March 14, 2005 -- Accountants who perform nonattest services for their attest clients (i.e., bookkeeping, tax and consulting services) must understand and comply with AICPA Ethics Interpretation 101-3.  Attest services include audits, reviews, compilations, and certain agreed upon procedures. The new rules were issued in September 2003 by the AICPA Professional Ethics Executive Committee and became effective for new engagements on December 31, 2003 .   

An accountant may continue to provide non-attest services, such as tax services, to attest clients without impairing independence, however, the client and the accountant must have documented the terms of the non-attest work in writing.

A meeting by the Public Accounting Oversight Board (PCAOB), held in December 2004, proposed additional rules of what would be specifically determined as a violation of the Sarbanes-Oxley Act in providing tax services to public companies by existing auditing firms. In summary the proposed rules would “treat such a firm as not independent if the firm or an affiliate of the firm provide assistance in planning, or provided tax advice on, certain types of potentially abusive tax transactions to an audit client or provide any tax services to certain senior officers of an audit client.” In addition the PCAOB would require the registered public accounting firms to provide certain information to the audit committee of an audit client in connection with seeking pre-approval to provide non-prohibited tax services to the audit client. In a recent SEC release, the SEC cautioned that audit committees should “scrutinize carefully” the retention of the auditors in transactions regarded as “tax-driven financial products.”

These rules reflect the importance of complete independence by auditors. As a result of this ever-changing landscape, CPAs should welcome open discussion regarding these issues. For more information, contact Matt Hurley at 215-564-1900 .

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