The Securities and Exchange Commission has approved a new rule and amendment to an existing rule from the Public Company Accounting Oversight Board related to ethics, independence and the provision of tax services.
The SEC approved the PCAOB's proposed ethics and independence Rule 3526, "Communication with Audit Committees Concerning Independence." The commission also approved an amendment to the interim independence standards and an amendment to Rule 3523, "Tax Services for Persons in Financial Reporting Oversight Roles."
Rule 3526 builds on interim rules requiring a registered firm on at least an annual basis after becoming a company's auditor to make a written communication to the audit committee that the firm is independent. The PCAOB adopted the new rule in part because it believed that an accounting firm should discuss with the audit committee before accepting an initial engagement any relationships the accounting firm has with the company that may reasonably be thought to bear on its independence. The rule also includes a new requirement for the firm to document the substance of its discussion with the audit committee.
Rule 3523 applies to all tax services performed for persons in a financial reporting oversight role during the audit and professional engagement period. It relates to services provided to individuals and not the audit clients. The board said it adopted Rule 3523 because, "The provision of tax services by the auditor to the senior management responsible for the audit client's financial reporting creates an unacceptable appearance of the auditor and such senior management having a mutual interest."
On July 24, 2007, the PCAOB proposed an amendment to Rule 3523 to exclude the portion of the audit period that precedes the beginning of the professional engagement period, as well as a new ethics and independence rule regarding communication with audit committees. The board also adopted a rule amendment to further delay the implementation of Rule 3523 to apply to tax services provided on or before April 30, 2008, when those services are provided during the audit period and are completed before the professional engagement period begins.
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