Washington (Sept. 16, 2003) -- While Sarbanes-Oxley doesn't expressly forbid accounting firms from offering tax shelter advice to the public companies they audit, a member of the new accounting oversight board indicated Monday that the board one day might.

In a speech to the Investment Company Institute, the trade association for the mutual fund industry, Board member Daniel L. Goelzer sought to clarify some of the gray areas of Sarbanes-Oxley, especially when it comes to tax services.

The Securities and Exchange Commission issued a release last January saying that accountants may still offer such services as tax compliance, planning and advice to audit clients, as long as such engagements are pre-approved by the internal audit committee and "scrutinized carefully."

But Goelzer said he worried that this leeway could open a dangerous loophole for the profession. "In my view, this is an area in which auditors and audit committees should be cautious," he said. "I have no problem with auditors assisting their clients with traditional tax compliance and routine planning….But tax services that go beyond that -- especially the marketing to audit clients of novel, tax-driven, financial products -- raise serious issues."

One of the reasons why neither lawmakers nor the SEC have written a rule prohibiting the marketing or sale of tax shelters is because distinguishing them from traditional tax planning advice is not an easy task, Goelzer noted.

"However, given the well-publicized Congressional and public concern in this area, the Board may have to try its hand at solving the problem," he warned.

Industry consultant and PDI Global president Allan Koltin said firms shouldn't worry too much about the PCAOB issuing new rules about tax shelter advice.

"I would dare say that they have more than enough to bite on right now trying to improve the quality of public company audits and firms that audit them," Koltin said. "The whole tax shelter area been properly diagnosed by the IRS and they seem to have it pretty well-covered. This seems like the PCAOB overreaching why they were created and frankly, is a little bit out o their league."

-- Tracey Miller-Segarra

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