For many years, the SECPS membership requirements have served as the cornerstone for the profession's peer review program. We recognize that quality controls should be the first line of defense to guard against independence concerns with respect to an audit client. The proposed rule also prohibits "any material indirect interest in an audit client, including: (1) Ownership of more than five percent of an entity that has an ownership interest in the audit client; or (2) Ownership of more than five percent of an entity of which the audit client has an ownership interest. SEC.gov | Audit Committees and Auditor Independence The order finds that Boynton was a cause of the same reporting violations and ALPS caused the funds related compliance violations under Rule 38a-1 of the Investment Company Act. In addition, the proposed rule should also extend the safe harbor for accounts with SIPC protection to instances where the value of assets in the account does not exceed, by a material amount, the aggregate of SIPC protection and the broker-dealer's insurance from unaffiliated private insurers. When considering whether to accept a new client or a new engagement at an existing client, each Deloitte firm must take into account the independence requirements in all applicable jurisdictions. To learn more, please read our Integrity Helpline FAQs. The proposed rule should not prohibit the accounting firm or any covered person from obtaining group insurance policies from an audit client, and the final rule should make this clear because suchpolicies would not impair an auditor's objectivity if obtained in the ordinary course of business, under normal terms and conditions, including pricing. To stay logged in, change your functional cookie settings. The proposed rule to the extent it, in effect, requires firms to adopt specified quality control procedures raises substantial issues concerning the Commission's authority. Proposed rule 2-01(c)(1)(ii)(D) provides that an accounting firm is not independent when the firm, any covered person, or any of his or her immediate family members has any "futures, commodity or similar account maintained with a futures commission merchant that is an audit client or an affiliate of an audit client. income taxes from continuing operations. Focus Only On When the Audit Services Are Commenced. Note that unlike your spouse, spousal equivalent and dependents, when it comes to Close Family Members, if you are not aware of these situations, you are not required to ask. To take your skills to the next level, these additional resources will be a big help: A free, comprehensive best practices guide to advance your financial modeling skills, Get Certified for Capital Markets (CMSA). Question: What is the value of keeping track of all of the They also allow us to work closely with other companies to provide better and more affordable products and services. They will similarly be in a position to influence the quality of the audit, and the accounting firm's independence may be impaired if they have a prohibited financial interest in an audit client. The proposed definition of the "chain of command" would unnecessarily include many individuals who have no direct or indirect responsibility or influence over the audit and who would not be in a position to influence members of the audit engagement team. Accordingly, the definition of "audit and professional engagement period" found in proposed rule 2-01(f)(6)(A) should be modified to read that the "the professional engagement period begins when the accountant begins review or audit procedures. Indeed, ISB Standard No. "12 The proposed definition's use of "any direct business relationship" and "any equity interest" is overbroad and would capture relationships that would not create a mutuality of interest, such as the relationship with the payroll service provider described above. Requiring third parties to comply with the independence rules applicable to accounting firms would be impractical. Deloitte's SEC reporting advisory services can help public entities looking to address or improve their present and private companies preparing for their future. Personal independence at PwC: PwC The Glass-Steagall Act is the name commonly used to refer to 16, 20, 21 and 32 of the Banking Act of 1933, 12 U.S.C. AICPA Code of Professional Conduct 101-5. A roadmap to SEC reporting considerations for business combinations has been saved, A roadmap to SEC reporting considerations for business combinations has been removed, An Article Titled A roadmap to SEC reporting considerations for business combinations already exists in Saved items. "61 This modification will provide definitive guidance to members of the audit engagement team on how to handle credit card balances with audit clients. PDF Investment policy for partners of KPMG (the Netherlands) 3, "Employment with Audit Clients," addresses many of the topics covered by the proposed rule relating to employment. The Provision Allowing The Commission To Look To "All They allow us to better understand the businesses and dynamics of audit clients. When a 100% ownership interest in a subsidiary is moved from one branch to another, why should it matter where in the family tree it is located? Please enable JavaScript to view the site. