(July 4 – 16:05 ET) – The Securities and Exchange Commission is soliciting comment on new rules regarding auditor independence.
The proposals provide governing principles for determining whether an auditor is independent based on the auditor’s investments, family investments, employment relationships between auditors and their families and audit clients, and the scope of services provided by audit firms to their audit clients.
The proposals would reduce the number of auditor employees and their family members whose investments are attributed to the auditor. They would identify non-audit services that may cause a conflict if also offered to an audit client. The proposals would also provide limited exceptions for firms with adequate quality control. The new rules would require companies to disclose in their annual proxy statements information about non-audit services provided by their auditors during the last fiscal year.
The SEC says the new rules are needed because, “Investors must be able to put their faith in issuers’ financial statements. If investors do not believe that the auditor is truly independent from the issuer, they will derive little confidence from the auditor’s opinion and will be far less likely to invest in the issuer’s securities.”
Comments are due in 75 days.