Yesterday, in a speech delivered to the New York University School of Law, Securities and Exchange Commission (SEC) Chairman, Arthur Levitt, asked major accounting firms to join him and the SEC in developing a plan to assess the firms’ past compliance with financial investment rules. He also wants to explore ways the process can be improved.
The speech put the events of the PwC auditor independence issues of January, 1999 into context and labeled them minor and inadvertent; however, he believes that there is still much to be done to preserve the public’s trust in this area. Currently, as much as 70 percent of larger accounting firms’ revenue comes in the form of consulting fees as opposed to 30 percent for audits.
The Chairman pledged to use the information obtained from the large firms to improve compliance systems in the future and not to punish them for minor, past mistakes. PwC Global’s CEO, James J. Schiro, has already released a statement that has dedicated PwC to this process.
Levitt indicated that a careful balance of “bright lines” rules that clearly demarcate certain services inconsistent with an independent audit, and greater disclosure of other services rendered to audit clients seems warranted and prudent.