Tuesday, March 14, 2006

SEC Wants Comments on Audit--Tax Independence Proposals

The Securities and Exchange Commission has invited comments on Public Companies Accounting Oversight Board proposed standards involving the independence of certain tax work if done by the auditing CPA firm of the company. The proposed rules would bar CPA firms which audit publicly-traded firms from providing the following tax services for these clients: tax services involving contingent fees, tax advice or planning that is considered confidential or which takes aggressive positions and tax services provided to certain financial executives and their family members if the financial executive plays an important role in audited financials. The proposal also requires that the CPA firm disclose to the audit committee (presumably prior to pre-approval) a list of proposed tax services to be provided.

It is not surprising that some limitations on tax services are being proposed by PCAOB on tax services to audit clients and the proposals made are not unreasonable at face. The potential problem here is that small CPA firms, which already fear "creeping PCAOB influence" may find this sort of requirement unacceptable.


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