[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
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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]
BILLING CODE 8010-01-P