System of Quality Control
", "click_2": "Pre-approval of services
", "click_3": "Independence communications
", "click_4": "Certain relationships with audit clients
", "click_1_text": "Each box will reveal more about the areas where KPMG works together with our clients to maintain independence; let’s start with our System of Quality Control.
", "transcript_1": "System of Quality Control
To provide reasonable assurance of compliance with independence requirements, the firm’s System of Quality Control around independence works in preventing and detecting independence violations.
The effectiveness of our systems relies in large part on receiving quality data from the audit client. We should discuss with our audit clients the importance of timely informing the audit engagement team of upcoming transactions, acquisitions, and other activity that may result in new affiliates or affiliated persons, such as persons in financial reporting oversight roles. Client management may also inform non-audit engagement teams performing services for the audit client or its affiliates about such activities or transactions. It’s important they’re aware of their shared responsibility to also notify the audit team. When made aware of upcoming transactions, audit teams should submit an inquiry in the Professional Practice Inquiry Management application (PPIM) for assistance with determining whether engagement reevaluation is required and with navigating the broad implications of such events, including the independence clearance process.
Compliance with our System of Quality Control must not only be top of mind when thinking through new affiliates or affiliated persons; we share in the responsibility to think about independence as soon as we’re made aware of opportunities with new audit clients, before they have been “won”.
When potential opportunities arise, new Audit Client Pursuits should be entered into KPMG Engage and submitted via PPIM, found on Launchpad under the Client Relationship Management section. A Professional Practice Support team member will be assigned to assist you with onboarding steps required for new audit clients and engagements.
", "transcript_2": "Pre-approval of services
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. There are additional PCAOB pre-approval requirements for tax services and non-audit services related to internal control over financial reporting. In addition to requirements set by the SEC and the PCAOB, IESBA has new requirements to obtain concurrence from the Audit Committee prior to providing non-audit services to upstream entities that control a public interest entity audit client and downstream entities that the audit client controls, regardless of whether the controlled entity is consolidated. These incremental IESBA requirements most significantly impact private equity firms, registered investment companies, issuers that control investment advisers, and issuers controlled by an upstream parent that is not an issuer.
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.
", "transcript_3": "Independence communications
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 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 the audit file, only attaching the written communication will not satisfy this requirement.
", "transcript_4": "Certain relationships with audit clients
SEC rules prohibit KPMG, including its Covered Persons, from having certain business and employment relationships with audit clients and their affiliates.
We require audit engagement teams to make written inquiries of the SEC audit client’s directors and officers about certain relationships they, their spouse or spousal equivalent, and dependents may have with KPMG, to confirm prohibited relationships with KPMG are not present. Sometimes clients do not include the relationships their spouse or spousal equivalent and dependents may have, so inquiring of our clients about their inclusion can mitigate against missing details within the questionnaires received. These questionnaires should be signed by client directors and officers after year-end to avoid required follow-ups.
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