Process for Pre-Approval of Non-Audit Services Provided by the External Auditor
Effective Date: March 1, 2006
In order to ensure objectivity of the external auditors, recent legislation for publicly listed companies1
requires that the Audit Committee pre-approve all non-audit services provided by the external auditors of the organization. At this time this is not a requirement for organizations that are not SEC or OSC registrants. In keeping with Queen’s University’s custom of instituting governance and accountability best practices prior to their legislation, the Audit Committee of the Board of Trustees has determined that a procedure for pre-approval of non-audit services provided by the external auditors should be implemented.
The external auditors for Queen’s University provide non-audit services throughout the year, such as tax consultations and sales and local tax services. These services are often provided on an as needed basis and are of significant value to the University, especially given the extensive knowledge the external auditors have of University operations. All non-audit services for the prior year are reported to the Audit Committee of the Board of Trustees by the external auditors in their Planning Report to the Audit Committee to verify independence. The following process will fulfill the pre-approval requirement for non-audit services provided by the external auditor:
- The Audit Committee delegates to the Chair of the Audit Committee the authority to pre-approve non-audit services provided by the external auditors.
- Given the nature and consistency of many of the non-audit services provided by the external auditors, and the need to have the engagement commence in a timely manner, the Chair does not need to pre-approve non-audit services that have a fee $25,000 or lower. These non-audit services will continue to be reported by the external auditors in their Independence Letter included in their Planning Report to the Audit Committee, presented annually at the March Audit Committee meeting.
- For all non-audit engagements with a proposed or potential fee greater than $25,000 and less than or equal to $75,000, pre-approval is required from the Chair of the Audit Committee, on behalf of the Audit Committee. This authority may be delegated to the Vice-Chair if the Chair is not available. If neither the Chair nor the Vice-Chair are available, and the engagement must commence in a timely manner, administration will seek approval from another independent2member of the Audit Committee and will ensure the Chair is notified. The Chair will report all such pre-approved engagements at the next Audit Committee meeting. Were there to be proposed non-audit engagements of significant magnitude or cumulative effect, the Audit Committee relies on the Chair’s discretion regarding appropriate consultation with other Committee members. For non-audit engagements greater than $75,000, there is no delegation of approval, thus pre-approval by the Audit Committee is required.
- Administration will communicate this process to units across the University and require that Financial Services be informed of all proposed non-audit services provided by the external auditors with a fee greater than $25,000. Such engagements may not commence until Financial Services has obtained pre-approval.
- Given the decentralized nature of the University and the ability to initiate engagements at the unit level, for all non-audit engagements with a proposed fee of greater than $25,000, the external auditors will be asked to confirm with Financial Services that there has been pre-approval, as noted above, prior to commencement of the engagement.
This process will be reviewed periodically and amended as appropriate.
Approved by the Audit Committee of the Board of Trustees on December 2, 2005.
1 Sarbanes-Oxley Act section 201 for SEC registrants, and Multilateral Instrument 52-110 for OSC registrants.
2 An Audit Committee member whom is not an employee or student of the University