By Thomas R. May

Thomas R. May is a tax partner in the New York office of Baker & McKenzie and chairman of the firm's Global Tax Transactions Group.

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Act"), Pub L. No. 107-204, which contains significant provisions addressing auditor independence, corporate accountability and other important issues. Both the U.S. Senate and the U.S. House of Representatives had approved the Act by overwhelming margins just five days earlier. According to the legislative history of the Act, its purpose is to:

[I]mprove quality and transparency in financial reporting and independent audits and accounting services for public companies, to create a Public Company Accounting Oversight Board, to enhance the standard-setting process for accounting practices, to strengthen the independence of firms that audit public companies, to increase corporate responsibility and the usefulness of corporate financial disclosure, to protect the objectivity and independence of securities analysts, to improve Securities and Exchange Commission resources and oversight, and for other purposes.

S. Rept. No. 205 at 1 (2002). There are a number of provisions in the Act that will have a direct impact on corporate tax departments and the tax professionals employed by public companies, including tax vice presidents, tax directors, and tax counsels. We have discussed the most significant of these provisions below.

Summary

At this early juncture, that portion of the Act which seems most likely to affect tax departments in the discharge of their responsibilities in the areas of tax planning, tax compliance, and tax controversy are the provisions governing auditor independence contained in section 201, et. seq. of the Act. Indeed, according to the legislative history of the Act, the issue of auditor independence is "at the center" of the legislation. S. Rept. No. 107-205 at 14.

Among other things, the provisions regarding auditor independence will prevent registered public accounting firms, including presumably each of the Big Four, from providing most types of non-audit services, including legal, expert, and appraisal services, to any public company that they audit. Further, a registered public accounting firm will be permitted to provide selected non-audit services, including tax services, to a public company that it audits only if the pre-approval of the audit committee of that company is obtained. As discussed in more detail below, given the uncertainty regarding the effective date of many of these provisions, corporate tax departments should consider what actions are required immediately in order to come into compliance with the Act.

Definitions

The Act contains a number of definitions that are critical to a complete understanding of its provisions. For purposes of this summary, we adopted from the Act, or have otherwise utilized, a number of specific terms and have defined these terms below:

• Audit. Section 2(a)(2) of the Act defines the term "audit" to mean an examination of the financial statements of any issuer by an independent public accounting firm in accordance with the rules of the Board or the Commission for purposes of expressing an opinion on such statements.

• Audit Committee. Section 2(a)(3) of the Act defines the term "audit committee" as a committee established by and amongst the board of directors of a public company for the purpose of overseeing the accounting and financial reporting processes of the company and audits of the financial statements of the company (or, if no such committee exists, the entire board of directors of the company).

• Audit Report. Section 2(a)(4) of the Act defines the term "audit report" to mean a document or other record prepared following an audit performed for purposes of compliance with the requirements of the securities laws and in which a public accounting firm either sets forth the opinion of that firm regarding a financial statement, report, or other document or asserts that no such opinion can be expressed.

• Board. Section 2(a)(5) of the Act defines the term "Board" to mean the Public Company Accounting Oversight Board created by section 101 of the Act to oversee the audit of public companies that are subject to the securities laws.

• Commission. Section 2(a)(6) of the Act defines the term "Commission" as the Securities and Exchange Commission.

• Non-Audit Services. Section 2(a)(8) of the Act defines the term "non-audit services" to mean any professional services provided to a public company by a registered public accounting firm other than those provided in connection with an audit of the company or a review of its financial statements.

• Person Associated With a Public Accounting Firm. Section 2(a)(9)(A) of the Act defines the terms "person associated with a public accounting firm" and "person associated with a registered public accounting firm" to mean any individual proprietor, partner, shareholder, principal, accountant, or other professional employee of a public accounting firm, or any or any other independent contractor or entity that, in connection with preparation or issuance of any audit report (i) shares in the profits of, or receives compensation in any other form from, that firm or (ii) participates as agent or otherwise on behalf of such accounting firm in any activity of that firm.

• Public Accounting Firm. Section 2(a)(11) of the Act defines the term "public accounting firm" to include any legal entity that is engaged in the practice of public accounting or preparing or issuing audit reports and, to the extent so designated by the Board, any associated person of a public accounting firm.

