Question

Required

(i)Define and Discuss to Non-audit services.

(ii)Define and Discuss Non-audit services supplied to an audit client should be stopped.

Note Please do new post (400 words longs )

Answer 1

Answer : (i) The term non-audit services means “any professional services provided to an audit client by an audit firm, other than those provided to an audit client in connection with an audit or a review of the financial statements of the client.

Non-audit services provided by auditors to their clients fall into three categories:

1. Services required by legislation or contract to be undertaken by the auditors of the business.

2. Services that it is most efficient for the auditors to provide because of their existing knowledge of the business, or because the information required is a by-product of the audit process.

3. Services that could be provided by a number of firms. In this case, the fact that the firm is the auditor is incidental and it would generally only be chosen because, for example, it had won a tender process.

(ii) The reform introduces a list of prohibited non-audit services. Member States have the option to expand the list of non-audit services. The audit firm should stop providing non audit services to an audit client ;

• Bookkeeping
• Financial information systems design and implementation
• Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
• Actuarial services
• Internal audit outsourcing services
• Management functions or human resources
• Broker-dealer, investment adviser, or investment banking services
• Legal services and expert services unrelated to the audit

In addition to the specific prohibited services, audit committees should consider whether any service provided by the audit firm may impair the firm's independence in fact or appearance.