Terry Strange, Global Managing Partner of Audit for KPMG, took the podium yesterday at the SEC auditor independence hearings, and offered his reservations about the hurried nature of the proposed auditor restrictions as well as the inappropriateness of the barriers to auditing firms providing non-audit services.
Noting his complete support of the SEC's desire to modernize independence rules, Strange expressed two troubling aspects of the proposals:
- The bundling of the much needed revisions of existing rules on investments and family relationships with the restriction on scope of services.
- The rushed process that the Commission has adopted.
Strange argued that the non-audit services that accounting firms provide, "enhance auditor knowledge and improve the quality of audits." He also noted that because certain firms [KPMG included] are currently in various stages of restructuring, it makes sense for the SEC to allow time to evaluate "the results of the market restructurings and the ability of the firms to effectively fulfill their role in the capital markets before forcing regulatory restrictions that could have unintended consequences."
Strange, along with others who spoke at the hearings, warned of the unintended consequences of a blanket restriction on non-audit services that can be provided by auditing firms., such as increased costs for investors and companies who must purchase non-audit services, as well as the potential inability to effectively perform audit services in the 21st century.
In conclusion, Strange recommends that the Commission separate the issues of modernization of existing rules regarding investments and family relationships of firm members from the proposed rules regarding restrictions on scope of services, and he recommends that the deadline be extended for analysis of these proposals.