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SEC approves PCAOB rules for tax services.

The Securities and Exchange Commission (SEC) has approved rules proposed by the Public Company Accounting Oversight Board (PCAOB) limiting the tax services that accounting firms can offer to companies for which they also serve as the auditor. (For background, see NewsNotes, "PCAOB Rules for Tax Services," TTA, March 2005, p. 128.)

Ban on some tax services: The new rules bar auditors of public companies from providing the following types of tax services to audit clients:

* Those involving contingent-fee arrangements. (This rule will not apply if the fees were paid in their entirety, converted to fixed-fee arrangements or otherwise unwound by June 18, 2006.)

* Tax marketing, planning or advice in favor of tax treatments considered confidential or based on an aggressive interpretation of applicable tax laws and regulations (including listed transactions). (This rule will not apply to services provided by a registered accounting firm that were completed by June 18, 2006.)

* Tax services to certain corporate managers who serve in financial reporting oversight roles at an audit client, or tax services to the immediate family members of such corporate managers. (This rule will not apply to tax services being provided pursuant to an engagement in progress on April 19, 2006, provided such services are completed by Oct. 31, 2006.)

Increased responsibilities: Auditors seeking pre-approval of tax services (as required by the Sarbanes-Oxley Act) are required to:

1. Describe in writing the proposed tax services engagements for the audit committee.

2. Discuss with the audit committee the potential effects of the service on the firm's independence.

3. Document the substance of that discussion.

These rules will not apply to any tax service pre-approved on an engagement-by-engagement basis before June 18, 2006. For tax services provided to audit clients whose audit committees pre-approve tax services pursuant to policies and procedures, these new rules will not apply to any such tax service that is begun by April 20, 2007

Ethics rule: Effective April 29, 2006, individual accountants and other persons associated with a registered public accounting firm can be held responsible when they contribute knowingly or recklessly to a firm's legal, regulatory or professional standards violation.

Lesli S. Laffie, J.D., LL.M.
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Title Annotation:Public Company Accounting Oversight Board
Author:Laffie, Lesli S.
Publication:The Tax Adviser
Date:Aug 1, 2006
Words:359
Previous Article:Corporate and shareholder reporting.
Next Article:Additional extension of time to file for taxpayers out of U.S.
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