List of nonattest services

3–47.

The issue of whether the performance of nonattest (consulting) services for audit clients impairs independence of the auditors has been widely debated within the public accounting profession. Restrictions on the performance of consulting are a major aspect of the Sarbanes-Oxley Act of 2002.

Required:

1. Describe the restrictions that are placed on the performance of nonattest services for audit clients by the Sarbanes-Oxley Act of 2002.

1. List arguments for restricting nonattest services for audit clients.

1. List arguments against restricting nonattest services for audit clients.

1. Present your opinion and support it with one or more of the arguments listed above.

The Answer (here is what you need to paraphrase)

(a) The Sarbanes-Oxley Act of 2002 and related SEC regulations prohibit the auditors of public companies from performing:

(1) Bookkeeping or other services related to the accounting records of financial statements of the audit client.

(2) Financial information systems design and implementation.

(3) Appraisal or valuation services, fairness opinions, or contribution-in-kind reports.

(4) Actuarial services.

(5) Internal audit outsourcing services.

(6) Management functions or human resources services.

(7) Broker or dealer, investment adviser, or investment banking services.

(8) Legal services.

(9) Expert services unrelated to the audit.

(b) There are a number of arguments that have been set forth for restricting nonattest services for audit clients, including:

(1) It is not possible for the auditors to objectively evaluate their own nonattest work as it relates to the audit. Thus independence related to the audit is impaired.

(2) The additional fees derived from nonattest services serves as an additional threat to auditor independence.

(b) The arguments that have been set forth for not restricting nonattest services include:

(1) Auditors have been providing nonattest services for audit clients for years in an objective manner.

(2) The additional knowledge of the client obtained from performing nonattest services actually enhances the performance of the audit.

(3) As long as the client establishes effective oversight over the performance of the nonattest services, the auditors can perform them in an objective manner.

(d) Responses by students may vary, including some of arguments in (b) and (c).

What you need to do

-Rewrite the answer is your own words and paraphrase it. Because it is taken from solution- Make sure to say the same but in different order from the answer and write it in completely your words. I don’t what it to look as the given answer at all.

-Write a very short summary of the answer after it is written in your own words – separated paragraph – indicated it

-Make sure you don’t copy anything from the answer.