As a result, certain registrants, and investors, would lose the benefit of the expertise of these retired partners. Reg. Please see www.deloitte.com/about to learn more. Proposed rule 2-01(c)(1)(ii)(G) would prohibit covered persons and their immediate family members from investing in any entity in an investment company complex if the accounting firm's audit client is also an entity in the same investment company complex. Moreover, there are many fee arrangements commonly referred to as "value added" which do not impair independence and should not be deemed the equivalent of a contingent fee. Second, the proposed rule omits important portions of AICPA Rule 302 and its related interpretation. In the example above, independence may be impaired if covered persons of the accounting firm conducting the audit of Company A havecertain relationships with Company B including: (1) investments;14 (2) loans; (3) savings or checking accounts; (4) brokerage accounts; (5) credit card balances; (6) individual insurance policies or professional liability policies;15 (7) business relationships;16 and (8) certain employment relationships.17 Yet there is no evidence that these relationships with an "affiliate of the audit client," as defined, impair independence when the affiliate is immaterial to the audit client. 450 Fifth Street, N.W. Thus, for instance, the audit engagement team should always be prohibited from entering into certain relationships with audit clients. 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. Insert Custom HTML fragment. The Integrity Helpline is a confidential, 24-hours-a-day, 365-days-a-year service you can access from any location. Furthermore, the proposed rule should provide an exception for policies obtained in the ordinary course of business from an insurer before the insurer became an audit client. These software programs have been adapted and used successfully by a number of registrants to sustain and improve their internal controls, including hundreds of banks which have used the programs to monitor their compliance with various banking laws. The expertise and subject matter knowledge we have developed through our audit services is valuable to the success of such an initiative in the new economy. What does 20% controlling influence mean? 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. First, professional personnel, regardless of their "office," who are consulted on substantive matters, even sporadically, by the audit engagement team would be included in our modified definition of "chain of command." A domestic partnership has been declared by the parties for joint coverage under an employer health and welfare benefit plan. decision. Am I required to validate this entitys information as well? 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. See Terms of Use for more information. As a practical matter, third parties will likely sever or avoid these relationships, rather than comply with the independence rules. Further, the payroll service provider would be subject to all of the independence requirements, including prohibitions on investments in our audit clients and their affiliates. Proposed rule 2-01(c)(1)(ii) lists several "other financial interests" between an auditor and an audit client that would impair independence because, according to the Release, "they create a debtor-creditor relationship or other commingling of the financial interests of the auditor and the audit client. taxes exceeds 5 percent of the parent's or investor's consolidated income from tree it is located? DTTL and each of its member firms are legally separate and independent entities. This box/component contains code We note that the ISB's and IFAC's proposed approach would not restrict the ability of accounting firms to obtain any type of insurance coverage from audit clients.63. Rather, the purpose of the Investment Company Act is to provide a framework to regulate the investing, reinvesting and trading in securities by investment companies, not the independence of auditors. This exception is necessary in light of the difficulty that many people face in securing life insurance coverage. Such a result would undermine any hope that the proposed rule would provide clear guidance that would allow accountants, clients, and other persons affected by the proposed rule, to understand the prohibited interests and relationships with respect to audit clients. 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. As noted in the Release, the "materiality" concept for purposes of auditor independence should not be confused with the meaning of "materiality" pursuant to Staff Accounting Bulletin ("SAB") No. The parent's or investor's aggregate The proposed rule on "other financial interests" is premised on the concept that an accounting firm must be independent not only in fact, but also in appearance. Such a construction ignores the fact that the parties also have a mutual interest in providing to their clients the best products or services possible, including those that would improve audit quality. For example, the proposed rule would unnecessarily require the spouse of a covered person to transfer assets out of his or her brokerage account held at an immaterial affiliate of an audit client to the extent the value of such assets exceed the Securities Investor Protection Corporation ("SIPC") coverage.19 There is no threat to an accounting firm's independence where the affiliate is not material to the audit client, and the accounting firm does not audit the affiliate. The Definition Of "Covered Persons In The Firm"Unnecessarily Includes All Professionals Providing Non-Audit Services. Trading securities on a restricted list can result in serious legal and financial repercussions. cc: The Honorable Arthur Levitt, ChairmanThe Honorable Isaac C. Hunt, Jr., CommissionerThe Honorable Paul R. Carey, CommissionerThe Honorable Laura S. Unger, Commissioner. For these reasons, we generally agree that, depending on the facts and circumstances, reselling activities could be a business relationship. