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  1. News
  2. SEC updates auditor independence rule

SEC updates auditor independence rule

SEC Update
2 December 2020
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The SEC recently updated its auditor independence rule in light of current market conditions and industry practice. The amendments, which were adopted over the dissenting votes of two Commissioners, relax a number of the rule's provisions addressing relationships that could compromise auditor independence. Because audit clients share responsibility with their accountants to monitor auditor independence, the amendments deserve close attention by registrants as well as auditors.

Rule 2-01 of Regulation S-X restricts financial, employment, and business relationships between an audit firm and its audit client to ensure that auditors are "independent of their audit clients both in fact and in appearance." The amendments focus the revised independence requirements on relationships and services the SEC considers more likely to impair an auditor's objectivity and impartiality.

Noteworthy amendments narrow the scope of independence assessments relating to entities under common control with the audited company that particularly affect private equity structures and investment company complexes. Other amendments shorten the look-back period for which domestic IPO issuers must evaluate independence. The SEC also has established a framework that will permit the audit client and its auditor to preserve the audit relationship by transitioning out of services and relationships resulting from merger and acquisition activity that would violate independence standards.

The SEC's adopting release describing the amendments (No. 33-10876) can be accessed here.

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Authored by Alan Dye, Richard Parrino, Suzanne Filippi, and Kevin Greenslade

 

 

Contacts
Alan Dye
Partner
Washington, D.C.
Richard Parrino
Partner
Washington, D.C.
Suzanne Filippi
Partner
Boston
Kevin Greenslade
Partner
Northern Virginia
Steve Abrams
Partner
Philadelphia
Richard Aftanas
Partner
New York
Alex Bahn
Partner
Washington, D.C.
John Beckman
Partner
Washington, D.C.
David Bonser
Partner
Washington, D.C.
Glenn Campbell
Partner
Baltimore
David Crandall
Partner
Denver
John Duke
Office Managing Partner
Philadelphia
Allen Hicks
Partner
Washington, D.C.
Paul Hilton
Partner
Denver
William Intner
Partner
Baltimore
Bob Juelke
Partner
Philadelphia
Paul Manca
Partner
Washington, D.C.
Michael McTiernan
Partner
Washington, D.C.
Brian O'Fahey
Partner
Washington, D.C.
Les Reese
Partner
Washington, D.C.
Richard Schaberg
Partner
Washington, D.C.
Michael Silver
Partner
New York
Abigail Smith
Partner
Washington, D.C.
Lillian Tsu
Partner
New York
Tifarah Allen
Counsel
Washington, D.C.
Jessica Bisignano
Partner
Philadelphia
Tiffany Posil
Partner
Washington, D.C.
Andrew Zahn
Partner
Washington, D.C.
Keywords Disclosure and Reporting Obligations, Securities and Financial Regulatory Advice, Capital Markets, Regulation S-X, Auditor, SEC
Languages English
Topics REITs, Equity Capital Markets, General Debt Capital Markets, Corporate Governance, Corporate / Company Law, Securities and Public Company Advisory
Countries United States
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