Proposals to restrict the non-audit services an auditor can perform for a client could be against the public interest, the American Institute of Certified Public Accountants (AICPA) has warned.
AICPA president Barry Melancon told the told the Panel on Audit Effectiveness, which is reviewing Securities and Exchange Commission plans to limit an auditor's relationship with the client, that - with the right safeguards - a firm can offer a variety of services and still carry out a reliable audit.
Melancon's comments reiterate the profession's opposition to SEC chairman Arthur Levitt's plans to tighten audit indepence regulations following the discovery of over 8,000 violations of the existing rules at PricewaterhouseCoopers.
Speaking on behalf of the AICPA, Melancon said: "We were pleased to see that the Panel did not detect any instances of non-audit services having had a negative effect on audit effectiveness. We understand that a majority of the Panel members hold the view that an exclusionary rule is not warranted and would not best serve the public interest, and that audit firms should be allowed to provide these services, if the audit firm has appropriate safeguards in place to assure independence from the attest function. We agree with this view held by the majority of the Panel members.
He continued: "We believe that, with the appropriate safeguards in place, the provision of many non-audit services may enhance the audit by broadening the firm's understanding of a company's business, operating environment, and other factors that lead to a more effective audit. This more effective audit clearly is in the public interest."
The AICPA could find itself in a sticky situation if the new rules are approved by the SEC, which is to debate the matter at the end of the month. Levitt has threatened the profession with "legislative action" if the scheme does not work.