WEBVTT 00:00:03.990 --> 00:00:06.690 KPMG’s independence systems, policies, and 00:00:06.690 --> 00:00:09.990 procedures are critical to as our System of Quality Control, 00:00:09.990 --> 00:00:13.230 also referred to our System of Quality Management. 00:00:13.980 --> 00:00:17.990 Key independence systems include Sentinel, KICS – ‘KPMG’s 00:00:17.990 --> 00:00:21.660 Independence Compliance System’, and the REL - ‘Restricted 00:00:21.660 --> 00:00:25.990 Entity List’. These systems help us maintain independence by 00:00:25.990 --> 00:00:28.710 preventing and detecting independence violations. 00:00:31.750 --> 00:00:34.840 Sentinel is the primary system used to determine if a 00:00:34.840 --> 00:00:37.990 proposed engagement or business relationship complies with 00:00:37.990 --> 00:00:42.460 applicable professional and regulatory standards. But its 00:00:42.460 --> 00:00:44.990 effectiveness is dependent upon entering complete and 00:00:44.990 --> 00:00:48.700 accurate data. Companies are constantly shifting, growing 00:00:48.700 --> 00:00:51.760 and restructuring, so we must stay ahead of transactions or 00:00:51.760 --> 00:00:54.990 activities that could result in new affiliates or affiliated 00:00:54.990 --> 00:00:59.920 persons. Audit engagement teams need to continually update 00:00:59.920 --> 00:01:03.190 the client’s Sentinel family tree in a timely manner to help 00:01:03.190 --> 00:01:06.490 ensure accurate placement of entities and affiliated persons 00:01:06.490 --> 00:01:09.880 on the tree, so all services and relationships can be 00:01:09.880 --> 00:01:13.360 evaluated appropriately, and the firm’s System of Quality 00:01:13.360 --> 00:01:17.050 Control can operate as intended. Teams also need to submit 00:01:17.050 --> 00:01:19.990 complete and accurate Sentinel requests so that Sentinel 00:01:19.990 --> 00:01:23.230 Lead Partners can appropriately evaluate the request. 00:01:23.710 --> 00:01:26.830 Getting tree maintenance, submittal and review right all are 00:01:26.830 --> 00:01:29.990 equally important in maintaining the system’s integrity, to 00:01:29.990 --> 00:01:31.840 avoid potential violations. 00:01:34.990 --> 00:01:37.840 The REL and KICS are additional tools that are important to 00:01:37.840 --> 00:01:41.380 our System of Quality Control. Restricting an entity on the 00:01:41.380 --> 00:01:45.160 REL results in the entity identifying as restricted in KICS. 00:01:46.870 --> 00:01:49.990 All public audit clients and any of their public affiliates, 00:01:49.990 --> 00:01:52.990 including their debt and equity securities, need to be 00:01:52.990 --> 00:01:56.380 properly listed as restricted on the REL. Non-public 00:01:56.380 --> 00:01:58.900 affiliates that offer financial products must also be 00:01:58.900 --> 00:02:04.570 included. Engagement teams are required to regularly review 00:02:04.720 --> 00:02:07.480 and confirm that restrictions are appropriate and request 00:02:07.480 --> 00:02:12.670 necessary updates, assuring the REL’s accuracy, including 00:02:12.670 --> 00:02:15.250 evaluating if new affiliates meet the requirements for 00:02:15.250 --> 00:02:18.910 inclusion. If changes need to be made, teams must submit a 00:02:18.910 --> 00:02:22.330 REL Update Form, verifying all engagement details are 00:02:22.330 --> 00:02:27.580 accurate. It is crucial the REL is updated timely, as our 00:02:27.580 --> 00:02:30.430 professionals rely on this information to maintain their 00:02:30.430 --> 00:02:31.630 personal independence. 00:02:34.990 --> 00:02:38.530 Our System of Quality Control also includes the procedures 00:02:38.530 --> 00:02:41.890 performed by audit engagement teams and documented in the 00:02:41.890 --> 00:02:46.270 KPMG Clara workflow, or KCw. It’s important that the 00:02:46.270 --> 00:02:49.990 engagement profile is set up within KCw accurately during 00:02:49.990 --> 00:02:52.900 the planning phase, to enable the delivery of applicable 00:02:52.900 --> 00:02:56.560 independence procedures within the Independence module. When 00:02:56.560 --> 00:02:58.660 the audit engagement team indicates that there are 00:02:58.660 --> 00:03:01.990 transactions resulting in new affiliates, the New Affiliates 00:03:01.990 --> 00:03:05.740 screen within the KCw Independence module is activated with 00:03:05.740 --> 00:03:08.980 procedures that must be completed to assess independence in 00:03:08.980 --> 00:03:11.990 relation to the new affiliate. Completing independence 00:03:11.990 --> 00:03:15.340 procedures is essential to a quality audit, so it’s critical 00:03:15.340 --> 00:03:18.910 to plan enough time to perform and document each step. There 00:03:18.910 --> 00:03:22.300 is execution guidance in the KPMG Audit Execution Guide 00:03:22.510 --> 00:03:25.810 (KAEG) that aligns with each step in the Independence module 00:03:25.930 --> 00:03:28.930 to assist teams in appropriately completing the procedures. 00:03:29.800 --> 00:03:32.530 Lead audit engagement partners rely on the results of 00:03:32.530 --> 00:03:35.680 independence procedures and the firm’s System of Quality 00:03:35.680 --> 00:03:38.990 Control to support annual independence communications to the 00:03:38.990 --> 00:03:44.890 Audit Committee, as required by PCAOB Rule 3526. In 00:03:44.890 --> 00:03:47.980 situations where there’s been a violation (also known as a 00:03:47.980 --> 00:03:51.190 breach) during the audit or professional engagement period, 00:03:51.550 --> 00:03:53.990 these communications must be reviewed and approved by the 00:03:53.990 --> 00:03:57.430 Independence Group, a key control step, prior to 00:03:57.430 --> 00:04:01.990 communicating to the Audit Committee. Teams are encouraged 00:04:01.990 --> 00:04:05.740 to use the Audit Committee templates available on Alex to 00:04:05.740 --> 00:04:08.170 help with all required written communications. 00:04:09.160 --> 00:04:11.990 The systems, policies and procedures that underpin our 00:04:11.990 --> 00:04:15.370 System of Quality Control work together to help us maintain 00:04:15.370 --> 00:04:18.790 our independence, communicate related matters, deliver 00:04:18.790 --> 00:04:21.990 quality audits to our clients, and ultimately build trust in 00:04:21.990 --> 00:04:23.260 the capital markets.