CPA Experts,Inc. ,a well-known public accounting firm has enjoyed a long-standing relationship with one of its clients,Generation Technologies,Inc.Recently,at a company-wide gala,the CEO of Generation Technologies announced that CPA Experts has performed the firm's independent audits for the past ten years,and he is looking forward to exploring other services that CPA Experts has to offer,including financial consulting."After all," he exclaims,"A recent magazine article called CPA Experts the 'profitability geniuses '!" As a senior accountant for Generation Technologies,how do you advise your CEO?
A)You inform the CEO that in order to remain competitive,Generation Technologies needs to utilize the expertise of professional accounting firms who can deliver new and innovative techniques for cutting costs and improving profitability.
B)You explain that it would create a conflict of interest to have both internal and external accountants.
C)You inform the CEO about Sarbanes-Oxley rulings concerning the utilization of the same firm for auditing and consulting.
D)You explain that hiring CPA Experts,Inc.to perform consulting would constitute a more in-depth partnership.Generally Accepted Accounting Principles would require Generation Technologies to purchase stock in CPA Experts.

Question

Quizplus · Accepted Answer

Sarbanes-Oxley rulings state that public accounting firms cannot perform both auditing and consulting services for the same client. Therefore, it would not be possible for CPA Experts to provide financial consulting services to Generation Technologies while also performing their independent audits.