Details
Series
Date Approved
Date Last Amended
Office(s) Responsible for Rule
Office of the Controller
System Audit Office
1. Title
Provision of Audit and Non-Audit Services by External Audit Firms
2. Rule and Regulation
Sec. 1 Audit Services.
1.1 Audit, Compliance, and Risk Management Committee’s Role. The ACRMC oversees contracting with external audit firms for audit services.
1.2 Board Approval. Neither U.T. System Administration 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.
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 must not have performed audit services for the institution(s) in each of the ten 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 ACRMC Review and Approval. Neither U.T. System Administration nor the institutions may engage the External Audit Firm to perform Non-Audit Services unless the proposed engagement is reviewed and approved by the ACRMC.
2.2 Delegation of Authority. The ACRMC Chairman may grant the approval required in the previous Subsection. Any such approval must be presented to the full ACRMC for approval 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 ACRMC 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 the firm may not be engaged to perform the Non-Audit Services.
Sec. 3 Prohibited Non-Audit Services. Neither U.T. System Administration nor any of the institutions may engage an External Audit Firm to provide Prohibited Non-Audit Services contemporaneously with the provision of Audit Services.
3. Definitions
ACRMC – refers to the Audit, Compliance, and Risk Management Committee of the Board.
Audit Services – services that result in an audit, review, or agreed-upon procedures communication for 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.
4. Relevant Federal and State Statutes
Texas Government Code Section 321.020 – Coordination of Investigations (with State Auditor)
5. Relevant System Policies, Procedures, and Forms
Regents’ Rules and Regulations, Rule 10501 – Delegation to Act on Behalf of the Board
6. System Administration Office(s) Responsible for Rule
Office of the Controller
System Audit Office
