As the firm works towards our goals around Trust and
Growth by collaborating to provide meaningful non-audit
services to our audit clients and their affiliates, it’s
crucial that when proposed services are identified and
engagement teams submit service requests via Sentinel, they
are assessed for permissibility appropriately.
Service requests for our SEC audit clients and affiliates
are routed to the Sentinel Lead Partner and their delegates,
requiring their manual approval. Each service request must
include a draft engagement letter, statement of work, or
equivalent document that describes all elements of the
proposed services, including the fee arrangement. If such a
draft document isn’t attached to the Sentinel request, it
should be sent back for revision.
For audit and attestation engagements where SEC independence
rules apply, be sure the draft document does not contain
indemnification or limitation of liability provisions.
To help determine the permissibility of the proposed
services, you will need to review the Description of
Services field in the Sentinel request, along with the
attached documents, to understand the scope, intended use and
resulting deliverables of the proposed services.
Confirm that all the information in the request is correct:
Have all the engaging parties been selected? Remember, when
a service is being provided to an affiliate, they should be
listed as the engaging party, not the Global Ultimate Parent,
unless it is a party to the engagement as defined in the
Sentinel User Guide. Ensure the billing party is included as
an engaging party.
Review the taxonomy codes, do they accurately represent all
aspects of the proposed services including any technology
components? The proposed service should be consistent with
the definition of the taxonomy code, which can be found by
clicking on the taxonomy code in the Sentinel request.
Independence guidance and any additional requirements, such
as risk management approval, will also be noted in the definition.
Evaluate the request against the applicable independence
rules and firm policies. Certain types of services and fee
arrangements are prohibited for restricted entities, such as
contingent fees, commissions, and referrals.
Assess whether the requestor appropriately evaluated and
documented why the proposed service is permissible and the
threats and safeguards for each non-audit service. For SEC
audit clients and their affiliates, is the service in line
with the SEC’s overarching principles and general standard
of independence? Was use of the IESBA Advice and
Recommendations exception detailed, where applicable?
Check the engagement start and end dates to make sure they
are appropriate. Sentinel approval should come before the
start date of the engagement.
Be mindful of proposed services that bring about
opportunities for scope creep. Confirm all services are
permissible, communicated to and pre-approved by the Audit
Committee or Those Charged With Governance, when required.
Services should be pre-approved in accordance with PCAOB, SEC
and IESBA rules, this includes compliance with PCAOB Rules
3524 and 3525, as applicable.
Pay special attention to service requests from KPMG member
firms; their engagements may include embedded activities.
For example, some member firms may perform financial
statement preparation assistance services (including word
processing or translation services) in connection with a
statutory audit service. Such services should be
specifically identified in the draft engagement letter as a
non-audit service and the appropriate financial statement
preparation assistance taxonomy code included in the
Sentinel request so that pre-approval may be obtained (as
relevant) when the service is permissible.
When approving a Sentinel request, the Sentinel Lead
Partners (or delegates) should indicate in the approval
comments the relationship between the engaging party and any
audit clients included in the Sentinel tree and the
rationale for determining the service is permissible. Have
conversations with client personnel to discuss limitations
on our services and remind the non-audit teams about any
service limitations and possible areas of scope creep.
For recurring, multi-year engagements, engagement teams must
submit a new Sentinel request before KPMG is engaged to
provide services for each year’s engagement. For example,
tax compliance services scoped for a three-year period would
require a new Sentinel request each financial year. It’s a
best practice to reiterate this requirement within the
Sentinel approval comments to raise awareness among
non-audit teams.
If there are any additional client requests, they must be
evaluated for permissibility via an additional Sentinel
request, added to the engagement letter or statement of work,
and pre-approved by the Audit Committee prior to the non-audit
team providing any additional service.