Glossary);

• Consultation with the National Director, Restructuring is required before EY Canada accepts an appointment as court-appointed receiver or trustee in bankruptcy where it is known that an Audit Client (which includes Affiliates, see definitions in the Glossary) is a significant creditor.

Section 321.2: Professionals providing corporate recovery and insolvency engagements

For all insolvency engagements, including acting as a Trustee in Bankruptcy, liquidator, receiver, receiver-manager, etc., EY and all Professionals on the engagement team must be and remain independent such that the Professional and EY shall be and shall remain free from any influence, interest or relationship which, in the view of a reasonable observer, would impair the professional judgement or objectivity of the Professional, EY or any other Professional of EY.

A Professional, and their respective Immediate Family Members, as well as EY, should not acquire directly or indirectly in any manner whatsoever any assets under the administration of a Professional or the firm, unless those assets are available to the general public for




sale and that no special treatment or preference over and above that granted to the public is offered to or accepted by the firm, a Professional, or their Immediate Family Members.




Part 4 Assurance engagements other than financial audits

This Part 4 applies to Assurance Clients that are not also Audit Clients and to certain non-assurance clients.


This section only applies to assurance clients that are not financial statement audit clients. It is also applicable to an Assurance Engagements other than a financial statement audit that is part of a larger engagement, although provisions of this section apply only to the assurance portion of the engagement. If we provide other assurance services to a financial statement audit client, refer directly to Parts 1, 2 and 3.

Independence with respect to an Assurance Client for purposes of this section is required during the Period of the Assurance Engagement.

For Assurance Clients, the independence restrictions differ depending on the purpose, subject matter and intended users of the assurance report and we must bear in mind these differences.

Principal additional requirements that must be followed for SSAE 16 engagements subject to AICPA Independence requirements for attest engagements are developed in G400.1. Independence considerations for Agreed-upon procedures engagements are developed in G400.2.

The definition of Assurance Engagement in the EY Canada Independence Policy differs from the definition of the Assurance Engagement as defined in Section 5025 of the CICA Handbook.

For purposes of the EY Canada Independence Policy, an Assurance Engagement includes:

1. CICA 5025 engagements, other than audits of financial statements and other historical financial information(see the Glossary);

2. CICA 5815 - audit reports on compliance with agreements, statutes and regulations;

3. CSAE 3410 - assurance engagements on greenhouse gas statements;

4. CSAE 3416 - auditor's report on controls at a service organization (as well as similar reports issued under ISAE 3402 and SSAE 16) [Note: for SSAE16 engagements the AICPA independence rules are also applicable and therefore incremental restrictions must be applied];

5. CICA 7600 - reports on the application of accounting principles;

6. CICA 8500 - reviews of financial information other than financial statements;

7. CICA 8600 – reviews of compliance with agreement and regulations.

Non-Assurance Engagements subject to independence policies in Part 4 include:

1. CICA 9100 - reports on the results on applying specified auditing procedures to financial information other than financial statements; and

2. CICA 9110 - agreed-upon procedures for internal controls over financial reporting.




Disclosure of Impaired Independence – A Professional, who provides a service not subject to independence restrictions, shall disclose any activity, influence, interest or relationship which may be viewed as impairing EY Canada’s independence, in the written report or other communication and shall indicate the nature of the influence or relationship and the nature and extent of the interest. Consultation with Canada Independence is encouraged in these circumstances.

In certain cases, the entity to which we apply our procedures is not the same as the entity that has engaged us. We apply independence for special report mandates to the party to which we are applying our procedures.

400S Non-audit assurance reports filed with the US SEC or used in a US SEC filing

If the non-audit assurance report is to be filed with the US SEC or used as an exhibit in US SEC filings, all relevant EYG independence requirements apply to their full extent to all EY Member Practices, notwithstanding the fact that the report is intended for restricted use. Refer to Parts 1, 2 and 3 of the EYG Independence Policy.

Policies apply to an Assurance Client subject to


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Section 401 Matters relating to Professionals

Generally, Section 401 requirements apply to members of the Assurance Engagement Team and their Immediate Family Members.

The independence requirements also need to be considered depending on the role and responsibilities of Professionals outside of the Assurance Engagement Team, as a threat to independence may be created by their financial interests and business relationships. If such threats are identified, consultation with Independence is recommended.




401.1 Financial Interests

Members of the Assurance Engagement Team, and their Immediate Family Members, are prohibited from holding a Financial Interest in their Assurance Client or in the controlling parent of their Assurance Client when the Assurance Client is material to that controlling parent.

For clarity, the Assurance Engagement Team and their Immediate Family Members are prohibited from holding a Financial Interest in the Assurance Client.

Where the Assurance Client is material to the controlling parent, members of the Assurance Engagement Team and their Immediate Family Members are prohibited from holding a Financial Interest regardless of the materiality of the Financial Interest.

For assurance engagements performed in accordance with AICPA rules (i.e., SSAE 16 engagements), refer to the US Independence Policy and Supplementary Guidance G400.1for additional restrictions. For such engagements, the Financial Interest restrictions apply to all Covered Persons (i.e., all four categories – refer to the Glossary) and not just the Assurance Engagement Team.

A professional may not be a member of the Assurance Engagement Team if the professional is aware that a Close Family Member holds a Financial Interest in the Assurance Client and the interest is material to the Close Family Member.

To the extent the professional does not have such knowledge there is no requirement to inquire about such financial interests.

401.2 Employment relationships

Professionals joining an Assurance Client

If a member of the Assurance Engagement Team, or former Partner of the Country Practice or Region issuing the assurance opinion for an Assurance Client, accepts an officer or director position, or a position that would allow the exercise of significant influence over the subject matter of the Assurance Engagement, such former Professionals should not receive benefits or payments from the Country Practice, or Region after departure, unless these are made in accordance with fixed pre-determined arrangements and the amounts owed to the individual are not significant to the Country Practice or Region.

Refer to section 403.3 in regard to the engagement period for which the employment relationship restrictions must be applied.




In addition, the former Professional may not maintain any other business or professional relationship with the Country Practice or Sub-Area.

For clarity, the Country Practice or Sub-Area may have a business relationship with the former Professional provided it is consistent with those permitted in accordance with section 107.

Personal Appointments

Professionals are not permitted to serve as an officer, director, promoter, underwriter, general partner, voting trustee, company secretary or in any capacity equivalent to a member of management of an Assurance Client.

Recent Service with an Assurance Client

A Professional previously employed at an Assurance Client in an officer or director position, or a position that would allow the exercise of significant influence over the subject matter of the assurance engagement, may not become a member of the Assurance Engagement Team during the period covered by the assurance report.

In Canada, the EYG restriction also applies to Professionals serving in such roles during any portion of the engagement period.

Family members

A Professional who has an Immediate Family Member who is employed by the Assurance Client in an officer or director position that would allow the exercise of significant influence over the subject matter of the assurance engagement may not be a member of the Assurance Engagement Team.

In Canada, a Professional also cannot be a member of the Assurance Team if the Professional’s Immediate Family Member holds or held one of the following positions during the period covered by the assurance report or the engagement period:

A director or officer of the Assurance Client; or

An employee of the Assurance Client in a position to exert direct significant influence over the subject matter of the Assurance Engagement.

401.3 Banking relationships

Bank savings and deposit accounts, loans, credit cards and overdraft facilities from an assurance client that is a bank, or equivalent, are permitted for

Sections 105 and 204 requirements with respect to “loan, guarantees and deposits” also apply to Assurance Clients.




members of the Assurance Engagement Team, including their Immediate Family Members, as long as the banking relationship is made and maintained under normal procedures, terms and conditions.

In Canada all such loan arrangements, including credit cards and overdrafts must be kept current.

401.4 Business Relationships

Purchases and sales of goods and services are generally permitted, if made in the ordinary course of business and at arm’s length.

Members of the Assurance Engagement Team and their Immediate Family may only enter into other business relationships with the Assurance Client if the relationship is immaterial and insignificant to all parties.

Other business relationships are prohibited unless they are immaterial and the relationship is clearly insignificant to the EY Member Practice, the Assurance Client and the management of either.

Section 402 Matters relating to Country Practices and Regions

The requirements of this Section apply to the Country Practice and Region providing the assurance service in relation to their Assurance Client. Section 402 requirements apply to all EY Member Practices involved in the provision of the assurance service if the assurance report is intended for unrestricted use. EY Member Practices with independence requirements with respect to an Assurance Client are further referred to as “covered EY Member Practices”.

