CASE 14

The issue of whether the performance of nonattest (consulting) services for audit clients
impair independence of the auditors has been widely debated within the public
accounting profession.

Arguments for restricting nonattest services for audit clients

1.) It is not possible for the auditors to objectively evaluate their own nonattest
work as it relates to the audit. (Self-review)
2.) The additional fees derived from nonattest services serves as an additional
threat to independence.
3.) Independence of mind and independence in appearance must both exist.
4.) Only services that will allow the CPA to maintain integrity and objectivity must
be accepted.

Arguments against restricting nonattest services for audit clients

1.) Auditors have been providing nonattest services for audit clients for years in
an objective manner.
2.) The additional knowledge of the client obtained from performing nonattest
services actually enhances the performance of an audit.
3.) As long as the client establishes effective oversight over the performance of
the nonattest services, the auditors can perform them in an objective manner.

Opinion on the restriction of the performance of nonattest (consulting) services

for audit clients
We are for restricting nonattest services for audit clients.
The rule is clearly emphasized in the Code of Ethics for Professional Accountants in the
Philippines. In order to maintain public trust and confidence in the accounting profession,
professional accountants must adhere to standards of ethical conduct: standards of
conduct that embody and demonstrate integrity, objectivity, and concern for public
interest rather than self-interest.
Performing nonattest services for an audit client that affect the preparation of the
financial statements will create a self-review threat. To do so would violate the basic
concept that one cannot act independently in evaluating his or her own work.
The additional fees derived from nonattest services serves as an additional threat to
independence. These may give rise to a self-interest threat to objectivity.

There are two phases of independence; the independence of mind and the
independence in appearance. Independence of mind is the auditors perception of his
own independence. A state of mind that permits the expression of a conclusion without
being affected by influences that compromise professional judgment, allowing an
individual to act with integrity, and exercise objectivity and professional skepticism. On
the other hand, independence in appearance refers to the publics perception of the
professional accountants independence. It is the avoidance of facts and circumstances
that are so significant that a reasonable and informed third person would reasonably
conclude that the firms integrity, objectivity and professional skepticism had been
compromised.
The Code of Ethics does not only require the professional accountants to maintain
independence in mental attitude, but professional accountants should also avoid
circumstances which would cause the public to doubt their independence.
Nonattest services could be provided by a number of firms. It may not stick to only one
firm to provide for all the services it needs, be it audit, consulting, or any other.
On the other hand, for certain types of valuation, appraisal, actuarial and informationtechnology-related services, members may not perform these services if they will have a
material effect on the clients financial statements and the service involves considerable
subjectivity. There are two exceptions to this rule: 1) valuation, appraisal and actuarial
services are permitted if performed for non-financial-statement purposessuch as
estate- and gift-tax-related valuations, and 2) actuarial valuations performed in
connection with a clients pension or postretirement benefit liabilities are permitted
because they do not involve a significant amount of subjectivity (that is, the valuation
results would be reasonably consistent regardless of who performs the valuation).
The rules also prohibit members from designing a clients financial information system
by creating or changing the computer source code underlying the system. If members
make any such modifications, they cannot be more than insignificant. Nevertheless,
members may install prepackaged software, such as Intuits QuickBooks, for clients and
can help set up their charts of accounts and financial statement formatting. But members
are not permitted to operate a local area network (LAN) for clients because the PEEC
considers that service a management function.

Code of Ethics Provision of Non-Assurance Services to Assurance Clients

-paki-paste dito yung bandang page 48 nung Code of Ethics of Professional Accountants
in the Philippines (nasa chatbox ang link) section 290.something.. tapos pati na din yung
nasa SolMan.
Tapos pakidagdag nalang din yung kabuuan nito, haha. At pakibawas nung sa tingin
niyo ay mali.
PS: Pakigawan na din tayo cover page at paayos din ng formatting huhu ewan bat
ganito ang MS Word ng laptop ko, parang Wordpad