As discussed in this letter, while we believe the Commission should defer to the ISB, the proposed rule, if adopted, would lead to unintended consequences, would not be in the public interest and would raise a number of concerns. However, the proposed rule should be modified to conform with AICPA guidance that independence is not impaired if the credit card balance owed to an audit client or a material affiliate of an audit client is not in excess of the proscribed limit "by the payment due date. Those license requirements are independent of, and in addition to, license requirements imposed elsewhere in the EAR. We suggest that the definition be limited to the partners and managerial employees responsible for the consulting and other non-audit services provided to the audit client as they may be in a position to influence the audit, whereas staff level employees are not. We suggest that this proposed rule be expanded given that an accounting firm's independence will not be impaired if a member of the audit engagement team has a brokerage account with immaterial assets in excess of SIPC coverage. These policies impact not only your own personal financial relationships, but also those of your spouse, spousal equivalent and dependents. The proposed definition of an "investment company complex" also would include non-client sister funds. Unlike a material investment in a corporation, the success of which could arguably be relevant to an auditor's decision-making process, one's insurance coverage simply does not create an interest in the actual or perceived success of the insurer sufficient to influence a policyholder's judgment. 2. . The Proposed Rule On Employment Of Former Employees May Hinder Retired Partners From Serving On Boards, VIII. that is needed on this page. Second, the proposed rule omits important portions of AICPA Rule 302 and its related interpretation. For the year ended December 31, 2022, 19 of the Company's project entities have entered into EMAs with NEM and NEM received approximately $1.4 million under the EMAs. Even in cases where an entity may have limited purposes and
In early March 2022, the SEC released a list of five Deloitte's SEC reporting advisory services can help public entities looking to address or improve their present and private companies preparing for their future. Listed Companies audited by Uninspected Audit Firms Using the determinations provided in the PCAOB's report, the SEC has begun to identify U.S.-listed companies have used an Uninspected Audit Firm to audit their financial statements. As a result, business relationships that would have otherwise been undertaken with accounting firms will be unlikely to occur. words to the right of the temporary GMFID field labeled "Get Unique Temp
Related to Restricted Entity List. If this were the case, the accounting firm may appear to have a mutuality of interest in the success of such products and services, and directly benefit through profit margins or commissions on each sale.
The Definition Of "Covered Persons In The Firm"Unnecessarily Includes All Professionals Providing Non-Audit Services. The services of these retired partners are now in demand more than ever because of the new self-regulatory organization rules adopted at the Commission's urging which require the members of audit committees to be financially literate, with one member having accounting or related financial management expertise.74. . For example, there is no evidence that an auditor's independence would be impaired if a covered person had a checking account containing an immaterial uninsured balance.44. This will not be the case in all situations. 24, 78, and 377-378 (1994 & Supp. In addition, this concept should be extended to bank overdrafts and other similar consumer finance arrangements. However, if the proposed rule is to include a prohibition with respect to insurance products, it should be limited to (1) individual life insurance products with material cash surrender values, and (2) life insurance policies or annuities that are invested in an audit client or a material affiliate of an audit client. The Quality Controls Provisions Should Be Modified, XI. 17 C.F.R. 43,148. 210.102(b). Forexample, we believe the following "chain of command" model based on our organizational structure provides a meaningful, yet flexible, framework that would encompass all individuals with the ability to influence the audit. Restricted KPIs, Calculated KPIs which plays important role in Key figure information requires Info object filtering. used in the calculation described above. The consequences of adopting this broad definition of an "affiliate of the audit client" would be exacerbated by the extensive financial and employment relationship restrictions between audit clients or affiliates of audit clients and the affiliates of accounting firms. The Deloitte network is committed to driving societal change and promoting environmental sustainability. The proposed rule defines the professional personnel in the accounting firm to whom the independence rules apply through its definition of "covered persons" and includes four categories of persons: (1) the audit engagement team; (2) those in the "chain of command"; (3) any other employee of the accounting firm whois "involved in providing any professional service to the audit client or an affiliate of the audit client"; and (4) partners, shareholders and principals in any "office" of the accounting firm that participates in a significant portion of the audit.20 We agree that those who are in a position to influence an audit should be included in the definition of "covered persons" under the proposed rule. +++ DO NOT USE THIS FRAGMENT WITHOUT EXPLICIT APPROVAL FROM THE CREATIVE STUDIO DEVELOPMENT TEAM +++, Telecommunications, Media & Entertainment. Tracking & Trading SystemAn internal tool to help you monitor your compliance with independence requirements related to certain personal investments and financial relationships. In general, that helps us proactively advise you on the issues affecting your business while saving you headaches down the road. The appearance of independence is dependent on many factors, including the country's culture, economic environment, business traditions, regulatory structure and legal environment. As a public accounting firm, PwC and its partners, employees, third-party contractors and their immediate family members must be independent of PwC's audit clients, including their affiliates, to comply with applicable independence regulations. 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. Meaningful Protection With Certain Modifications. The SEC definition of a promoter includes a founder of the company who is still with the company, or holds at least 10% of any class of its securities. Deloitte & Touche* submits this letter in response to the Securities and Exchange Commission's request for comments on its proposed rule regarding Revision of the Commission's Auditor Independence Requirements, Securities Act Release No. Exceptional organizations are led by a purpose. non-client and its carrying amount of investments in and advances to the client
See how we connect, collaborate, and drive impact across various locations. The Entity List specifies the license requirements that it imposes on each listed person. what a client states as being material or significant and validate that
We do not believe an accounting firm's independence is impaired if an audit client acquires a financial institution at which a covered person has a savings account with an immaterial uninsured balance. * As used in this letter, Deloitte & Touche includes Deloitte & Touche LLP and Deloitte Consulting L.P. ** The Release can be found in the Federal Register at 65 Fed. Broker Data Import Program (BDIP)A feature of the Tracking & Trading System that allows the professional to receive automatic downloads of their financial holdings from their authorized brokerage accounts. potential conflicts regarding restricted investments are identified. Can a client
18 recognizes that "an investment of 20% or more of the voting stock of an investee should lead to a presumption that in the absence of evidence to the contrary an investor has the ability to exercise significantinfluence over an investee.
