Compliance risk is the potential for losses and legal penalties due to failure to comply with laws or regulations. In this case, the Sarbanes-Oxley Act of 2002, a U.S. law, specifically prohibits a registered public accounting firm from performing certain non-audit services for a public company client for whom it performs financial statement audits. This is to ensure the independence and objectivity of the audit. If WPC were to accept the offer to perform both external and internal audits for Anderson Bank, it could potentially violate this law, thereby exposing the bank to compliance risk. This could result in legal penalties for the bank, and could also damage its reputation.