Public Company Auditing Oversight Board

Question 1

T/F: All PCAOB rules need to be approved by SEC?

Answer 1

YES

Question 2

T/F: AICPA rules are consistent with SEC and PCAOB?

Answer 2

TRUE, but if the SEC and PCAOB rules are stricter than the AICPA, they govern for public companies?

Question 3

Do contingent fees and commissions impair independence?

Answer 3

Yes, any service to an audit client for a contingent fee impairs independence.

Question 4

May public companies provide tax services to audit clients?

Answer 4

yes, with limits:

• forbids services related to marketing, planning, or opinion in favor of tax transactions that are:
• Confidential- a transaction that is offered to a taxpayer under conditions of confidentiality
• Aggressive- A tax transactions position initially recommend by the accounting firm and a “significant purpose” of which is tax avoidance, unless the proposed taxes treatment is more likely than not to be allowed

Question 5

May an auditor provide services to an audit client’s FROR?

Answer 5

No.

FROR: Directors, CEOS, presidents, CFOS, COO, general counsel, controller,

Not impaired if:

1) The person is on an FROR only because he or she is a member of the client’s BOD
2) Can provide tax advice FROR if they are an affiliate to the audit client and not material to the audit client
3) if the FROR before got hired or promoted before the tax relationship after 180 days after the employment event.

Question 6

Are there any requirements for provision of tax services to an audit client?

Answer 6

Yes, SOX requires pre-approval by the client’s audit committee. Three step procedure:

1) Describe in writing:
- Scope, fee structure, and any other agreement
- Any other compensation agreement

2) Discuss with the audit committee in detail
3) Document the discussion

Question 7

How should a firm ensure independence when considering accepting a new client?

Answer 7

1) Describe in writing to the audit committee all relationships between the firm and its affiliates
2) Discuss with the audit committee these relationships and their potential affect on independence
3) Document the discussion

Question 8

Is the independence review an ongoing obligation?

Answer 8

Yes, follow the three D’s

Describe
Discuss
Document