WEBVTT 00:00:06.330 --> 00:00:08.970 Shannon, the audit engagement partner for Brancorp, 00:00:08.970 --> 00:00:12.840 an SEC audit client just received a Sentinel Request 00:00:12.840 --> 00:00:16.590 proposing tax return preparation services to WhitonRidge, an 00:00:16.590 --> 00:00:20.340 upstream affiliate of Brancorp. She works with Katelyn, an 00:00:20.340 --> 00:00:23.580 audit manager on the Brancorp engagement team to talk through 00:00:23.580 --> 00:00:26.580 what’s required prior to approving the Sentinel Request. 00:00:26.580 --> 00:00:29.010 Katelyn: I reviewed the Sentinel Request and the draft 00:00:29.010 --> 00:00:32.430 engagement letter for WhitonRidge. The request is for tax 00:00:32.430 --> 00:00:35.640 return preparation services and only includes permissible 00:00:35.640 --> 00:00:38.460 services, so I think we can go ahead and approve the 00:00:38.460 --> 00:00:41.130 Sentinel Request for the proposed services for this 00:00:41.130 --> 00:00:43.410 affiliate of our SEC audit client. 00:00:43.410 --> 00:00:46.740 Shannon: That’s good news. But have we thought about whether 00:00:46.740 --> 00:00:49.620 we need to get Audit Committee concurrence for this service? 00:00:49.620 --> 00:00:52.800 I looked at our Sentinel Family Tree and WhitonRidge is an 00:00:52.800 --> 00:00:55.620 upstream affiliate that ultimately controls Brancorp. 00:00:55.620 --> 00:00:59.280 Katelyn: What do you mean? I thought we only needed to get 00:00:59.280 --> 00:01:02.760 Audit Committee pre-approval for services for consolidated 00:01:02.760 --> 00:01:03.870 downstream entities. 00:01:03.870 --> 00:01:08.340 Shannon: Well, that’s true under SEC and PCAOB pre-approval 00:01:08.340 --> 00:01:11.160 rules, but we also need to consider the new IESBA 00:01:11.160 --> 00:01:13.350 communication and concurrence requirements. 00:01:13.350 --> 00:01:15.540 Katelyn: I’m still getting up to speed with the new IESBA 00:01:15.540 --> 00:01:18.540 rules. Can you help me understand how they’re relevant here? 00:01:18.540 --> 00:01:21.990 Shannon: IESBA has issued revisions to their rules around the 00:01:21.990 --> 00:01:25.890 provision of non-audit services to audit clients, which 00:01:25.890 --> 00:01:29.040 now requires concurrence for non-audit services proposed for 00:01:29.040 --> 00:01:32.280 entities that control our audit client, and for entities 00:01:32.280 --> 00:01:35.790 that are controlled by our audit client, even if they aren’t consolidated. 00:01:35.790 --> 00:01:38.700 Katelyn: But Brancorp isn’t even responsible for engaging 00:01:38.700 --> 00:01:41.610 us to perform this work. Why would Brancorp’s Audit 00:01:41.610 --> 00:01:44.490 Committee need to pre-approve this service for WhitonRidge? 00:01:44.490 --> 00:01:47.100 Shannon: While Brancorp might not be responsible for 00:01:47.100 --> 00:01:50.640 engaging KPMG, they are responsible for evaluating and 00:01:50.640 --> 00:01:53.460 concurring with our conclusion that the service will not 00:01:53.460 --> 00:01:56.280 create an unacceptable threat to our independence in 00:01:56.280 --> 00:01:57.690 relation to our audit of Brancorp. 00:01:57.690 --> 00:02:01.110 Katelyn: Okay. Now I see how the new IESBA rules expand 00:02:01.110 --> 00:02:05.250 beyond what’s required by SEC and PCAOB pre-approval rules. 00:02:05.250 --> 00:02:08.520 Sounds like we need to get concurrence prior to approving 00:02:08.520 --> 00:02:11.490 the Sentinel Request. Is the process around obtaining 00:02:11.490 --> 00:02:14.790 concurrence different than what’s required under SEC and 00:02:14.790 --> 00:02:16.650 PCAOB pre-approval rules? 00:02:16.650 --> 00:02:19.660 Shannon: The IESBA rules provide flexibility in the methods 00:02:19.660 --> 00:02:22.210 that can be used to meet these requirements. One approach 00:02:22.210 --> 00:02:24.460 would be to have Brancorp’s Audit Committee adopt a 00:02:24.460 --> 00:02:25.750 “general policy” approach. 00:02:25.750 --> 00:02:29.440 Katelyn: Would that be similar to the SEC’s policies and 00:02:29.440 --> 00:02:30.310 procedures approach? 00:02:30.310 --> 00:02:33.700 Shannon: Yes, this method identifies categories of services 00:02:33.700 --> 00:02:36.490 that the Audit Committee concurs would be permissible under 00:02:36.490 --> 00:02:37.180 independence rules. 00:02:37.180 --> 00:02:39.730 Katelyn: And if Brancorp’s Audit Committee is agreeable, 00:02:39.730 --> 00:02:42.700 we can obtain concurrence for tax compliance services that 00:02:42.700 --> 00:02:44.530 can be provided to any controlling entity? 00:02:44.530 --> 00:02:47.200 Shannon: That’s right. Then further concurrence wouldn’t be 00:02:47.200 --> 00:02:50.170 required with respect to individual tax compliance services 00:02:50.170 --> 00:02:51.850 that we’re engaged to perform during the year. 00:02:51.850 --> 00:02:55.230 Katelyn: Well, what happens if a service comes up that isn’t 00:02:55.230 --> 00:02:56.520 in one of those categories? 00:02:56.520 --> 00:02:59.220 Shannon: Then we would need to present the services to Brancorp’s 00:02:59.220 --> 00:03:02.310 Audit Committee and obtain concurrence, similar to SEC’s 00:03:02.310 --> 00:03:05.070 ad-hoc approach. This is the approach we would need to 00:03:05.070 --> 00:03:07.260 take regarding the services we’re proposing for WhitonRidge. 00:03:07.260 --> 00:03:10.350 Katelyn: That makes sense. I’ll pull together a slide to 00:03:10.350 --> 00:03:13.440 request concurrence for these tax compliance services from 00:03:13.470 --> 00:03:16.500 Brancorp’s Audit Committee for you to review. What type of 00:03:16.500 --> 00:03:17.970 information should I include? 00:03:17.970 --> 00:03:20.820 Shannon: Be sure to use the Audit Committee presentation 00:03:20.820 --> 00:03:23.250 templates available on Alex to help with preparing the 00:03:23.250 --> 00:03:24.210 required communications. 00:03:24.210 --> 00:03:26.190 Katelyn: Sounds great. I’ll do that.