Question

Discuss the nonaccounting services that external auditors are no longer permitted to render to audit clients.

Answer 1

The act addresses auditor independence by creating more separation between a firm’s attestation and non-auditing activities. This is intended to specify categories of services that a public accounting firm cannot perform for its client. These include the following functions:

g.

bookkeeping or other services related to the accounting records or financial statements;

h.

financial information systems design and implementation;

i.

appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

j.

actuarial services;

k.

internal audit outsourcing services;

l.

management functions or human resources;

m.

broker or dealer, investment advisor, or investment banking services;

n.

legal services and expert services unrelated to the audit; and 

o.

any other service that PCAOB determines is impermissible.

 

While the Sarbanes-Oxley Act prohibits auditors from providing the above services to their audit clients, they are not prohibited from performing such services for non-audit clients or privately held companies.