Firstly, the SEC always has and now seeks to increase its tendency towards a rules based; rather than a principles based, approach to regulation. Rules that will inevitably be out of date before the ink is dry.
In the UK and indeed globally the preferred method of regulation is to set down guiding principles and then rely upon the good sense of those regulated to follow them. The SEC approach ignores the trend for global harmonisation.
The SEC is incapable of understanding the mindset of the auditor. The independently minded auditor knows he would be letting down himself if he allowed his audit to be compromised; it is not a question of gaining more fees for his firm or seeking to please a client. With its suggestions that an auditor cannot operate unless hidebound by rules, the SEC is close to implying that auditors lack common sense never mind honesty.
Worse, the SEC has not even remotely considered the consequences of its proposals on the smaller enterprises that are the lifeblood of any economy.
In a recent report by London Economics that shows 52% of UK SMEs consider their accountant to be their main business adviser, no less than 91% of the SMEs want the option to use their audit firm for services other than just audit.
In complete contrast to the SEC’s perception, 76% disagree that auditor independence is so compromised.
And yet if large accountancy firms were prohibited from supplying non audit services to multi-national audit clients, they could not economically provide them to smaller companies.
On so many counts the SEC has got it wrong, it must not be allowed to compound its error by working on a timeframe that suits no one but itself.