Final answer:
Under the SEC's rules, a client must disclose the fees for external audits, audit-related fees, tax fees, and fees for other nonaudit services performed by the audit firm to ensure auditor independence.
Step-by-step explanation:
The Securities and Exchange Commission (SEC) places a significant emphasis on auditor independence to ensure the integrity of financial reporting. One crucial aspect of maintaining independence is the disclosure of fees paid to audit firms by their clients. The correct answer to the question, as stated, is indeed C: Fees for the external audit, audit-related fees, tax fees, and fees for other nonaudit services performed by the audit firm.
This disclosure requirement is essential for promoting transparency and allowing stakeholders, including investors and the public, to assess the potential impact of these fees on auditor independence. The disclosure encompasses a range of services beyond the external audit, such as audit-related activities, tax services, and other nonaudit services provided by the audit firm.
External audits are the primary services conducted to ensure the accuracy and reliability of financial statements. However, audit-related fees may involve additional assurance and compliance services. Tax fees pertain to tax-related services provided by the audit firm, and fees for other nonaudit services cover a variety of consulting and advisory services.
By disclosing a comprehensive range of fees, the SEC aims to provide stakeholders with a holistic view of the financial relationship between the client and the audit firm. This transparency allows interested parties to evaluate whether the auditor's independence may be compromised due to financial ties with the client, ultimately safeguarding the credibility and objectivity of the audit process. The disclosure requirement aligns with the broader regulatory efforts to maintain the trust and confidence of the public in the financial reporting and auditing process.