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Forensic Accounting, Forensic Techniques, and Fraud Detection Copyrighted 2001 D. Larry Crumbley, ... - page 30 / 352

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© D.L. Crumbley

SEC’s Proposed Rules (12-5-2002)

Auditor may not

Audit own work.

Perform management function.

Act as an advocate of a client.

Traditional tax preparation service okay:

preparation of tax returns.

tax compliance.

tax planning.

tax recovery.

other tax-related services.

Reviewing tax accruals is audit service.

Tax Court representation would impair an auditor’s independence.

Formation of tax strategies (e.g., tax shelters) is not okay.

Unknown: Tax opinions for tax shelters.

The audit committee must weigh the risk associated with using the company auditor for tax services versus the cost savings of using the company auditor.

Source: Sheryl Stratton, “SEC Seeks Input on Defining Scope of Tax Service,” Tax Notes, December 9, 2002, pp. 1265 – 1266.

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