Auditor conflicts concern SEC’s Unger

Auditor conflicts concern SEC's Unger

Laura Unger, the acting chairman of the US Securities & Exchange Commission, has said conflicts of interest arising from firms offering both audit and non-audit work are 'greater than regulators suspected'.

A recent SEC analysis showed higher-than-expected payments for non-audit services, with companies paying three times as much for non-audit work as for audit services.

Speaking this week, Unger said the numbers alone did not prove there was a conflict, but acknowledged the SEC was ‘very surprised’ by the results.

She said more time was needed to see how investors reacted to the new information about payments to auditors, but re-affirmed that disclosure of payments was better than a complete ban on firms doing both audit and non-audit work for the same company.

Unger’s comments came just days after Big Five firm Andersen agreed to pay $7m (£4.9m) to the SEC to settle allegations of fraudulent audit work for Waste Management, the largest ever settlement of its kind.

She referred to the case as ‘the smoking gun that everyone was looking for’ following last year’s debate on the SEC’s amended auditor independence rules. Unger said the Andersen case was evidence of the pitfalls that could occur when an auditor provided other services to audit clients.

Last year’s decision by the regulator to tighten rules governing auditor independence was not well received by the Big Five accounting firms, including Andersen. The ‘watered-down’ rules, however, did not include a total ban on audit firms providing other services to audit clients.

Instead they made a requirement for companies to disclose payments for audit and non-audit services in annual proxy reports.

But despite the Andersen penalty and Unger’s interest in the auditor independence issue, the pressure on large firms is likely to drop off when George Bush appoints a full-time chairman. It is thought the Republican lawyer William Pitt is top of the list and Bush, in an effort to appear more ‘business friendly’, is expected to steer him away from audit independence probes.

Moreover, in the next couple of days, all five positions on the commission become vacant and Bush is likely to remould the watchdog to suit his policies.

Links

Andersen makes $7m payout to SEC

SEC releases finalised independence rules

KPMG disappointed by SEC’s new rules

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource