SEC Proposes Amendments to Auditor Independence Rules

By Randi Morrison posted 05-04-2018 02:05 PM

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On Wednesday, the SEC released proposed amendments to its auditor independence rules that would modify the analysis to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client during an audit or professional engagement period.

The proposed amendments would - among other things:

- Focus the analysis solely on beneficial ownership, rather than on both record and beneficial ownership,
- Replace the existing 10% bright-line shareholder ownership test with a “significant influence” test,
- Add a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities, and
- Amend the definition of “audit client” for a fund under audit to exclude funds that otherwise would be considered affiliates of the audit client.

Comments are due within 60 days after publication in the Federal Register.

Access law firm memos and additional resources on this proposal on our Audit Firms page here.

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