Audit Conduct

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Chief Accountant Remarks about Independence at Baruch College Conference

On May 4th, Baruch College hosted the 16th Annual Financial Reporting Conference, assembling regulators, auditors, standard-setters and preparers to discuss hot topics in financial reporting, accounting and auditing.  

In his remarks, SEC OCA Chief Accountant Wesley Bricker addressed a variety of topics, including auditor independence.  First, he noted that given the central role that independence plays in auditor relationships, the SEC closely monitors the application of SEC rules, including through the staff's consultations with firms.  

He mentioned the loan provision rule, a portion of which is subject to a no-action letter which suspended enforcement while the SEC considers possible changes to the rule's applicability to entities holding 10 percent of more of an audit client's securities. In the meantime, Bricker said he expected his colleagues in the Division of Investment Management to extend the relief provided in the no-action letter, which will expire in December 2017. 

Bricker then discussed a recent consultation in which the staff was asked whether proposing prohibited nonaudit services (which he did not specify) to an audit client that would be performed after the auditor's dismissal, but before the end of the professional engagement would impair independence.  The staff thought it could, citing facts and circumstances that should be evaluated in light of the general standard in Rule 2-01(b) of Reg. S-X. He added that proposing such services while still engaged as the company's auditor could adversely affect the firm's ability to maintain professional skepticism during the audit. 

The Chief Accountant encouraged audit committees to engage with their auditors on the impact of proposed services on independence, especially during periods of audit firm rotation, and for firms to consult with the staff on questions of independence.