SEC Approves PCAOB’s Ethics and Independence Rule and an Amendment to PCAOB’s Tax Services Rule
September 8, 2008
On August 22, 2008, the SEC approved the PCAOB’s proposed ethics and independence Rule 3526, “Communication with Audit Committees Concerning Independence.” The SEC also approved an amendment to the interim independence standards and an amendment to Rule 3523, “Tax Services for Persons in Financial Reporting Oversight Roles.”
Rule 3526 builds on the communication requirements in interim standard ISB No. 1 and requires a registered accounting firm on at least an annual basis after becoming a company’s auditor to make a similar written communication and also to affirm to the audit committee that the firm is independent. The PCAOB adopted the new rule in part because it believed that an accounting firm should discuss with the audit committee before accepting an initial engagement any relationships the accounting firm has with the company that may reasonably be thought to bear on its independence. The rule also includes a new requirement for the firm to document the substance of its discussion with the audit committee.
Rule 3523 provides that an audit firm is not independent if it provides any tax service to any person who fills a financial reporting oversight role at an audit client, or an immediate family member of such individual, unless the person is in that role solely because he or she is a member of the board of directors or similar management governing body. It relates to services provided to individuals and not the audit clients. The proposed amendment to Rule 3523 provides that the PCAOB will not apply Rule 3523 to tax services when those services are provided during the audit period and are completed before the professional engagement period begins. Rule 3523 continues to apply to tax services provided during the professional engagement period.
http://www.sec.gov/rules/pcaob/2008/34-58415.pdf
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