October 12, 2005
SEC Changing Auditor Independence Standards
With so much criticism of - so far - two of the top four Audit Firms, the SEC along with its Oversight Board - PCAOB - are trying to rein in the bad behavior of some firms without crippling the industry. With Sarbanes-Oxley consuming so much in resources from accounting firms, the SEC has to tread lightly to assure abuse stops but not bankrupt the firms needed to do the oversight of financial reporting at public companies.
An excerpt is here:
"Some of the issues of concern at the SEC are non-audit financial services offered by audit firms and “high-risk situations,” such as when an auditor and its client each sell services to the same outside party, Bailey said.
He noted that some audit firms are working internally to make it easier to comply with the rules by creating databases of firms' financial interests and business relationships. The information is then extracted to determine whether conflicts could arise on the audit engagement.
The Public Company Accounting Oversight Board (PCAOB) has also proposed an auditor-independence rule change that the SEC will consider for approval.
The PCAOB's July proposal would significantly limit accounting firms' ability to sell tax services to audit clients and their top executives.
"We wanted to strike a balance so as to ensure the independence of the auditor to the extent possible in this area," Charles Niemeier, a PCAOB member and a former chief accountant for the SEC's enforcement division, told the Wall Street Journal. "The other option – to have eliminated the audit firms from providing any tax advice – we did not believe to be in the interest of the public good."
According to an April study by the Government Accountability Office, 61 of the nation's 500 largest companies bought abusive or potentially abusive tax shelters from their independent auditors from 1998 through 2003, costing the U.S. Treasury an estimated $3.4 billion, the Journal reported. " See www.accountingweb.com for the complete article.
If your firm needs to comply with Sarbanes-Oxley in a reasonable manner, then see www.issuescentral.com to learn more about Compliance Playbook(tm).
An excerpt is here:
"Some of the issues of concern at the SEC are non-audit financial services offered by audit firms and “high-risk situations,” such as when an auditor and its client each sell services to the same outside party, Bailey said.
He noted that some audit firms are working internally to make it easier to comply with the rules by creating databases of firms' financial interests and business relationships. The information is then extracted to determine whether conflicts could arise on the audit engagement.
The Public Company Accounting Oversight Board (PCAOB) has also proposed an auditor-independence rule change that the SEC will consider for approval.
The PCAOB's July proposal would significantly limit accounting firms' ability to sell tax services to audit clients and their top executives.
"We wanted to strike a balance so as to ensure the independence of the auditor to the extent possible in this area," Charles Niemeier, a PCAOB member and a former chief accountant for the SEC's enforcement division, told the Wall Street Journal. "The other option – to have eliminated the audit firms from providing any tax advice – we did not believe to be in the interest of the public good."
According to an April study by the Government Accountability Office, 61 of the nation's 500 largest companies bought abusive or potentially abusive tax shelters from their independent auditors from 1998 through 2003, costing the U.S. Treasury an estimated $3.4 billion, the Journal reported. " See www.accountingweb.com for the complete article.
If your firm needs to comply with Sarbanes-Oxley in a reasonable manner, then see www.issuescentral.com to learn more about Compliance Playbook(tm).
