ExpertHard1 markMultiple Choice
CPA · Question 02 · Area I: Ethics & General Principles
During the audit of an issuer, Gamma Corp, the audit firm proposes to provide tax services to the company's CEO. Under PCAOB rules and the Sarbanes-Oxley Act, which of the following statements is correct regarding this proposed service?
During the audit of an issuer, Gamma Corp, the audit firm proposes to provide tax services to the company's CEO. Under PCAOB rules and the Sarbanes-Oxley Act, which of the following statements is correct regarding this proposed service?
Answer options:
A.
The firm may provide the services if they are pre-approved by the audit committee.
B.
The firm is prohibited from providing any tax services to persons in a financial reporting oversight role at the audit client.
C.
The firm may provide the services provided the fees are immaterial to the firm.
D.
The firm may provide the services as long as the CEO pays for them personally.
How to approach this question
Recall PCAOB Rule 3523 regarding tax services to persons in a Financial Reporting Oversight Role (FROR).
Full Answer
B.The firm is prohibited from providing any tax services to persons in a financial reporting oversight role at the audit client.✓ Correct
The firm is prohibited from providing any tax services to persons in a financial reporting oversight role at the audit client.
PCAOB Rule 3523 prohibits a registered public accounting firm from providing any tax services to a person in a financial reporting oversight role (FROR) at the audit client, or an immediate family member of such a person. The CEO is in a FROR.
Common mistakes
Confusing general tax services to the company (allowed with pre-approval) with tax services to executives (restricted).
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