Certified Valuation Analyst (CVA) Practice Exam

According to Sarbanes-Oxley, which services are independent auditors prohibited from providing to audit clients?

1. Tax advisory services

2. Appraisal valuation services

3. Financial consulting services

4. Financial statement auditing

The correct answer is: Appraisal valuation services

The prohibition outlined in the Sarbanes-Oxley Act specifically prevents independent auditors from providing certain non-audit services to their audit clients to maintain auditor independence and avoid conflicts of interest. Appraisal valuation services fall under this category, as they are deemed to impair the auditor's objectivity. Auditors must remain independent to effectively evaluate the financial statements of their clients without bias. When auditors engage in appraisal or valuation services, they may have conflicts related to their assessment of their own work, compromising their objectivity in the audit process. In contrast, tax advisory services and financial consulting services can still be offered under specific conditions, provided that they don't compromise the independence of the auditors. Financial statement auditing, which is a core function of what auditors do, is not only permitted but is the primary focus of an auditor's responsibilities.