The US Securities and Exchange Commission has accepted a softened version of auditor independence rules which encourage more disclosure rather than decimating IT consulting services offered by the Big Five accounting firms.
Under the previous proposal, Ernst & Young, KPMG, PricewaterhouseCoopers, Deloitte Touche Tohmatsu and Arthur Anderson would have been forced to sell off their consulting or actuarial practices, a move which would curb their flourishing e-commerce consulting arms. "To radically cut these services away would completely decimate the firms' ability to operate in the modern world," says an industry spokesperson.
The SEC, led by Arthur Levitt, sought to block firms from providing lucrative IT services to audit customers because it felt the mix of accounting, IT and actuarial skills presented a potential conflict of interest. "The inquiry was driven by a perception of conflict rather than an actual example of conflict."
The decision applies only to SEC clients in Australia, of which there are few. It is possible ASIC, the Australian accounting regulatory body, could be influenced by the ruling, however, in light of a covenant struck between the ASIC and Deloitte in recent weeks regarding independent audit, this is unlikely.
According to a Reuter's report, an international summit of accountancy bodies has moved to develop a global code on auditor independence endorsed by world stock market regulators. If passed the code will overrule the US SEC decision.