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Last updated on April 19, 2014 at 1:20 EDT

US auditor watchdog sets vote on tax shelters rule

July 21, 2005

WASHINGTON (Reuters) – The U.S. Public Company Accounting
Oversight Board said on Thursday that it will vote on Tuesday
on a proposal to bar corporate auditors from providing
aggressive tax shelter advice to audit clients.

The proposal, as previously reported, enjoys wide support
and will likely be adopted unanimously, said sources close to
the PCAOB, a panel set up under the post-Enron Sarbanes-Oxley
accounting and corporate governance reforms of 2002.

The PCAOB rules, unanimously proposed last December, would
largely shut down a once booming business for auditors.

Recent scandals have already driven most top auditors out
of the tax shelter advisory market, including Big Four firms
KPMG, Ernst & Young, Deloitte & Touche and
PricewaterhouseCoopers .

But critics of the business have said a formal PCAOB
restriction will help prevent problems from recurring.

KPMG said last month it was cooperating with the Justice
Department in a criminal investigation of tax shelters. The
firm said it took “full responsibility for the unlawful conduct
by former KPMG partners” involved in the questionable shelters
offered by the firm from 1996 to 2002.

KPMG said the shelters being probed were no longer sold by
the firm and that it had undertaken key internal reforms.

As proposed, the PCAOB rules would bar an auditor from
providing tax advice to an audit client on certain types of
potentially abusive tax deals. Auditors would also be
prohibited from selling individual tax services to senior
officers of an audit client.

Not barred under the rules, as first drafted, would be
routine tax return preparation and tax compliance, general tax
planning and advice and some other exempted services.

The board also said it will vote on Tuesday on proposed
rules for how an auditor should handle a request from a client
company for an opinion reassuring investors that a flaw in the
client company’s internal financial controls has been fixed.

Under Section 404 of Sarbanes-Oxley, corporate managers
must state regularly how they keep their financial houses in
order and auditors must check off on managers’ statements. )