Rule 20402: Provision of Audit and Non-Audit Services by External Audit Firms | University of Texas System

Rule 20402: Provision of Audit and Non-Audit Services by External Audit Firms

Rule 20402: Provision of Audit and Non-Audit Services by External Audit Firms

Details

Series: 
20000: Administration
Who should know: 
Administrators
Internal Audit
Responsible Offices: 
Controller
System Audit
Date Approved: 
December 10, 2004
Date Last Amended: 
August 22, 2013

Sec. 1 Audit Services.  

1.1 Audit, Compliance, and Management Review Committee’s Role. 

The ACMRC is responsible for contracting with external audit firms for audit services.

1.2 Board Approval. 

Neither U. T. System nor any of the institutions may engage an external audit firm for audit services unless the contract is authorized through a delegation of authority as provided by Texas Government Code Section 321.020 and the contract has been approved by the Board in accordance with Section 3 of Regents’ Rules and Regulations, Rule 10501 concerning contracts requiring Board approval.

1.3 Conflict of Interest Provision.  

Neither U. T. System nor any of the institutions may engage an external audit firm for audit services unless the contract includes an acceptable conflict of interest provision approved by the Vice Chancellor and General Counsel.

(a) Lead Partner Rotation.  The lead (or coordinating) audit partner (having primary responsibility for the audit), or the audit partner responsible for reviewing the audit shall not have performed audit services for the institution(s) in each of the five previous fiscal years.

(b) Hiring Restrictions.  Neither U. T. System nor any of the institutions may hire a former or current partner, principal, or professional employee in a key position, as defined in the Code of Professional Conduct of the American Institute of Certified Public Accountants (AICPA), that would cause a violation of the AICPA Code of Professional Conduct or other applicable independence rules, during the year subsequent to the completion of the audit engagement.

Sec. 2 Non-Audit Services.

2.1 ACMRC Review and Approval. 

The U. T. System and the institutions may not engage the external audit firm to perform non-audit services unless the proposed engagement is reviewed and approved by the ACMRC.

2.2 Delegation of Authority.

The ACMRC Chairman may delegate to one or more designated members of the ACMRC the authority to grant the approval required in the previous Subsection. The decision(s) of any member to whom authority to approve is delegated shall be presented to the full ACMRC at the next Committee meeting.

2.3 Conflict of Interest Not Permitted.

If, upon review of a proposed engagement for non-audit services under Subsection 2.1 of this Rule, the ACMRC determines that a conflict of interest exists between the external audit firm’s obligations to perform audit services and that firm’s anticipated obligations to perform non-audit services contemporaneously with the performance of audit services, then U. T. System and the institutions may not engage the external audit firm to perform the non-audit services.

Sec. 3 Prohibited Non-Audit Services.

Neither U. T. System nor any of the institutions may engage an external audit firm to provide prohibited non-audit services contemporaneously with the provision of audit services.

Definitions

ACMRC – refers to the Audit, Compliance, and Management Review Committee of the Board.

Audit Services – are services provided for the purpose of expressing an opinion on the financial statements of U. T. System or any of the institutions.

External Audit Firm – is a public accounting firm (including its partners, employees and agents) engaged by the Board to provide audit services.

Non-Audit Services – any non‑audit services (including tax services) that are not listed in the definition of prohibited non-audit services.

Prohibited Non-Audit Services – include:

a)    bookkeeping or other services related to the accounting records or financial statements of
       U. T. System or any of the institutions;

b)    financial information systems design and implementation;

c)    appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

d)    actuarial services;

e)    internal audit outsourcing services;

f)     management functions or human resources;

g)    broker, dealer, investment adviser, or investment banking services;

h)   legal services and expert services unrelated to the audit; and

i)     any other service that the Board determines, by rule, is impermissible.

Amended Log

August 22, 2013
December 10, 2004

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