Non-Audit Services
Write a two page, double-spaced summary addressing the question – “Explain any dangers which may result from auditors providing ‘additional services’ to auditees”?
Non-audit services (NAS) may be any services other than audit provided to an audit client by an incumbent auditor. Such services may be referred to in the professional and academic press as management advisory services or consulting, but NAS also includes compliance related services (such as taxation and accounting advice) and assurance related services (such as due diligence and internal audit). Compliance related services are closely linked to the annual financial reporting round.
In the engagement of an external financial statement audit, the auditor becomes very familiar with the client’s company, its operation in business, its accounting system, and all aspects of the affairs related to financial scope. Thus, the auditor is a qualified and experienced individual who comes to the auditee as an independent objective outsider, divorced from the day-to-day running of the entity. These factors place the auditor in an ideal position to observe where improvements can be made. The auditor is able to advise the auditee on matters such as strengthening internal control; the development of accounting or other management information systems; and tax, investment and financial planning. Moreover, the auditor is able to provide advice on matters such as how to proceed with a share float, business acquisition or divestment, or liquidation. The provision of these ‘additional services’ by the auditor is very valuable for the auditee.
In many cases, it is the presence of these non-audit services which makes the audit an economical package from management’s point of view. The auditor may loss their independence when providing non-audit services to their clients. Providing management advisory services or the pressure to sell the non-audit services to the client may cause an auditor consciously or subconsciously to
Non-audit services (NAS) may be any services other than audit provided to an audit client by an incumbent auditor. Such services may be referred to in the professional and academic press as management advisory services or consulting, but NAS also includes compliance related services (such as taxation and accounting advice) and assurance related services (such as due diligence and internal audit). Compliance related services are closely linked to the annual financial reporting round.
In the engagement of an external financial statement audit, the auditor becomes very familiar with the client’s company, its operation in business, its accounting system, and all aspects of the affairs related to financial scope. Thus, the auditor is a qualified and experienced individual who comes to the auditee as an independent objective outsider, divorced from the day-to-day running of the entity. These factors place the auditor in an ideal position to observe where improvements can be made. The auditor is able to advise the auditee on matters such as strengthening internal control; the development of accounting or other management information systems; and tax, investment and financial planning. Moreover, the auditor is able to provide advice on matters such as how to proceed with a share float, business acquisition or divestment, or liquidation. The provision of these ‘additional services’ by the auditor is very valuable for the auditee.
In many cases, it is the presence of these non-audit services which makes the audit an economical package from management’s point of view. The auditor may loss their independence when providing non-audit services to their clients. Providing management advisory services or the pressure to sell the non-audit services to the client may cause an auditor consciously or subconsciously to