SEC Making Some Seriously Ominous Noises About Auditor Independence

If the Big Four accounting firms—Deloitte, Ernst & Young, KPMG and PwC—thought having to beat a hasty retreat from Russia was going to be the worst thing to happen to them this month, we have bad news: They’ve caught the attention of Securities and Exchange Commission chief Gary Gensler, who may have charged his enforcement chief with finding enough incriminating shit on them to justify following the U.K.’s and European Union’s lead in insisting on a modicum of independence of audit from consulting, et. al., with a bit more than the current U.S. standard of simply asking for it.

About 47 companies in the S&P 500 index paid significant nonaudit fees to firms hired to test their accounting practices…. In the current investigation, the SEC has asked audit firms to disclose instances to regulators in which the firms provided services such as consulting, tax advice, and lobbying to audit clients, according to the people familiar with the matter. The SEC also asked for information on any cases in which audit firms obtained contracts that reimburse them for losses caused by lawsuits over their work, or made fees contingent on a particular result or outcome, they say.

Big Four Accounting Firms Come Under Regulator’s Scrutiny [WSJ]

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