A CPA firm is performing an audit of a nonissuer in accordance with GAO Government Auditing Standards (the Yellow Book). The auditor has been asked to perform a non-audit service: preparing the entity's indirect cost proposal for a federal grant. The auditor has determined that this service creates a self-review threat. Which of the following statements BEST describes the auditor's responsibility regarding independence?

The auditor is strictly prohibited from performing any non-audit services for a Yellow Book audit client, regardless of safeguards.

The auditor may perform the service provided that management designates an individual with suitable skill, knowledge, or experience (SKE) to oversee the service and accepts responsibility for the results.

The auditor may perform the service without applying safeguards because preparing cost proposals is considered a routine administrative service.

The auditor is independent as long as the fees for the non-audit service do not exceed the audit fees.