Auditor independence and non-audit services The following statement relates to some of the potential conflicts that impair auditor independence when auditors perform audit and non-audit services for the same client. Read and discuss the statement. Provide your opinion on each individual question indicated below. You are strongly recommended to provide practical examples to justify your comments.

When an audit firm performs valuations of figures that appear in its client’s financial reports, the mandate for independence is threatened. When an audit firm performs the internal audit function its client would otherwise do, the ethics of independence is tarnished. When an audit firm also keeps its client’s books, the principle of independence is undermined. All these issues can, to some extent, jeopardize the auditor’s objectivity when performing the audit of publicly listed companies.

With regard to the above-mentioned issues, it is appropriate to address certain questions:

(a) Should there be more appropriate limits on the types of services that an audit firm can render to a company publicly listed on a stock exchange?

(b) How should audit firms be structured to assure independence?

(c) Should a firm be permitted to become an affiliate with entities that provide services to its audit clients that the firm itself would not be allowed to provide?

(d) What are the potential conflicts that impair auditor independence when auditors perform audit and non-audit services for the same client?