The firm’s System of Quality Control works
to prevent and detect independence violations, allowing us
to provide reasonable assurance of compliance with
independence requirements. To maintain its effectiveness, we
rely on receiving quality data from the audit client. It’s
important to have discussions with our clients about the
importance of timely communicating planned mergers and
acquisitions, materiality and ownership changes, or other
corporate transactions. This allows teams to appropriately
assess independence and make necessary updates in Sentinel.
It also allows the firm to promptly exit any prohibited
services or relationships with any new affiliates, in
advance of the effective date of a transaction.
When activities occur that may result in new affiliates or
affiliated persons, audit engagement teams can seek
assistance by submitting an inquiry to Professional Practice
Support via the Audit Operations Portal.
As important as it is to receive quality information from
our audit clients, it is equally important for audit
engagement teams to provide quality communications to the
client’s Audit Committee to enable them to exercise their
oversight role effectively. Prior to accepting a new SEC
audit client and annually thereafter, PCAOB Rule 3526
requires our firm to report to the Audit Committee, in
writing, all relationships that may be reasonably thought to
bear on independence, and to discuss with them the potential
effects those relationships may have on our independence.
Documentation of the substance of the discussion with the
Audit Committee is required to be included in KCw; only
attaching the written communication will not satisfy this
requirement and As part of our annual written
communications, we are also required to affirm in writing
that the firm is independent, in compliance with PCAOB Rule 3520.
Furthermore, the SEC requires all proposed audit and
permitted non-audit services provided to the audit client
and its subsidiaries to be pre-approved by the client’s
Audit Committee. Additional PCAOB pre-approval requirements
exist for tax services and non-audit services related to
internal control over financial reporting. IESBA also
requires concurrence from the Audit Committee of any public
interest entity, including our SEC audit clients, prior to
providing non-audit services to upstream entities that
control the audit client, and downstream entities that the
audit client controls, regardless of consolidation. To aid
in the preparation of required independence communications
with the Audit Committee, including communications necessary
for obtaining pre-approval or concurrence, teams should
refer to “The Audit Committee Communications User Guide”
found on Alex.
In order for the Audit Committee to make an informed
decision about a proposed service, we need to provide them
with sufficient information about the service, to enable
them to evaluate the potential effects on our independence.