The banking industry is getting into the reform act with new rules that reflect those the accounting sector has adopted—by October 1, auditors who have been disciplined by the Securities and Exchange Commission (SEC) or Public Company Accounting Oversight Board (PCAOB) can be prohibited from auditing banks.

According to a release from the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and Office of Thrift Supervision the agencies can "establish procedures under which the agencies can, for good cause, remove, suspend, or bar an accountant or firm from performing audit and attestation services for insured depository institutions with assets of $500 million or more. The rules permit immediate suspensions in limited circumstances."

The rules apply to independent public accountants and firms that provide audit and attestation services, required by section 36 of the Federal Deposit Insurance Act, "for insured depository institutions with assets of $500 million or more."

The proposed rules were published in the Federal Register in January and provide instances whereby an accountant can be removed, suspended or barred from providing section 36 audits for banks. According to the release issued by the federal bank and thrift regulatory agencies, these instances include violating laws, negligent conduct, reckless violations of professional standards or lack of qualifications to perform auditing services.

The rules supercede each agency’s own rules of practice, but are substantively identical, the release stated.