This information will assist you in determining whether or not acquiring or having certain financial relationships would create a potential independence issue. Deloitte operates in dynamic regulatory environments in which national rulemaking often has broad-reaching global implications. We fail to see why independence could be impaired in the former, but not the latter. ", A manager or senior staff accountant who does not participate in the audit but who may supervise or evaluate an assistant staff accountant who also works on other unrelated audit engagements would appear to be included in the proposed definition of "chain of command.". Telecommunications, Media & Entertainment. A spouse, spousal equivalent or dependent who is employed in an accounting, financial reporting or other significant role at a company, Your current or previous employer is a restricted entity, You or your spouse, spousal equivalent, or dependent is an officer or member of a board of directors or audit committee (whether for pay or not), Community activities/community leadership positions, Non-Deloitte employment or independent consulting services, including but not limited to professor/instructor roles, part-time employment (e.g., retail store, self-employment, family business, professional service, any other type of paid position), and providing independent contractor services (e.g., sales- or commissions-based activities). Certain services may not be available to attest clients under the rules and regulations of public accounting. This capability would support the concept of continuous auditing and promote the use of more sophisticated auditing techniques on a broader scale and consistent basis. We demonstrate this strength of character through our actions. Proposed rule 2-01(c)(1)(ii)(C) provides that an accountant is not independent when the accounting firm, any covered person, or any of his or her immediate family members has: (1) Any such accounts include assets other than cash or securities (within the meaning of "security" provided in the Securities Investor Protection Act); or, (2) The value of the assets in the account exceed the amount that is subject to a Securities Investor Protection Corporation advance, for those accounts, under Section 9 of the Securities Investor Protection Act.58. * 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. The proposed rule could result in the loss of these relationships. The parent's or investor's aggregate The Provision Allowing The Commission To Look To "All Relevant Circumstances" Would Not Provide Clear Guidance, The Securities and Exchange Commission's (the "Commission") proposed rule governing financial and employment relationships between auditors and their family members and audit clients represents a significant step towards modernizing the independence rules. "61 This modification will provide definitive guidance to members of the audit engagement team on how to handle credit card balances with audit clients. The Proposed Rule Should Not Restrict The Employment Relationships Of The Close Family Members Of Uninvolved Partners, B. 7507, 63 Fed. 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. Significant II 1997) (repealed 1999). A domestic partnership has been declared by the parties for joint coverage under an employer health and welfare benefit plan. who is still a covered person. But they are not alone in safeguarding the audit process, and the other fiduciaries charged in this case failed to fulfill their roles and preserve investor confidence.. It also does not contain the interpretive languageon this point set forth in AICPA Interpretation 302-1.78 Under this guidance, a contingent fee "determined based on the results of judicial proceedings or the findings of governmental agencies" is permissible if "the member can demonstrate a reasonable expectation, at the time of the fee arrangement, of substantive consideration by an agency with respect to the member's client. To the Securities and Exchange Commission, Mr. Donald J. Kirk (the Independent Reporter), Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP, and PricewaterhouseCoopers LLP: We have reviewed the design, implementation, and operating effectiveness of the systems, procedures, and Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. The Definition Of "Covered Persons" Washington D.C., July 1, 2015 . . 210.102(b). The proposed definition of "contingent fee" is largely consistent with existing guidance, which has been applied in practice for many years. Absent the specific relationships above, a Spousal Equivalent relationship may still exist based on individual facts and circumstances. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses. The final rule also modifies the criteria for pro forma adjustments by replacing current requirements with two categories of required adjustments that depict (1) only the accounting for the transaction (referred to as transaction accounting adjustments) and (2) the registrant as a stand-alone entity (referred to as autonomous entity adjustments). A Useful Framework For Determining Who Should test to differentiate when a company should or should not be listed. Tracking & Trading SystemAn internal tool to help you monitor your compliance with independence requirements related to certain personal investments and financial relationships. "80 We believe that this "catch-all" is unnecessary and adds more uncertainty about what precisely the proposed rule prohibits. Generally accepted auditing standards require the audit engagement team to, The ISB is contemplating the same approach. 6LinkedIn 8 Email Updates. U.S. sanctions regulations restrict who U.S. persons (i.e., persons located in the U.S., U.S. citizens, and U.S. entities such as Rice University) may do business with, such as conducting financial transactions and shipping ANYTHING (whether or not the equipment, material or item is export controlled) to these individuals and entities. "79 This is an important concept because when there is reasonable expectation that a court or governmental agency will be involved in determining a tax matter, the results are not determined by the auditor, and accordingly could not impair independence. This Roadmap is intended to help registrants navigate their SEC reporting requirements related to the acquisition or probable acquisition of a business. 