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Can accounting firms now legally perform nonaudit consulting type to a client firm that they have audited their books and verified their financial statements?
Yes, accounting firms can legally perform nonaudit consulting services for clients whose financial statements they have audited, but there are specific regulations and restrictions in place. The Sarbanes-Oxley Act prohibits auditors from providing certain types of nonaudit services, such as internal audit outsourcing or financial information systems design, to ensure independence and prevent conflicts of interest. Firms must carefully navigate these rules to maintain compliance while offering additional services.
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Can CPA firms serve as consultants for the companies for which they provide audit services?
To ensure independence, CPA firms are not allowed to complete most consulting services for their publicly traded audit clients. Under Section 201 of SOX, it is unlawful for a CPA firm to provide any nonaudit service to an audit client,
How can the provisions of the Sarbanes-Oxley Act help minimize the likelihood of auditors failing to identify accounting irregularities?
The Sarbanes-Oxley Act of 2002 is considered to be the most important change to federal securities laws in the United States since the New Deal. It came in the wake of a series of corporate financial scandals, including those affecting Enron, Arthur Andersen, and WorldCom. Among the major provisions of the act are: criminal and civil penalties for securities violations, auditor independence, certification of internal audit work by external auditors, and increased disclosure regarding executive compensation, insider trading and financial statements.While unquestionably useful to the investing public, thousands of companies now face the daunting task of ensuring their operations are Sarbanes-Oxley compliant. Auditing departments typically turn to a two pronged solution to achieve this goal. First, firms initiate a comprehensive external audit of the company by Sarbanes-Oxley compliance consultants to identify areas of risk. Second, firms initiate a company-wide installation of automated software systems that provide the security and electronic paper trails necessary to guarantee compliance on a long term operational basis.Perhaps the most controversial aspects of Sarbanes-Oxley Act are the change from industry self-promulgation and self-enforcement of standards relating to auditing, accounting, quality control, ethics, and independence, to, in effect, government regulation and promulgation of standards through the Public Company Accounting Oversight Board, and the limitations on the nonaudit services a company can provide to its audit clients. Although the Public Company Accounting Oversight Board is not directly empowered to establish accounting standards, Sarbanes-Oxley Act section 108 allows the SEC to recognize "generally accepted" accounting standards set by private entities.Sarbanes-Oxley Act established the Public Company Accounting Oversight Board, under Securities and Exchange Commission oversight, to be
