WEBVTT

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Kelsey, an audit managing director, works with Mark,

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a recently promoted audit manager, on the Willtop, LLC SEC

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audit engagement. Kelsey is meeting with Mark to discuss the

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Sentinel family tree audit procedure.

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Kelsey: Ensuring the accuracy of our client’s Sentinel

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family tree is critical. Can you take a look at the tree and

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make any needed updates?

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Mark: Sure, I can do that. 

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Kelsey: Reviewing the Sentinel family tree helps ensure the

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data is accurate. Review will need to occur more frequently

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if our client has an acquisition or other transactions that

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change its affiliated entities.

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Mark: I see. So the tree needs to be up to date at all times?

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Kelsey: Definitely. The Sentinel family tree is key to

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helping us maintain independence, assuring teams are aware

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upfront of possible service restrictions. If client

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ownership structure changes aren’t reflected in the family

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tree, we’re putting both the firm and individuals at risk

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of non-compliance. It’s our responsibility to keep the tree

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updated, so others can rely on it to appropriately evaluate

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services and other proposed relationships. 

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Mark: Ok. I’ll ask the client if there were any changes

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since the last quarter, and then I’ll make those updates to

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the tree right away.

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Kelsey: Unfortunately, just asking is not enough. We need to

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perform our own comparison of the Sentinel family tree

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against the full legal entity listing at least once every 12 months.

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We need to make sure each entity is listed properly,

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has the correct legal entity name, and we always need to

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check for spelling errors.

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Mark: Okay, yeah I want to make sure I do this right. So,

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any pointers?

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Kelsey: For smaller trees, I usually do a side-by-side

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comparison of the Sentinel family tree against a PDF of the

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legal entity listing from the client.

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Mark: What about for larger trees?

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Kelsey: Then I’ll request all their legal entities in an

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Excel file. And using the Sentinel Entity Management Tool,

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download the tree as an Excel file and compare.

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Mark: Ok, well that seems easy enough.

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Kelsey: You’ll need to check for correct placement of

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the entity on the tree in Sentinel. Incorrect placement could

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impact the independence review and approval, depending on the

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rules that apply. If the entity is placed incorrectly--for

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example, it is placed under the wrong parent entity-- the

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Sentinel Lead Partner might not consider appropriate non-audit

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service permissions or other system checks may not take place.

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Mark: Sounds good, well I’ll inspect the entity’s placement

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within the tree. 

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Kelsey: Also be sure to check the materiality of Willtop’s

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sister entities, as materiality could impact whether an entity is

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considered an affiliate or not.

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Mark: Okay, will do, anything else?

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Kelsey: Our client’s tree also needs to include all

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affiliated persons, directors, and officers such as the CFO or

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anyone who’s in a financial reporting oversight role.

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Mark: What if I find that an entity or affiliated person is

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missing from the tree, what actions should I take?

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Kelsey: Start by checking if the entity already exists in Sentinel.

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We don’t want to create any duplicates in the system.

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If it’s in Sentinel, you’ll need to add that entity

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to the tree. If you’re not able to find it in Sentinel,

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create a new entity.

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Mark: Got it. Thanks for walking me through this. To be honest,

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I didn’t realize all the considerations involved in

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completing this independence procedure. Your tips are really helpful.

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After consulting with Kelsey and referencing the KPMG Audit

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Execution Guide (KAEG), Mark completed the Sentinel family tree

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audit procedure. The lead audit engagement partner reviewed

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the tree within the Sentinel Entity Management Tool and

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determined all affiliates and affiliated persons were

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properly reflected. 

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