• Public Company (or Issuer). Consistent with definition of the term "issuer" contained in section 2(a)(7) of the Act, we use the term "public company" to include any entity with securities registered under Section 12 of the Securities Exchange Act of 1934 ("the Exchange Act") or that is obliged to file periodic reports under Section 15(d) as well as entities that are in the process of conducting an initial public offering and have filed a registration statement.

• Registered Public Accounting Firm. Section 2(a)(12) of the Act defines the term "registered public accounting firm" as a public accounting firm registered with the Board in accordance with the Act.

Auditor Independence Provisions

Effective Dates.

Unless otherwise indicated, the provisions of the Act were effective immediately upon its enactment on July 30, 2002. While it is unlikely that all of the rules governing auditor independence were meant to be effective immediately (due to practical transition concerns), the Act contains no provisions prescribing a specified future effective date for any of these rules. It may be possible to extrapolate a potential effective date for certain of the rules if they are read in conjunction with the other provisions of the Act but whether this extrapolated effective date is the effective date contemplated by Congress is not entirely clear.

As discussed below, the auditor independence rules of section 201(a) of the Act (prohibiting the provision of most non-audit services and requiring audit committee pre-approval for all others) apply only to a public accounting firm that is a registered public accounting firm. Under section 2(a)(12) of the Act, the term "registered public accounting firm" includes all public accounting firms that have registered with the Board in accordance with the Act.

However, a public accounting firm may register with the Board only after the Commission determines that the Board is operational and, under section 101(d) of the Act, the members of the Board have up to 270 days after the date of enactment of the Act (or until April 26, 2003) to take the actions necessary and appropriate to allow the Commission to make such determination. Furthermore, section 102 of the Act does not prohibit the provision of an audit report to a public company by a person other than a registered public accounting firm until 180 days after the Commission has determined that the Board is operational (or until October 23, 2003, assuming the Board does not become operational until April 26, 2003).

Based on the foregoing, it could argued that the effective date of the auditor independence rules could be delayed for up to 450 days after the date of enactment of the Act because the Commission has up to 270 days after such enactment date to determine the Board is operational and public accounting firms that wish to audit public companies need not be registered until 180 days after such determination date.

Of course, there are a number of circumstances under which the auditor independence rules would come into effect earlier. For example, the Commission could determine that the Board is operational at any time before the expiration of 270 days from the date of the enactment of the Act. Furthermore, public accounting firms would be ill advised to delay the submission of their application to become registered with the Board far beyond the point at which the Commission determined the Board is operational given the novelty of the procedure and the fact that the Board has at least 45 days (and possibly more) to act on that application.

In short, though some public companies may be profoundly affected (in terms of their selection of outside service providers) by the auditor independence rules, they may have little control over, or certainty with respect to, the date after which the rules will affect them.

This uncertainty is compounded by the fact that the effective date extrapolated as described above may not, in fact, be the date upon which Congress truly intended the auditor independence rules to be effective. Section 208(a) of the Act provides that the Commission must issue final regulations implementing the auditor independence rules within 180 days after the date of enactment of the Act (January 26, 2003) and it could be argued that the auditor independence rules will become effective upon issuance of such regulations.

It is difficult to see why the Commission would be given only 180 days to promulgate final regulations if public accounting firms have far more time (in concept, up to 270 days more) to come into compliance with these regulations. Some Congressional staffers have expressed the view that the auditor independence rules were indeed intended to become effective upon the issuance of final regulations by the Commission.

There is also a possibility that some aspects of the auditor independence rules may take effect immediately even if the prohibitions contained in section 201 of the Act have a substantially delayed effective date. Specifically, as described below, section 202 of the Act requires that all audit and non-audit services provided by a public company's auditor be pre-approved by its audit committee and that any such pre-approval be disclosed to investors.

It is important to note that this provision utilizes the term "auditor" in lieu of the term "registered public accounting firm" in contrast to virtually every other provision of the auditor independence rules. Consequently, it could be argued that the effective date of this pre-approval and disclosure provision does not depend on an auditor being registered with the Board and, in the absence of a specified effective date, the provision is effective immediately.

On the other hand, in discussing the pre-approval provision, the legislative history of the Act utilizes the term "registered public accounting firm" in lieu of the term "auditor" and it is arguable that utilization of a different term in the language of the statute was inadvertent and, in any event, is inconsistent with the other provisions of the auditor independence rules. The fact that the term "non-audit services" is defined to mean any professional services provided to a public company by a "registered public accounting firm" strongly supports this position.

