SEC, Accounting Firms Agree on Audit-Independence Rule

The Securities and Exchange Commission reached a compromise with four major accounting firms on an audit-independence rule that would relax an earlier plan’s limits on computer consulting contracts, said Russell Horwitz, a senior SEC official.

The agreement, which SEC members will vote on today, seeks to prevent conflicts of interest among accounting firms that do consulting work for public companies they audit. During months of debate, the most contentious part of the rule proposal would have barred accounting firms from doing computer-related consulting work for their audit clients.

The agreement will let firms do computer consulting work if their corporate clients clearly keep management responsibility for the systems, said Horwitz, senior advisor to SEC Chairman Arthur Levitt. Consulting fees would have to be disclosed, he said.

“This should help give investors increasing confidence in the integrity of companies’ financial statements,” Horwitz said.

In exchange for this SEC concession, the firms and the industry’s leading trade group, the American Institute of Certified Public Accountants, agreed to push for tougher industry self-policing, Horwitz said. This would involve increasing the independent funding for and public representation in self-regulatory organizations.

The parties to the agreement were the AICPA and four of the Big Five accounting firms--Arthur Andersen, Deloitte & Touche, Ernst & Young and PricewaterhouseCoopers--Levitt said. The lone holdout is KPMG.