SEC Concerned with Changes in the Public Accounting Profession The SEC and the former Chief Arthur Levitt Jr. had been extremely worried that the public accounting businesses were violating the auditors independence rules addressed throughout the Securities Exchange Acts. Auditing firms today had dual citizenship in public places companies: (1) they given opinions in audited financial statements and (2) that they participated in several consulting events for those same companies. Levitt's solution was going to split auditing and talking to. The former Chairman was concerned that the public would reduce confidence inside the financial market segments В…В… plus the whole program would be jeopardized.
General public Accounting Income vs . Asking Revenues simply by 1999
By 1976, examine fees made up approximately 70 percent of total revenue gained by any kind of accounting organization in general. According to the Public Accounting Report, an Atlanta e-newsletter, the auditing and guarantee services revenues dropped to 30% and tax companies business accounted for 19% in the total income earned in 1999. Mathematically speaking, this means administration consulting solutions accounted for about 51% of the total revenue being earned in 1999 simply by public accounting firms.
Fact: Based on the Business Journal's Book of Lists, PwC had $75 million in South Sarasota billings in 1998 to place third among accounting firms.
SEC Auditors' Independence Regulation
The freedom rules require that auditors refrain from buying companies that they can audit, to make sure objective, honest reporting and opinion. The rule relates to all auditors, their relatives, spouses, dependents, nondependents, and, in some cases, acquaintances must divulge all coalition.
On the September 25, 2002 issue of BusinessWeekOnline. com, the Accounting Wars Powerful auditor-consultants are the target of Arthur Levitt's mission articles described " Independence to imply, CPAs cannot audit their particular or their particular partners' workВ…. В….. very clear and honest information is dependent on the Certified public accountants independenceВ…В…an auditor must not possess any financial stake inside the health, or perhaps survival, of the client organization. "
There are those in the profession that believe this kind of rule is usually archaic and does not hold virtually any value in the current financial community. Barry Melancon, President and CEO in the American Commence of Certified Public Accountancy firm stated, " The SEC has a right to expect the profession to stick to the rules; nevertheless , the job has a right to expect the regulatory environment to remain contemporary. "
Fact: In 1933, the moment Congress first required general public financial information, lawmakers contested whether audit fees might taint auditors' independence.
PriceWaterhouseCoopers LLP is a community accounting firm formed by using a merger among Coopers & Lybrand LLP and Price Waterhouse LLP, which was consummated on or perhaps about This summer 1, 1998.
Simple fact: The combination resulted in producing PwC the biggest accounting firm in the world.
The SECURITIES AND EXCHANGE COMMISSION'S Targets the C& D Tampa Office for possible violations During 1997, the SEC received an private letter via a whistle blower with the Southeast Regional Office in Miami. The letter alleged that taxation staff in the Tampa business office of C& L held stock in the companies these people were auditing, which in turn clearly violated the SEC's independence secret. In 1998, the SEC ordered an investigation in to the allegations of auditor clashes of interest at Coopers & Lybrand's Polk office, right now known as PwC.
Reality: Upon blending, both accounting firms (partners and staff) were needed by the self-reliance rule to divest all shares owned or operated in businesses audited by simply each other. The independent analyze revealed that this kind of never came about and in simple fact PwC had committed an independence breach at that area.
SECURITIES AND EXCHANGE COMMISSION'S Charges PwC with Auditors' Independence Guidelines
The " auditor independence" issue came to the cutting edge on January 14, 99. The SECURITIES AND EXCHANGE COMMISSION'S issued an Opinion and Order Pursuant to Rule 102(e) of the Commission's...
Bibliography: 1 . Tampa Gulf Business Record вЂ“ March 15, 99: SEC problems auditors fresh independence recommendations by Carol Cronan: http://tampabay.bizjournals.com/tampabay/stories/1999/02/15/newscolumn2.html
2 . CFO Magazine вЂ“ March Concern 2000 вЂ“ CFO. com: Policing the Auditors You will find rumbles on the market that more than one Big Five accounting firm will be found in infringement of self-reliance regulations by Leslie Schultz: http://www.cfo.com/article.cfm/2988508/c_3046533?f=insidecfo
three or more. Accounting Education. com: 3rd party Consultants Locates Widespread Self-reliance Violations for PriceWaterhouseCoopers вЂ“ January twelve, 2000 by simply Andrew Priest: http://www.accountingeducation.com/news/news779.html
four. South Fl The Business Record вЂ“ The spring 7, 2k: SEC keeping close eyesight on accountants ' independence by Jim Freer: http://www.bizjournals.com/southflorida/stories/2000/04/10/focus3.html?t=printable
5. The CPA Diary: The SECURITIES AND EXCHANGE COMMISSION'S 's New Auditors Independence Standard by simply Dan M. Goldwasser Esq. http://nysscpa.org/cpajournal/2001/0400/features/f041801.htm
6th. Business Week Online. com вЂ“ Sept. 2010 30, 2002 вЂ“ Arthur Levitt is actually Crusade http:businessweek.com/print/magazine/content/02_39/b3801097.htm/
7. The Auditor 's Report Quantity 23, Number 2, Winter months 2002 вЂ“ An Update in Auditor Independence by Douglas F. Prawitt, Brigham Young University http://www.accounting.rutgers.edu/raw/aaa/audit/Pubs/Audrep/00winter/item04.htm
8. Business Week Online. com вЂ“ September 25, 2002 вЂ“ Accounting Wars Powerful auditor-consultants are the target of Arthur Levitt 's crusade http://businessweek.com/2000/00_39/b3700001.htm?scriptFramed
9. TheStreet. com: Survey on PriceWaterhouseCoopers Violations Has its own Critics by Robert Kowaiski and Tracy Byrnes Personnel Reporters http://thestreet.com/pf/funds/taxes/856161.html
10. The Motley Deceive вЂ“ Trick. com: Who 's Auditing the Auditors? by Yi-Hsin Chang http://www.fool.com/news/2000/foth000110.htm