Graham Ward, the President of the Institute of Chartered Accountants in England and Wales, is scheduled to appear before the Securities and Exchange Commission's hearings on auditor independence in New York at 4.30pm today. He will urge the SEC to drop its prescriptive, rules-based approach to regulation in favour of the framework approach used in the UK.
Ward is one of the few non-US speakers invited to present evidence before the hearings and he will use the opportunity to argue that the SEC should align its auditor independence crusade with international initiatives already underway.
The framework versus rules debate has long raged in accounting standards circles, where US regulators have tended to snipe that because they are simpler to understand and apply, international standards are not as rigorous as the lengthy and detailed US rulebooks.
But Ward's contention that the framework approach is in practice more rigorous than the prescriptive approach has gained support internationally. While the SEC is conducting its 75-day consultation on proposals to prevent auditors from offering clients other business services, the International Federation of Accountants is developing a framework for regulating and monitoring auditor performance.
Ward's testimony focuses on a broad picture of accountancy as an international issue. "Seeking to enforce internationally a rule-based approach designed for the US economy and US domestic law would do little to achieve the objective of high quality and objective auditing throughout the world. Far better to make the globally developed framework approach, based on principles, rather than on detailed rules with inevitable loopholes, the foundation of independence regulations."
"The framework approach is more likely to foster global economic growth, since it is less influenced by local circumstances and better able to respond rapidly and flexibly to today's fast moving business environment."
A partner with PricewaterhouseCoopers' global energy practice, Ward echoed the concerns of other Big Five partners and US accountancy representatives who have argued against the SEC's proposals.
Meanwhile, KPMG chief executive Stephen Butler pulled out of today's SEC hearings because of the lack of time allowed at the stand, according to the Financial Times.
Butler was allotted just 15 minutes to give his opinion on the controversial proposals, and would have had to share the stand with five others. The KPMG chief asked to be heard in the morning, so he could leave for a partner meeting in Germany, but the agenda scheduled Butler to appear at 2:45pm.
Butler withdrew from the hearing and wrote SEC chairman Arthur Levitt claiming that the Commission "is not seriously interested in hearing my views".
In May, Butler launched a no-holds-barred attack on the SEC rules governing auditor independence, calling the present independence framework "archaic, irrelevant and discriminatory".
Deadline for public comment after today's hearing is September 25th, with a final hearing scheduled for next week.