(June 7) – The Securities and Exchange Commission says that the Big Five accounting firms have all agreed to participate in a voluntary program to report any past violations of auditor independence rules.
The firms themselves will receive immunity from SEC enforcement in exchange for their co-operation. The firms will be required to retain independent counsel to oversee reviews and to disclose past independence violations. The program will commence on June 15 to examine whether accounting firms’ partners’ or their immediate family held investments in audit clients during a period of at least nine months ending March 31, 2000. Firms are to report back to the SEC by July 15, 2001.
SEC chairman Arthur Levitt said, “This is a significant chapter in the commission’s and the profession’s efforts to reinforce the importance of auditor independence. This serious and comprehensive review will enhance investor confidence and lead to improved quality control systems going forward. I commend the profession for working constructively with the Commission’s staff to develop this vital program.”
Richard Walker, director of the SEC’s division of enforcement, said, “Auditor independence in fact and in appearance is at the core of investor confidence in the accuracy of financial statements. The look-back program provides a constructive framework for addressing past independence violations and will help to promote the integrity of the financial reporting process.”