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Auditor Independence

In: Business and Management

Submitted By jeannebell
Words 1180
Pages 5

Auditor Independence
Linda Bell
Strayer University
Ronal P. Lentz, CPA, PhD
March 26, 2010

Auditor Independence After the Enron scandal in late 2001, the government decided that there was a need for more regulations for the accounting profession. The Sarbanes-Oxley Act of 2002 was enacted to ensure more controls on accountants and public companies. One of the issues addressed in the act was the independence of auditors. In 2003 the Securities and Exchange Commission (SEC) strengthened their regulations regarding auditor’s independence and requires additional disclosures to investors of public companies about the services provided by the independent accounting firms that are hired to audit the companies. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct has required accountants who perform attest services to be independent of their clients. The Sarbanes-Oxley Act lists the services that auditors can no longer provide to audit clients in Title II. The reasoning for this is that maintaining auditor independence is essential to the audit process. It is necessary for retaining the confidence in the stock market so that the public continues to invest the market. The provision that will have the greatest effect on the accounting profession will be the inability to sell additional services to their current clients and also future clients. (Kleckner & Jackson, 2004) The Sarbanes-Oxley Act and the SEC rules do not eliminate the types of services that can be offered to clients, but they clarify and expand the prohibitions. There are a number of nonaudit services that are considered to impair the independence of the auditor. Among the services are bookkeeping and other accounting services, financial information systems design and implementation,...

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