US Accounting Regulator Plans To Restrict Tax Work By Auditors

by Leroy Baker, Tax-News.com, New York

16 December 2004

The US accounting regulator, the Public Company Accounting Oversight Board (PCAOB), has voted to put new proposals aimed at restricting the ability of accountants to provide tax services to audit clients to public consultation.

If approved, the new rules would expressly prohibit accountants from offering tax services to their audit clients on a contingent fee basis, whilst also preventing them from providing tax services to those corporate officers of an audit client with a reporting oversight role.

In addition, the proposals seek to address the issue of tax sheltering by prohibiting audit firms from marketing tax strategies that rely on a questionable interpretation of the relevant tax laws and regulations, or involve a scheme that is “listed and confidential” under Treasury rules.

However, the the PCAOB's new rules will not prevent audit firms from offering more general tax planning advice and routine tax preparation services, provided these services have been approved by the company’s audit committee.

Welcoming the proposals, Chairman of the PCAOB, William McDonough, observed:

“The proposed rule should help auditors stay clear of more aggressive tax work that can put them in an inappropriate position of advocating on behalf of a client at the same time they are charged with objectively passing on the fairness of the accounting."

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