British accountants yesterday warmly welcomed the US Securities & Exchange Commission's decision to allow auditors to provide lucrative tax services to their clients.
There was concern that the SEC would impose stringent new rules above those proposed in the controversial Sarbanes-Oxley Act, drawn up last summer in the wake of the Enron scandal.
However, the SEC yesterday voted 5-0 to adopt the rules mandated by Congress and ditch some of its own proposals. The rules will bar auditors from selling non-audit services such as IT and management consulting, internal auditing, brokerage work and legal advice.
But on the key issue of tax consulting, the SEC has decided not to ban the service.
“This is fantastic news,” said Peter Wyman, president of the Institute of Chartered Accountants in England & Wales. “They are only banning the things banned under Sarbanes-Oxley and are saying everything not banned must be overseen by the audit committee, which is what we have in the UK anyway.”
Sarbanes-Oxley has been widely criticised for heaping US legislation on UK firms because the requirements apply to the auditors of any company with a US listing.
Accountants had vigorously opposed plans to ban auditors from offering tax services because tax generates about a third of the firms' income. Audit similarly generates a third. Professionals were also worried that the quality of graduates would fall if only one service were on offer.
The new rules will force auditors to disclose more information about their work and quality control. They will also be required to rotate the lead audit partner every five years. Proposals to change the whole audit team had been under examination and could still be enforced.
A full draft of the rules will be issued next week.