Definition
Nonattest services are professional services provided to a client, other than attest services. Bookkeeping, payroll processing, tax preparation, valuation, IT design, internal audit outsourcing and financial statement drafting are examples. When provided to an attest client, they threaten independence unless the member meets the general requirements in ET 1.295.
Why it matters in an audit or review
The general requirements include that the member not assume management responsibilities, that the client designate someone with suitable skill, knowledge and experience (SKE) to oversee the service, that the client take responsibility for the results, and that the member meets the documentation requirements in the same subtopic. Cumulative effects of multiple services are also considered. Failing a requirement impairs independence, which cannot be fixed by a safeguard.
Example
Illustrative: a firm audits a client and also prepares its trial balance from bank statements. The client's controller reviews the work, approves the adjusting entries and accepts responsibility. The firm documents the engagement terms. That arrangement can meet the requirements. If the firm instead decides which entries to post, it is making management decisions, and independence would be impaired.
Common mistakes
Skipping the SKE assessment because the owner is 'involved'. The oversight person must be able to evaluate the work.
Sources
- AICPA, Code of Professional Conduct, ET 1.295, Nonattest Services (including ET 1.295.040, General Requirements for Performing Nonattest Services)
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error