1 answer

The following situations involve the provision of nonaudit services. Indicate whether providing the service is a...

Question:

The following situations involve the provision of nonaudit services. Indicate whether providing the service is a violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence. Explain your answer as necessary. Providing bookkeeping services to a public company. The services were preapproved by the audit committee of the company. Providing internal audit services to a public company audit client with the preapproval of the audit committee. Providing advice to a private company client on accounting for a merger with ­another private company. Providing bookkeeping services to a private company. The source documents were prepared and authorized by the client. Providing internal audit services to a public company that is not an audit client. Implementing a financial information system designed by management for a private company. Recommending a tax shelter to a client that is publicly held. The services were preapproved by the audit committee.


Answers

The AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence requires certain services not to be rendered by the auditor for an audit client which include,

1) Bookkeeping services

2) Financial information system design or implementation

3) Appraisal & Valuation Services

4) Actuarial Services

5) Internal Audit

6) Management & Human Resources Functions.

7) Investment Advising services

8) Legal Services

9) Expert Services, however tax services are permitted to be provided with pre-approval of audit committee obtained.

In accordance with above provision above the given services can be identified as:

a) Yes

In violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence as the bookkeeping services are prohibited to be rendered by a auditor.

b) Yes

As per the provisions above, providing any internal audit services to audit client is prohibited even though pre*approved by the audit committee. since the public company is audit client, providing internal audit services to such client is in violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence.

c) No

The provision above applies only to the auditor of publically traded companies, hence expert services provided to private company client is not violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence.

d) No

Providing bookkkeping services to a private company is also not violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence.

e) No

Providing any internal audit services to audit client is prohibited. As the public company not a client, rendering of such services is allowed & is not in violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence.

f) No

Implementing a financial information system for a private company is not in violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence.

g) No

As the tax services with pre-approval by audit committee are exception, hence are not in violation of AICPA rules or SEC rules including Sarbanes–Oxley requirements on independence.

.

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