Other independence requirements also need to be considered depending on the role and responsibilities of other EY Member Practices as an independence threat may be created by their Financial Interests and business relationships. If such threats are identified, consultation with Independence is encouraged.




402.1 Financial Interests

Covered EY Member Practices are prohibited from holding a Financial Interest in their Assurance Client or in the controlling parent of their Assurance Client when the Assurance Client is material to that controlling parent.

For clarity, Covered EY Member Practices are prohibited from holding a Financial Interest in their Assurance Client.

Where the Assurance Client is material to the controlling parent, Covered EY Member Practices are prohibited from holding a Financial Interest regardless of the materiality of the Financial Interest.

402.2 Banking relationships

Bank savings and deposit accounts, loans, credit cards and overdraft facilities from an Assurance Client that is a bank, or equivalent, are permitted for covered EY Member Practices, as long as the banking relationship is made and maintained under normal procedures, terms and conditions.

In Canada such permitted loan arrangements must also be kept current.

Section 203 requirements with respect to Country Practice pension plans also apply to Assurance Clients.

Section 204.1 requirements with respect to loans from Audit Clients other than a bank or similar financial institution also apply to Assurance Clients.

Section 204.2 and 204.4 requirements with respect to loans or overdrafts from a bank or other similar financial institution client also apply to Assurance Clients.

402.3 Business Relationships

Purchases and sales of goods and services are generally permitted, if made in the ordinary course of business and at arm’s length.

Covered EY Member Practices may only enter into other business relationships with the Assurance Client if the relationship is immaterial and insignificant to all parties.




402.4 Hospitality, gifts or other benefits

Hospitality and gifts to and from Assurance Clients that are not commensurate with the normal courtesies of business and social life should not be offered or accepted. Any gifts accepted from an Assurance Client should be nominal value except for gifts in the form of cash, which are never permitted. Nominal value will vary with the culture of the country of the giver and the receiver of the gift or benefits.

Refer also to the Policy on Hospitality and gifts involving clients CA-P5196.

An EY Member Practice should not accept benefits from an Assurance Client except on business terms no more favourable than those available to other parties.

Section 403 Matters related to services to Assurance Clients

403.1 Scope of service

EY Partners or employees cannot serve as officer, director, promoter, underwriter, general partner, voting trustee, company secretary or in any capacity equivalent to a member of management of an Assurance Client, nor be in any position to exert significant influence over the subject matter of the Assurance Engagement, nor assume a management responsibility as part of the assurance service.

We cannot prepare or maintain non-financial records or statements (for example, a company’s environmental report) and subsequently provide assurance on this information unless our involvement is routine and ministerial and does not involve any management function.

There are generally no independence restrictions for non-assurance services unrelated to the subject matter of the assurance engagement and related subject matter information, including management functions.

Section 305 requirements with respect to “Management activities” as they relate to the subject matter of the Assurance Engagement apply to Assurance Clients and to the Assurance Team.

Section 315 requirements with respect to “Corporate Finance Services” apply to Assurance Clients and applies only to the Assurance Engagement Team and EY Canada.

Section 318.3 requirements with respect to Pricing also apply to Assurance Clients.

403.2 Contingent fees/Fees in-kind

Contingent fee arrangements are prohibited for all Assurance Engagements.

EY cannot perform an Assurance Engagement for no fee or as an in-kind service as part of a sponsorship or donation to any entity.




Contingent fee arrangements for non-assurance services to Assurance Clients are generally acceptable provided the Lead Assurance Engagement Partner has granted prior approval. In determining whether to approve the contingent fee, the Lead Assurance Engagement Partner may consider:

• The range of possible fee amounts, • The nature of the service, or • The effects of the event transaction on the

subject matter of the assurance engagement; and,

• As deemed necessary, the implementation of safeguards.

Such safeguards may include not using Assurance Engagement Team personnel in the provision of the service, seeking additional advice or the performance of a review of the work done.

403.3 Engagement Period

Independence with respect to the Assurance Client is required during the period of the Assurance Engagement. The period of the Assurance Engagement starts when the Assurance Team begins to perform assurance services and ends when the assurance report is issued, except when the Assurance Engagement is of a recurring nature. If the Assurance Engagement is expected to recur, the period of the Assurance Engagement ends with the notification by either party that the professional relationship has terminated or the issuance of the final assurance report, whichever is later.

Apply the Part 4 policy requirements except with respect to the independence requirements in regard to employment relationships in section 401.2. The independence requirements for section 401.2 apply to the period covered by the subject matter of the Assurance Engagement in addition to the Engagement Period.




Part 5 Financial audit and review engagements that are restricted for use and distribution

Part 5 of the EYG Independence Policy is not applicable in Canada. Apply Parts 1, 2 and 3 of the EY Canada Independence Policy to all Audit and Review Clients regardless of whether or not the engagement is restricted for use and distribution.


The independence requirements in Parts 1, 2 and 3 apply to all audit and review engagements. However, in certain circumstances involving audit and review engagements where the report includes a restriction on use and distribution, and provided the conditions described below are met, the independence requirements may be modified.

If the EY Member Practice also issues an audit report that does not include a restriction on use and distribution for the same client, the provisions of this section do not apply. To determine whether modified independence requirements are applicable, consultation with Independence is required.

Section 501 Applicability

The modified independence requirements are only applicable to an audit or review engagement that is restricted for use and distribution presenting all of the following characteristics:

• The engagement is an audit or review of special purpose financial statements, and

Part 5 of the EYG Independence Policy is not applicable in Canada. Apply Parts 1,2 and 3 of the EY Canada Independence Policy to all Audit and Review Clients regardless of whether or not the engagement is restricted for use and distribution.

• The audit or review report explicitly includes a restriction on use and distribution.

The modifications are not permitted in the case of an audit of financial statements required by law or regulation.

CICA Section 5600

Auditor’s report on financial statements prepared using a basis of accounting other than GAAP would be equivalent with the EYG criteria. However, in Canada there are no modified independence requirements in the provincial rules of professional conduct for these types of engagements even for restricted use. For such engagements in Canada apply independence requirements contained in Parts 1, 2 and 3 fully to the entity and its affiliates.




Section 502 Engagement requirements

All of the following conditions must be met before the modified independence requirements can be applied to an audit or review engagement that is restricted for use and distribution:


• The intended users of the report are knowledgeable as to the purpose and limitations of the report,

• The intended users of the report must agree (in their own right or via authorized representatives) to the modified independence requirements,

• The engagement letter must state that modified independence requirements according to Section 290.500 of the IESBA Code of Ethics are applicable and that any additional users of the report not contemplated at the time of entering into the engagement agreement will be bound to the same engagement agreement.

Knowledge of the intended users would usually be demonstrated by documented discussions or communications to establish the nature and scope of the engagement where we are also expected to address independence matters to obtain their agreement to apply modified independence requirements.

Section 503 Modified independence

The modifications to the independence requirements that are permitted for audit and review engagement that is restricted for use and distribution are limited to the following. Compliance in all other respects with the provisions of Parts 1, 2 and 3 is required and cannot be modified.


• Specific independence requirements of this policy that apply only to public interest entities and that are stricter to requirements applicable to all other audit clients do not apply,




• Independence requirements are applicable only to the entity that is engaging us or the entities that are within the scope of the audit or review engagement that is restricted for use and distribution,

• Independence requirements are applicable only to the EY Member Practice is performing the audit and review engagement that is restricted for use and distribution and any other EY Member Practice that participates to the audit or review engagement,

• Independence requirements relating to Professionals in Sections 101 (Financial Interests), 103 (Pension, Insurance and Investment Products), 105 (Loans, Guarantees and Deposits), 106 (Brokerage accounts), and 107 (Business Relationships) of this policy apply only to members of the Audit Engagement Team or review engagement team and Always Covered Persons in the EY Member Practice issuing the report, plus their respective immediate or close family members as relevant.

Notwithstanding the modified independence provisions above, situations that would create a significant threat to independence and be prohibited in an audit or review engagement that is not restricted for use and distribution, would need to be evaluated by Independence who will determine applicable safeguards if any. Such situations should be communicated and agreed with the intended users of the report, as provided in 502 above.




GLOSSARY

Accounting Role

A role in which a person is in a position to or does exercise more than minimal influence over the contents of the accounting records or anyone who prepares them. All persons in a Financial Reporting Oversight Role are also in an Accounting Role. Under US SEC independence rules, persons in an Accounting Role include individuals in clerical positions responsible for the accounting records (e.g., payroll, accounts payable, accounts receivable, purchasing, sales) as well as those who report to individuals in Financial Reporting Oversight Roles (e.g., assistant controller, assistant treasurer, manager of internal audit, manager of financial reporting).

