SEC begins review.

The US Securities and Exchange Commission will next month announce the results of a wide-ranging review of part of its audit independence rules in advance of an expected meeting with the English ICA to discuss the fair treatment of accountancy firms. The review will encompass certain rules that govern investments and employment relationships between auditors, their families and clients. It is seen as an olive branch following a spate of clashes that include the resignation of UK PricewaterhouseCoopers partner Geoff Westmore. SEC chief accountant Lynn Turner said: ‘The core principle of independence is immutable, but the rules which weave the fabric around independence must continually be scrutinised. Recently, some have said certain aspects of the independence rules are unfair and just unrealistic.’ Chairman Arthur Levitt has asked for the review to be completed by next month. However, any changes that are made would have been unlikely to have saved Westmore because his brother-in-law, as financial controller of Reuters, would still have been deemed too close to the audit. But other UK partners and staff may find that the outcome lifts some of the harsh restrictions governing their investments in US clients and may also lead to the redefinition of what employment relationships compromise the audit. Auditing Practices Board chairman and Arthur Andersen partner Ian Plaistowe said: ‘Anything like this is positive but what the SEC ought to be looking at is the approach taken in the UK where we identify threats to audit independence and in some circumstances there is outright prohibition. Auditors are faced with a list of principles that they can deal with.’ Many UK firms, not just the Big Five, have to comply with the tough SEC regulations because an increasing number of domestic companies are seeking a listing in the US. Last week, English ICA deputy president Graham Ward said he will seek a meeting with the SEC in order to improve communication.