The SEC voted unanimously to approve new guidelines for auditors. Four of the Big Five firms acquiesced in accepting the rules, KPMG being the hold out firm that still feels the rules are unnecessary. The AICPA has indicated it has no problem with the final rules.

Under the new independence guidelines, firms conducting audits of publicly held companies may still perform some consulting functions for these companies, but there are limitations on the services that can be provided.

The new rules, which will become effective sometime after the first of the year, include the following restrictions:

• Auditing firms may provide consulting services to help client companies acquire and setup financial information systems, as long as the client companies are responsible for making all decisions relating to the systems and maintain control of the project.
• Auditing firms will disclose in their financial statements the fees charged for audit services and information systems consulting as well as fees for all other services provided to the client during the year.
• Auditing firms cannot maintain or prepare financial statements for the clients they are auditing, however the firms may provide bookkeeping services for foreign divisions or subsidiaries of the client.
• Auditing firms may provide up to 40% of a client's internal audit work.

Statement filed by firms violating these rules may be rejected by the SEC, and firms violating the rules may be subject to investigation by the SEC.

The move was welcomed by the major firms; PwC CEO James J Schiro said: "The new rule that the SEC has approved will provide greater certainty, enhanced investor protection, needed transparency and the flexibility necessary to adapt our business to the evolving economy and capital markets. We are also pleased that the Commission has acted to modernise the antiquated personal investment rules currently in force."

SEC chairman Arthur Levitt praised the work of Schiro and Ernst & Young chief Phil Laskawy for "their leadership throughout this process". He went on: "I firmly believe that today's result strikes a balance that serves the interests of America's investors while remaining flexible and adaptable for the unforeseen changes in tomorrow's marketplace."

Andersen Worldwide CEO Lou Salvatore released the following statement: "Arthur Andersen, the accounting profession and the SEC have had a common goal in this process, and that is to protect investors and to ensure high quality auditing and the reliability of financial statements. We believe that the SEC's final rule, which represents a significant improvement over the original proposal, meets these objectives. While we have not yet seen the precise language of the entire rule, we believe that the principal concerns we raised throughout the comment period have been addressed."

He added that the revised rules would enable the auditor to provide the range of services needed to understand a client's interests, and attract the talented employees necessary for a professional audit through such a range of work.