One of the key responsibilities of the audit
committee is to appoint and oversee the auditor and ensure
they remain independent. For SEC issuer audit clients and
their consolidated entities. audit committees are required
to pre approve all services before KPMG is engaged.
Additionally, the new ISO standards require us to obtain
concurrence from the audit committee for proposed non
assurance services for Public Interest entity audit clients,
which include SEC issuers and any entities controlling or
controlled by the audit client. This means services for
incremental entities now require concurrence in advance from
the audit committee, namely upstream controlling entities
and downstream controlled entities that are not consolidated
I S bar requires the audit committee to be informed of and
concur that each non audit service does not impact the
firm's independence before KPMG is engaged. To help the
audit committee fulfill their responsibility, we must
provide them with sufficient information about the services
and their potential impact on our independence. There are a
number of steps that need to be taken to be in compliance
with the SEC audit committee pre approval rules, the
additional requirements associated with PCAOB rules 3524 and
3525 and I EZPass new concurrence requirements. And hearing
to these rules requires that professionals fully understand
the requirements. SEC rules permit two methods of obtaining
pre approval for services provided to sec issuer audit
clients and their subsidiaries. The policies and procedures
approach and the ad hoc approach, we can identify which pre
approval method is used by checking the proxy statement or
the Audit Committee Charter. We should also discuss with the
audit committee to ensure there is a common understanding of
the expected approach. I ESPA provides flexibility and how
communication requirements are met. procedures for obtaining
concurrence may be established under a general policy on an
individual engagement basis, or on any other agreed basis.
When the audit committee uses the policies and procedures
method of pre approval. SEC rules require that we
subsequently notify the audit committee on a timely basis,
usually at the next scheduled meeting when a previously pre
approved service is being provided. In addition, if a
proposed service is not approved under the Audit Committee's
policies and procedures, separate ad hoc pre approval would
need to be obtained prior to beginning the service. A
similar approach under the ISO standards would be the
general policy approach. But unlike the SEC, I as ba does
not require subsequent reporting of services that have been
engaged pursuant to concurrence under a general policy. When
employing the SCCs ad hoc method of pre approval, each
specific service requires approval by the audit committee in
advance of the service being provided. If the audit
committee allows for pre approval by an audit committee
member delegate, the team must then present the service to
the full audit committee on a timely basis, usually at the
next scheduled meeting. I EZPass individual engagement basis
method is similar to SCCs ad hoc method where concurrence is
required for each specific non audit service in advance of
the service being provided. There are various templates
available on ALEKS to help teams comply with pre approval
methods. The slides in the audit committee presentation
templates should be tailored to describe the relevant
services as well as considerations specific to the client.
There are additional requirements in PCAOB rules 3524 and
3525. That audit engagement teams must comply with when
seeking pre approval to perform permissible tax services and
non audit services related to internal control over
financial reporting for an SEC issue or audit client or its
subsidiaries. To comply with part A of PCAOB rules 3524 and
3525. Complete written descriptions need to be provided by
the audit team to the audit committee for all related tax
and non audit internal control related services including
fee structures when tax services are proposed. fee
arrangements should be based on a fixed fee or on actual
time incurred and must be described to the audit committee
as such. written descriptions provided by the clients
management or other client teams such as internal audit
would not satisfy the requirement for the audit team to
provide the written description. To comply with Part B of
PCAOB rules 3524 and 3525. We must discuss with the audit
committee the nature and scope of services and their
potential effects they may have on our independence. The
sufficiency of the written descriptions that are provided
play an important role when having the discussion with the
audit committee. When written descriptions are incomplete.
For example, if they do not include all components of the
service, or required information on the fee structures for
tax services, there's usually a domino effect resulting in
incomplete discussions with the audit committee. Because
these two requirements go hand in hand, extra attention and
scrutiny of written descriptions is warranted. Remember to
fulfill Part C of PCAOB, rules 3524 and 3525. We are
required to document the substance of the discussion with
the full audit committee. Be sure not to miss this step
because all elements must be addressed to satisfy rule
requirements. Our audit documentation should include both
the written description provided to the audit committee and
the documentation of the discussion