It was a busy week for the Securities and Exchange Commission. In a two-day whirlwind of activity, the agency voted to implement the spirit of accounting and corporate governance reform measures – but stopped short of some of the harshest recommendations.
The biggest win for auditors was the SEC’s decision not to prohibit accountants from offering tax shelter and other tax advice to their audit clients. Audit committees were advised to scrutinize any such dealings and KO any that don’t pass the smell test, but the vote allowed the Big Four to breathe a large sigh that nearly one-third of their revenue streams wouldn’t be wiped out.
The rule on auditor rotation was also softened somewhat. The top two partners are now required to rotate off an audit after five years, but the commission backed away from an original plan to require all partners on the auditing team to rotate off the engagement.
Small public accounting firms also got a gift from SEC commissioners, who decided that small firms that audit public companies wouldn’t be subject to the auditor rotation rule the agency codified for larger firms.
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