The Sarbanes-Oxley Act of 2002 placed significant restrictions on the types of consulting that may be performed by auditors for their public company audit clients.a. List four types of services that are prohibited by the Act.b. List three types of general consulting activities that would impair the auditors' independence based on the AICPA Code of Professional Conduct.
What will be an ideal response?
a. Services prohibited by the Act include (4 required):
Bookkeeping or other services related to the accounting records or financial statements.
Financial information systems design and implementation.
Appraisal, valuation, and actuarial services.
Internal audit outsourcing services, management functions, or human resources.
Various investment services.
Legal services and expert services unrelated to auditing.
b. Consulting functions that the AICPA Code of Professional Conduct indicate impair independence include (3 required):
Authorizing, executing, or consummating a transaction.
Preparing source documents.
Having custody of client assets.
Supervising client employees in their normal recurring activities.
Determining which recommendation should be implemented.
Reporting to the board of directors on behalf of management.
Serving as a client's stock transfer or escrow agent, registrar, or its general counsel.
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