Audit Committee Pre-Approval Requirements 2510
Hoiya last edited by
It seems like I am the only one constantly struggling with these independence/pre-approval rules. I did a search and also researched the rules but didn’t quite find an answer.
The question is: If a company is now anticipating to go overbudget on a service that has been pre-approved by the Audit Comm, does the over-budget portion need to be pre-approved by the Committee again (assuming no change in the nature of the approved service)? I would think the idea of the SEC/PCAOB rules focus on the nature of the service and not the dollar amount, but can’t find anything to back that up and don’t want to violate the pre-approval requirement.
Thoughts? Or did I miss some rule that has that specified (In which case I apologize.)?
kymike last edited by
SOX won’t address this. It will all depend on how your individual company audit committee wants to handle cost overruns. Many companies allow up to 10% overrun before going back to get approval to spend more
gmerkl last edited by
The SEC’s rule concerning the approval of non-audit services by the audit committee only concerns the approval of the non-audit engagement BEFORE the auditor is engaged or the pre-approval of certain types of non-audit services within an audit committee’s pre-approval policy.
In other words, the SEC rules do not require an approval of a non-audit service engagement that overruns its budget. You need to check your audit committee’s rules whether they specify what happens in the case of budget overruns and if they don’t ask your audit committee what they would like and propose to add the missing provision to the audit committee rules.
Denis last edited by
yes, this was my understanding too.
Audit Committee needs to pre-approve whether the activity can happen but does not, for SOX purposes, need to define the budget.
As gmerkl and kymike suggest it would be good practice for the audit committee to have its own practice or requirements around this.