Question: Mini- Case: Nonaudit Services and Independence. Refer to the mini- case How Much Are Auditors Paid? shown on page C23 and respond to questions 1

Mini- Case: Nonaudit Services and Independence. Refer to the mini- case “How Much Are Auditors Paid?” shown on page C23 and respond to questions 1 and 2.

1. From a conceptual standpoint, how do the requirements of Sarbanes- Oxley related to nonaudit services affect perceptions of the auditors’ independence?

2. Assume that your firm was auditing General Electric in 2000 and was recommending an adjustment to its financial statements that reduced net income. Based on the fees paid to your firm in 2000, what incentive(s) might your firm consider in insisting upon this adjustment? How would your firm’s incentive(s) differ after 2004?

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