PCAOB Adopts New Rules for Tax Preparation by Auditors

Source: Accounting Today

Although some commentators supported a total prohibition on tax services provided by auditors of public companies, the new rules don’t go that far. They do prohibit offering aggressive tax shelter schemes to audit clients. Auditors who offer tax arrangements predicated on an “aggressive interpretation of applicable tax laws and regulations,” will be considered not independent.

Contingent fee tax services and tax services for executives with financial reporting oversight responsibilities are also prohibited.

A firm registered with the PCAOB may seek pre-approval from an audit committee to render allowable tax services. It must disclose the scope of the service, the fees, and any referral fees.

Consideration had been given to a rule that would have penalized accountants who “knew or should have known their conduct would contribute to a violation” by the firm. That wording was changed to “knew or was reckless in not knowing.”

In addition the accountant’s accountant’s “act or omission must directly and substantially contribute to the firm’s violation.”

From Accounting Today, August 22, 2005. For the complete article, click on the following link:

http://www.webcpa.com/article.cfm?articleid=14433&;pg=acctoday.