May an Independent Auditor Provide Any Tax Services to Smaller Companies?
Some have long asserted that a company’s auditor should not provide it with tax services at all. The reason most often given is that the auditor may be put in the position of evaluating its own work, a circumstance that impairs independence. The SEC considered and rejected a ban on tax services in its Reg. S-X independence rules, emphasizing instead that tax services are subject to the same restrictions as other non-audit services. In addition to narrowing the scope of permissible tax planning services, as described in the previous section, the PCAOB now makes a new point for smaller companies to consider. It is that, if the company does not have sufficient in-house tax expertise to make its own decisions regarding tax matters, the auditor may de facto “be in the position of performing management functions or making management decisions for the company.” This would be inconsistent with the general independence principle that an auditor cannot function in the role of management. The PCA