See also Significant Accounting Role.

In Canada, for clients other than US SEC Audit Clients, Accounting Role means a role in which a person is in a position to or does exercise more than minimal influence over:

a) The contents of the client’s accounting records related to the financial statements subject to audit or review; or

b) Anyone who prepares such financial statements.

Affiliate

An entity which has certain relationships with an entity EY audits or reviews.

The affiliates that are included in the scope of “Audit Client” vary depending on the nature of that client.

Divisions, branches and other units that are not separately incorporated are also part of the audit client but are not considered “Affiliates” but rather components of the entity EY audits. Certain independence exceptions that are applicable to immaterial subsidiaries only are not applicable to divisions, branches and other units.

See Audit Client and Affiliates.

Alliance Arrangement

Alliance Arrangement refers to any arrangement with a third party entity involving a common or shared business objective over a medium to long term period, generally involving the joint provision of professional services to shared clients. An Alliance Arrangement may be evidenced by the existence of a joint venture, an exclusive marketing arrangement, memorandum of understanding, or other formal arrangement.




Always Covered Persons Partners who, for independence purposes, are considered Covered Persons with respect to EY audit clients based on the attributes of their role or function within the firm, including:

• Those in positions of leadership who must maintain the appearance of independence;

• Roles with operating and risk management responsibilities that are in a position to influence the conduct of audits; and

• Individuals who consult on a range of audit client matters including staffing, ASQ and other relationship matters, and on matters specifically related to the conduct of audits.

See Supplementary Guidance G600.7 for the roles and functions within the firm for which partners who fill such positions are considered to meet this definition. See also Covered Person.

For clarity, members of the General Counsel’s Office with a rank of Assistant Director / Manager or above are included in the definition of Always Covered Persons. See also definition of Chain of Command as it is included in Always Covered Persons.

Area

A grouping of Country Practices and Regions for EY organization purposes including:

1. Americas

2. Europe, Middle East, India and Africa (EMEIA)

3. Asia-Pacific

4. Japan.

Assurance Client

An Assurance Client is the entity responsible for the subject matter information of an Assurance Engagement. For the purpose of this policy, an Assurance Client is not a financial statement Audit Client. The Assurance Client might not always be the person or entity engaging EY to perform the Assurance Engagement. “Assurance Client” always includes its subsidiaries but does not include its other affiliates.

In Canada Assurance Client also excludes a client for which EY completes a Review Engagement as such clients are considered to be equivalent to an Audit Client for independence purposes.

Assurance Client also includes any of the following entities where the engagement team knows or has reason to believe that the existence of an activity, interest, or relationship involving a Professional or




an EY Member Practice and the entity responsible for the subject matter of the Assurance

Engagement is relevant to the evaluation of independence with respect to the Assurance Engagement:

(i) An entity that has Control over the client, provided the client is material to such entity (for a client subject to the New Brunswick independence rules, the clause “provided the client is material to such entity” does not apply);

(ii) An entity that is under common Control with the client, provided such entity and the client are both material to the Controlling entity (for a client subject to the New Brunswick independence rules, the clause “provided such entity and the client are both material to the Controlling entity” does not apply);

(iii) An entity over which the client has Significant Influence, unless the entity is not material to the client; and

(iv) An entity that has Significant Influence over the client, unless the client is not material to the entity.

Assurance Engagement

Any engagement where we express a conclusion designed to enhance the degree of confidence of intended users about the outcome of the evaluation or measurement of a subject matter against criteria is considered to be an Assurance Engagement.

An assurance report is for restricted use when (1) the assurance report is expressly restricted for use by identified users and not intended for general

The definition of Assurance Engagement in the EY Canada Policy differs from the definition of the Assurance Engagement as defined in Section 5025 of the CICA Handbook.

For purposes of the EY Canada Policy, an Assurance Engagement includes:

1. CICA 5025 engagements, other than audits of financial statements and other historical financial information;

distribution, and (2) the users of the report are knowledgeable as to the purpose, subject matter and limitations of the report through their participation in establishing the nature and scope of the instructions to deliver the services, including the criteria by which the subject matter is evaluated.

An assurance report is for unrestricted use when intended for general distribution. This would generally apply to any Examination or Review

2. CICA 5815 - audit reports on compliance with agreements, statutes and regulations;

3. CSAE 3410 - assurance engagements on greenhouse gas statements;

4. CSAE 3416 - auditor's report on controls at a service organization (as well as similar reports issued under SSAE 16 or ISAE 3402). [Note: for SSAE16 engagements, the AICPA




engagements when the report is broadly distributed (for example, a Cyber process certification).

See also Supplementary Guidance G600.4 for further discussion and examples.

independence rules are also applicable and therefore incremental restrictions must be applied];

5. CICA 7600 - reports on the application of accounting principles;

6. CICA 8500 – reviews of financial information other than financial statements;

7. CICA 8600 – reviews of compliance with agreements and regulations;

8. CICA 9100 – reports on the results of applying specified auditing procedures to financial information other than financial statements; and

9. CICA 9110 agreed upon procedures for internal controls over financial reporting.

The above Assurance Engagements require independence to be applied as provided in Part 4 of this Policy.

In Canada Review Engagements are considered equivalent to an Audit Engagement for independence purposes. Therefore such engagements do not fall within the definition of Assurance Engagement.

Assurance Engagement Team

1) All members of the engagement team for the Assurance Engagement.

2) All others within a firm who can directly influence the outcome of the Assurance Engagement, including:

a) Those who recommend the compensation of, or who provide direct supervisory, management or other oversight of the Assurance Engagement Partner in connection with the performance of the Assurance Engagement;

b) Those who provide consultation regarding technical or industry specific issues, transactions or events for the Assurance Engagement; and

For clarification, in Canada, part 2 of the definition refers only to the Managing Partner of the Service Line to which the Assurance Engagement Partner belongs.




c) Those who provide quality control for the Assurance Engagement including those who perform the engagement quality control review for the Assurance Engagement.

Audit Client

An Audit Client is an entity for which an EY Member Practice conducts an audit or review, and all affiliates of that entity.

The affiliates that are included in the scope of “Audit Client” vary depending on the nature of that client. The following categories of Audit Client are defined separately:

For purposes of Canadian Audit or Review Clients, the EY Canada Policy does not use the Audit Client and Affiliate definitions/charts per EYG except for Audit Clients and Affiliates – US SEC Audit Client. Instead, for Canadian audit or review Clients, follow the Canadian definitions/charts indicated as follows:

• Non Public Interest Entity Audit Client (non PIE) includes:

• Non-PIE Audit Client (IESBA)

• Non-PIE Audit Client (AICPA)

• Public Interest Entity Audit Client (PIE) includes:

• Non-listed PIEs Audit Clients –

• Listed PIEs Audit Clients –

• US SEC Audit Client – Chart 3.

See also Supplementary Guidance G600.1 for illustrative examples.

For a: Use the Audit Client and Affiliate Definition in the Canadian column as follows:

Non-PIE;

PIE (Not Listed); and

Audit Client and Affiliate - subject to Minimum independence standards

PIE (CRI);

PIE Listed (but not CRI or

SEC)

Audit Client and Affiliate – subject to CRI independence standards

PIE (SEC) Audit Client and Affiliate – US SEC

For Canadian clients, detailed definitions of Audit Clients and Affiliates are included in the Glossary for: Audit Client and Affiliate subject to Minimum independence standards, Audit Client and Affiliate subject to CRI independence standards, and Audit Client and Affiliate - US SEC.

Illustrative examples in the Supplementary Guidance are used by other EY Member Firms and should not be applied for Canadian clients.




Audit committee

A committee (or equivalent body charged with governance) established by the board of directors of an audit client for the purpose of overseeing the accounting and financial reporting processes of the audit client and audit of the financial statements of the audit client. Audit committees are generally required for all US SEC issuer audit clients. If no such committee of equivalent exists, consider the entire board of directors as an equivalent to the audit committee.

Audit Client and Affiliates - subject to CRI independence standards

An Audit Client subject to CRI independence standards is an entity that is deemed to be a reporting issuer under applicable Canadian provincial or territorial securities legislations, regardless of their size; or an entity that is a Listed PIE (non-CRI / non-SEC) for which EY Canada conducts an Audit Engagement. This includes a Canadian mutual fund that is a reporting issuer.

An Affiliate of an Audit Client subject to CRI independence means:

1. An entity that has Control over the client, or over which the client has Control, or that is under common Control with the client, including the client's parents and subsidiaries; An entity that has Control over the audited entity, or over which the audited entity has Control, or which is under common Control with the audited entity is an affiliate of the audit client regardless of materiality.

