The Public Company Accounting Oversight Board's plan to place new restrictions on the ability of accountants to offer tax services to their audit clients doesn't go far enough to restore investor confidence in financial reporting, critics of the accounting profession warned. In comments to the board expressing concern over new tax service restrictions proposed late last year, several tax experts urged the PCAOB to place auditors on an even shorter leash. In order to "help restore investor confidence in the independence of auditors and the integrity of their audits," the PCAOB should adopt a rule which prohibits audit firms from providing any tax services "which are unrelated to the audit," New York City tax attorney Robert Chira told the board. "I believe the board has clear and ample legal authority to prohibit such non-audit related tax services," he said in comments on the PCOAB proposal. "I further believe the board should exercise leadership in this area to persuade the Securities and Exchange Commission to the position that an audit firm should perform audits and not commingle that function with the performance of unrelated tax services." Harvard Law Professor Bernard Wolfman called for an even more far-reaching set of limitations on the sale of tax services by accountants. Arguing that the rule that the PCAOB proposed does not go far enough to ensure the independence of auditors, Wolfman maintained that "the auditor of a public company should not be permitted to render tax services to any company, whether the company is an audit client of the auditor or not." The only exception under Wolfman's plan would be for routine compliance work and tax return preparation. In contrast, the new rule proposed by the PCAOB in December would allow accountants to continue providing general tax services to audit clients, but prohibit them from marketing tax strategies that involve "an aggressive interpretation of applicable tax laws and regulations," or result in a tax avoidance maneuver that is a "listed or confidential" transaction under Treasury regulations. The proposal also calls for outlawing the use of contingent fees for tax services to audit clients, and would bar audit firms from providing any tax services to corporate officers who are "in a reporting oversight role of an audit client." The PCAOB wrestled with the idea of a far more restrictive policy toward tax services by auditors, but ultimately concluded that such an approach would be unnecessarily burdensome for accountants and their clients. In defending the PCAOB's decision to stop short of an all-out prohibition against the sale of tax services to audit clients, board member Daniel L. Goelzer said that "auditors have traditionally performed these kinds of services for their audit clients, and this kind of assistance is particularly important to small and medium-sized businesses that lack the resources to maintain extensive in-house tax expertise."
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access