E&Y criticises US regulator proposals
In a change of heart, Ernst & Young chairman Phil Laskawy rounded on the US regulator over its proposals to tighten rules on auditor independence.
Laskawy told the American Accounting Association in Philadelphia this week of his worries over the SEC’s proposed rule changes forcing firms to separate their consulting and auditing businesses, the Financial Times reported this week.
Laskawy’ marks came as a surprise to the profession as he had previously supported the SEC’s initiatives on auditor independence rule changes.
E&Y sold its consulting arm earlier this year to Cap Gemini, the French consulting firm, leading to criticism from its Big Five rivals which claimed he was ‘cosying up’ to the SEC in order to gain competitive advantage.
Following the disclosure of over 8,000 reported violations at the largest firm, PricewaterhouseCoopers, SEC chairman Arthur Levitt has been pursuing a battle to combat conflicts of interest arising from accountancy firms offering their audit clients other services.
Laskawy, however, said E&Y backed rules that provided greater clarity on auditor independence, but criticised the newest proposals as going too far.
The SEC proposals would, among other things, significantly reduce investments in audit clients by audit firm employees and their family members and identify non-audit services that, if provided to an audit client, would impair an auditor’s independence.
Big Five firms say it would be impossible to compete in the marketplace if they were forced to hive off all consulting services.
Laskawy has been named to the Independence Standards Board created by the SEC and the American Institute of Certified Public Accountants to review and update auditor independence rules.
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