SEC turns on firms again

Chairman Arthur Levitt has warned that the regulator is to examine how the firms should be structured to ensure independence.

Observers viewed the thinly veiled threat as an indication the SEC would force the Big Five to break up.

Speaking in New York last week, 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 the regulator to be given powers to make rules to clarify activities and called for support for a plan by the Public Oversight Board – the US profession’s overseer – to boost 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.

The speech follows a major review of the relationship between consulting and auditing arms of PricewaterhouseCoopers. KPMG has pressed the SEC for a decision on whether it can float its consulting arm, while Ernst & Young partners recently backed a decision to sell its consulting arm to Cap Gemini.

KPMG chairman Stephen Butler rejected the need for such restrictive rules when audits are almost always above board.

He said: ‘People in the profession resent that we get characterised as not being serious about independence. That’s absolutely false. We’re more interested [in maintaining independence] than the SEC and the rest of the world.’

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