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Prohibited Services and Independence – More Changes

USA
13 May 2012

Professionals in accounting and finance, are well aware of the independence requirements set forth by the Sarbanes-Oxley Act of 2002 that govern how accounting firms can, and cannot, interact with their publicly traded clients. Yet 10 years after its enactment, independence is still a dynamic issue. In the first quarter of 2012, we saw a resurfacing of activity around independence, and specifically the prohibited services related to independence. Taxand US reviews the prohibited services that are held by the Act to compromise independence and assess how this may impact multinationals in the US.

Prohibited Services
One of the Sarbanes-Oxley Act's primary intentions is to ensure and preserve auditor independence. To that end, Title II of the Act addresses the provision of certain non-audit services by the auditor and specifically provides for nine categories of prohibited non-audit services including, bookkeeping or other services related to the accounting records or financial statements of the audit client, 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 or dealer, investment advisor, or investment banking services, legal services and expert services unrelated to the audit and any other service that the PCAOB determines, by regulation, is impermissible.

Taxand US provides a more in-depth look at the issues presented by the changes in prohibited services and independence
 

Your Taxand contact for further queries is:

Kelly Peele
T. +1 503 442 3625
E. kpeele@alvarezandmarsal.com

Taxand's Take

Independence is not a simple "once and done" analysis. When evaluating service providers for non-attest services, consideration must be given to the evolving independence landscape. The recent activity seen around this topic demonstrates an elevated posture for regulators, service providers and audit clients alike. Navigating through these issues can be time-consuming and risky. While it remains uncertain whether or not the PCAOB will adopt rules requiring audit firm rotation, the fact remains that companies should be extremely careful and conservative when determining what non-attest services they will use their audit firm to perform. In light of all of these developments, the appeal of an independent multi-disciplinary consulting firm, which can perform services without any of the complicated independence issues needing to be considered, has become even more apparent.

Taxand's Take Author