In a meeting last week, SEC Chief Accountant Don Nicolaisen ordered accounting firms to disclose all contingency-based tax fees to company audit committees.

Nicolaisen

As we reported in our May 25 edition, those fees—which enable the auditor to take a cut of whatever savings the client was able to realize as a result of the tax advice—have become a target of the SEC, as the fees could impair the auditor's independence.

In a recent letter to the chairman of the AICPA's professional ethics executive committee, Nicolaisen stated audit committees should be aware of contingency agreements, whether they are a direct contract provision or "a wink and a nod."

According to reports, the AICPA and the seven largest accounting firms were present at the meeting, and Nicolaisen said he expected the firms to fully disclose such billing arrangements to issuers' audit committees.

Burke

Samuel L. Burke, a former SEC associate chief accountant who now serves as a partner in PricewaterhouseCoopers' national independence office, told Compliance Week that PwC plans to follow the interpretation set forth in Nicolaisen's letter. "PwC is committed to preserving its independence and its important role to investors in the capital markets," Burke wrote in an email to CW editors. "We have been and will continue to dialogue with the SEC staff to ensure that we implement the letter consistent with the SEC staff's expectations."

The letter from Nicolaisen can be downloaded below below:

Read The Letter From Nicolaisen To AICPA's Bruce Webb

Topics