As is obvious from the foregoing discussion, one of the first tasks of the Commission (or perhaps the Congress) should be to clarify the effective date or dates of all of the auditor independence rules. In advance of (or the absence of) any clarification, public companies may wish to take immediate action to bring themselves into compliance with the auditor independence rules. For example, it may be advisable to seek immediate audit committee approval of any non-audit services that will be provided by the company's auditor prior to the time that such firm becomes a registered public accounting firm.

Rules Restricting the Provision of Non-Audit Services.

Section 201(a) of the Act amends the Exchange Act to make it unlawful for a registered public accounting firm (and any associated person of that firm to the extent determined by the Commission) that performs for a public company any audit required by the securities laws, the rules of the Commission, or (beginning 180 days after it commences operations) the rules of the Board, to provide, contemporaneously with that audit, any non-audit service including:

• bookkeeping or other services related to the accounting records or financial statements of the company;

• financial information systems design and implementation;

• appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

• actuarial services;

• internal audit outsourcing services;

• management functions or human resources;

• broker or dealer, investment adviser, or investment banking services;

• legal services and expert services unrelated to the audit; and

• any other service that the Board determines, by regulation, is impermissible.

The Act provides that a registered public accounting firm may engage in any non-audit service, including tax services, which is not among the specifically prohibited services listed above, for an audit client only if the audit committee of the public company approves the activity in advance in accordance with the amendments contained in section 202 of the Act.

Further, section 201(b) of the Act permits the Board to exempt any person, issuer, public accounting firm, or transaction from the prohibition on non-audit services to the extent such exemption is necessary or appropriate in the public interest and is consistent with the protection of investors. Registered public accounting firms may provide, without limitation, non-audit services to any public company they do not audit and to any private company.

Comparison With Existing Restrictions.

The rules in section 201 of the Act restricting the scope of non-audit services that may be provided to a public company by its auditor are generally stricter than those contained in the Commission's auditor independence rules that became effective in 2001. See 17 C.F.R. Section 210.2-01(c)(4) (2001).

For example, under the Commission's rules effective since 2001, an accounting firm was generally prohibited from providing an audit client with appraisal services, valuation services, or any services involving a fairness opinion (unless the results were not material or were not audited by the accounting firm). 17 C.F.R. Section 210.2-01(c)(4)(iii)(A). This prohibition was subject to several exceptions including, significantly, if the valuation was performed in the context of the planning and implementation of a tax-planning strategy or for tax compliance services. 17 C.F.R. Section 210.2-01(c)(4)(iii)(B).

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In contrast, the Act would appear to prohibit, without exception, the provision of any appraisal or valuation services, fairness opinions, or contribution-in-kind reports by a registered public accounting firm (or a person associated with that firm to the extent determined by the Commission) to a public company that it audits. This prohibition would arguably prevent a registered public accounting firm from bundling its valuation services with its tax services when developing, implementing and documenting certain transfer pricing strategies for its audit clients.

As another example, under the Commission's rules effective since 2001, an accounting firm was generally prohibited from providing an audit client with legal services but only in those circumstances in which the persons providing the service must be admitted to practice before the courts of a United States jurisdiction. 17 C.F.R. Section 210.2-01(c)(4)(ix). This rule, in effect, permitted the accounting firms and their foreign affiliates to provide legal advice on virtually any aspect of foreign law from locations both within and without the United States.

In contrast, the Act would appear to prohibit, without exception, the provision of any legal services by a registered public accounting firm (or a person associated with that firm to the extent determined by the Commission) to a public company that it audits.

As a final example, under the Commission's rules effective since 2001, an accounting firm was permitted to provide any expert services to an audit client with the sole caveat that it be mindful of its duty to maintain objectivity and integrity. That is, the accounting firm could render or support expert opinions for its audit client in legal, administrative, or regulatory filings or proceedings. In contrast, the Act would appear to prohibit, without exception, the provision of any expert services by a registered public accounting firm (or a person associated with that firm to the extent determined by the Commission) to a public company that it audits.

Permissible Tax Services.

