PCAOB Amends Tax Services Rule; Adopts New Rule on Communication With Audit Committees

Earlier today, the Public Company Accounting Oversight Board (PCAOB) voted to adopt an amendment to its Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles, to exclude from the scope of the rule tax services provided during the portion of the audit period that precedes the beginning of the professional engagement period.

The amendment was provided to remove an unintended consequence of the original rule which limited the choice of audit firms a company could change to.

In addition, the PCAOB voted to adopt a new rule, Rule 3526, Communication with Audit Committees Concerning Independence, which would supersede the Board's interim independence requirement, Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. The rule would require a registered public accounting firm to communicate to an issuer's audit committee about any relationships between the firm or any of its affiliates and the issuer or persons in financial reporting oversight roles at the issuer that may reasonably be thought to bear on the firm's independence.

The communication with audit committees would be required both before the firm accepts a new engagement pursuant to the standards of the PCAOB and annually for continuing engagements.

Under existing rules, no such communication was required prior to the initial audit engagement.

NOTE: All final PCAOB rules are subject to SEC approval.

UPDATE 11:36 a.m.: Here is the PCAOB's press release on today's vote, which includes the effective dates of the rule amendments/new rule.

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