Use of a Specialist 1120

  • We need to document which vendors we consider to be specialists vs. service providers and why we determine they should be specilists. Has anyone experience with this? Perhaps some guidelines as to what an outside auditor would be looking for in this area would be appreciated.

  • Generally, a service provider provides a transaction processing service such as pension payments, payroll, etc. A specialist generally provides information such as valuation, actuarial analyses, etc.
    Here is an example that our external auditor was OK with relating to our evaluation of someone as a specialist for which we did not have to test controls of that company -
    XXXX Qualifications as a Specialist
    SOX 404-Tax Equalization
    Associates for XXXX has been designated as a specialist in regards to the tax equalization process. XXXX is a human resources consulting firm dedicated to facilitating global mobility. Since 1954, XXXX has provided organizations superior global cost-of-living services for their international cross-border transfers. XXXX offers a wide range of expatriate compensation data services that include: COLA, Expatriate Rent and Utilities Guidelines, Statistical Income Tax, Hardship Evaluations, Automobile Capital Costs, Per Diems, and One-Way Transfer Calculations. For all of these services, both the calculation and data delivery can be customized according to client needs. Additionally, XXXX provides clients comprehensive program design consulting including policy development, benchmark surveys, and transition support. XXXX is headquartered in Anytown, USA and has full-service offices in XXXX. XXXX of XXXX Senior Consultant, is the primary contact for our company. Mr. XXX has an Economics degree from XXXX College and a Masters in Business Administration from XX. He has been an employee with XXXX for 12 years.
    Concluding Remarks:
    Based on our review, Mr. XXX has the necessary qualifications and expertise to be designated as a specialist. Consequently, we rely on XXXX’s expertise to provide estimates of cost of living, utilities, and housing adjustments used in expatriate salary adjustments. Note: XXXX’s role with our company complies with the PCAOB’s interpretation of an outsourced service that is not part of a company’s information system (paragraph .03 of AU section 324). We waive further review.

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