Case 2: Kpmg: How Many Firms? Essay

769 Words Dec 24th, 2012 4 Pages
Professional standards do not allow for a company’s auditors to also provide tax services and still retain their independence. The SEC and the PCAOB have put restrictions on the nonaudit services that a company’s auditors can provide. These restrictions really limit the company’s auditors to the extent that if a firm provides auditing services for a company they cannot really provide any other types of services. This limitation was put into place in order to maintain the independence of auditors and the companies that they audit. If an accounting firm was allowed to provide auditing services as well as tax services to a company, the independence, in such a case, of the firm would not be maintained because the firm would be in part auditing …show more content…
Another advantage is that it gives a company more options of who they want to provide services for them. Since there is a limited number of large accounting firms, companies become limited on who they can choose for different services once they have some services being provided by some of the same companies. For example, if you already have your auditing services being done by Firm A and your tax services being done by Firm B, you only have firm C or D to choose from for another service.
While there would be advantages to allowing auditors to provide nonaudit services to their clients, there are also some disadvantages. One main disadvantage to having an auditor provide nonaudit services is that it makes it more difficult to maintain independence from the company. If an auditor of a company provides nonaudit services to the same company there could be the appearance of a lack of independence. Since independence is one of the most important factors to maintain as an auditor, it becomes very essential to preserve this aspect of the auditing services that are being provided. Also, a disadvantage is that it makes it more difficult for oversight of these engagements because the different services being provided could become unclear to an oversight board. When an auditor also provides different services to the same company that it is auditing, it becomes more and more

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