SCENARIO:

Part 1

You have recently been assigned to an engagement team for a cheesecake factory inc, a client of the Firm. In preparation for an upcoming audit committee meeting - and specifically for a discussion of non-audit services with the audit committee - your manager has asked that you determine whether the companys audit committee charter aligns with the SEC and PCAOB rules and whether there are further audit committee instructions outside the charter (often disclosed in the proxy statement).

1. locate the most current proxy statement (DEF-14A). Find the disclosure in the proxy statement relative to the auditors, and also obtain the Companys Audit Committee Charter. (The charter may be easily accessible through the proxy or it may direct you to the companys website to download it).
2. Review the SEC and PCAOB rules relative to audit committee requirements and audit committee communication. See supporting materials for links to the specific rules.
3. Match up the audit committee charter for your company with the rules and identify whether the charter complies with all of the rules. Please put this in a matrix format.
4. Compose an email to the engagement partner (accompanied by the Charter and a cross-reference to the rules) indicating whether you believe the Charter complies with the stated requirements. If it does not, highlight what you believe is missing, whether that missing item could have a material impact on the operation of the audit committee, and what remedial action should be taken by the company to resolve the matter.

Part 2:

One of the primary tasks of the audit committee is to pre-approve non-audit services. This pre-approval, as the regulations specify, may be done by the audit committee as a whole, or potentially by the delegation of authority to a single member of the audit committee. The rules and policies that you referenced in part 1 of this project should contain sufficient information for you to understand how your chosen company approaches pre-approval of non-audit services.

Your client (the company you chose in part 1) has recently asked that your firm perform certain tax services. Pursuant to this, they have received pre-approval from the audit committee chairperson to conduct the following tax service - to assist in the preparation of a tax transfer pricing study in Europe. Contemporaneously, you have been told that the companys Vice President of Tax has also engaged your firm to conduct a tax transfer pricing study in Singapore.

Your objective is to understand whether or not (1) the audit committee pre-approval of the European tax services was appropriate based on company documented policies; and (2) the actions of the Vice President of Tax were appropriate.

Compose a memo to analyze the actions of the audit committee and the VP of Tax. Answer the following questions:

1. Is the pre-approval of sufficient granularity based on SEC and PCAOB rules? Be sure to cite the rules that apply.
2. Do both actions comply with the companys audit committee charter or the more detailed disclosures in the proxy statement?
3. If either of the actions does not comply with the rules and/or the companys policies and procedures, what needs to happen?