The SEC will review the auditor independence rules of the top five accounting firms, the SEC has announced.

The review, scheduled to have begun last week, will include what auditor independence rules the firms have in place, as well as the securities and mutual funds held by the firms, the firms' partners, auditors and other key executives, the SEC said.

The Big Five accounting firms agreed to allow the SEC to examine them for possible violations of auditor independence during the nine months from June 1999 to March 2000.

The SEC will allow each firm to retain independent counsel to oversee the reviews. It will also give the firms safe harbor from enforcement or other staff actions, except in cases involving serious violations.

The five firms that voluntarily agreed to the exams are Arthur Andersen of Chicago, Deloitte & Touche of Wilton, Conn., Ernst & Young of New York, KPMG of Montvale, N.J. and PricewaterhouseCoopers of New York. Because the SEC completed an independent review of PricewaterhouseCoopers' auditor independence rules in January (MFMN 1/6/00), the SEC will exclude it from the forthcoming review.

In January, an SEC independent consultant concluded that 1,300 partners of PricewaterhouseCoopers and dozens of other professionals compromised their independence by owning stocks of, or shares, of mutual funds with holdings in companies that PricewaterhouseCoopers had audited.

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