Sections 201 and 202 of the Sarbanes-Oxley Act provide that an issuer's auditing committee must pre-approve "allowable services" to be provided by the auditor of the issuer's financial statements in order to assure the independence of such auditor. In doing so, the auditing committee may establish policies and procedures for pre-approval provided they are consistent with the Act, detailed as to the particular service, and designed to safeguard the continued independence of the accountant.

Thus "Actuarial Services", usually provided by the "Big 4" auditing firms on tax planning or tax optimizations, are now restricted. "Expert services unrelated to the audit, usually provided by legal and tax divisions of auditing and accounting firms" to clients audited, or to its legal representatives, are now restricted too. Likewise, "outsourcing services provided by an audit firm to their audit clients" could not be subject to audit procedures during an audit of the client's financial statements. Same happens on transactions as broker or dealer, investment adviser, or investment banking services, usually provided on the acquisitions of cash companies, losses, assets, by the "Big 4" auditing firms, who use to act as promoter or underwriter on behalf of an audit client.

Finally, one of the most sensitive areas, Legal Services, usually provided by auditing firms through their Tax & Legal Departments, may jeopardize the independence required by US SEC.

From our view, legal and tax assistance require independent and experienced lawyers. TAX & LEGAL CHILE has the experience required to avoid risks and future unsuspected liabilities and impacts arisen from Sarbanes-Oxley Act.

The Chilean SEC (Superintendencia de Valores y Seguros -SVS) went further than the US SEC against restricted services to auditing firms. Thus, SVS stated that among non-audit services affecting independence (forbidden services) would be the following:

• Bookkeeping.
• Bonds ADR’s, and Shares.
• Actuarial services in certain circumstances.
• Financial information systems design and implementation.
• Internal audit outsourcing services.
• Management functions or human resources including headhunting for key professionals.
• Legal services which could affect the financial statements.
• Expert services, appraisal or valuation services, fairness opinions, or contribution-in-kind reports.
• Any other service that the Chilean SEC by a General Ruling if the product is reflected in the accounting records or financial statements of the audit client.

The proposal states also that other Non-Audit Services must be approved by the Board of Directors of the Company after a report of the Board Committee. More Restrictions will be imposed.

For a complete reference of the Chilean regulations proposed, please click here