2. An entity over which the client has Significant Influence, unless the entity is not material to the client; and

3. An entity that has Significant Influence over

the client, unless the client is not material to the entity.

Divisions, branches and other units that are not separately incorporated are also part of the Audit Client but are not considered “subsidiaries”. Certain independence exceptions are applicable to




immaterial subsidiaries as specified herein. However, these exceptions are not applicable to divisions, branches and other units.

The following chart is intended to assist Professionals in understanding the definition of “Audit Clients subject to CRI independence standards”

Audit Clients subject to CRI independence standards

Note :

EY only audits A and does not audit any other entity in this chart. An investment in I (non-Audit Client) is also subject to certain investment restrictions. Refer to

section 101.

Audit Client and Affiliates - subject to Minimum independence standards

An Audit Client subject to Minimum independence standards is a Canadian Audit Client or Review Client not subject to CRI or US SEC independence standards and includes:

C: Ultimate parent

A is not material to C

L: B's sister

L is material to C

B: Parent

A is material to B

K: A's sister

K is not material to B

J: A's sister

J is material to B

A: Audit client

CRI standards

D: Subsidiary

D is material to A

Q: Subsidiary

R: Investee

R is material to A

S: Significant influence Investee

S is not material to A

E: Subsidiary

E is not material to A

H: Significant Influence investee

H is material to A

M: Subsidiary

M is material to A

N: Subsidiary

N is not material to A

I: Significant Influence investee

I is not material to A

G: Investor

G has significant influence

A is not material to G

F: Investor

F has significant influence

A is material to F

The « audit client » is identified in solid grey shaded boxes.




(i) a privately held entity (non-PIE); and (ii) a non-listed PIE.

The following definition is effective for the first reporting period commencing after December 15, 2014.

An Affiliate of an Audit Client subject to minimum independence standards means:

1. An entity over which the client has Control; and

2. Any of the following entities where the engagement team knows or has reason to believe that the existence of an activity, interest or relationship between a Professional or an EY Member Practice with respect to the audit or review engagement:

(i) An entity that has Control over the client, provided the client is material to such entity (for a client subject to the New Brunswick independence rules, the clause “provided the client is material to such entity” does not apply);

(ii) An entity that is under common Control with the client, provided such entity and the client are both material to the Controlling entity (for a client subject to the New Brunswick independence rules, the clause “provided such entity and the client are both material to the Controlling entity” does not apply);

(iii) An entity over which the client has Significant Influence, unless the entity is not material to the client; and

(iv) An entity that has Significant Influence over the client, unless the client is not material to the entity.

Divisions, branches and other units that are not separately incorporated are also part of the Audit Client but are not considered “subsidiaries”. Certain independence exceptions are applicable to immaterial subsidiaries as specified herein. However, these exceptions are not applicable to divisions, branches and other units.


C: Ultimate parent


L: B's sister

L is material to C

B: Parent

A is material to B

K: A's sister

K is material to B

O: Subsidiary

O is material to B

P: Subsidiary

P is not material to B

T: Significant influence investee

J: A's sister

J is not material to B

A: Audit client

Minimum standards

D: Subsidiary

D is material to A

Q: Subsidiary

R: Significant influence investee

R is material to A

S: Significant influence investee


E: Subsidiary



H is material to A

M: Subsidiary

M is material to A

N: Subsidiary




G: Investor



F: Investor


A is material to F

The « audit client » is identified in solid grey shaded boxes. The diagonally shaded boxes would be included in the definition of the <<audit client>> where the engagement team knows or has reason to believe that the existence of an activity, interest or relationship between a Professional or an EY Member Practice with respect to the audit or review engagement.

Entities C, L and J would also be affiliates of the non-listed audit client under New Brunswick rules.



To determine materiality of a subsidiary, refer to materiality definition.

The following chart is intended to assist Professionals in understanding the definition of “Audit Clients subject to minimum independence standards”.

Audit Clients subject to minimum independence standards

Note :

EY only audits A and does not audit any other entity in this chart. An investment in I (non-Audit Client) is also subject to certain investment restrictions. Refer to

section 101.




Audit Client and Affiliates—US SEC (applicable to US SEC PIE Audit Clients)

US SEC Audit Client

A US SEC Audit Client means a US SEC issuer or registrant whose financial statements or other information is being audited, reviewed, or attested and any affiliates (see below) of the US SEC audit client, or any other entity subject to the US SEC independence requirements. This includes Foreign Private Issuers (FPIs).

EY Canada uses this definition of US SEC Audit Client.

Affiliate of a US SEC Audit Client

An affiliate of a US SEC Audit Client means:

i) An entity that has Control over the US SEC audit client, or over which the US SEC audit client has Control, or which is under common Control with the US SEC audit client, including the US SEC audit client’s parents and subsidiaries; and

ii) An entity over which the US SEC audit client has Significant Influence, unless the entity is not material to the US SEC audit client; and

iii) An entity that has Significant Influence over the US SEC audit client, unless the US SEC audit client is not material to the entity; and

iv) Each entity in the Investment Company Complex when the US SEC audit client is an entity that is part of an Investment Company Complex.

With respect to (i) above:

An entity that has Control over the US SEC audit client, or over which the US SEC audit client has Control, or which is under common Control with the US SEC audit client is deemed an affiliate of the US SEC audit client regardless of materiality.

To determine materiality with respect to (ii) and (iii) refer to materiality definition.

With respect to (iv) above refer to the definition of Investment Company Complex.




Where the information is available, the test should follow US APB 18, “The Equity Method of Accounting for Investments in Common Stock.” This involves calculating the carrying value of an investment in the investee compared to the total assets of the investor.

The following chart is intended to assist Professionals in understanding the definition of “Audit Client – US SEC” and applies to all US SEC PIE Audit Clients.

Audit Clients – US SEC

Note :

EY only audits A and does not audit any other entity in this chart. An investment in entity G or I (non-Audit Clients) is also subject to certain investment restrictions.

Refer to sections 101 and 101S.

Audit Engagement

An Assurance Engagement in which an opinion is expressed (or intended to be expressed) on financial statements prepared in accordance with an applicable financial reporting framework. This includes statutory audits.

In Canada, independence policies applicable to an Audit Engagement/Audit Client are equally applicable to a Review Engagement or Review Client.

C: Ultimate parent


L: B's sister

L is material to C

B: Parent

A is material to B

K: A's sister

K is not material to B

J: A's sister

J is material to B

A: Audit client

US SEC standards

D: Subsidiary

D is material to A

Q: Subsidiary

R: Investee

R is material to A

S: Significant influence Investee


E: Subsidiary



H is material to A

M: Subsidiary

M is material to A

N: Subsidiary




G: Investor



F: Investor


A is material to F

The « audit client » is identified in solid grey shaded boxes.




Audit Engagement Team

The Audit Engagement Team includes all members of the engagement team for the Audit Engagement (including non-audit personnel such as tax Professionals involved in the review of the tax provision and accrual), the engagement quality review partner, and those who consult or need to be in a position to consult with the engagement team on technical or industry-specific issues, transactions or events.

There is no minimum number of hours with respect to being a member of the Audit Engagement Team. The Audit Engagement Team also includes Assurance Professional Practice members.

Audit and Professional Engagement Period

The Audit Period is the period covered by the financial statements being audited or reviewed.

The Professional Engagement Period is the period of the engagement to audit or review the financial statements or to prepare an audit or review report. This period begins on the earlier of the signing of an engagement letter (or similar agreement) or the commencement of audit or review procedures. The Professional Engagement Period ends when a final audit report is issued, or with the notification by either party that the professional relationship has ended, whichever is later. For a US SEC Audit Client, the professional engagement period ends when the Audit Client or the accountant notifies the US SEC that the client is no longer that accountant’s Audit Client.

In the case of an Audit Engagement for an SEC Audit Client, CRI Audit Client or Listed PIE (non-CRI / non-SEC) Audit Client, the period ends when the Audit Client or the firm notifies the relevant securities commission that the Audit Client is no longer an Audit Client of the firm.

Beneficial owner

Any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares:

1. Voting power which includes the power to vote, or to direct the voting of, such security; and/or

2. Investment power which includes the power to dispose, or to direct the disposition of, such security.




Canadian Fund Complex In the context of partner rotation requirements for a CRI Fund Audit Client, a Canadian Fund Complex is defined as including the following funds (but not the fund manager): 1. a CRI Fund that has the same fund manager as

the Audit Client; 2. a CRI Fund that has a fund manager that is

Controlled by the fund manager of the Audit Client; and

3. a CRI Fund that has a fund manager that is under common Control with the fund manager of the Audit Client.

