By Stewart Lewis
(September 13 – 11:00 ET) – The Securities and Exchange Commission is continuing its hearings, today, into its proposed auditor conflict of interest rule. The aim of the new rule is to promote greater integrity in financial statement audits.
Accounting firms have been watching their revenue streams from auditing decrease over the last few years, but auditing still provides a foot in the door for more lucrative consulting contracts. Regulators have become increasingly concerned about a decline in the integrity of audits, driven by a desire to maintain consulting revenue.
Accounting firms are concerned that the new rule will result in a the breakup of their auditing and consulting arms. Two of the “Big Five” accounting firms — Ernst & Young and Arthur Andersen — have already made the split. PricewaterhouseCoopers is considering a sale of its consulting division, too.
OSC chairman, David Brown, is speaking at today’s hearing. He has delivered several speeches to the Canadian accounting community in recent years, expressing concern about “aggressive accounting” practices. Brown will be repeating those concerns before the SEC, says OSC spokesman, Frank Switzer. For the full story on the SEC proposal look in the upcoming October issue of Investment Executive.