In discussing the provision that prohibits a registered public accounting firm from providing these and other non-audit services to a public company that it audits, the legislative history to the Act states that:

The intention of this provision is to draw a clear line around a limited list of non-audit services that accounting firms may not provide to public company audit clients because their doing so creates a fundamental conflict of interest for the accounting firms. The list is based on simple principles.

S. Rept. No. 107-205 at 18. Despite Congress's intent to draw a clear line around a limited list of non-audit services based on simple principles, many significant questions are left unanswered by the Act. For example, while the Act clearly provides that a registered public accounting firm may provide "tax services" to a public company it audits if the audit committee of that client pre-approves the services, the term "tax services" is not defined clearly by either the Act or by its legislative history.

Left unanswered is the critical question of whether there are certain categories of tax services that registered public accounting firms should be prohibited from providing because they give rise to the same fundamental conflicts of interest that Congress, according to the legislative history of the Act cited above, wished to eliminate.

While the Act and the legislative history of the Act are not particularly helpful in defining the scope of permissible tax services, that portion of the legislative history discussing the reasons why registered public accounting firms are prohibited from providing other non-audit services (whether or not audit committee approval is obtainable) is instructive. In this regard, the legislative history of the Act states that:

An accounting firm, in order to be independent of its audit client, should not audit its own work, which would be involved in providing bookkeeping services, financial information systems design, appraisal or valuation services, actuarial services, and internal audit outsourcing services to an audit client. The accounting firm should not function as part of management or as an employee of the audit client, which would be required if the accounting firm provides human resources services such as recruiting, hiring, and designing compensation packages for the officers, directors, and managers of an audit client. The accounting firm should not act as an advocate of the audit client, which would be involved in providing legal and expert services to an audit client in legal, administrative, or regulatory proceedings, or serving as a broker-dealer, investment adviser, or investment banker to an audit client, which places the auditor in the role of promoting a client's stock or other interests.

S. Rept. No. 107-205 at 18. Based on this legislative history, it could be argued that a registered public accounting firm should be prohibited from providing to an audit client any non-audit tax service that requires the firm to audit its own work, requires it to function as part of the management or as an employee of such client, or requires the firm to act as an advocate of the client (including promoting a client's stock or other interests).

A prohibition of this nature would, for example, preclude a registered public accounting firm from providing tax controversy services, such as representing an audit client in a judicial proceeding (e.g., a Tax Court case) or in an administrative proceeding (e.g., an Internal Revenue Service audit) or acting as an expert in any such proceedings, because these services involve a significant and direct element of advocacy.

If this reasoning is taken to the extreme, a registered public accounting firm could also be precluded from providing tax compliance services and tax planning services to its audit clients because even these services arguably involve some degree of advocacy before the tax authorities (albeit not in the context of an immediate formal proceeding). A registered public accounting firm may be precluded from providing other tax services (such as the rendering of a tax opinion) to an audit client on the grounds that they require the firm to function as part of the management of that client or require it to audit its own work.

On the other hand, Congress clearly intended to permit registered public accounting firms to provide a broader array of non-audit tax services to their audit clients than those that arise merely in connection with an audit. Indeed, given the relevant definitions, tax services that arise in connection with an audit (such as tax provision work) would be classified as audit services that could be provided by a registered public accounting firm under any circumstances.

Consequently, it may be that some line will be drawn, based not just upon policy but also upon practicalities, that will, for example, permit a registered public accounting firm to provide certain tax services, such as tax planning and tax compliance, to an audit client with the prior approval of its audit committee but will prohibit that firm from providing other tax services, such as tax controversy, under any circumstances. However, this line is not likely to be drawn until the Board and/or Commission issues rules and regulations interpreting and implementing the auditor independence provisions of the Act.

Audit Committee Approval.

The foregoing distinction between prohibited non-audit services and non-audit tax services that may be provided with audit committee pre-approval will become all but moot if audit committees of public companies routinely refuse to approve the provision of all non-audit services, including tax services, by the registered public accounting firms that audit them.

There has been much speculation that this will be one of the by-products of the Act because audit committees will fear that any appearance that auditor independence has been compromised may expose the company to litigation from the plaintiffs' securities bar. Some directors and officers insurance policies may require, as a condition of coverage, that a public company's auditor not provide any non-audit services to the company. On the other hand, the audit committees of some public companies that, under existing rules, routinely approve the provision of non-audit services may not change their view that the benefits of having their auditors perform such services outweigh any attendant risks.

