The Securities and Exchange Commission is considering introducing rules which would prohibit accounting firms from providing their audit clients with certain tax services, in a move to improve auditor independence.
Citing a report issued by the US regulator this week, Reuters revealed that
the measures were proposed by the SEC in response to the Sarbanes-Oxley Act,
passed this summer, which addresses corporate governance issues.
According to the report, the SEC is concerned that as things stand, there is the possibility that an accounting firm which offers tax advice to its clients may conceivably end up auditing its own work, which represents an unacceptable conflict of interest, especially in the current climate.
'Where an accountant provides representation before a tax court the accountant serves as an advocate for his or her client and the accountant's independence would be impaired,' the SEC report explained, continuing: 'Another example would be the formulation of tax strategies (e.g. tax shelters) designed to minimize a company's tax obligations.'
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