News

The US Securities and Exchange Commission (SEC)’s reforms to the Auditor Independence Framework have exposed deep divisions in the sector over where the audit profession is heading.

On October 16, the SEC announced changes to the Auditor Independence Framework which set out to relax rules around conflict of interest, allowing audit firms greater discretion over what constitutes a conflict of interest.

The reforms were passed by the regulator by three votes to two, with the two Democrats, Commissioner Allison Herren Lee and Commissioner Caroline Crenshaw voting against the proposals and releasing a statement entitled: ‘Who watches the watchers?’.

The statement of dissent concluded: “We are concerned that the dial for auditor independence is turning in only one direction, and that is towards loosening standards and reducing transparency. We cannot support introducing greater opportunity for error and uncertainty into auditor independence standards while decreasing visibility into how auditors are actually making these judgments.”

Kyle Gibbons, managing director Europe for audit tech vendor, Confirmation (part of Thomson Reuters) says the relaxation of the rules presents a “risk” for the sector even though the reforms might be good for audit quality and competitiveness.