Certified Valuation Analyst (CVA) Practice Exam

Under Sarbanes-Oxley, what is an independent auditor prohibited from providing?

1. Internal audit services

2. Valuation analyses

3. Compliance reviews

4. Forensic accounting services

The correct answer is: Valuation analyses

The correct choice indicates that an independent auditor is prohibited from providing valuation analyses under Sarbanes-Oxley. This reflects the legislation's intent to maintain auditor independence and objectivity. Sarbanes-Oxley was enacted to enhance corporate governance and strengthen the accuracy and reliability of corporate disclosures by ensuring that auditors do not have conflicts of interest that could compromise their impartiality. Valuation analyses can involve subjective measurements that may lead to biased reporting when conducted by auditors who also perform external audits. This prohibition is part of a broader set of regulations designed to separate auditing from consulting services, thus preventing situations that could impair the auditor's independent judgment. As for the other activities mentioned, while internal audit services, compliance reviews, and forensic accounting services may raise questions about independence, they are treated differently under the regulations. For example, independent auditors may perform forensic accounting services under certain conditions, especially if they are not also engaged in the external audit process for the same client. Each of these services has its own nuances in relation to independence and potential conflicts of interest, but valuation analyses specifically represent a distinct area where the most significant independence concerns arise according to the standards set by Sarbanes-Oxley.