Sox Section 201

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§201 of the Sarbanes-Oxley Act of 2002 specifies those activities which a public accounting firm cannot do if they are performing an audit for a company. The firm cannot provide: “(1) bookkeeping or other services related to the accounting records or financial statements of the audit client; (2) financial information systems design and implementation; (3) appraisal or valuation services, fairness opinions, or contribution-in-kind reports; (4) actuarial services; (5) internal audit outsourcing services; (6) management functions or human resources; (7) broker or dealer, investment adviser, or investment banking services; (8) legal services and expert services unrelated to the audit; and (9) any other service that the Board determines, by regulation, is impermissible” (Sarbanes-Oxley Act of 2002 §201).

Some reasons a firm should be able to perform both audit and other assurance services for the same company could include: •Performing both the internal and external audit functions could help to eliminate errors that would lead to material misstatements. •Providing assistance to the company with regards to its accounting system could help to decrease time required during the audit. •Valuation services provided by the audit firm could help to reduce errors in financial instruments.

Reasons that a firm should not perform audit and other, separate functions could include: •The AICPA Code of Professional Conduct maintains that there must be independence in regards to attestation services. Performing both types of services would severely limit independence. •Having too much influence in a company by performing audit, internal audit, and management consulting services could be of great concern if legal action was, for some reason, brought against the company.
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