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (DTTL), its global network of member firms, and their related entities (collectively, the Deloitte organization). Also, due to growth in the accounting profession and technological innovations, the traditional "office" has become an unusable, archaic term. However, in other respects the definition is both overbroad and under inclusive. Audit committee guide: Evolving from good to great Event summary. The Proposed Exceptions Would Provide More Meaningful Protection With Certain Modifications, A. . DTTL (also referred to as "Deloitte Global") does not provide services to clients. *** Entities or subentities owned or controlled by another entity or subentity on this list are not treated as restricted unless also specified by name on the list. If the entity you were seeking did not appear on the list, you may attempt a different search, or if it does not exist, add it by clicking on "add it here" on the screen. at 43,180. It's administered by a third party to help maintain confidentiality and, when requested, anonymity. Indeed, a clear rule that can be applied to the myriad of investment products that may encompass indirect interests through other entities (e.g., mutual funds, unit investment trusts, etc.) 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 . 1971). 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. 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 proposed definition of "contingent fee" is largely consistent with existing guidance, which has been applied in practice for many years. The Release explains that the term "significant influence" should be determined in light of the guidance in Accounting Principles Board ("APB") Opinion No. For example, there is no evidence that an accounting firm's independence would be impaired if the spouse of an uninvolved partner had a $10,001 balance on a credit card issued by an audit client.46 Given these concerns, we believe the Commission should follow the ISB's proposed approach of applying restrictions on "other financial interests" to the accounting firm and professional employees directly involved in providing audit services to the audit client.47. From determining the financial statements required for an acquisition to the creation of pro forma financial information, complying with Securities and Exchange Commission (SEC) rules and regulations can be difficult. Finally, we believe the proposed rule would not prohibit group insurance policies, such as group health or group life insurance policies. Deloitte Global was an early signatory to the United Nations Global Compact (UNGC) and to the World Economic Forums Partnering Against Corruption Initiative (PACI). Close family members (other than immediate family members) of the members of the audit engagement team. DTTL and each of its member firms are legally separate and independent entities. Deloittes SEC reporting advisory services can help public entities looking to address or improve their present and private companies preparing for their future. Do not delete! In that respect, this proposed rule presents accountants with additional financial services opportunities, which were otherwise restricted. The funds audit committee charter addressed auditor independence generally, but the T&O questionnaires did not expressly cover business relationships with the auditors affiliates. In addition, this concept should be extended to bank overdrafts and other similar consumer finance arrangements. Additionally, it would be difficult and expensive for an accounting firm to assure that none of its audit clients or their affiliates have a direct investment in third parties with which the accounting firm either has a relationship or is considering a relationship. items marked with an asterisk (*) are common in India. MINFAR Ministerio de las Fuerzas Armadas Revolucionarias The Proposed Rule Should Provide Certain Exceptions Proposed rule 2-01(c)(1)(ii)(A) would prohibit any loan to or from an audit client, an affiliate of an audit client, or any officer, director, or beneficial owner of more than five percent of those entities' equity securities, with certain exceptions for collateralized loans.51 Although the proposed rule captures the accounting profession's agreement that certain loans to and from audit clients might create a financial interest that impairs independence,52 in certain respects the proposed rule is overbroad. For example, the beneficial owner of 5.1% of the equity securities of an immaterial affiliate of a public audit client, controlled by unrelated third parties, would not be in a position to influence the audit client. These independence policies and procedures are designed to help Deloitte professionals understand and meet independence standards and regulatory requirements to achieve excellence in service delivery. Deloitte Consulting acquired a proprietary brainstorming business methodology from Boynton in 2006 and collaborated with Boynton to implement it and serve both internal and external firm clients through 2011. Please see www.deloitte.com/about to learn more about our global network of member firms. 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 and each of its member firms are legally separate and independent entities. If you clicked a link from a site other than DeloitteNet, please contact the CallCenter at 2222 or +1 800 DELOITTE (1-800-335-6488).
North Tyneside Council Parking Permit Renewal,
Is Controlled Chaos Curly Girl Approved,
Mathematics Quarter 2 Module 5 Solving Problems Involving Percent,
Why Doesn't Matt Smith Have Eyebrows,
Host Home Provider Salary In Ga,
Articles S