KPMG’s independence systems, policies, and
procedures are critical to as our System of Quality Control,
also referred to our System of Quality Management.
Key independence systems include Sentinel, KICS – ‘KPMG’s
Independence Compliance System’, and the REL - ‘Restricted
Entity List’. These systems help us maintain independence by
preventing and detecting independence violations.
Sentinel is the primary system used to determine if a
proposed engagement or business relationship complies with
applicable professional and regulatory standards. But its
effectiveness is dependent upon entering complete and
accurate data. Companies are constantly shifting, growing
and restructuring, so we must stay ahead of transactions or
activities that could result in new affiliates or affiliated
persons. Audit engagement teams need to continually update
the client’s Sentinel family tree in a timely manner to help
ensure accurate placement of entities and affiliated persons
on the tree, so all services and relationships can be
evaluated appropriately, and the firm’s System of Quality
Control can operate as intended. Teams also need to submit
complete and accurate Sentinel requests so that Sentinel
Lead Partners can appropriately evaluate the request.
Getting tree maintenance, submittal and review right all are
equally important in maintaining the system’s integrity, to
avoid potential violations.
The REL and KICS are additional tools that are important to
our System of Quality Control. Restricting an entity on the
REL results in the entity identifying as restricted in KICS.
All public audit clients and any of their public affiliates,
including their debt and equity securities, need to be
properly listed as restricted on the REL. Non-public
affiliates that offer financial products must also be
included. Engagement teams are required to regularly review
and confirm that restrictions are appropriate and request
necessary updates, assuring the REL’s accuracy, including
evaluating if new affiliates meet the requirements for
inclusion. If changes need to be made, teams must submit a
REL Update Form, verifying all engagement details are
accurate. It is crucial the REL is updated timely, as our
professionals rely on this information to maintain their
personal independence.
Our System of Quality Control also includes the procedures
performed by audit engagement teams and documented in the
KPMG Clara workflow, or KCw. It’s important that the
engagement profile is set up within KCw accurately during
the planning phase, to enable the delivery of applicable
independence procedures within the Independence module. When
the audit engagement team indicates that there are
transactions resulting in new affiliates, the New Affiliates
screen within the KCw Independence module is activated with
procedures that must be completed to assess independence in
relation to the new affiliate. Completing independence
procedures is essential to a quality audit, so it’s critical
to plan enough time to perform and document each step. There
is execution guidance in the KPMG Audit Execution Guide
(KAEG) that aligns with each step in the Independence module
to assist teams in appropriately completing the procedures.
Lead audit engagement partners rely on the results of
independence procedures and the firm’s System of Quality
Control to support annual independence communications to the
Audit Committee, as required by PCAOB Rule 3526. In
situations where there’s been a violation (also known as a
breach) during the audit or professional engagement period,
these communications must be reviewed and approved by the
Independence Group, a key control step, prior to
communicating to the Audit Committee. Teams are encouraged
to use the Audit Committee templates available on Alex to
help with all required written communications.
The systems, policies and procedures that underpin our
System of Quality Control work together to help us maintain
our independence, communicate related matters, deliver
quality audits to our clients, and ultimately build trust in
the capital markets.