WEBVTT 00:00:02.980 --> 00:00:05.340 An audit engagement team has just received a 00:00:05.340 --> 00:00:08.310 Sentinel request to provide a tax service for their audit 00:00:08.310 --> 00:00:11.990 client, The Redstone Group. Let’s join them as they respond 00:00:11.990 --> 00:00:12.870 to this request. 00:00:14.970 --> 00:00:17.730 Senior Manager: Did you see the Sentinel request for 00:00:17.730 --> 00:00:20.220 transfer pricing consulting services for Redstone? 00:00:20.550 --> 00:00:22.990 Partner: Yes! Can you help me review this request for 00:00:22.990 --> 00:00:25.990 permissibility? The tax engagement team wants to start the 00:00:25.990 --> 00:00:27.600 work as soon as possible. 00:00:28.110 --> 00:00:30.420 Senior Manager: Sure, I will review the details included in 00:00:30.420 --> 00:00:33.280 the Sentinel request and get back to you. 00:00:33.280 --> 00:00:36.990 Senior Manager: I reviewed the draft engagement letter 00:00:36.990 --> 00:00:39.590 included in the Sentinel request and everything matched what 00:00:39.590 --> 00:00:42.620 was detailed in the Description of Services and the taxonomy 00:00:42.620 --> 00:00:45.830 codes selected. I reviewed the guidance on the Independence 00:00:45.860 --> 00:00:48.860 Non-Audit Services Portal and the transfer pricing service 00:00:48.890 --> 00:00:52.280 is permissible, so I think the tax team can proceed with the work. 00:00:52.280 --> 00:00:57.950 Partner: Great, I checked Redstone’s Audit Committee 00:00:57.950 --> 00:01:01.310 Charter, and we will need to obtain specific pre-approval 00:01:01.310 --> 00:01:04.520 for this tax service before approving the Sentinel request 00:01:04.610 --> 00:01:07.370 since the committee’s policies and procedures only provide 00:01:07.370 --> 00:01:10.550 for pre-approval for audit and attestation services. 00:01:11.060 --> 00:01:12.800 Senior Manager: Hmm, our next meeting with the Audit 00:01:12.800 --> 00:01:14.390 Committee isn’t until next month. 00:01:14.390 --> 00:01:17.150 Partner: That’s okay because their Charter allows for 00:01:17.150 --> 00:01:20.570 pre-approval by an Audit Committee member delegate, so we 00:01:20.570 --> 00:01:22.370 can seek pre-approval from the Chair. 00:01:25.940 --> 00:01:27.470 Senior Manager: Ok, I’ll use the Audit Committee 00:01:27.470 --> 00:01:29.720 communication templates to prepare the communications. 00:01:29.720 --> 00:01:33.230 Partner: Those templates are a great resource; they also 00:01:33.230 --> 00:01:36.890 capture IESBA concurrence requirements. The “pre-approval 00:01:36.890 --> 00:01:40.790 examples for tax and non-audit services” slides linked in 00:01:40.790 --> 00:01:43.520 the templates are also helpful because they provide examples 00:01:43.520 --> 00:01:49.460 to meet PCAOB Rule 3524 and 3525 requirements for common 00:01:49.490 --> 00:01:52.910 non-audit services, including transfer pricing services. 00:01:53.570 --> 00:01:57.020 Senior Manager: I’ll do that. I’ve also used the PCAOB Rule 3524 00:01:57.050 --> 00:02:01.010 Practice Aid to make sure we’re complying with all 00:02:01.010 --> 00:02:02.870 aspects of the rule for this tax service. 00:02:02.870 --> 00:02:08.960 Partner: Great, to satisfy parts a and b of Rule 3524, we 00:02:08.960 --> 00:02:11.450 need to be thorough in the written descriptions that we 00:02:11.450 --> 00:02:14.300 provide to the chair because those details will drive our 00:02:14.300 --> 00:02:15.440 required discussion. 00:02:15.950 --> 00:02:17.720 Senior Manager: I’ll be mindful of that and will tailor the 00:02:17.720 --> 00:02:20.540 slides to describe the proposed transfer pricing service, 00:02:20.780 --> 00:02:24.270 the associated fee structure details, and independence considerations. 00:02:24.270 --> 00:02:28.970 Partner: Thanks for preparing the Audit Committee 00:02:28.970 --> 00:02:31.490 communication templates for our communications with the 00:02:31.490 --> 00:02:35.810 chair! The Chair just confirmed pre-approval. Let’s document 00:02:35.810 --> 00:02:38.210 the substance of our discussion with the Chair and their 00:02:38.210 --> 00:02:41.750 pre-approval in the audit file. Now we can approve the 00:02:41.750 --> 00:02:45.240 Sentinel request for the transfer pricing service. 00:02:45.240 --> 00:02:49.820 Senior Manager: No problem! I’ll approve the Sentinel 00:02:49.820 --> 00:02:52.550 request and will schedule a meeting with the tax engagement 00:02:52.550 --> 00:02:55.880 team to discuss service limitations and possible areas of 00:02:55.880 --> 00:02:57.170 scope creep. 00:02:57.170 --> 00:03:02.990 Partner: Good idea. We also need to provide a written 00:03:02.990 --> 00:03:05.750 description of the service to the full Audit Committee at 00:03:05.750 --> 00:03:08.950 the next scheduled meeting and discuss the potential effects 00:03:08.950 --> 00:03:12.380 on our independence. Please add the transfer pricing service 00:03:12.380 --> 00:03:15.560 to the slide of services pre-approved by the Audit Committee delegate. 00:03:15.560 --> 00:03:17.960 Senior Manager: Will do. I’ll incorporate the same 00:03:17.960 --> 00:03:20.190 information we presented to the Chair. 00:03:20.190 --> 00:03:24.940 Partner: Thank you for your help with this service request. 00:03:24.940 --> 00:03:27.080 Now that we’ve presented the transfer pricing service to the 00:03:27.080 --> 00:03:31.090 full Audit Committee, all that’s left is to document 00:03:31.120 --> 00:03:36.790 everything in KCw to satisfy part c of Rule 3524. Could you 00:03:36.790 --> 00:03:39.670 prepare the documentation this week evidencing compliance 00:03:39.670 --> 00:03:42.970 with part c of PCAOB Rule 3524? 00:03:42.970 --> 00:03:45.940 Senior Manager: I can do that. I’ll document the substance 00:03:45.940 --> 00:03:50.030 of both discussions with the chair and then the full Audit Committee. 00:03:50.030 --> 00:03:54.580 Partner: Thanks for documenting everything in KCw. 00:03:55.330 --> 00:03:56.170 Everything looked great. 00:03:56.170 --> 00:03:59.260 Senior Manager: My pleasure, I’m happy everything’s already 00:03:59.260 --> 00:04:00.220 documented in KCw. 00:04:00.580 --> 00:04:03.250 Partner: Yes, it’s definitely helpful to get ahead of 00:04:03.250 --> 00:04:06.640 documentation where we can, so we don’t have to go back and 00:04:06.640 --> 00:04:09.990 address a lot of open items in KCw right before we issue our 00:04:09.990 --> 00:04:10.960 audit report. 00:04:10.960 --> 00:04:12.100 Senior Manager: Agreed!