SEC chair calls for new powers in crackdown

Speaking in New York, Levitt said the SEC should be able to make rules to clarify activities that may be ‘inconsistent for an independent auditor of financial statements to perform for audit clients’.

He also called for support for a plan by the US profession’s overseer – the Public Oversight Board – to enhance its powers and responsibilities. And Levitt urged the major accountancy firms to undertake a self-evaluation of past compliance with the SEC’s and the profession’s financial investment rules and their system of internal controls for monitoring those investments.

Levitt’s speech follows announcements of major reorganisations within the Big Five accountancy firms, including divestitures of firms’ consulting businesses through sales to third parties.

PwC announced a major review of the relationship between consulting and audit arms and following a perceived crackdown by the SEC on shares in audit clients held by staff and partners at the firm.

And KPMG has pressed the SEC for a decision on whether the firm can float its consulting arm, while Ernst & Young partners are set to back the firm’s decision to sell its consulting arm to Cap Gemini.

Levitt also challenged newly-empowered audit committees to pay close attention to the types of services their auditors are performing and to question whether it is in investors’ interests to have those services performed by someone else.

He also encouraged audit committees to inquire about their auditor’s past compliance with auditor independence rules and about the firm’s program for enhancing safeguards to ensure that conflicts do not arise in the future.

Chairman Levitt proposes rulemaking, other measures to maintain quality of financial reporting