Big Five firms have agreed to participate in a voluntary review program to list past violations of non-compliance with audit independence rules in a bid to improve quality control and boost investor confidence.
The landmark accord between the US accountancy regulator, the Securities and Exhange Commission, and the world’s largest accountancy firms follows months of clashes, with the SEC compiling a report outlining over 8,000 violations at PricewaterhouseCoopers, the largest of the five firms.
Firms will disclose violation results to the SEC and to the audit committees of their clients. The programme will kick off on 15 June 2000.
SEC chairman Arthur Levitt said: ‘This is a significant chapter in the ommission’s and the profession’s efforts to reinforce the importance of auditor independence. This serious and comprehensive review will enhance investor confidence and lead to improved quality control systems going forward. I commend the profession for working constructively with the Commission’s staff to develop this vital program.’
In exchange for firms’ participation, the program provides safe harbor from enforcement, except in situations involving the most serious violations, such as when a firm itself or senior persons working on an audit own stock in an audit client.
The reviews aim to examine investments held by partners and managers over a period of at least nine months ending on 31 March 2000 and determine whether individuals or immediate family members held financial interests in audit clients.