Canadian Reporting Issuer See CRI.

Chain of Command

See Always Covered Person.

In Canada, the definition of Chain of Command refers to those Partners those who directly influence the outcome of the engagement, including those at all successively senior levels above the Lead Audit Engagement Partner, and all members of the EY Canada Executive Committee through to the Americas managing Partner/CEO with respect to all Canadian Audit Clients.

Clearly Insignificant Clearly insignificant means trivial and inconsequential, after considering both qualitative and quantitative factors.

Close Association with the Firm Former Partners may have varying degrees of involvement with EY Canada. When a former Partner continues to provide administrative or client service for or on behalf of EY Canada, the Partner may be closely associated with EY Canada. The following factors may indicate the Partner retains a Close Association with the Firm:

• the nature and extent of the former Partner’s client and administrative activities within EY Canada may be more than Clearly Insignificant and transitional;

• the former Partner holds a Direct or Indirect Financial Interest in EY Canada, including share-based retirement income that may fluctuate with EY Canada’s income; and




• the former Partner is held out to be a member of EY Canada through, for example: • having a separate, identified office on EY

Canada’s premises, • acting as its spokesperson or

representative, • using a firm business card, or • having a listing in EY Canada’s telephone

directory for other than a predetermined period of time following retirement.

When evaluating whether a former Partner has a Close Association with the Firm, consideration should be given to how a reasonable observer would regard the association.

Close Family Member

The term Close Family Member includes an individual’s nondependent parents, stepparents, children, stepchildren and siblings.

The term Close Family Member includes an individual’s non-financially-dependent:

• parents; • stepparents; • children; • stepchildren; and • siblings.

Financially dependent individuals include any person who receives or is expected to receive more than half of their support for the current fiscal year from a Professional and/or his or her Spouse (or spousal equivalent). If any of the above individuals are financially dependent, refer to the definition of Immediate Family Member.

Consortium

Any arrangement with any third party (including individuals and entities, clients and non-clients) involving a joint proposal or engagement relating to the provision of professional services.

Contingent Fees

Fees based upon a specified determination or result of a service or, are fixed (such as by a percentage or multiple) by reference to a specified determination or result of a service. Contingent Fees do not include fees fixed by a court or other public authority (such as fees awarded to the firm as

Policies regarding fees for all clients are set out in the Canadian Policy CA-P3105, Professional Fees.




part of a bankruptcy proceeding). A retainer or otherwise fixed payment may be received, but a fee structure including such a payment will be a contingent fee where the amounts to be received are principally determined by an outcome or finding. A contingent fee also includes situations where a component of the fee arrangement is dependent upon the finding or results of our services, such as an hourly-based fee arrangement that includes a fee-cap that is based in part on our findings. Fees that are commonly referred to as differential fees or event-based fees in some countries are considered Contingent Fees.

Control For a US SEC Audit Client, the term Control (including the terms Controlling, Controlled by and under common Control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise.

For a non-SEC Audit Client, control of an enterprise is the continuing power to determine its strategic operating, investing, and financing policies without the co-operation of others.

There is a presumption that control exists if the investor owns more than 50% of the outstanding voting shares, is the primary beneficiary of a variable interest entity or consolidates an investee.

Controlling Owner

Controlling Owner refers to an individual or an entity that:

(1) Directly owns more than 50 percent of the voting equity interest in an entity; or

(2) Beneficially owns more than 50 percent of the voting equity interest in an entity through an intermediary over which the individual or entity has control or the ability to influence investment decisions.




Cooperative Business Relationship

Cooperative Business Relationships other than joint investments and alliances can include any formal or informal arrangements with any third party (including individuals and entities, as well as clients and non-clients). Examples of such arrangements would be when acting as a software vendor, consultant, facilitator, sub-contractor, independent contractor, licensor, licensee, reseller, or distributor. Further, such other cooperative business relationships also include arrangements with any third party (including individuals and entities, as well as clients and non-clients) involving joint marketing, sponsorships, co-marketing or consortium association. These arrangements would also include the purchase or licensing of a product or service from an Audit Client and distribution, resale, re-marketing or re-licensing such item or service, including, for example, software products.

Country Practice

Collectively the individual entities in a country that are members of EY International or EY Global and includes the voting and any other associated entities of the Country Practice.

Covered Person

The term Covered Person includes the following categories of persons:

1. The Audit Engagement Team (see separate definition).

1. Category 1 Covered Person also includes Assurance Professional Practice members. The engagement team and engagement quality review partner are Covered Persons with respect to the Audit Client (which includes affiliates); Assurance Professional Practice members in Canada are Covered Persons with respect to all Canadian Audit Clients (which includes Affiliates).

There is no minimum number of hours with respect to being a member of the Audit Engagement Team.

2. Always Covered Persons (see separate definition).

2. For clarity, Category 2 includes those in the Chain of Command.




3. Partners and managerial employees who have provided 10 or more hours of non-audit services during a particular Audit Client’s fiscal year.

3. Category 3 includes Partners, associate partners, senior managers, and managers providing 10 hours or more of non-audit services to the audit client or to an affiliate of

the audit client during a particular Audit Client’s fiscal year.

4. Any other Partner located in the office in which the Lead Audit Engagement Partner is located. See also Office.

The Covered Person concept is client specific, as a result, a Professional may be a Covered Persons with respect to certain clients, but not others.

CRI CRI is a Canadian Reporting Issuer. CRI means an entity that is deemed to be a reporting issuer under applicable Canadian provincial or territorial securities legislation. EY Canada applies the independence standards for reporting issuers to all reporting issuers regardless of their size which includes a Canadian Mutual Fund that is a reporting issuer under the applicable Canadian provincial or territorial securities legislation.

CRI Fund A CRI Fund is either: (i) a listed investment fund that is a CRI; or (ii) a CRI mutual fund under the applicable Canadian provincial or territorial securities legislation.

Dependent See Immediate Family Member.

Direct Financial Interest

A Direct Financial Interest refers to any of the following:

• An interest owned directly by and under the Control of an individual or entity (including those managed on a discretionary basis by others);

• An investment beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has Control or ability to influence the investment decisions; or




• An investment in a US SEC proscribed entity through an intermediary such as a trust or partnership if the intermediary is not a diversified management investment company and the intermediary has an investment in the proscribed entity of 20% or more of the value of the intermediary’s total investments.

In Canada, an investment in an entity through an intermediary or fund that is not a Diversified Management Investment Company and the intermediary such as a fund, trust, or partnership, Pooled Investment Vehicle, etc., has an investment in the entity of 20% or more of the value of the intermediary’s total investments is deemed to be a Direct Financial Interest.

A Direct Financial Interest also includes an investment in an entity through an intermediary such as a trust or partnership if any Partner, or any Professional Employee (including Immediate Family Members of those individuals), alone or in association with other persons, supervises or participates in the intermediary’s investment decisions or has Control over the intermediary.

Diversified Management Investment Company

For US SEC purposes: An entity where at least 75% of the value of its total assets is in cash, cash items, government securities, and securities of other investment companies, and other securities (limited in respect of any one issuer to an amount not greater in value than five percent of the value of the total assets of such management company and not more than ten percent of the outstanding voting securities of such issuer).

To be considered a diversified management investment company, a Canadian Mutual Fund must meet the definition of a diversified management investment company as defined here.

Employment related (interest or loan)

A financial interest or a loan received solely as a result of current or past employment rights (e.g. through pension, share option plans or other employment benefit plans). Examples may also include a housing, education or emergency loan made by an employer.

Engagement quality review partner (EQR)

The partner performing a second level of review to provide additional assurance that the financial statements subject to the audit or review and any associated report are in accordance with generally accepted auditing standards applicable to that audit.




EY Member Practice

EY Member Practice as used in this policy generally refers to a Country Practice. However, depending on the partnership structure in a particular geography and the specific section of policy being applied, the requirements of this policy may equally apply to Region and EYG entities in addition to Country Practices. If there is uncertainty in the determination of the appropriate practice classification in a particular situation, consultation with Independence is encouraged.

Financial Interest

A Financial Interest is direct or material indirect ownership of debt or equity securities or participation in mutual funds or other rights of participation, including puts, calls, options, warrants, and short sales. It also includes ownership of bonds guaranteed by, or secured by assets of, an Audit Client or its material Non-Client Affiliates.

