Code Provisions Flashcards
IMPORTANT:
THIS SECTION IS IMPORTANT
What does the Nonaudit services: Code Provisions govern?
The code governs Nonaudit Services to non-public clients and to public non-attest clients
Communications about the following topics relate both audit and Non-audit services which do not impact independence:
These do not impair independence:
- The client’s selection and application of accounting standards or policies and F/S disclosure requirements
- Appropriateness of client’s method used in determining accounting and financial reporting
- Adjusting journal entries that the member has prepared for client management consideration
- The form or content of F/S
T/F: Audit firms shouldn’t assume MANAGEMENT RESPONSIBILITIES
TRUE. Your job is to give guidance, suggestions, alternatives.
Management responsibilities: Leading and directing an entity, including making significant decisions regarding the acquisition, deployment, and control of human, financial, physical, and intangible resources.
- Setting policy
- Authorizing transactions
- Preparing source documents
- Having custody of clients assets
- Deciding which recommendations of the member or third party to implement
What are the “General Requirements” on when you can give NAS: (Three requirements)
1 ) The client should:
- Management needs to assume all responsibilities
- Client should oversee the service (senior management) to assess the work that you’re doing. The member should assess the situation to ensure that the senior member is up to task
- The client should evaluate the adequacy and results of the services performed
- Accept responsibility for the results of the service
2) MIPPS do not assume management responsibly and are satisfied with the clients management to:
- Meet criteria mentioned above
- Make an informed judgement on the results of the member’s NAS
- Accept responsibility for making significant judgements
3) Before performing NAS, MIPPS establish and document IN WRITING their understanding regarding:
- Objectives of the engagement
- Services to be performed
- The attest client’s acceptance of responsibilities
- The member’s responsibility
- Any limitations on the engagement
SOX limits NAS by saying that MIPPS may not provide certain advisory services to audit clients that are public companies:
Key MIPPS Should not:
- Audit their own work
- Advocate for attest clients
- Serve as client’s managers
MIPPS cannot provide the following to clients who are public companies:
- Bookkeeping or other services related to the accounting records or financial statements
- Financial information systems design and implementation
- appraisal or valuation services, fairness options
- internal audit outsourcing services
- management functions or Human Resources
- broker or dealer
- legal services
The PCAOB says that independence is impaired in the ta area if:
- The firm entered into a contingent fee arrangement with an audit client
- Firm provides marketing planning, or opinion services in favor of tax treatment of a confidential transactions
- Firm provides tax services to management or family that oversees financial information
What is the SOX process for picking a audit firm?
Independent audit committee selects, evaluates, and compensates auditors
Audit committees must pre-approve any permitted NAS (such as tax services) purchased by a company from its auditor