The US Securities and Exchange Commission (SEC) issued new rules on Wednesday intended to modernise the requirements for auditor independence and alleviate any perception of conflicts of interest.
The new proposals are the result of months of haggling between the SEC and the accounting industry. SEC chairman Arthur Levitt has acknowledged that the final ruling reflects the concerns of the major accounting firms as well as the American Institute of Certified Public Accountants.
Lou Salvatore, chief executive at Andersen Worldwide, said that his firm believes the proposals to be in the best interests of its clients, which should benefit from greater clarity in the rules and more consistency in their application.
The give and take between regulator and regulated also surfaced in Salvatore's remarks. He suggested that the SEC's revised proposals were more palatable to the industry than those put forward earlier this year.
Under the new rules an auditor cannot operate or supervise the operations of a client's IT system. It can, however, offer consulting services provided it meets certain criteria. These include provisions that a client's management team make all significant decisions with respect to the IT project, and that the client must disclose any fees paid to the auditing firm for its IT consulting.
The rules will also reduce the number of audit firm employees and family members whose investments in, or employment with, audit clients could impair the auditor's independence. Audit committees will now have to disclose whether they consider the types of non-audit services performed, and the fees involved, to be consistent with auditors' independence.
According to Arthur Andersen spokesperson George Rafeedie, the company "didn't know at this time what impact, if any, the ruling in the US would have on its operations in the UK and worldwide".
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