SEC left isolated over audit independence code.

The US Securities and Exchange Commission was left facing isolation this week after an international summit of accountancy bodies moved to develop a global code on auditor independence endorsed by world stock market regulators. If, as expected, the International Federation of Accountants’ plan is endorsed by Iosco, the global club of stock market regulators, the SEC could find itself severely out of step with its controversial rule-based approach. The SEC was set to announce significant concessions to the large accountancy firms in its long awaited verdict on audit independence rules as Accountancy Age went to press. It was expected to back compromise proposals from Ernst & Young and PricewaterhouseCoopers that would stop far short of forcing firms to sell off their consulting arms, a move that had looked possible several months ago. IFAC is working on a ‘framework’ approach based on principles rather than the hard-and-fast rules expected to be unveiled by the SEC yesterday. European and international standard-setters hope that if a framework wins sufficient support outside the US, the SEC will change its thinking. Martyn Jones, technical partner at Deloitte & Touche, said: ‘The SEC seems to be out on a limb. There is much more merit in working in principles than in detailed rules which people find a way of getting around.’ IFAC, the international accountancy organisation, has been working closely with Iosco – of which the US Securities and Exchange Commission is a full-time member – to develop its code of professional conduct. On his return from an IFAC board meeting in Manila last week English ICA president and IFAC board member Graham Ward, said: ‘There is complete support for the framework approach. We hope to get that endorsed in the early part of next year.’ An Iosco endorsement would mean IFAC’s members from 113 countries, and Iosco’s full-time members, from 98 countries, fully support the initiative. The three US accountancy bodies aligned to IFAC will be obliged to lobby government to change the rules. The European Union committee on auditing will meet later this month in Berlin to discuss auditor independence. Levitt interview, page 14; Leader, page 18 STANDARDS FOCUS Quoted European companies need to have a concrete strategy on global accounting standards in place by the end of 2002 – or risk meeting the wrath of regulators. Peter Holgate, technical partner at Pricewaterhouse-Coopers, said this week that companies needed to prepare well ahead of 2005 – the deadline for European listed companies to adopt the single set of standards – because financial reports always include comparative figures from consecutive years. Analysts and investors will face huge problems if previous years’ financial reporting is done using both national and international accounting standards, he warned. Full story Standards on the web, page 12 Is Europe ready? page 20 Who sets the standards? page 21 Emerging economies, page 28 IT adds to the pressure, page 29.

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