CASE 14

Arguments for restricting non-attest services to audit clients

1.) Additional fees derived from the non-attest services serves as an
additional threat to the auditors independence.
2.) The existence of both the independence of mind and appearance is
necessary.
3.) It is not possible for the auditors to do a self-review or an
objective evaluation of
their own non-attest work in an engagement.
4.) Engagements that might impair integrity and objectivity should not
be accepted.

Arguments against restricting non-attest services for audit clients

1.) Auditors can still perform audit engagement in an objective manner
as long as the
client establishes effective oversight over the
performance of the non-attest services.
2.) For so many years, the auditors have been providing non-attest
services for audit clients in an objective manner.
3.) The performance of an audit is actually enhanced by the additional
knowledge of the client obtained from performing non-attest
services.
Our Opinion
We believe that restricting non-attest services for audit clients is best.
Doing non-attest services with audit clients is a violation with the provisions
of the Code of Ethics for Professional Accountants in the Philippines.
Adherence to the Code of Ethics require the demonstration of integrity,
objectivity, and independence of the auditor in every service that he
engages himself to.
The objectification with the Code of Ethics can be evident under the
following circumstances when engaging non-attest services of audit clients:
1. Self-review
Auditors may have to review the outcome of their own consulting
It is impossible for the auditors to objectively evaluate their own nonattest work
For example, where audit firms have been responsible for advice on or
the actual installation of financial and other systems then subsequently

found out in their audit some evidences that they are malfunctioning,
they will be reluctant to report these findings to client management.
2. Fees
The additional fees derived from non-attest services serves as an
additional threat to independence. These may give rise to a selfinterest threat to objectivity.
The loss of an audit client is also likely to lead to the loss of nonassurance engagement services which are perceived to be more
profitable than audit engagements.
Restricting non-attest services would mean that bigger clients would
actually create a proportionately bigger intimidation threat because
they would form a larger part of the firm's income.
A consultant who had developed an accounting system for a client, and
then an auditor afterward is engaged in forming an opinion about the
set of financial statements is likely to be more mindful of the overall
fee income which the client represents to the firm.
3. Independence of mind and independence in appearance must both
exist.
A state of mind that permits the expression of a conclusion without
being affected by influences that compromise professional judgment,
allowing an individual to act with integrity, and exercise objectivity and
professional skepticism. On the other hand, independence in
appearance refers to the publics perception of the professional
accountants independence. It is the avoidance of facts and
circumstances that are so significant that a reasonable and informed
third person would reasonably conclude that the firms integrity,
objectivity and professional skepticism had been compromised.
The Code of Ethics does not only require the professional accountants
to maintain independence in mental attitude, but professional
accountants should also avoid circumstances which would cause the
public to doubt their independence.
Auditors may allow inappropriate accounting treatments because their
independence has been compromised, either because they have
become too close to the company they are auditing or the "familiarity"
threat or, more directly, because their objectivity is challenged by overreliance on income from a single source.