A Financial Interest also includes any Financial Interests over which a Professional Employee and/or Partner acts as trustee or executor, or acts under a power of attorney and Financial Interests held in registered accounts, such as RRSPs, RRIFs, and RESPs.

It also includes ownership of bonds guaranteed by, or secured by assets of any entity.

Indirect Financial Interests can be deemed to be Direct Financial Interests. Refer to definition of “Direct Financial Interest”.

Financial Statements Audit Client

See “Audit Client” and “Audit Engagement”.

Financial Reporting Oversight Role

A Financial Reporting Oversight Role (or “FROR”) refers to those persons exercising or in a position to exercise influence over the financial statements and anyone who prepares those statements. For FRORs of US SEC Audit Clients, this would include a member of the board of directors or similar governing body, chief executive officer, president, chief financial officer, chief operating officer, general counsel, chief accounting officer, controller, director of internal audit, director of financial reporting, treasurer, or any equivalent position. These restrictions refer to any individual who has direct responsibility for oversight over those who prepare the registrant’s financial statements and related

For CRI Audit Clients, apply the US SEC definition of FROR.




information (e.g., management’s discussion and analysis) that are included in filings with the US SEC.

See also Restricted FROR.

Findings-based Fees

Findings-based Fees are generally based on the findings of a court or governmental agency (typically in a tax matter) and are often computed as a percent of the benefit derived by the client.


Foreign Private Issuer

A non-US domiciled US SEC issuer (other than a foreign government) except if the issuer meets the following conditions:

1. More than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the US; and

2. Any of the following:

a. the majority of the executive officers or directors are US citizens or residents;

b. more than 50 percent of the assets of the issuer are located in the US; or

c. the business of the issuer is administered principally in the US.

Issuers meeting the exceptions in 1 and 2 above are US SEC issuers, but not foreign private issuers.

Futures Commission Merchants

Futures Commission Merchants provide brokerage services for futures contracts of foreign currencies, commodities (e.g., sugar, coffee, cocoa, interest rates).

GIL GIL refers to the Global Independence List.

GIIRS GIIRS refers to Global Independence Incident Reporting System, an EYG database summarizing external regulatory independence violations that have been gathered centrally from several




sources.

GIS GIS refers to the Global Independence System (family tree tool).

GMS GMS refers to the Global Monitoring System.

Hourly-based Fees

Fees based on our standard hourly rates (or a fraction or multiple thereof) and fixed fees based on the budgeted or estimated time necessary to complete the work at our standard hourly rates (or a fraction or multiple thereof).


Immediate Family Member

Spouses, spousal equivalents and financially dependent individuals (e.g., children, step children and other relatives). Financially dependent individuals include any person who received more than half of their support for the most recent calendar year from a Professional and/or his or her Spouse (or spousal equivalent).

Spousal equivalent includes co-habitants occupying a relationship generally equivalent to that of a Spouse.

Indirect Financial Interest

A Financial Interest beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which an individual has no Control or ability to influence the investment decisions.

Indirect Financial Interests could be deemed to be Direct Financial Interests. Refer to definition of “Direct Financial Interest”.

Investment Company Complex

For US SEC purposes, an Investment Company Complex includes:

1) An investment company registered under the US Investment Company Act of 1940 (“registered”) and its investment adviser (*) or sponsor (**);

2) Any entity Controlled by or Controlling an investment adviser or sponsor in paragraph (1), or any other entity under common Control with an investment adviser or sponsor in paragraph (1) if the entity:




a) Is an investment adviser (*) or sponsor (**); or

b) Is engaged in the business of providing administrative, custodian, underwriting or transfer agent services to any investment company, investment adviser or sponsor; and

c) Any investment company or entity that would be an investment company but for the exclusions provided by Section 3(c) of the US Investment Company Act of 1940 (i.e., investment partnerships sold to less than 100 investors) that has an investment adviser or sponsor included in this definition by either paragraphs (1) or (2) above.

* An investment adviser does not include a sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser.

** A sponsor is an entity that establishes a unit investment trust.

Joint Investment

Jointly owned financial interests including investments in joint ventures, co-ventures, partnerships, franchises, tax shelters and real estate project arrangements with any third party (including individuals and entities, and clients and non-clients).

Key Audit Partner

Key audit partners include the following audit partners:

• The Lead Audit Engagement Partner, • The engagement quality review partner, • Other audit partners, if any, making key

decisions or judgments on matters significant to the audit including an audit partner assigned to the engagement team and responsible for key decisions or judgments on significant matters or risk




factors for the audit of the financial statements of the Audit Client or an audit partner on a significant subsidiary or division when such partner is responsible for key decisions that affect the financial statements of the Audit Client.

See also Supplementary Guidance G210.1 related to the determination of key audit partner roles.

Lead Audit Engagement Partner

Lead Audit Engagement Partner refers to the Partner with ultimate responsibility for the Audit Engagement. The Lead Audit Engagement Partner is the Partner with prime responsibility for signing the audit opinion on the consolidated financial statements of the Audit Client, and, where relevant, the Partner with prime responsibility for signing the audit opinion in respect of any listed entity whose financial statements form part of the consolidated financial statements.

Under certain defined circumstances, assurance executive directors may be authorized to serve as Lead Audit Engagement Partner. The circumstances and formal requirements for this authorization is described in the Global Assurance Practice Manual 2.14. In such instances, assurance executive directors serving as Lead Audit Engagement Partners are subject to additional independence requirements that are not otherwise applicable to executive employees, specifically:

• Compensation and evaluation restrictions under EYG Independence Policy Section 210;

• Category 4 Covered Person requirements with respect to Financial Interests under Section 101;

• Cooling off requirements under Section 102; and

• When an executive director is assigned Lead Audit Engagement Partner responsibilities either for an audit of a PIE, or for an audit of




a component of a PIE, and is designated a Key Audit Partner, the executive director is included in the EY member firm’s rotation policies and practices as described in Section 303.

Listed Public Interest Entity (Listed PIE) Audit Client

A listed entity is always a PIE. The listed PIE Audit Client includes the listed entity for which any EY Member Practice conducts an audit or review engagement and all its affiliates.

The affiliates of a listed PIE entity include all the following entities (except for entities listed in the US where you should refer to the definition of “US SEC Audit Clients”):

• All entities that have direct or indirect control over the listed audited entity where the listed audited entity is material to the parent (“material parent”);

• All entities that have significant influence over the listed audited entity where the listed audited entity is material to the investor (“material investor”);

• All entities over which the listed audited entity has direct or indirect control regardless or materiality (“subsidiary”);

• All entities over which the listed audited entity has significant influence from a financial interest held directly by the listed audited entity or a subsidiary and the inters is material to the listed audited entity (“material investee”);

• All entities that are under common control when both the listed audited entity and the other controlled entity are material to the controlling parent (“material sister entity”).

See also Supplementary Guidance G600.1 for illustrative examples of listed PIE Audit Client.

For Canadian Audit or Review Clients, refer instead to the Audit Client and Affiliates definitions: Audit Client and Affiliate subject to Minimum independence standards, Audit Client and Affiliate subject to CRI independence standards, and Audit Client and Affiliate - US SEC as appropriate.

For Listed PIE Audit Clients that are not CRIs or US SEC Registrants, refer to Audit Client and Affiliate subject to CRI independence standards.

The illustrative examples in the Supplementary Guidance are used by other EY Member Firms and should not be applied for Canadian clients.




Litigation

Litigation is a legal proceeding conducted in any forum that is intended to lead to a legally binding result, such as a lawsuit in a judicial court, an administrative matter, or a binding arbitration proceeding. Litigation does not include non-binding arbitration, mediation, conciliation, or any other process that is intended to facilitate voluntary resolution of a dispute but not to lead to a legally binding result.

Materiality

The determination of materiality is a matter of professional judgment, and should be based on such factors as the size or nature of an item, the expected users of the financial information, and the cumulative effect of items under consideration. In assessing the materiality of certain services and relationships, we need to consider their aggregate impact during the current fiscal year. The Lead Audit Engagement Partner has responsibility for making this determination in relation to the Audit Client’s latest annual consolidated financial statements (or stand-alone financial statements if there are no consolidated financial statements). See also Supplementary Guidance G600.2 for further discussion on materiality thresholds.

Refer to Supplementary Guidance G600.2 for materiality thresholds to be applied for purposes of affiliate determination, scope of service restrictions and other personal or firm matters. In Canada, guidance applicable to SEC Audit Clients must also be applied to CRI Audit or Review Clients.

Non-Client Affiliate An Affiliate that is not itself an entity for which EY performs an Audit or Review Engagement, but is subject to independence rules as an affiliate.

