Code Provisions

Question 1

IMPORTANT:

Answer 1

THIS SECTION IS IMPORTANT

Question 2

What does the Nonaudit services: Code Provisions govern?

Answer 2

The code governs Nonaudit Services to non-public clients and to public non-attest clients

Question 3

Communications about the following topics relate both audit and Non-audit services which do not impact independence:

Answer 3

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

Question 4

T/F: Audit firms shouldn’t assume MANAGEMENT RESPONSIBILITIES

Answer 4

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

Question 5

What are the “General Requirements” on when you can give NAS: (Three requirements)

Answer 5

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

Question 6

SOX limits NAS by saying that MIPPS may not provide certain advisory services to audit clients that are public companies:

Key MIPPS Should not:

Answer 6

• Audit their own work
• Advocate for attest clients
• Serve as client’s managers

Question 7

MIPPS cannot provide the following to clients who are public companies:

Answer 7

• 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

Question 8

The PCAOB says that independence is impaired in the ta area if:

Answer 8

• 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

Question 9

What is the SOX process for picking a audit firm?

Answer 9

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