In any event, section 301 of the Act amends the Exchange Act to strengthen the authority of the audit committee (as well as its independence from management) by assigning to it direct responsibility for the appointment, compensation, and oversight of the registered public accounting firm that audits a public company.

In terms of audit committee approval, section 202 of the Act amends the Exchange Act to provide that all auditing services and non-auditing services provided to a public company by the auditor of that company must be pre-approved by the company's audit committee (subject to a de minimus exception for non-audit services that is of limited applicability). The audit committee may delegate its pre-approval authority to one or more of its members who are also independent directors of the board of directors of the public company (provided any decisions made pursuant to this delegation are presented to the full audit committee at each scheduled meeting). However, approval by the audit committee of any non-audit service to be performed by the auditor of a public company must be disclosed to investors in the public company's periodic reports.

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While the Act clearly requires the pre-approval of the audit committee for non-audit services, it leaves unanswered many critical questions regarding how and when such services may be approved. The legislative history of the Act indicates that the audit committee of a public company need not make a particular or specified finding justifying the provision of a non-audit service by the registered public accounting firm that audits such public company. S. Rept. No. 107-205 at 19. However, each non-audit service must be specifically identified in order to be pre-approved by the audit committee and pre-approvals that simply endorse the determinations of management or allow any non-audit service permissible by law are not acceptable. S. Rept. No. 107-205 at 20.

The requirement that each non-audit service be specifically identified by the audit committee would also seem to preclude a blanket approval of a specified dollar amount of non-audit services that may be provided by the public company's auditor each year. Thus, a corporate tax department that routinely utilizes a public company's auditor to discharge a variety of tax projects may find the requirement that audit committee approval be obtained each time to be a practical impediment to the continued use of that auditor.

In terms of timing, the audit committee of a public company must approve any non-audit service to be provided by its auditor prior to the time such service commences though how far in advance such approval may be granted is left to the discretion of the Board and/or the Commission. In this regard, the legislative history appears to suggest that a one-year advance approval period might be an acceptable limit. S. Rept. No. 107-205 at 20.

Foreign Public Accounting Firms.

The Act does not definitively provide that a foreign public accounting firm, whether or not affiliated with a U.S. public accounting firm, is subject to the same restrictions on the provision of non-audit services as a U.S. registered public accounting firm. Section 106(a)(1) of the Act provides that any foreign public accounting firm that prepares or furnishes an audit report with respect to any public company shall be subject to the Act and the rules of the Board and Commission issued thereunder to the same extent as an accounting firm organized and operating under the laws of the United States.

Thus, if a foreign public accounting firm intends to issue an audit report with respect to an entity with securities registered under the Exchange Act or that is obliged to file periodic reports or that has filed a registration statement, that foreign public accounting firm must register with the Board in the same manner as a public accounting firm organized under the laws of the United States. On the other hand, if it does not intend to issue an audit report on behalf of such a public company, there is no current requirement that it become a registered public accounting firm and it arguably should not be subject to the same rules restricting the provision of non-audit services by such firms.

Under section 106(a)(2) of the Act, the Board may, by rule, determine that a foreign public accounting firm (or a class of such firms) that does not issue any such audit reports plays such a substantial role in the preparation and furnishing of such reports that it is necessary or appropriate that such firm be registered with the Board. A foreign public accounting firm, including a foreign affiliate of a registered public accounting firm, that was required to be registered would presumably be subject to the same restrictions on the provision of non-audit services as a registered public accounting firm organized under the laws of the United States. Indeed, a strong policy-based argument could be made that a foreign public accounting firm that plays a role in the preparation and furnishing of an audit report should be restricted in the provision of non-audit services given that the same fundamental conflicts of interest that Congress wished to eliminate will invariably arise.

Associated Persons of Registered Firms.

It is also possible that any associated person of a registered public accounting firm, including a foreign affiliate of a U.S. registered public accounting firm, may be subject to the restrictions on the provision of non-audit services on one or more other bases.

Section 2(a)(11) of the Act defines the term "public accounting firm" and indicates that the Board may, by designation, include any person associated with a public accounting firm within the definition of the term "public accounting firm." Any person so included would presumably be considered to be a part of the relevant accounting firm for purposes of applying all of the provisions of the Act (including those restricting the scope of non-audit services that may be provided a public accounting firm that registers with the Board).

