Question

The Sarbanes-Oxley Act placed restrictions on the types of services that public accounting firms are allowed to perform for audit clients. Which of the following services are public audit firms now expressly prohibited from performing for their audit clients?

1) Quarterly review services
2) Tax services
3) Bookkeeping services
4) All of the above

Answer 1

According to the Sarbanes-Oxley Act of 2002, public accounting firms cannot perform bookkeeping services for their audit clients due to potential conflicts of interest and threats to the audit firm's independence.

Step-by-step explanation:

The Sarbanes-Oxley Act, introduced in 2002 in response to major accounting scandals such as those involving Enron and WorldCom, imposed restrictions on the types of non-audit services that public accounting firms can provide to their audit clients. According to the Sarbanes-Oxley Act of 2002, public accounting firms cannot perform bookkeeping services for their audit clients due to potential conflicts of interest and threats to the audit firm's independence.

Among these services, public audit firms are expressly prohibited from performing bookkeeping services for their audit clients. While tax and quarterly review services are allowed under certain circumstances, providing bookkeeping services would pose a conflict of interest and is seen as compromising the independence of the audit firm.