What is the key limitation on non-audit service fees for a listed client?

The key limitation on non-audit service fees for a listed client is indeed that they are limited to 70% of the average audit fee over the last three years. This rule is in place to maintain auditor independence and ensure that the audit firm's objectivity is not compromised by the potential for economic dependence on the client due to significant non-audit work. By capping the fees for non-audit services, regulators aim to minimize conflicts of interest that could arise when an auditor has a substantial financial stake in the client beyond the audit itself.

This limitation is designed to uphold the integrity of the audit profession and provide assurance to stakeholders that the auditor's independence is preserved. It reflects a regulatory approach intended to safeguard the credibility of financial statements prepared by listed entities, ensuring that audits remain impartial and objective.

Other responses do not accurately reflect the established guidelines regarding non-audit services. The notion that non-audit service fees could exceed 50% of audit fees or that there is no limitation does not align with these regulatory practices. Similarly, suggesting that non-audit fees must be less than 30% of total fees misrepresents the specific thresholds that have been enacted to promote auditor independence in the context of listed companies.