The SEC's View of Auditor Independence Bloomberg Law Reports – Risk & Compliance
By William F. Sullivan, Thomas A. Zaccaro, and Adam D. Schneir
Financial statement integrity and investor confidence form the core of the Securities and Exchange Commission (SEC)'s auditor independence rules. Very generally, these rules provide that independence is impaired if the accountant's judgment is not objective or impartial. In 2002, the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors of public companies to protect investors by promoting fair and independent audit reports. Sarbanes-Oxley also amended or affected certain auditor independence rules concerning, among other things, employment relationships and prohibited non-audit services. Overall, the SEC's auditor independence rules are strict, complicated, and should be taken very seriously. A violation of these rules can result in violations of not only the rules themselves, but also the federal securities laws.