In addition to the foregoing, under section 201(a) of the Act, the Commission may determine that the rules restricting a registered public accounting firm in the provision of non-audit services should apply to any associated person of that firm. Thus, to the extent determined by the Commission, an associated person, though not necessarily considered to be a part of a registered public accounting firm for all purposes of the Act, may nevertheless be subject to the same restrictions on the provision of non-audit services as would be a person who was a part of that registered public accounting firm.

As noted above, section 2(a)(9)(A) of the Act defines the terms "person associated with a public accounting firm" and "an associated person of a registered public accounting firm" to mean any individual proprietor, partner, shareholder, principal, accountant, or other professional employee of a public accounting firm, or any other independent contractor or entity that, in connection with preparation or issuance of any audit report (i) shares in the profits of, or receives compensation in any other form from, that firm or (ii) participates as agent or otherwise on behalf of such accounting firm in any activity of that firm.

The requirement that the person either share in profits (or receive compensation) or participate as agent (or otherwise) in any activity of that firm "in connection with the preparation or issuance of any audit report" seems calculated to ensure that only persons that have a direct financial interest in the profits from the audit of a public company or that have performed some service in connection with that audit will be considered to be associated with a public accounting firm or registered public accounting firm.

As a practical matter, the non-U.S. affiliates of international accounting firms, including each of the Big Four, will typically be considered to be associated with the U.S. affiliate of such firms because public companies typically retain a single public accounting firm to perform their audit worldwide (though there is no requirement that they do so). What is left unclear is whether other professional services firms that are aligned with a registered public accounting firm (whether U.S. or non-U.S.) or an associated person of that firm (whether U.S. or non-U.S.) will be swept into the definition of a person associated with a registered public accounting firm for purposes of applying the auditor independence rules or other provisions of the Act.

Certainly, a strong policy argument could be made that they should be, even though they may not technically share in the profits of an audit or perform services with respect to that audit, if their interests (whether financial or otherwise) and those of a registered public accounting firm are sufficiently intertwined.

Other Auditor Independence Provisions.

Other provisions contained within the Act that impact the independence of auditors include:

• Section 203 of the Act amends the Exchange Act to make it unlawful for a registered public accounting firm to provide audit services to a public company if the lead (or coordinating) audit partner (having primary responsibility for the audit), or the audit partner responsible for reviewing the audit, has performed audit services for such public company in any of its five immediately preceding fiscal years.

• Section 204 of the Act amends the Exchange Act to require that each registered public accounting firm that performs an audit for a public company timely report to the audit committee of that company certain information including all critical accounting policies and practices to be used, alternative treatments of financial information within generally accepted accounting principles, and other material written communications with the management of the company (including any management letter or schedule of unadjusted differences).

• Section 206 of the Act amends the Exchange Act to make it unlawful for a registered public accounting firm to perform any required audit service for a public company if a chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position was employed by that firm and participated in any capacity in the audit of that public company during the one-year period preceding the date the audit is initiated.

• Section 207 of the Act requires the Comptroller General of the United States to study, and report to Congress within one year, the potential effects of the imposition of a limit on the period of years in which a particular registered public accounting firm may be the auditor of record for a particular public company.

Other Provisions Affecting
Internal Tax Professionals

The Act contains a number of provisions, other than those relating to auditor independence discussed above, which may directly or indirectly impact tax professionals, including tax vice presidents, tax directors, and tax counsels, employed by public companies.

For example, section 1001 of the Act indicates that it is the sense of the U.S. Senate that the federal income tax return of any corporation should be signed by the chief executive of the corporation and this could affect the way companies consider and implement tax planning strategies. One bill currently before the U.S. Senate, S. 1971, would, if enacted into law, incorporate such signature requirement into the U.S. Internal Revenue Code.

Section 303 of the Act makes it unlawful for any officer or director of a public company to (or direct any person to) fraudulently influence, coerce, manipulate, or mislead an auditor for purposes of rendering the company's financial statements materially misleading. This provision, along with the high level of scrutiny to which companies and their auditors are currently subject, could conceivably change the dynamic between internal tax professionals and outside auditors during the course of their tax provision work.

Finally, under the Act, internal tax professionals that are also officers will be subject to additional "blackout periods" during which they may not trade in the shares of their public company nor may such company extend loans to these officers. See sections 306 and 402.