By providing reasonable assurance of the accuracy of financial reports, an audit is integral to enhancing investor

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Question:

By providing reasonable assurance of the accuracy of financial reports, an audit is integral to enhancing investor confidence and thereby, supporting the efficient and effective allocation of resources within Australia's capital markets. The audit is, therefore, a key element of Australia's wider financial reporting framework, and an essential prerequisite to strong economic growth. However, recent years have witnessed many audit failures and audit quality has received regulatory and public attention in Australia. To address the concern of poor audit quality, someone argues that:

(1) audit firms should be explicitly prohibited from providing non-audit services (NAS) to their audit clients.

(2) audit firms or audit clients shall disclose NAS based on specific categories (e.g., tax-related NAS, consulting-related NAS, or other types of NAS).

(3) audit partners should not be incentivized to sell NAS to their audit clients.

Required

From the audit client’s perspective, discusses the advantages and disadvantages of engaging its auditor to also perform NAS. (Note: Do not discuss this from the auditor’s perspective)