Narration: Marco, the lead audit engagement partner,
is meeting with Trina, a senior manager,
to discuss the importance of documenting independence procedures
outlined in KPMG Clara workflow, also referred simply as Clara or KCw.
Let’s hear their discussion.
Marco: As we plan for our audit, I want to remind you about the
importance of independence and a vital component of our engagement,
the completion of procedures in the independence module within KCw.
Trina: Ahh yes, I’m familiar with documenting in KCw as a part of the audit program.
I’ve been using KAEG as a guide within KCw to help with evaluating
and documenting assessment of independence matters.
Marco: That’s great because documenting the execution and results of
independence procedures is just as important as any other area of the audit.
And it helps us ensure that the firm can issue an independent auditor’s report.
Trina: So, there are a number of required steps
noted in the independence module of KCw.
We need to evaluate the ongoing services and relationships with all new affiliates
and confirm the Sentinel tree is complete and accurate.
This also includes the correct placement of affiliates on the tree.
Marco: Yes, it’s necessary to follow the procedures outlined for all the steps.
I know of an engagement team with an independence violation
because they didn’t follow the procedures correctly for assessing ongoing services
we were providing to a company that their client acquired.
Trina: Agreed. I recall you mentioned the importance of
setting up the client profile correctly too.
Marco: I’m glad you remembered that point.
If their profile isn’t set up properly in KCw,
the appropriate independence procedures may not be applied.
If you set up an SEC profile, you’ll be provided SEC procedures.
Similarly for an AICPA profile, AICPA procedures will be listed in KCw.
By the way, I know you sent out the director and officer questionnaire to the client.
Did you get it back from them yet?
Trina: They actually reached out requesting a meeting to confirm related details.
Marco: Well, to be in full compliance,
all survey responses must be recorded within the questionnaire
and documented in Clara.
The information they include within the questionnaire helps us identify
and avoid certain relationships and interests with related individuals,
which include their spouses and dependents.
Verbal responses are not sufficient.
Trina: Got it. I’ll let them know we can discuss the details
but they’ll need to respond directly within the questionnaire as well.
Can we complete all independence procedures at year-end,
once we’ve gotten through substantive testing?
Marco: No, procedures in KCw are always active.
They should be initiated when the engagement begins and managed throughout.
If we wait until the engagement is almost finished,
we might not have enough time to complete all procedures.
So make sure to allocate enough time to perform each individual step correctly.
We need to treat independence like any other audit area.
Trina: Well this all makes sense.
It will be my responsibility to complete independence procedures, correct?
Marco: Yes, you may ask staff level professionals to assist,
but managers should have primary responsibility for completing procedures
and ensuring all documentation is included in KCw.
Partners, including Engagement Quality Control Reviewers,
are then required to review the procedures in Clara
and ensure they’ve been completed properly and to sign-off.
Trina: That’s what I thought. I’ll be sure to document everything.
Marco: Thank you. These procedures are our evidence
that we performed our due diligence, helping us avoid independence violations,
which directly supports Trust in our firm.
And remember, if you have any questions, just reach out.
Narrator: With the guidance of Marco, Trina worked through
the independence procedures during the course of the audit engagement.
She was able to wrap up all procedures within the independence module of KCw
by year-end and after partner review,
procedures were determined to be complete
and accurate and received partner sign-off.