(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

SEC Deputy Chief Accountant Discusses Scope of Audit Fee Disclosure

In a letter to Ernst & Young, SEC Deputy Chief Accountant Scott Taub clarified the scope of recently adopted rules relating to the disclosure of the fees paid for audit and non-audit services to the company's principal accountant. Adopted in response to the Sarbanes-Oxley Act, the enhanced proxy rules require disclosure of fees paid to the independent accountant aggregated into four identified categories, one of which is audit-related fees.

Under audit-related fees, companies must disclose the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the financial statements.

According to Mr. Taub, the Commission intends that only fees for services that are reasonably related to the performance of an audit or review of the financial statements, and that traditionally have been performed by the independent accountant, should be classified as audit-related.

Thus, reasoned the senior official, not all attest services may be classified as audit-related. For example, since an evaluation of the potential acquisition of a software product or system cannot be related to the audit of the financial statements, the SEC staff believes that classification of such fees as audit-related would not be in accordance with the rules. Similarly, it would be inappropriate under the rules to classify fees