The Public Company Accounting Oversight Board, in its December 7, 2004 press release, succinctly described an upcoming meeting in one sentence: "The Public Company Accounting Oversight Board has scheduled an open meeting for 10 a.m. Tuesday, Dec. 14, to consider whether to propose rules concerning auditor independence and tax services for audit clients."
That statement is rather misleading. I don't think the PCAOB is considering whether it will propose rules. I just think it is considering how far it wants to go. The amount of tax advice given by auditors to its public company clients is well known. The auditors don't want to give up that revenue and would prefer any restrictions on providing tax advice to audit clients to be very limited. The PCAOB just might be trying to gauge any potential backlash from imposition of such rules.
It should be pointed out that auditors aren't the only CPAs closely watching the PCAOB's actions in this regard. The CPAs that advise closely held businesses are worried about the possible trickle-down effect of any rule involving tax services. They are concerned that it might eventually restrict the breadth of services offered to clients and to which CPAs provide audit, review, attestation, and compilation work. There is also a concern that clients will be reluctant to use the same CPA for tax services if the CPA performs any type of attestation work for the client.
The real fun won't be in today's meeting, but it will likely occur when the proposal actually is released. I expect the PCAOB will take a strong position with regard to when providing tax advice can impede an auditor's independence. It will be interesting to watch a rather spirited debate that will undoubtedly follow. Despite the single sentence from PCVOB, it is not a matter of if, but rather a question of the severity.
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