The SEC has adopted new auditor independence rules with several notable changes from the original rule proposal.
"The Commission's staff has heard the specific concerns of all of the Big 5 firms and the AICPA, and the final rule reflects, to a great extent, their concerns," said Arthur Levitt, chairman of the SEC. "I firmly believe that today's results strikes a balance that serves the interests of America's investors while remaining flexible and adaptable for the unforeseen changes in tomorrow's marketplace."
The rules are designed to update the parameters determining auditors' independent status in terms of their personal and family members' investments in audit clients, employment status between auditors and their family members and the audit client and the type of non-audit services audit firms can offer their clients.
One of the primary differences between the adopted rule and the proposed rule is the elimination of four guiding principles that measured an auditor's independence. The SEC received many comment letters that the principles were far too broad and could affect services that may not necessarily impair an auditor's independence. The adopted rule does not embrace the four principles but includes them as suggested guidelines.
Another notable exclusion in the adopted rule is that of the definition of accounting firms' affiliate organizations that was included in the rule proposal.