ICAEW's definition of a network is that used by the International Ethics Standards Board for Accountants (IESBA):
Network: a larger structure:
The Financial Reporting Council (FRC) Ethical Standard on auditor independence (which needs to be applied instead of ICAEW's code, for audits in accordance with UK Auditing Standards) uses a slightly different wording.
Any entity which is part of a larger structure that is aimed at co-operation and which is:
Both definitions seek to apply a principles based approach and thus require groups themselves to consider whether they are networks. In essence, if a grouping either holds itself out as acting in concert (common name, etc) or acts so closely together that any of them could influence the audits carried out by any other, then they should consider themselves a network.
The big firms and the mid-tier firms regard themselves as networks. A lot of smaller, loose referral groupings of independent firms do not regard themselves as networks. However, it is feasible that some smaller mid-tier groupings might find themselves within the definition of networks even though they have not considered themselves to be one.
If in doubt, consider the threats and apply common sense.
The threats are:
There is some guidance in the ICAEW code at paragraphs 290.13-290.24.
Network firms have to be independent of audit clients of other network firms, which implies the need for a pro-active system to identify independence issues throughout the network.
In doing this, network firms need to take account of a variety of independence requirements around the world, which sometimes means having to apply the most stringent requirements across the board.
Although the FRC has elected to apply its own standard rather than use IESBA's, complying with their standards results in all material respects in complying with IESBA.
Note that in the FRC Ethical Standard 'audit firm' [which in the Standard has to be independent] includes network firms in the UK, which are controlled by the audit firm or its partners.