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. Proposed rule 2-01(c)(1)(ii)(E) provides that an accountant is not independent when the accounting firm, any covered person, or any of his or her immediate family members has "any credit card balance in excess of $10,000 owedto a lender that is an audit client or an affiliate of an audit client. The proposed rule could result in firms being unable to secure adequate insurance. Spouses, spousal equivalents, or dependents former and/or current 401(k) plans or any other employee benefit plan (including pension, stock option, profit sharing, and stock purchase plans). "43 These "other financial interests" include: (1) loans; (2) savings and checking accounts; (3) broker-dealer accounts; (4) futures commission merchant accounts; (5) credit card balances; (6) insurance products; and (7) any investment in an investment company complex. Please see www.deloitte.com/about to learn more about our global network of member firms. However, as discussed in our comment letter on the scope of services provisions of the proposed rule, the appearance of auditor independence varies from country to country.48 What may appear to present an independence issue in one country may be perfectly acceptable, or even required, in another country. How open is the system to inappropriate changes to client data after validation? The Proposed Rule Should Provide Certain ExceptionsFor Employer-Sponsored Benefit Plans, V. The Proposed Rule Regarding "Other Financial Interests" Should Be Modified, VI. It combines the SECs1 guidance on reporting for business acquisitionsincluding acquisitions of real estate operations and pro forma financial informationwith Deloittes interpretations (Q&As) and examples in a comprehensive, reader- friendly format. DTTL and each of its member firms are legally separate and independent entities. How can I see if work has been done on a particular entity? In May 2020, the SEC issued a final rule2 to improve the information investors receive regarding acquired or disposed businesses, reduce the complexity and costs of preparing the required disclosures, and facilitate timely access to capital. Any person has a financial interest that would cause an accountant to be not independent under paragraphs (c)(1)(i) or (c)(1)(ii) of this section, and: (1) the accountant did not audit the client's financial statements for the immediately preceding fiscal year; and, (2) the accountant is independent under paragraphs (c)(1)(i) and (c)(1)(ii) of this section before the earlier of: (i) accepting the engagement to provide audit, review, or attest services to the audit client; or (ii) commencing any audit, review or attest procedures (including planning the audit of the client's financial statements).67. Consistent with our views on affiliates of the audit client, we believe that the relevant issues are whether the beneficial owner could exercise significant influence53 or control over the audit client or a material affiliate of the audit client and whether the beneficial owner's investment in the audit client or an affiliate is material to the beneficial owner. Reporting and disclosure in accordance with SEC requirements can be difficult and demanding for many companies. These member firms and each of their related entities (each a "Deloitte firm"), along with Deloitte Global . DTTL (also referred to as "Deloitte Global") does not provide services to clients. As experienced auditors serving attest and non-attest clients, we understand what both your auditor and the SEC is looking for in your financial reporting. Influence (ownership 20-50%)/ Material (>5%) ( M ), Significant DTTL and each of its member firms are legally separate and independent entities. We believe that this is both unnecessary and contrary to the public interest. Proposed rule 2-01(c)(1)(ii)(G) provides that an accountant is not independent when the accounting firm, any covered person, or any of his or her immediate family members has: An "investment company complex" is defined to include, among other things, "[a]ny entity controlled by, under common control with or controlling the investment advisor or sponsor. Consistent with our view that those who are capable of influencing the audit process should be independent of the audit client, we believe that the term "position to influence" would be a more appropriate descriptor than "chain of command." The Integrity Helpline is a confidential, 24-hours-a-day, 365-days-a-year service you can access from any location. that is needed on this page. The proposed rule should also grandfather all collateralized loans obtained from a financial institution under its normal lending procedures, terms and requirements. For Employer-Sponsored Benefit Plans, The proposed rule should provide exceptions for employer-sponsored benefit plans of the immediate family members of certain covered persons, when those benefit plans involve: (1) insurance products;37 (2) direct investments;38 and (3) investment company complexes.39 Such exceptions would further the Commission's goal of modernizing the independence rules in light of the increase in dual-career families.40. 2023. "1 Indeed, the increase in dual-career families, the increased mobility of professionals, and the broadening international presence of audit firms and their clients have altered the landscape in which the accounting profession operates.2 The financial interests and employment relationship rules are in need of updating and we support efforts to realize this goal.3, We believe, however, that it would be preferable for the Independence Standards Board ("ISB") to develop standards in this area, and we believe that the Commission should defer to the ISB as the appropriate private sector body for that purpose.4 Indeed, the ISB already has several projects underway or completed in this area.

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