Code Provisions

Question 1

Name two kinds of communications between auditors and their clients that would not be considered nonaudit services.

Answer 1

Any communications about: (1) the client’s selection and application of accounting standards or policies and financial statement disclosure; (2) the appropriateness of the client’s methods used in accounting and financial reporting; (3) adjusting journal entries; and (4) the form or content of the financial statement.

Question 2

Fill in the blank: In performing nonaudit services, members must never assume attest clients’ ______________.

Answer 2

Management responsibilities

Question 3

Briefly summarize the general requirements that must always be met before members may perform nonaudit services for attest clients.

Answer 3

The client must agree to assume all management and evaluative responsibilities. The member must not do so. The member and client must establish these agreements in writing.

Question 4

Why should covered members monitor the total amount of their nonaudit services?

Answer 4

To ensure that it doesn’t become so extensive that it constitutes performing a separate service, even though no specific boundaries in any area have been breached

Question 5

Name two nonaudit services that a member may perform for an attest client if the general requirements are met.

Answer 5

Any of the following: (1) provide advice, research materials, and recommendations to assist management in making decisions; (2) attend board meetings as a nonvoting advisor; (3) interpret financial statements, forecasts, and so on; and (4) provide management with advice regarding its potential plans, strategies, or relationships.