Are you currently using your auditor for executive tax services?
Public company executives who often use their company's auditors for personal tax compliance and planning will have to look elsewhere for assistance. At its July 26 meeting, the Public Company Accounting Oversight Board (PCAOB) adopted new rules on ethics and independence, and in the process effectively eliminated certain company officials from using their auditors for personal tax matters.
According to the new rules, an audit firm is not independent if it provides any tax service to a person in a financial reporting oversight role at the audit client, or to an immediate family member of any such person.
The PCAOB's rules do not apply to tax services provided to directors or other employees who do not have a financial reporting oversight role. The definition of "financial reporting oversight role" follows the existing SEC definition and includes the chief executive officer, president, chief financial officer, chief operating officer, general counsel, chief accounting officer, controller, director of internal audit, director of financial reporting, and treasurer of the audit client.
The PCAOB cited three circumstances in which an accounting firm's independence would be impaired.
- If the Firm enters into a contingent fee arrangement with an audit client.
- If the firm provides services related to marketing, planning, or opining in favor of the tax treatment of a confidential transaction, or if the services are for a transaction that is based on aggressive interpretation of applicable tax laws and regulations.
- If the firm provides tax services to certain members of management who serve in financial-reporting oversight roles at an audit client, or to their immediate family.
The PCAOB's new rules also increase auditor responsibilities when a firm seeks pre-approval of tax services from a client's audit committee. The audit firm will be required to describe the proposed services in writing for the audit committee, discuss with the committee the potential effects on the firm's independence, and document that discussion.
Although the SEC may modify some provisions in the PCAOB rules, changes are expected to be only minor. The oversight board and SEC are making it clear they intend to erect a higher wall between outside audit services and other services that may compromise independence.
Weaver and Tidwell Offers Executive Compliance and Planning Services
We understand the ruling on auditor independence and restriction on executive tax services can have an immediate impact on management members who have financial reporting oversight. We stand ready to commit professional tax advisors to help you with tax planning and compliance.
The time to act is now - call us today to arrange a consultation. You can learn more about our services and professional by visiting www.weaverandtidwell.com.
[read full pdf]