[Federal Register Volume 72, Number 189 (Monday, October 1, 2007)]
[Notices]
[Pages 55841-55843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-19274]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56516; File No. PCAOB-2007-03]


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

September 25, 2007.
    Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002 (the 
``Act''), notice is hereby given that on July 24, 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

[[Page 55842]]

Exchange Act of 1934 (as incorporated, by reference, into Section 
107(b)(4) of the Act) and Rule 19b-4(f)(1) thereunder, 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 April 30, 2008, 
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 by this 
filing.

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. 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 to a person in, or an immediate family 
member of a person in, a financial reporting oversight role at an audit 
client. This rule was intended to address concerns related to auditor 
independence when auditors provide personal tax services to individuals 
who play a direct role in preparing the financial statements of public 
company audit clients. Rule 3523 was approved by the Securities and 
Exchange Commission (``SEC'' or ``Commission'') on April 19, 2006.
    Consistent with the SEC's independence rules,\1\ 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.\2\ The ``professional 
engagement period'' is the period beginning when the firm either signs 
the initial engagement letter or begins audit procedures, whichever is 
earlier, and ends when either the company or the firm notifies the SEC 
that the company is no longer that firm's audit client.\3\
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    \1\ 17 CFR 210.2-01(f)(5).
    \2\ Rule 3501(a)(iii)(1).
    \3\ Rule 3501(a)(iii)(2).
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    On April 3, 2007, the Board issued a concept release to solicit 
comment about the possible effect 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.\4\ The Board 
also 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.\5\
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    \4\ See PCAOB Release No. 2007-002 (April 3, 2007).
    \5\ See id., at 7. Specifically, the Board stated that Rule 3523 
will not apply 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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    The Board received 13 comment letters on the concept release. 
Commenters included auditors, state certified public accountant 
societies, and one investor. The majority of the commenters recommended 
that the Board amend Rule 3523 to exclude the portion of the audit 
period that precedes the beginning of the professional engagement 
period. On July 24, 2007, the Board proposed an amendment to Rule 3523 
to exclude the portion of the audit period that precedes the beginning 
of the professional engagement period, as well as a new ethics and 
independence rule regarding communication with audit committees.
    The Board has determined to further adjust the implementation 
schedule for Rule 3523 to allow sufficient time for consideration of 
commenters' views. Specifically, the Board will not apply Rule 3523 to 
tax services provided on or before April 30, 2008, when those services 
are provided during the audit period and are completed before the 
professional engagement period begins.\6\
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    \6\ This will apply regardless of whether there is an engagement 
in process on July 31, 2007.
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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 because of its designation by the PCAOB as 
``constituting a stated policy, practice, or interpretation with 
respect to the meaning, administration, or enforcement of an existing 
rule.'' 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 [email protected]. Please include 
File Number PCAOB-2007-03 on the subject line.

[[Page 55843]]

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-2007-03. 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, 100 F Street, NE., 
Washington, DC 20549-1090, on official business days between the hours 
of 10 a.m. and 3 p.m. 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-2007-03 and should be 
submitted on or before October 22, 2007.

    By the Commission.
Nancy M. Morris,
Secretary.
 [FR Doc. E7-19274 Filed 9-28-07; 8:45 am]
BILLING CODE 8011-01-P