An audit engagement team has just received a
Sentinel request to provide a tax service for their audit
client, The Redstone Group. Let’s join them as they respond
to this request.
Senior Manager: Did you see the Sentinel request for
transfer pricing consulting services for Redstone?
Partner: Yes! Can you help me review this request for
permissibility? The tax engagement team wants to start the
work as soon as possible.
Senior Manager: Sure, I will review the details included in
the Sentinel request and get back to you.
Senior Manager: I reviewed the draft engagement letter
included in the Sentinel request and everything matched what
was detailed in the Description of Services and the taxonomy
codes selected. I reviewed the guidance on the Independence
Non-Audit Services Portal and the transfer pricing service
is permissible, so I think the tax team can proceed with the work.
Partner: Great, I checked Redstone’s Audit Committee
Charter, and we will need to obtain specific pre-approval
for this tax service before approving the Sentinel request
since the committee’s policies and procedures only provide
for pre-approval for audit and attestation services.
Senior Manager: Hmm, our next meeting with the Audit
Committee isn’t until next month.
Partner: That’s okay because their Charter allows for
pre-approval by an Audit Committee member delegate, so we
can seek pre-approval from the Chair.
Senior Manager: Ok, I’ll use the Audit Committee
communication templates to prepare the communications.
Partner: Those templates are a great resource; they also
capture IESBA concurrence requirements. The “pre-approval
examples for tax and non-audit services” slides linked in
the templates are also helpful because they provide examples
to meet PCAOB Rule 3524 and 3525 requirements for common
non-audit services, including transfer pricing services.
Senior Manager: I’ll do that. I’ve also used the PCAOB Rule 3524
Practice Aid to make sure we’re complying with all
aspects of the rule for this tax service.
Partner: Great, to satisfy parts a and b of Rule 3524, we
need to be thorough in the written descriptions that we
provide to the chair because those details will drive our
required discussion.
Senior Manager: I’ll be mindful of that and will tailor the
slides to describe the proposed transfer pricing service,
the associated fee structure details, and independence considerations.
Partner: Thanks for preparing the Audit Committee
communication templates for our communications with the
chair! The Chair just confirmed pre-approval. Let’s document
the substance of our discussion with the Chair and their
pre-approval in the audit file. Now we can approve the
Sentinel request for the transfer pricing service.
Senior Manager: No problem! I’ll approve the Sentinel
request and will schedule a meeting with the tax engagement
team to discuss service limitations and possible areas of
scope creep.
Partner: Good idea. We also need to provide a written
description of the service to the full Audit Committee at
the next scheduled meeting and discuss the potential effects
on our independence. Please add the transfer pricing service
to the slide of services pre-approved by the Audit Committee delegate.
Senior Manager: Will do. I’ll incorporate the same
information we presented to the Chair.
Partner: Thank you for your help with this service request.
Now that we’ve presented the transfer pricing service to the
full Audit Committee, all that’s left is to document
everything in KCw to satisfy part c of Rule 3524. Could you
prepare the documentation this week evidencing compliance
with part c of PCAOB Rule 3524?
Senior Manager: I can do that. I’ll document the substance
of both discussions with the chair and then the full Audit Committee.
Partner: Thanks for documenting everything in KCw.
Everything looked great.
Senior Manager: My pleasure, I’m happy everything’s already
documented in KCw.
Partner: Yes, it’s definitely helpful to get ahead of
documentation where we can, so we don’t have to go back and
address a lot of open items in KCw right before we issue our
audit report.
Senior Manager: Agreed!