The Securities and Exchange Commission yesterday proposed changes to its auditor independence framework. These changes would codify consultations by SEC staff and modernize other aspects of the framework last revised in 2003, the commission said. The agency said that the proposed amendments are aimed at preserving auditor objectivity and impartiality without “trigger[ing]non-substantive rule breaches or potentially time consuming audit committee review of non-substantive matters.”
The proposal addresses the definitions of an affiliate of the audit client and the definition of the audit and professional engagement period. It would also add certain student loans and de minimis consumer loans to the categorical exclusions from independence-impairing lending relationships, replace a reference to “substantial stockholders” in the business relationship rule with the concept of “beneficial owners with significant influence” and replace the Rule 2-01(e) transition and grandfathering provision with one to address inadvertent independence violations resulting from M&A. Comments on the proposal are due 60 days after it is published in the Federal Register.