Printer Friendly

AICPA to comment on PCAOB proposal on auditor independence and tax services.

The AICPA's reaction was generally favorable to the rule proposed by the Public Company Accounting Oversight Board concerning tax services that can be offered to public company audit clients, but the Institute will submit a comment letter on the Dec. proposal. Four circumstances are identified in the proposal that would be considered as impairing an auditor's independence. They are entering into contingent Fee arrangements with the client, providing services related to planning or opining on the tax consequences of a transaction that the Treasury Department has said is a listed or confidential transaction, providing "'aggressive tax planning" or providing tax services to officers in a financial reporting oversight role of an audit client.

"Aggressive tax planning" is defined to be any planning or opinion that meets of all the following four tests: (1) the audit firm provides any service related to the plan or opinion: (2) the idea was not initiated by the client: (3) a significant purpose of the idea was to avoid taxes: and (4) the plan has a less than 50-50 chance of prevailing if challenged by the Internal Revenue Service.

Some who have reviewed the proposal have expressed two concerns with these tests: the words "any service" in number 1 and "significant purpose" in number 3. If read broadly, "any service" could be construed to be the mere preparation of a tax return if it included the aggressive tax idea, even though the idea was promoted to the client by an unrelated third party. For item number 3, it would be preferable to use the term "principal" purpose rather than "significant" purpose. After all, virtually any tax suggestion would have as one of its significant purposes the avoidance of taxes.

Services that would be allowed under the proposal include routine tax return preparation and tax compliance, general tax planning and advice, international assignment tax services, and employee personal tax services.

A copy of the proposed rule is on the PCAOB's Web site: 2004-015.pdf
COPYRIGHT 2005 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2005, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:regulatory matters
Publication:CPA Letter
Date:Feb 1, 2005
Previous Article:GASB issues statement on net assets, staff technical bulletin.
Next Article:AICPA, IRS reach out to CPAs to help prepare returns for low-income filers.

Related Articles
POB Proposes Controversial Changes to Audit Process.
SEC proposals on auditor independence, non-audit services affect tax practitioners.
Chair's corner.
Independence standards--putting it all together.
A year of renewal and reforms.
The future of peer review: it is a misconception that the CBA requires peer review.
Ask FERF (financial executives research foundation) about ... recent regulatory highlights.
Auditing standards available on AICPA and PCAOB Web sites.
Exposure draft: financial interests and independence.
AICPA pleased with new PCAOB independence and tax services rules, and remediation standard.

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters