In: Accounting
In order to preserve auditor independence, the Sarbanes–Oxley Act of 2002 restricts the types of nonaudit services that auditors can perform for their public‐company audit clients. The list includes nine types of services that are prohibited because they are deemed to impair an auditor's independence. Included in the list are the following: Financial information systems design and implementation Internal audit outsourcing Describe how an auditor's independence could be impaired if she performed IT design and implementation functions for her audit client. Likewise, how could an auditor's involvement with internal audit outsourcing impair his or her independence with respect to auditing the same company?
Sarbanes–Oxley Act of 2002 restricts the types of nonaudit services that auditors can perform for their public‐company audit clients. The list includes nine types of services that are prohibited because they are deemed to impair an auditor's independence. Included in the list are the following: Financial information systems design and implementation; & Internal audit outsourcing Services.
UNDERSTANDING THE RATIONALE:
An Auditor needs to main her Independence Status throughout the Audit Period. Any other services that may impair her Independence Status is not in conformity with Auditing Principles.
The Auditor should consider whether a service provided by her :
(a) creates a mutual or conflicting interest with their audit
client;
(b) places them in the position of auditing their own work;
(c) results in their acting as management or an employee of the
audit client; or
(d) places them in a position of being an advocate for the audit
client.
Since IT Design and Implementation and Internal Audit Outsourcing leads to one or more of the above mentioned situations, the same is Restricted by SOX Act.