Narrator: Carol, an audit managing director, has been selected for
an independence compliance audit. The auditor has identified
independence violations related to her spouse opening a new brokerage
account without her knowledge which held a restricted entity. She’s now
become aware that her spouse opened another brokerage account
last month, after she had submitted her documentation for audit.
She’s now speaking with the auditor.
Carol: I’ve been reviewing my KICS account during the quarterly
confirmations, but you still uncovered issues during the audit.
Working so much during busy season, I guess I didn’t complete a thorough
enough review of our financial interests.
Auditor: Many violations occur because a spouse or spousal equivalent
makes changes without letting the professional know,
or professionals don’t complete all of the steps to enroll and activate
their accounts for KICS Broker Import. Taking small steps to correct
these issues can make a big impact.
Carol: I thought I was doing everything to comply with the Broker Import
requirements. I should have my spouse join this call so he can hear
first-hand how important it is that we get this right. These violations
could impact my future promotions.
Auditor: I’d be happy to discuss independence considerations with you both,
but because your responsibility extends to your spouse, you should
have regular discussions about your independence responsibilities,
so they notify you of any changes before they occur.
Carol: That’s good advice. Can you tell me more about your findings?
Auditor: Sure, during the audit I identified that you had accounts activated
for Broker Import, but when your spouse opened a new account
at the same brokerage firm, it was never activated. New accounts
won’t automatically be enrolled and activated. You must manually do this
for each new account within 14 days of opening the account
Carol: I get it. I also just found out that after I submitted my audit materials,
my spouse opened another brokerage account that
wasn’t timely activated for Broker Import.
Auditor: Unfortunately, that will be counted as another independence violation.
Make sure you complete all the steps to activate the account today.
Any investments held through the account will need to be reported in KICS.
Carol: Okay. I’m going to speak with my spouse so I’m aware of any new
accounts in the future, and this doesn’t happen again. I understand
that I must complete the entire process to enroll and activate accounts,
which includes adding them to KICS and submitting the client
authorization form in a timely manner.
Auditor: A best practice to preventing independence violations
in the future is to regularly complete a thorough review of the
financial relationships you and your immediate family
members hold. The quarterly confirmations are great opportunities
to make sure you’re getting it right.
Narrator: Carol acted in an ethical manner by reporting the additional
independence violation to the auditor. After the call, she acted in a
timely manner to enroll and activate the account for Broker Import and
discussed her independence responsibilities with her spouse.