SEC approves PCAOB independence rule
The SEC officially approved the PCAOB’s proposed ethics and independence Rule 3526, Communication with Audit Committees Concerning Independence, and an amendment to the interim independence standards and an amendment to Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles.
Rule 3526 requires the firm to describe in writing to the audit committee all relationships between the firm or any of its affiliates and the issuer or persons in a financial reporting oversight role at the issuer that may reasonably be thought to bear on the firm's independence before accepting the initial engagement.
The rule becomes effective on Sept. 30, 2008.
Registered firms also will be required to:
- Discuss with the audit committee the potential effects of any such relationships on the firm’s independence
- Make a similar communication annually for continuing engagements
Tax services amendments effective
The SEC also approved an amendment to Rule 3523. The tax services amendment is effective immediately.
The amendment excludes from the scopeof the rule tax services provided during the portion of the audit period that precedes the beginning of the professional engagement period.
When originally adopted, the rule provided that a registered public accounting firm is not independent of its audit client if it or any of its affiliates provides any tax service to a person in a financial reporting oversight role or an immediate family member of such a person during the audit and professional engagement period.
The PCAOB determined that providing tax services to such a person during the portion of the audit period preceding the beginning of the professional engagement period does not necessarily impair a firm's independence.
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