The term "foreign practice" will be used in this letter to refer to non-U.S. practices of the international accounting organization of which the accounting firm is a part. Rather than the proposed rule, we believe the Commission should follow the ISB's proposed approach regarding material indirect interests, which would provide clarity and a more meaningful rule. STUDIO DEVELOPMENT TEAM +++, Telecommunications, Media & Entertainment, Stay current: Audit & Assurance subscriptions. Further, it allows registrants to (1) present fewer acquiree financial statement periods, (2) present acquiree financial statements in fewer circumstances, and (3) when certain criteria are met, use abbreviated financial statements without requesting permission from the SEC staff. Time will be needed for covered persons and their family members to unwind financial interests or employment relationships. This message will not be visible when page is activated. While registrants are also required to disclose the nature and financial impact of a business combination under the FASBs accounting standards, the SECs requirements are significantly more detailed and can result in considerable financial reporting responsibilities regardless of whether a company acquires businesses frequently or only occasionally. Deloitte offers a tailored suite of services geared toward public entities who file with the SEC and private ones considering an initial public offering (IPO) or engaging with public counterparts. L. No. In light of these very serious concerns, the rationale for the proposed definition is sorely deficient. What does 20% controlling influence mean? Proposed Rule 2-01(c)(2)(ii) provides that an accountant is not independent when a "close family member of a covered person in the firm is in an accounting or financial reporting oversight role at an audit client or an affiliate of an audit client, or was in such a role during any period covered by an audit for which the covered person in the firm is a covered person." This complex system ofreinsurance and spreading of risk across a number of insurance companies may effectively prevent accounting firms from obtaining adequate professional liability insurance and insurers from obtaining audits. Can I change data for any entity on the FCT? This box/component contains JavaScript that is needed on this page. ALPS contractually agreed to assist the funds in discharging their responsibilities yet failed to adopt sufficient written policies and procedures as required to prevent auditor independence violations. The Proposed Rule Should Provide Certain ExceptionsFor Employer-Sponsored Benefit Plans, V. The Proposed Rule Regarding "Other Financial Interests" Should Be Modified, VI. The proposed rule also would prohibit other ordinary consumer transactions. Disclosure of this information can be important to investors because an acquisition will generally affect a registrants financial condition, results of operations, liquidity, and future prospects. It's pretty confusing at first, but basically certain companies are restricted in owning shares in or using certain companies because of the relationship that Deloitte has with that company. The final rule must be adopted for fiscal years beginning after December 31, 2020; however, early application is permitted. Consider contacting Independence Compliance Onboarding if you are aware of a Close Family Member who has one of the following situations: a financial interest in a company that is material to his/her net worth or employment in an accounting, financial reporting or other significant role at a company. For example, if you want to export, reexport or transfer (in-country) an EAR99 item to a listed entity and the license requirements for . Our shared values are not an abstract ethical philosophy, but a powerful, living compass intended to guide us all toward the right decisions and the correct actions, whatever situations we may encounter, whenever and wherever we are. However, each client service team should challenge
"21 While we support the use of a "chain of command" model, the proposed definition of "chain of command" is overbroad in its inclusion of all individuals who have any type of responsibility over any member of the audit engagement team, regardless of whether such responsibility has any bearing on the audit. of the SEC's Auditor Independence Requirements
According to the SECs order instituting a settled administrative proceeding, Deloitte violated the rules with respect to the appearance of independence by failing to follow its own policies and conduct an independence consultation prior to entering into a new business relationship with Boynton. The proposal on savings and checking accounts also does not give adequate consideration to business practices in other countries. To add an entity, click on add it here on the "Entity Search" screen, or select "Add an entity" under the Entity Administration menu item. ALPS agreed to pay a $45,000 penalty. The ERC decided to remove these four entries based on information BIS received pursuant to 744.16 of the EAR and the review the ERC conducted in . 450 Fifth Street, N.W. Regarding Financial and Employment Relationships, Securities and Exchange Commission