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. Through the definition of covered person, the proposed rule would prohibit all such investments by the immediate family members of uninvolved partners. We respectfully request that the Commission consider the changes suggested in this letter which would substantially address our concerns with the proposed rule governing financial and employment relationships. All entities and subentities were listed effective November 9, 2017, unless otherwise indicated. At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. Audit committee guide: Evolving from good to great Event summary. activated.+++ DO NOT USE THIS FRAGMENT WITHOUT EXPLICIT APPROVAL FROM THE CREATIVE proportionate share of the client subsidiary's or investee's total assets is Boynton did not identify his business relationship with Deloitte Consulting in response to a question calling for identification of his principal occupation(s) and other positions. Relying on his understanding that Deloitte Consulting was a separate legal entity from Deloitte, Boynton also did not identify the business relationship in his responses to a question added to the questionnaire in 2009 inquiring whether he had any direct or material indirect business relationship with Deloitte. The parent's or investor's equity in Visit www.integrityhelp.com. Companies selling securities in the US or to US investors are required to either register with the SEC or have an exemption. Deloitte Platforms Navigation. Section 210.1-02(b) of Regulation S-X defines an "affiliate" as any "person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified." The application of this proposed rule to both foreign and domestic audit firms is further complicated by the fact that the insurance risk is spread among a number of insurance companies. Technologies including automation and digital controllership can be used to fuel your financial statement transformation. 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." words to the right of the temporary GMFID field labeled "Get Unique Temp Deloitte Organization Structure | Deloitte Global When the parent or investor is a Designated Officers are individuals who are charged with risk management or general oversight responsibilities and who do not direct, effect, or recommend securities and/or securities-based swap transactions or loan trades for any account. SEC | DART - Deloitte Accounting Research Tool It is also not a substitute for consulting with Deloitte professionals on complex transactions and SEC reporting matters. sell investments in restricted entities that are not permissible. This means that all PwC audit clients are restricted entities, AND any of their affiliates are also considered restricted entities. For more information about Crowe LLP, its subsidiaries, and Crowe Global, . They allow us to better understand the businesses and dynamics of audit clients. The Entity List specifies the license requirements that it imposes on each listed person. Please see www.deloitte.com/about to learn more about our global network of member firms. We believe that if the "chain of command" concept is modified to include all professional personnel who have the ability to influence the conduct of the audit, the "office" concept is unnecessary. Internally, Deloitte Global provides Deloitte professionals worldwide with information and guidance on independence issues, as well as enabling technologies to raise awareness and help them comply with rapidly changing and increasingly complex requirements. GMF Contribution System For more information about the final rule, see the Changing Lanes discussion in the Roadmaps introduction; Appendix C, which summarizes a registrants disclosure requirements before and after adoption of the final rule; and Deloittes June 2, 2020, Heads Up. SEC Identification of U.S. some other service that could compromise our independence. 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. 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. The funds audit committee charter addressed auditor independence generally, but the T&O questionnaires did not expressly cover business relationships with the auditors affiliates. 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 Use Of The "Office" Concept Does Not Provide We respectfully submit that the proposed rule should provide for an exception when: (1) the indirect financial interest in the audit client is immaterial to the covered person; (2) the beneficiary has no direct or indirect control over the investment decisions or assets of the trust; and (3) the trust was not created by the covered person named as a beneficiary. Exceptional organizations are led by a purpose. "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. 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. The Commission has recognized that changes in the existing rules are necessary due to "significant demographic changes, changes in the accounting profession, and changes in the business environment that have affected firms. Deloitte Global Independence leaders continually engage with external professional bodies and regulators to advance the development of independence requirements around the world. Corporate Finance Institute Menu All Courses Certification Programs Again, although we believe that it is unnecessary to include uninvolved partners as covered persons, at a minimum this proposed rule should provide an exemption for investments by immediate family members of uninvolved partners in client funds and non-client sister funds through an employer-sponsored benefit plan. DTTL (also referred to as "Deloitte Global") does not provide services to clients. 24, 78, and 377-378 (1994 & Supp. The proposed rule should be modified to provide an exception when the financial interest in the inheritance or gift is immaterial to the covered person and the covered person is restricted from disposing of the financial interest for an extended period. 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.