WEBVTT 00:00:02.960 --> 00:00:04.590 After obtaining Audit Committee pre-approval, 00:00:04.590 --> 00:00:08.990 KPMG was engaged by Indy & Co., an SEC audit 00:00:08.990 --> 00:00:12.270 client, to provide ESG readiness services. 00:00:12.720 --> 00:00:15.840 Midway through providing services, Indy & Co. approached 00:00:15.870 --> 00:00:18.900 Anita, a tech assurance manager on the engagement, 00:00:19.140 --> 00:00:21.990 requesting assistance in developing their ESG implementation 00:00:21.990 --> 00:00:25.990 plan. Anita meets with Jasmine, the managing director on the 00:00:25.990 --> 00:00:27.960 engagement, to discuss the request. 00:00:27.960 --> 00:00:31.650 Anita: We submitted our draft gap analysis deliverables to 00:00:31.650 --> 00:00:35.310 Indy & Co., including recommendations and observations for 00:00:35.310 --> 00:00:37.990 consideration and they requested we develop our 00:00:37.990 --> 00:00:41.400 recommendations into their implementation plan. I was going 00:00:41.400 --> 00:00:43.200 to begin putting this together today. 00:00:43.710 --> 00:00:46.530 Jasmine: Hmmm. Let’s check to make sure this is an approved 00:00:46.530 --> 00:00:49.110 service included in the engagement letter, and the Sentinel 00:00:49.110 --> 00:00:52.680 request. What’s included in our deliverable can’t go beyond that. 00:00:52.680 --> 00:00:55.560 Anita: But isn’t developing an implementation plan a 00:00:55.560 --> 00:00:58.770 reasonable expansion on our observations and recommendations? 00:00:58.770 --> 00:01:01.990 Jasmine: Not necessarily. I believe the scope of the 00:01:01.990 --> 00:01:05.250 engagement was limited to the gap analysis. Providing Indy & 00:01:05.250 --> 00:01:08.130 Co. with an implementation plan would go beyond the approved 00:01:08.130 --> 00:01:10.770 scope of work. Let me take a look and get back to you. 00:01:11.490 --> 00:01:14.490 Jasmine reviews the engagement letter and confirms that an 00:01:14.490 --> 00:01:17.310 implementation plan is not included within the approved 00:01:17.310 --> 00:01:20.370 scope of work. After reaching out to the Sentinel Lead 00:01:20.370 --> 00:01:23.880 Partner to discuss the client’s incremental request, Jasmine 00:01:23.880 --> 00:01:26.070 meets with Anita again to discuss her findings. 00:01:26.070 --> 00:01:29.760 Jasmine: Okay, so I confirmed that an implementation plan 00:01:29.760 --> 00:01:31.990 was not included in the approved engagement letter or 00:01:31.990 --> 00:01:32.910 Sentinel request. 00:01:32.910 --> 00:01:36.090 Anita: Can we just amend the engagement letter and submit an 00:01:36.090 --> 00:01:37.500 additional Sentinel request? 00:01:37.500 --> 00:01:41.070 Jasmine: Unfortunately, not in this case. I consulted with 00:01:41.070 --> 00:01:43.380 the Sentinel Lead Partner to see if the service would be 00:01:43.380 --> 00:01:47.100 permissible. She reminded me of the guidance within the 00:01:47.100 --> 00:01:50.460 Independence Guidance for ESG Services and the Non-audit 00:01:50.490 --> 00:01:53.520 Services Independence Permissions Matrix; and noted that 00:01:53.520 --> 00:01:56.220 designing or developing future state implementation plans 00:01:56.250 --> 00:01:59.130 are generally prohibited under SEC independence rules. 00:01:59.130 --> 00:02:03.060 Anita: So in addition to the implementation plan not being 00:02:03.060 --> 00:02:06.330 in the approved scope of work, it would also be considered 00:02:06.330 --> 00:02:09.600 impermissible under SEC independence rules? 00:02:09.600 --> 00:02:12.240 Jasmine: That’s right. We’re also planning to perform the 00:02:12.270 --> 00:02:16.710 ESG attestation engagement in the future. Given the SEC’s 00:02:16.740 --> 00:02:19.740 adoption of rules to enhance and standardize climate-related 00:02:19.740 --> 00:02:22.800 disclosures, our objectivity would be further impacted 00:02:22.800 --> 00:02:25.050 because we would be opining over this subject matter. 00:02:25.050 --> 00:02:28.560 Anita: Indy may be upset when we tell them we can’t proceed. 00:02:29.130 --> 00:02:31.410 Jasmine: They’ll be disappointed, but they’ll understand. 00:02:31.830 --> 00:02:34.530 Management and the Audit Committee expect us to adhere to 00:02:34.530 --> 00:02:35.520 the independence rules. 00:02:36.120 --> 00:02:38.940 Jasmine worked with Anita to avoid potential independence 00:02:38.940 --> 00:02:42.930 violations. The team was able to explain to Indy & Co. why 00:02:42.930 --> 00:02:45.570 proceeding with their additional request would affect the 00:02:45.570 --> 00:02:48.570 firm’s independence- not only to their audit, but to the 00:02:48.570 --> 00:02:52.410 planned ESG attestation engagements KPMG was set to perform. 00:02:53.100 --> 00:02:55.860 As a result of the team acting with independence in mind, 00:02:56.070 --> 00:02:57.960 they were able to do the right thing for the firm and the 00:02:57.960 --> 00:03:00.990 client, being sure not to step over the lines of the initial 00:03:00.990 --> 00:03:02.100 engagement’s scope.