Document ID: SEC-2007-0920-0001
Agency: sec
Document Type: Notice
Title: Public Company Accounting Oversight Board: Tax services for persons in financial reporting oversight roles; proposed rule filing
Posted Date: 2007-07-09T04:00Z

[Federal Register: July 9, 2007 (Volume 72, Number 130)]
[Notices]               
[Page 37281-37282]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jy07-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55997; File No. PCAOB-2007-01]

 
Public Company Accounting Oversight Board; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Adjusting 
Implementation Schedule of Rule 3523, Tax Services for Persons in 
Financial Reporting Oversight Roles

July 2, 2007.
    Pursuant to section 107(b) of the Sarbanes-Oxley Act of 2002 (the 
``Act''), notice is hereby given that on April 3, 2007, the Public 
Company Accounting Oversight Board (the ``Board'' or the ``PCAOB'') 
filed with the Securities and Exchange Commission (the ``SEC'' or 
``Commission'') the proposed rule change described in Items I and II 
below, which items have been prepared by the Board. The PCAOB has 
designated the proposed rule change as ``constituting a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule'' under Section 
19(b)(3)(A)(i) of the Securities Exchange Act of 1934 (as incorporated, 
by reference, into Section 107(b)(4) of the Act), which renders the 
proposal effective upon receipt of this filing by the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule from interested persons.

I. Board's Statement of the Terms of Substance of the Proposed Rule

    The PCAOB is filing with the SEC an adjustment of the 
implementation schedule for Rule 3523, Tax Services for Persons in 
Financial Reporting Oversight Roles. Specifically the Board will not 
apply Rule 3523 to tax services provided on or before July 31, 2007, 
when those services are provided during the audit period and are 
completed before the professional engagement period begins. The PCAOB 
is not proposing any textual changes to the Rules of the PCAOB.

II. Board's Statement of the Purpose of, and Statutory Basis for, the 
Proposed Rule

    In its filing with the Commission, the Board included statements 
concerning the purpose of, and basis for, the proposed rule and 
discussed any comments it received on the proposed rule. The text of 
these statements may be examined at the places specified in Item IV 
below. The Board has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Board's Statement of the Purpose of, and Statutory Basis for, the 
Proposed Rule

(a) Purpose
    On July 26, 2005, the Board adopted certain rules related to 
registered public accounting firms' provision of tax services to public 
company audit clients. The rules were designed to address certain 
concerns related to auditor independence when auditors sell personal 
tax services to individuals who play a direct role in preparing the 
financial statements of public company audit clients or market or 
otherwise opine in favor of aggressive tax shelter schemes. As part of 
this rulemaking, the Board adopted Rule 3523, which provides that a 
registered firm, subject to certain exceptions, is not independent of 
an audit client if the firm, or an affiliate of the firm, provides tax 
services during the audit and professional engagement period\1\ to a 
person in, or an immediate family member of a person in, a financial 
reporting oversight role at an audit client. Rule 3523 was approved by 
the Securities and Exchange Commission (``SEC'') on April 19, 2006.
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    \1\ Consistent with the SEC's independence rules, 17 CFR 210.2-
01(f)(5), the phrase ``audit and professional engagement period'' is 
defined to include two discrete periods of time. The ``audit 
period'' is the period covered by any financial statements being 
audited or reviewed. Rule 3501(a)(iii)(1). The ``professional 
engagement period'' is the period beginning when the accounting firm 
either signs the initial engagement letter or begins audit 
procedures and ends when the audit client or the accounting firm 
notifies the SEC that the client is no longer that firm's audit 
client. Rule 3501(a)(iii)(2).
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    On October 31, 2006, the Board adjusted the implementation schedule 
for Rule 3523, as it applies to tax services provided during the period 
subject to audit but before the professional engagement period, so that 
the Board could revisit this aspect of the

[[Page 37282]]

rule.\2\ On April 3, 2007, the Board issued a concept release to 
solicit comment on the possible effects on a firm's independence of 
providing tax services to a person covered by Rule 3523 during the 
portion of the audit period that precedes the beginning of the 
professional engagement period, and other practical consequences of 
applying the restrictions imposed by Rule 3523 to that portion of the 
audit period. The Board has determined to further adjust the 
implementation schedule for Rule 3523 in order to allow sufficient time 
for consideration of commenters' views. Specifically, the Board will 
not apply Rule 3523 to tax services provided on or before July 31, 
2007, when those services are provided during the audit period and are 
completed before the professional engagement period begins.
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    \2\ See PCAOB Release No. 2006-006 (October 31, 2006), at 2. 
Specifically, the Board stated that Rule 3523 will not apply to tax 
services provided on or before April 30, 2007, when those services 
are provided during the audit period and are completed before the 
professional engagement period begins.
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    No other aspect of the Board's rules on independence and tax 
services is affected by this extension. As of November 1, 2006, 
registered firms have been required to comply with Rule 3523 as it 
relates to tax services provided while they serve as auditor of record 
for an audit client--that is, during the ``professional engagement 
period.'' In addition, with one exception, all other PCAOB rules 
concerning independence, tax services, and contingent fees that were 
adopted by the Board on July 26, 2005 and approved by the SEC on April 
19, 2006 are now in effect.\3\
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    \3\ With respect to tax services provided to audit clients whose 
audit committees pre-approve tax services pursuant to policies and 
procedures, Rule 3524 will not apply to any such tax service that is 
begun by April 20, 2007. See PCAOB Release No. 2006-001 (March 28, 
2006), at 2-3, PCAOB Release No. 2005-020 (November 22, 2005) at 2-
3, and PCAOB Release No. 2005-14 (July 26, 2005) at 47-48.
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(b) Statutory Basis
    The statutory basis for the proposed rule change is Title I of the 
Act.

B. Board's Statement on Burden on Competition

    The Board does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

C. Board's Statement on Comments on the Proposed Rule Received From 
Members, Participants or Others

    The Board did not solicit or receive written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Securities Exchange Act of 1934 (as incorporated, by 
reference, into Section 107(b)(4) of the Act) and paragraph (f) of Rule 
19b-4 thereunder. At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
is consistent with the requirements of Title I of the Act. Comments may 
be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/pcaob.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number PCAOB-2007-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number PCAOB-2007-01. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/pcaob.shtml
). Copies of the submission, all subsequent amendments, all 

written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the PCAOB. All comments received will be posted 
without change; we do not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number PCAOB-
2007-01 and should be submitted on or before July 30, 2007.

    By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E7-13136 Filed 7-6-07; 8:45 am]

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