Non-Assurance Engagement Certain non-Assurance Engagements are subject to independence policies in Part 4.

Refer to the definition of Assurance Engagement for such engagements.

Non-Assurance Engagement Team Certain non-assurance engagements are subject to independence policies in Part 4. Refer to definitions for Assurance Engagement and Assurance Engagement Team for such engagements.




Non-listed public interest entities (Non-listed PIE) Audit Client

A non-listed PIE is a privately held entity that is a PIE. The non-listed PIE Audit Client includes the non-listed PIE entity for which any EY Member Practice conducts an Audit or Review Engagement and all its affiliates. The affiliates of a non-listed PIE include all entities over which the non-listed PIE audited entity has direct or indirect Control, regardless of materiality (i.e., subsidiaries).

See also Supplementary Guidance G600.1 for illustrative examples of Non-listed PIE Audit Client.

For Canadian Audit or Review Clients, refer to the definition of Audit Client and Affiliates subject to minimum independence standards for the entities comprising the affiliates.

The illustrative examples in the Supplementary Guidance G600.1 are used by other EY Member Firms and should not be used for Canadian clients.

Non-public interest entity (Non-PIE) Audit Client

A non- PIE is a privately held entity that is not a PIE.

For Canadian Audit or Review Clients, refer to the definition of Audit Client and Affiliates subject to minimum independence standards for the entities comprising the affiliates.

Non-PIE Audit Client (IESBA)

The non-PIE Audit Client (IESBA) includes the non-PIE entity for which any EY Member Practice conducts an audit or review engagement and all its affiliates. The affiliates include all entities over which the non-PIE audited entity has direct or indirect control, regardless of materiality (ie. subsidiaries).

See also Supplementary Guidance G600.1 for illustration. For non-PIE Audit Client (IESBA), follow the example provided for Non-listed PIE Audit Client.

Non-PIE Audit Client (AICPA)

Non-PIEs for which EY performs a financial statement audit under AICPA standards are subject to the following definition of “Audit Client and Affiliate.”

A Non-PIE Audit Client (AICPA) includes the following affiliates, in addition to the entity being audited (see Supplementary Guidance G600.1 for illustration):




• Subsidiaries and other controlled investees (e.g., partnerships, LLC), regardless of materiality;

• An entity over which the entity being audited has significant influence (investee), if the investee is material to the entity being audited;

• An entity that has control over the entity being audited (e.g., parent, partnership, LLC), if the entity being audited is material to the entity that has control;

• An entity that has significant influence over the entity being audited (investor), if the entity being audited is material to the investor;

• An entity which is under common control with the entity being audited (sister entity), if the sister entity and the entity being audited are both individually material to the entity that has common control; and

• An employee benefit plan sponsored by the entity being audited or an entity controlled by the entity being audited.

In addition, these entities are also considered affiliates of the entity being audited:

• A trustee that is deemed to control the

entity being audited if the entity being audited is not an investment company;

• The sponsor of the entity being audited if the entity being audited is a single employer employee benefit plan;

• Any union or participating employer that has significant influence over the entity being audited if the entity being audited is a multiple or multiemployer employee benefit plan; and

• An investment advisor, general partner, or trustee of the entity being audited if the entity being audited is an investment company and the entity being audited is material to the investment advisor, general partner or trustee, and they are deemed to have control or significant influence over the fund.




See Supplementary Guidance G600.2 for guidance in determining materiality.

Office

The term office relates to a distinct sub-group within an EY Member Practice whether distinguished along geographic or practice lines.

Officer An entity’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of the entity in charge of a principal business unit, division or function (such as sales, administration or finance), any other person who performs a policy-making function, or any other person who performs similar policy-making functions for the entity. Officers of the entity’s parent(s) or subsidiaries are deemed officers of the entity if they perform such policy-making functions for the entity. In addition, when the entity is a limited partnership, officers or employees of the general partner(s) who perform policy-making functions for the limited partnership are deemed officers of the limited partnership. When the entity is a trust, officers or employees of the trustee(s) who perform policy-making functions for the trust are deemed officers of the trust.

Overall financial statements

“Overall financial statements” refers to the financial statements that are the subject of an EY Audit Engagement, i.e., the consolidated financial statements (or stand-alone financial statements if there are no consolidated financial statements). The IESBA Code of Ethics refers to these as the “financial statement on which the firm will express an opinion.”

Participate in the Audit Engagement

The term “Participate in the Audit Engagement” refers to all Professionals assigned to an Audit Engagement, tax Professionals involved in the

There is a rebuttable presumption that anyone who charges time to the Audit Engagement code is a member of the Audit Engagement Team.




review of the tax provision or tax accrual, the engagement quality review partner, Professionals involved as information systems auditors, actuaries, and other specialists assisting in the Audit Engagement.

Partner

The term Partner means:

1) A partner of an EY Member Practice;

2) A partner equivalent of an EY Member Practice; or

3) An individual who has responsibilities and performs duties similar to a partner.

Refer also to definition of Lead Audit Engagement Partner.

Period of the Assurance Engagement

The period that starts when the assurance team begins to perform assurance services or is engaged, and ends when the assurance report is issued. If the assurance engagement is expected to recur, the period of the assurance engagement ends with the notification by either party that the professional relationship has terminated or the issuance of the final assurance report, whichever is later.

Permitted Mutual Fund

A mutual fund is operated by an investment company that pools money from many investors and invests the money in stocks, bonds, money-market instruments, real estate or other securities, in accordance with a stated set of objectives on the principle of risk spreading and which do not seek to take legal or management control over any of the issuers of its underlying investments.

A permitted mutual fund is a mutual fund with the following attributes:

• The investments held within the fund are diversified, such that no single investment comprises 20 percent or more of the value of the portfolio; and

• Shareholders are generally free to sell their shares at any time.




An open-ended mutual fund is considered a permitted mutual fund for purposes of this policy.

Phased Fees

Phased fee structures include fee structures that are set in phases, not fixed up-front, as well as fee structures with rates that vary by phase of the engagement. In a phased fee structure, the varying fees by phase are encompassed in a written agreement. A Phased-fee structure may be contingent depending on its design.


Examples of a phased fee structure which would be deemed a contingent fee are:

• A structure in which a heavily reduced rate in an earlier phase is subsidized by a much higher rate in later phases;

• A phased fee engagement that contains a fixed fee for subsequent phases where the performance of the subsequent phases is dependent on the findings or outcome of the earlier phase or phases will be deemed a contingent fee arrangement.

An arrangement that has either an escalating or declining percentage of standard hourly rates based upon the number of professional hours incurred in each of two or more phases is not a contingent phased-fee structure.

Pooled investment vehicles

Investment products, such as but not limited to:

1. Hedge funds; 2. Private equity funds; 3. Investment companies; 4. Common trust funds; 5. Collective trust funds; 6. Exchange traded funds (ETFs); 7. Real estate investment trusts (REITs); 8. Real estate funds; 9. Separate/segregated accounts; and 10. Unit trusts.




Procurement

Procurement refers to the purchase of goods and services from a third party to satisfy an internal need of our business, for example, office supplies and phone service. Procurement does not include purchases of goods and services that are not intended to meet our internal need but are an integrated element of our professional services, and such arrangements are likely to be cooperative business relationships.

Professional

The term Professional is a general term covering all Partners and Professional Employees.

Professional Employee

The term Professional Employee means all audit and non-audit employees providing professional services to clients. For Country Practices organized other than as a partnership, it includes all individuals providing professional services to Audit Clients, other than those deemed to be a Partner. Also included are individuals who are not otherwise employees, such as external contractors and consultants, who are to comply with these independence policies in respect of the Audit Clients on which they work irrespective of the type of service being provided (audit or non-audit services).

For clarity, Professional Employee includes: • part-time Professional Employees; • employees providing language translation

services to clients; • associate partners; • core business staff (“CBS”) whose role is

primarily client serving as evidenced by time reporting;

• external contractors who charge time to clients; • former or retired partner on contract or who

retain a Close Association with the Firm.

Public Interest Entity (PIE)

A Public Interest Entity (“PIE”) is:

• A listed entity; and • An entity (a) defined by regulation or

legislation as a PIE or (b) for which the audit is required by regulation or legislation to be conducted in compliance with the same independence requirements that apply to the audit of listed entities. Such regulation may be promulgated by any relevant regulator, including an audit regulator.




Publicly Available Financial Interest Refer also to definition of Financial Interest.

