The Public Company Accounting Oversight Board voted to seek comment on the three-part proposal, which would bar only those tax services seen as most likely to undermine auditor independence.

"The proposed rule should help auditors stay clear of more aggressive tax work that can put them in an inappropriate position of advocating on behalf of a client at the same time they are charged with objectively passing on the fairness of the accounting," Chairman William McDonough said.

Under the proposal, auditors would be deemed in violation of independence standards if they promote aggressive tax-avoidance schemes to client companies and their top executives. Accounting firms also would be banned from entering into "contingent-fee" arrangements, in which clients are charged a percentage of the money they save as a result of audit advice.

The Securities and Exchange Commission must give final approval to any standards that are ultimately approved by the accounting board. Don Nicolaisen, the chief accountant at the SEC, said after the meeting that the proposal "strikes the right balance."

Congress banned the sale of legal, banking and other services to audit clients in 2002, when it passed a corporate-fraud law in the aftermath of accounting scandals at companies such as Enron Corp.

But lawmakers allowed auditors to continue providing tax services, a situation that critics say may compromise an accounting firm's independence.

Tax services account for almost a third of revenue at big auditing firms such as PricewaterhouseCoopers and include everything from the preparation of tax returns to general tax planning and international-assignment tax services.

The tax services may compromise the integrity of an audit if the auditor feels compelled to overlook auditing errors in order to win lucrative tax fees.

"We're still evaluating the proposal, but I think there are clearly those in the corporate governance world who would like to see auditors do nothing but audit," said Kent Hughes, managing director at Egan-Jones Proxy Services in Haverford, Pa. "When you receive fees as an auditor for non-audit services, you immediately raise the possibility that your audit will be maybe less pure."

The accounting watchdog's proposal also aims to seek audit-committee pre-approval to provide tax services to document their plans. Auditors would have to discuss the impact of providing tax services on their independence and document the substance of the discussion.

-- Siobhan Hughes