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Provision of non audit services by the auditor to the audit client is a threat to auditors' independence. Evaluate the seriousness of this threat compared with other threats to auditors' independence and identify the strengthening auditors' - Essay Example

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Provision of non audit services by the auditor to the audit client is a threat to auditors' independence. Evaluate the seriousness of this threat compared with other threats to auditors' independence and identify the strengthening auditors'

eveloped from the long audit tenure and the economic dependence arising from the non audit services and social bond developed between the auditor and the auditor’s client through long-term association have raised questions regarding auditor independence (Carson & Simnett, 2006).
Non Audit Services (NAS) are also identified as ‘management advisory services’. Regulators believe that non audit services provided to audit clients is a serious threat to the auditors’ independence. Regulators believe that conflicts of interest occur and fee dependence has a damaging affect on auditor independence. Audit firms often defend themselves by saying that fee dependence does not influence them and audit and non audit services are performed independently by separate staff (Houghton & Ikin, 2001).
It is also opined that non auditing services help in reduction of total costs, improve technical competence and intensify competition. The audit firms, the audit clients and regulatory bodies can bring about efficient services mix through market interaction (Arrunada, 1999).
The services that external auditors provide to their clients can be categorised into consulting, tax and audit. Consulting and tax are often referred as non audit services. Section 201 of the Sarbanes Oxley Act lays down the services which the external audit firm should not perform. They cannot perform bookkeeping services related to financial statements and accounting records. They cannot design or implement financial information systems. They cannot perform valuation or appraisal services, actuarial services, management functions, legal services, litigation or administration related expert services. The auditor is also prohibited from providing marketing and planning related non audit services to the audit client and tax services to the management team or the family members of the team (Burke & et. al., 2008).
It is believed that NAS services of auditors change their role from that of an outsider who can ...Show more

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Evaluate the Seriousness of this Threat Compared With Other Threats to Auditors Independence and Identify the Effective Means of Strengthening Auditors Independence
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Author : cassandremoen
Provision of non audit services by the auditor to the audit client is a threat to auditors independence. Evaluate the seriousness of this threat compared with other threats to auditors independence and identify the strengthening auditors essay example
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