QQuestionAuditing
QuestionAuditing
The SOX Act seeks to increase auditor independence through all but which of the following?
Requiring accounting firms to elect whether to offer auditing services or nonauditing services to the public
Restricting accounting firm employees Involved in auditing from leaving the auditing firm to go to work for an audit cllient
Setting mandatory rotation of auditing partners
Baniling accounting firms from providing nonauditing consulting services for public companies for which they provide auditing
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Answer
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Step 1:: Identify the option that increases auditor independence in a different manner
The SOX Act aims to enhance auditor independence through various measures. We need to identify the option that does not contribute to this goal.
Step 2:: Examine the first option
Requiring accounting firms to elect whether to offer auditing services or nonauditing services to the public might increase specialization and focus, which can potentially improve auditor independence.
Step 3:: Examine the second option
Restricting accounting firm employees involved in auditing from leaving the auditing firm to go to work for an audit client can prevent potential conflicts of interest and thus promote auditor independence.
Step 4:: Examine the third option
Setting mandatory rotation of auditing partners ensures a fresh perspective on the audit, potentially reducing familiarity threats and enhancing auditor independence.
Step 5:: Examine the last option
Banning accounting firms from providing nonauditing consulting services for public companies for which they provide auditing eliminates self-review threats and further promotes auditor independence.
Step 6:: Identify the option that does not increase auditor independence
The option that does not contribute to increasing auditor independence is the first one: Requiring accounting firms to elect whether to offer auditing services or nonauditing services to the public. This option is about specialization rather than independence.
Final Answer
The SOX Act seeks to increase auditor independence through requiring accounting firms to elect whether to offer auditing services or nonauditing services to the public (this option does not increase auditor independence), restricting accounting firm employees involved in auditing from leaving the auditing firm to go to work for an audit client, setting mandatory rotation of auditing partners, and banning accounting firms from providing nonauditing consulting services for public companies for which they provide auditing.
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