The Public Company Accounting Oversight Board released a new auditing standard along with guidance targeting how tax services are provided to people in financial reporting oversight roles.
The board is now soliciting public comment during a 45-day review period.
The audit standard, “Evaluating Consistency of Financial Statements,” would update and clarify auditor responsibilities when it comes to evaluating and reporting on matters relating to the consistency of financial statements. The clarifications would also enhance auditor reporting on accounting changes and corrections of misstatements by clearly distinguishing between those events.
The board also proposes removing the hierarchy of generally accepted accounting principles from its interim auditing standards in light of the recent proposal by the Financial Accounting Standards Board to place that hierarchy in its accounting standards.
The board also released a proposal addressing Rule 3523, “Tax Services for Persons in Financial Reporting Oversight Roles,” and new guidance, in the form of questions and answers, addressing both that rule and Rule 3522, “Tax Transactions.”
The tax services rule provides that a registered accounting firm, subject to certain exceptions, is not independent of an audit client if the firm, or an affiliate of the firm, provides tax services during the audit and professional engagement period to a person in, or an immediate family member of a person in, a financial reporting oversight role at an audit client.
The board is seeking information about the possible effects on a firm's independence of providing tax services to a person covered by Rule 3523 during the portion of the audit period that precedes the beginning of the professional engagement period, and other practical consequences of applying the restrictions imposed by Rule 3523 to that portion of the audit period. The PCAOB will extend the implementation schedule for the rule in order to allow time for consideration of comments on the issues raised in the concept release.
Specifically, Rule 3523 will not apply to tax services provided on or before July 31, 2007, when those services are provided during the audit period and are completed before the professional engagement period begins. The Securities and Exchange Commission approved the rule in April 2006.
The text of the trio of proposals is available on the board’s Web site, www.pcaob.org.
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