Review of internal controls and other issues related to the required tri-annual review of Qualified Intermediaries, Withholding Partnerships and Withholding Trusts under the FATCA rules, has limitations on the use of the same firm to both design procedures on internal FATCA controls and then subsequently perform the certification review.
The IRS has just updated the independence issue with a change to Q2 on its website. The Q2 and new answer is as follows:
A2. Section 10.04 of the QI agreement and section 8.04 of the WP and WT agreements provide that an internal or external reviewer must be independent. The preamble to the QI agreement provides that the reviewer must have sufficient independence to conduct the review objectively and cannot review his or her own work or the work of others in the same "firm." The IRS has received requests for clarification of the independence standard for external reviewers and, in particular, how the IRS construes the term "firm" for purposes of this requirement. The IRS will permit an external reviewer of a QI, WP, or WT to apply the standards of independence that would otherwise apply to its engagement to conduct the periodic review (such as the standards for an agreed-upon procedures engagement by a certified public accountant).
If you have a question as to how this might impact your certification process, Moore Doeren Mayhew would be pleased to discuss this issue with you. Contact us.
Thank you.
Neal Weiss co-authored this article.
