New York (Jan. 23, 2004) -- While Sarbanes-Oxley restricts outside auditors from performing certain non-audit services for clients, it’s the responsibility a company’s audit committee to go beyond the prohibited services and to determine any independence issues, the Securities and Exchange Commission’s deputy chief accountant told a group of CPAs.

“An audit committee needs to know exactly what a non-audit service is and not pre-approve it,” Scott Taub told several hundred CPAs who attended the New York State Society of CPAs’ SEC/FASB conference, here. “For instance, if you have something listed as ‘tax services over $500,000.’ That’s really not enough [information] for an audit committee to make a real analysis.”

Taub presented an overview of the top priorities for the SEC’s office of the chief accountant and touched on such critical areas as auditor independence, internal controls, revenue recognition, fair value measurements, asset impairments, international convergence and rules- vs. principles-based accounting.

“Everyone seemed to be in favor of principles-based accounting, but the problem was that no one was quite sure of just what they were,” Taub said. With regard to the daunting SOX Section 404 and a company’s internal controls, Taub said that instead of asking what management has to do to get ready for the auditor, the question should be, “What does management have to do to issue its opinion?”

“An auditor can help, but cannot ‘do,’” Taub said. He added that auditors “will have to do more than simply decide management’s evaluation of its controls was right -- they will have to look at something more than management looked at.”

“One of the major enforcement issues we see is when people think they know accounting literature so well, they can figure out the answer they want,” Taub said.

-- Bill Carlino

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