The SEC requested comments on a proposal to change the interpretation of "auditor independence" for lending relationships between the auditor and certain shareholders of an audit client.
According to the SEC, the proposed rule amendments would better identify debtor-creditor relationships that could harm "an auditor's objectivity and impartiality." The amended rule would not apply to certain extended relationships that the SEC deemed unlikely to threaten "objectivity or impartiality." The amendments would:
- focus on beneficial ownership;
- replace the 10-percent bright-line shareholder ownership test with a "significant influence" test;
- implement a "known through reasonable inquiry" standard to determine beneficial owners; and
- exclude funds from "affiliates of the audit client" from the definition of "audit client."
The SEC is seeking comments regarding the proposal. Comments must be submitted to the SEC by July 8, 2018.
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