The accounting industry's main trade and lobby group in the US urged the Securities and Exchange Commission to allow accountants to provide tax minimization strategies to audit clients, as regulators consider banning the practice.
The SEC has proposed rules aimed at removing any conflicts of interests for auditors, who have come under fire after a spate of accounting scandals last year, including Enron Corp. and WorldCom Inc. The agency is considering forbidding accountants from providing certain tax services, such as setting up tax shelters, since it could mean the accounting firm ends up auditing its own work.
In a statement, the American Institute of Certified Public Accountants said it asked the Commission to “specifically recognize that tax minimization services are appropriate, while precluding auditors from advising audit clients on tax transactions for which there is no business purpose other than tax avoidance (except those that are consistent with the intent of applicable tax laws).”
It also urged the SEC to specifically spell out in the new rules that accountants will still be allowed to provide traditional tax services such as preparing tax returns and tax planning.
The AICPA, well known for its lobbying prowess and clout on Capitol Hill, also asked the SEC to revise its definition of “expert” services that auditors are not allowed to provide to clients. It argued that certain expert services, which it did not specify in the statement, did not impair the objectivity of the auditor.
The AICPA also wrote that it supported the idea of rotating the lead partner on an audit on a periodic basis, but said that it would hurt small businesses for whom rotating partners might force them to resign from clients for lack of qualified partners to take over the account.