There is a rebuttable presumption that Financial Interests held by a Professional and their Immediate Family Members are publicly available, with the exception of an investment in a private, closely-held entity (e.g. family-owned/managed business that is owned jointly with a family member or close friend). For example, Financial Interests in flow-through shares, limited partnerships and other similar tax shelters available through private placement are considered, by their nature, to be publicly available and must be reported in the Global Monitoring System. If there is any uncertainty whether a Financial Interest is to be considered publicly available, consultation with Independence is encouraged.

Rabbi Trust

For US SEC purposes only: the term rabbi trust refers to an irrevocable trust whose assets are not accessible to the EY Member Practice until all benefit obligations have been met, but are subject to the claims of creditors in bankruptcy or insolvency.

Restricted FROR

See “Financial Reporting Oversight Role.” Restricted FROR excludes persons only serving as a member of the board of directors or similar management or governing body of the Audit Client i.e. it excludes directors whose only role at a US SEC registrant Audit Client is to serve on the board (e.g. directors, including audit committee members, who are not also executive employees of the Audit Client). It also excludes a FROR of an affiliate of the US SEC Audit Client when the affiliate is not material to the consolidated financial statements of the US SEC Audit Client or is audited by another auditor.

This Restricted FROR definition applies only to US SEC Issuer Audit Clients.




Restricted for use and distribution audit or review engagement

An audit or review engagement that is restricted for use and distribution is identified by the following characteristics:

• The engagement is an audit or review of special purpose financial statements; and

• The audit or review report explicitly includes a restriction on use and distribution.

Review Client See definition for Audit Client.

Review Engagement

An assurance engagement, conducted in accordance with International Standards on Review Engagements or equivalent, in which a conclusion is expressed on whether, on the basis of the procedures which do not provide all the evidence that would be required in an audit, anything has come to our attention that causes us to believe that the financial statements are not prepared, in all material respects, in accordance with an applicable financial reporting framework.

See also Audit Engagement. For purposes of the EY Canada Independence Policy, independence policies applicable to an Audit Engagement or Audit Client are equally applicable to a Review Engagement or Review Client.

RIA An SEC registered investment advisor.

Significance

Significance refers to the relative importance of a matter, taken in context. Significance can be considered in the context of quantitative and qualitative factors, such as relative magnitude, the nature and effect. Although the matter may be clearly not material from a quantitative standpoint, there may be situations where qualitative factors, such as the nature of a service or relationship, or its visibility, would result in a conclusion that the service or relationship is significant. Consideration should be given to how the matter would be viewed by an impartial yet informed third party.

Refer also to definition of Clearly Insignificant.




Significant Accounting role

A role where a person is in a position to exert significant influence over the preparation of client accounting records or financial statements. It would usually not include accounting roles where the work of the person is subjected to multiple levels of review and approval.

Significant subsidiary or division

A significant subsidiary or division includes, on a rebuttable presumption to be agreed with Independence, a subsidiary or division whose assets or revenues constitute 20 percent or more of the audited entity’s consolidated assets or revenues.

Refer also to definition of Significant Influence.

Significant Influence For the purposes of this definition, significant influence is presumed to exist if an investor owns 20% or more of an entity’s voting shares but does not Control the entity, or proportionately consolidate or equity account for the investee. It may also exist at lower ownership levels depending on factors such as board representation.

SORT SORT refers to the EY Service Offering Reference Tool. For Canadian Audit Clients, use the Americas-Canada edition of SORT.

Spousal Equivalent

A cohabitant occupying a relationship generally equivalent to that of a spouse. The definition of spousal equivalent is not limited to formal agreements or registered partnerships in jurisdictions that have adopted various forms of civil union. A spousal equivalent can be a person of the same gender or the opposite gender.

Spouse or Dependent

See Immediate Family Member.




Substantial Stockholder

A substantial stockholder in a decision making capacity generally includes those that exercise significant influence over the audit client by ownership of 20% or more of the audit client’s securities. Ownership of between 10% and 20% of the audit client’s securities could be considered a substantial stockholder if there are other facts and circumstance that support the stockholder being in a decision making capacity. In situations where a 10% or greater stockholder is determined to not be a substantial stockholder, advance approval by Independence is required.

Technical assistance firm

A Technical Assistance (“TA”) relationship with third party service provider governed by specific terms and conditions for the performance of professional services and related disclosure of professional data. A technical assistance firm is not an EY network firm. Under such terms and conditions, the TA firm agrees to comply with EYG independence policies and requirements in respect of any work referred by an EY Member Practice.

US SEC Audit Client

A US SEC Audit Client includes all the following categories:

(1) All Audit Clients that are US SEC Registrants and their affiliates.

(2) Certain non-SEC registered pooled investment vehicles, that are advised by an SEC registered investment advisor (RIA) and required to comply with the Custody and Recordkeeping Rules (Rule 206(4)-2) of the Investment Advisers Act of 1940 by relying on audit reports, security count examinations or internal control reports issued by an EY Member Practice, and their affiliates;

(3) Qualifying FDIC-insured banks and their affiliates;

(4) US SEC registered transfer agents for which an EY Member Firm issues an accountants

See also Audit Client and Affiliates.




report on transfer agent controls as required under US SEC Rule 17ad-13, and their affiliates;

(5) Entities involved in the servicing function for an asset-backed securities issuer for which an EY Member Firm issues an attestation report over servicing controls as required under US SEC Rule 13a-18 or US SEC Rule 15d-18, and their affiliates (“Reg AB attestations”).

The affiliates of a US SEC Audit Client include all of the following entities:

(1) An entity, regardless of materiality, that has control over the US SEC Audit Client, or over which the US SEC Audit Client has control, or which is under common control with the US SEC Audit Client, including the US SEC Audit Client’s parents and subsidiaries; (for SEC purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting shares, by contract or otherwise); and

(2) An entity over which the US SEC Audit Client has significant influence, unless the entity is not material to the US SEC Audit Client; and

(3) An entity that has significant influence over the US SEC Audit Client, unless the US SEC Audit Client is not material to the entity; and

(4) Each entity in the Investment Company Complex when the US SEC Audit Client is an entity that is part of an Investment Company Complex.

See also Supplementary Guidance G600.1 for illustrative examples of US SEC Audit Client G600.5 for registered investment companies and US SEC pooled investment vehicles, and G600.3 related to Insured Depository Institutions (IDIs).




US SEC Issuer

Any entity which issues or proposes to issue any security in a public offering in the US (including Foreign Private Issuers and voluntary filers), or that files a registration which has not yet become effective or been withdrawn.

The US SEC regulations broadly define “issuer”. It could be a corporation, a partnership, an association, a joint- stock company, a business trust, a domestic of foreign government, an individual or an unincorporated organization. The most common types of securities issued are common and preferred stocks, bonds, notes, debentures, bills and derivatives.

However, with respect to certificates of deposit for securities, voting-trust certificates, or collateral-trust certificates, or similar instruments, the term issuer is the entity or entities performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued.

In respect to equipment-trust certificates or like securities, the term "issuer" means the person by whom the equipment or property is or is to be used.

Finally, in the case of fractional undivided interests in oil, gas, or other mineral rights, the term "issuer" means the owner of any such right or of any interest in such right (whether whole or fractional) who creates fractional interests therein for the purpose of public offering.

US SEC Non-Issuer Registrant

Any entity that has not issued securities to the public in the US but is registered with the SEC, including voluntary filers, or that is required to have an audit or attestation report on file (e.g. broker-dealers). However, registered investment advisers are not considered to be US SEC non-issuer registrants.

See also Supplementary Guidance G600.6 for criteria for determining applicability to non-issuers.




US SEC Registrant

A US SEC registrant includes all of the following categories:

(1) All US SEC Issuers (Section 12 of the 1934 Act)

(2) All US SEC non-issuer registrants.

Value-added Fees

Value-added fees, like Contingent Fees, are paid based upon the happening of an event. However, value-added fees involve a reasonable amount paid (usually in the form of a retainer or contractually-fixed payments) not dependent on the outcome of the service, plus a limited additional amount based upon the ultimate value of the service to the client the determination of which may include an assessment of the novelty or complexity of the engagement.

A value-added fee arrangement that provides that an Audit Client may pay a completely discretionary performance bonus in addition to a base fee would not be considered a Contingent Fee. However, care must be taken to assure that a fee is not inappropriately labelled value-added when it is, in fact, a Contingent Fee.


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EY Canada Independence Policy CA-P1101 December 2014 Canada... · 2015-08-17 · EY CANADA INDEPENDENCE POLICY • DECEMBER 2014 4 Canada Independence Policy as indicated (Refer to