Professional Standards do not allow a company’s auditors to also provide tax services and retain independence. There have been myriad restrictions placed on professional service companies by the SEC and PCAOB. These companies are restricted on the nonaudit services that the company’s auditors can provide clients. If a service company provides auditing services for a particular company, they are restricted in terms of other services that they can provide. These restrictions were not always in place, but were created in order to increase and maintain the independence of auditors and the auditor’s clients. This independence issue for example can arise from situations where a company provides auditing and tax services to the same client. The auditors would essentially be auditing some of their own work, or may compromise their professional judgment and due care if the tax services provide more revenue, ultimately sacrificing their independence. Furthermore, according to rule 3523 “ if auditors or their affiliates provide tax services to public company managers in financial reporting oversight roles during the audit and professional engagement period, their independence is impaired”. (PCAOB, 2013) The rule generally prohibits an auditor from providing tax services to these persons during this period, to eliminate any perception that the auditor and the client’s management share a joint interest, which may lessen the ability of the auditor to conduct an unbiased audit. Regarding the restrictions placed specifically on tax services, the rules in the related professional standards include the prohibition of tax services that are based on judicial proceedings and tax services for key company executives, such as to an individual in a financial reporting oversight role. (Louwers, 2013). Thus, even though PCAOB and the SEC regulate these tax services allowed in order to maintain independence, all tax services are not necessarily prohibited.
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