The Commission rules include certain pre-approval requirements that the audit committee must follow. Subject to certain limited exceptions, the audit committee must pre-approve all permitted services provided by the independent auditor (i.e., tax services, comfort letters, statutory audits or other). In addition to the specific prohibited services, audit committees should consider whether any service provided by the audit firm may impair the firm's independence in fact or appearance. Legal services and expert services unrelated to the audit.Broker-dealer, investment adviser, or investment banking services.Management functions or human resources.Appraisal or valuation services, fairness opinions, or contribution-in-kind reports.Financial information systems design and implementation.
The auditor is prohibited from providing the following non-audit services to an audit client including its affiliates: The Commission rules also address specific auditor independence issues, some of which are: (d) places them in a position of being an advocate for the audit client. (c) results in their acting as management or an employee of the audit client or
(b) places them in the position of auditing their own work (a) creates a mutual or conflicting interest with their audit client The audit committee should consider whether a relationship with or service provided by an auditor: To determine whether an auditor is independent under this standard an audit committee needs to consider all of the relationships between the auditor and the company, the company's management and directors, not just those relationships related to reports filed with the Commission. The Commission's general standard of auditor independence is that an auditor's independence is impaired if the auditor is not, or a reasonable investor with knowledge of all the facts and circumstances would conclude that the auditor is not, capable of exercising objective and impartial judgment on all issues encompassed within the audit engagement. More information on this topic is available in the Commission's rules and on the Commission's web site at Audit committees should also be aware that the PCAOB has Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees. The purpose of this brochure is to highlight certain Commission rules and other authoritative pronouncements relevant to audit committee oversight responsibilities regarding the auditor's independence. The Sarbanes-Oxley Act of 2002 mandates that audit committees be directly responsible for the oversight of the engagement of the company's independent auditor, and the Securities and Exchange Commission (the Commission) rules are designed to ensure that auditors are independent of their audit clients. Securities and Exchange Commission has not approved this pamphlet and hasexpressed no views on its contents.