PCAOB Rules

Rule 3520Auditor Independence

Rule 3521Contingent Fees

Rule 3522Tax Transactions

Rule 3523Tax Services for Persons in Financial Reporting Oversight Roles

Rule 3526 establishes guidelines when an accounting firm should discuss with the audit committee of the client information with respect to any relationships between the firm and the entity that might bear on auditor independence. Under the rule, a registered public accounting firm must do the following:

1. Prior to accepting an initial engagement, pursuant to the standards of the PCAOB, describe in writing, to the audit committee of the issuer, all relationships between the registered public accounting firm or any affiliates of the firm and the potential audit client or persons in financial reporting oversight roles at the potential audit client that, as of the date of the communication, may reasonably be thought to bear on independence.
2. Discuss with the audit committee the potential effects of the relationships on the independence of the firm, should it be appointed as the entity's auditor.
3. Document the substance of its discussion with the audit committee.

These requirements would also apply annually subsequent to being engaged as the auditor. An additional requirement annually is to affirm to the audit committee of the issuer of the communication that the registered public accounting firm is still independent in compliance with Rule 3520.

1. Which of the rules above does the most in your opinion to prevent investment fraud? Explain why?