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WSJ reports that SEC may loosen independence rules

A December 16, 2019 Wall Street Journal (WSJ) article stated that according to the Securities and Exchange Commission (SEC) Chairman, Jay Clayton, the SEC is planning changes to auditor independence rules that would loosen regulation of audit firms by giving auditors more discretion in evaluating their independence.

The SEC's Final Rule, Auditor Independence With Respect to Certain Loans or Debtor-Creditor Relationships, amended the loan provision and solicited comments on possible additional amendments to the independence rules. The SEC categorized the comments received as follows: 

(1) relating to the Loan Provision, but not the significant compliance challenges that need to be immediately addressed (e.g., other types of loans that commenters suggested should be excluded from the Loan Provision, such as student loans);

(2) broadly impacting provisions of the auditor independence rules, including the Loan Provision (e.g., comments relating to the “covered person” and “affiliate of the audit client” definitions); or

(3) broadly impacting provisions of the auditor independence rules other than the Loan Provision (e.g., suggestions to narrow the look-back period for domestic initial public offerings so that the period is similar to that for foreign private issuers).

Consideration of rule changes is expected by April 2020, according to the WSJ article.

The article also cited a December 11 Public Company Accounting Oversight Board (PCAOB) document (which I was unable to locate online), which stated that auditor independence was one of the five (5) most common deficiencies found in PCAOB inspections over the past year.