Providing certain non-assurance services to an audit client may create a threat to independence so significant that no safeguards could reduce the threat to an acceptable level. All the following are examples of this type of non-assurance services except: A. Services that assume a management responsibility. B. Tax planning that impacts the financial statements C. Tax preparation for chief executives. D. Internal audit services.
Question
Providing certain non-assurance services to an audit client may create a threat to independence so significant that no safeguards could reduce the threat to an acceptable level. All the following are examples of this type of non-assurance services except: A. Services that assume a management responsibility. B. Tax planning that impacts the financial statements C. Tax preparation for chief executives. D. Internal audit services.
Solution
The question is asking which of the listed non-assurance services would not create a significant threat to independence that no safeguards could reduce to an acceptable level.
A. Services that assume a management responsibility - This would create a significant threat to independence as the auditor would be in a position of making management decisions, which is a conflict of interest.
B. Tax planning that impacts the financial statements - This could also create a significant threat to independence as the auditor could potentially manipulate the financial statements through tax planning.
C. Tax preparation for chief executives - This could potentially create a conflict of interest and thus a threat to independence, as the auditor could be in a position to favor the executives.
D. Internal audit services - While this could potentially create a threat to independence, it is generally considered that safeguards can be put in place to reduce this threat to an acceptable level. For example, the internal audit function can be kept separate from the external audit function, and the internal auditors can be prohibited from making any management decisions.
Therefore, the answer is D. Internal audit services.
Similar Questions
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