[Federal Register Volume 66, Number 183 (Thursday, September 20, 2001)]
[Rules and Regulations]
[Pages 48335-48336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-23434]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 211

[Release Nos. 33-8004; 34-44792; IC-25157; FR-57]
RIN 3235-A131


Bookkeeping Services Provided by Auditors To Audit Clients in 
Emergency or Other Unusual Situations

AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Interpretation.

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SUMMARY: This release expresses the view of the Commission that 
auditors of the financial statements of Commission registrants may 
provide certain bookkeeping services to those audit clients directly 
affected by the events of September 11, 2001.

EFFECTIVE DATE: September 14, 2001.

FOR FURTHER INFORMATION CONTACT: John M. Morrissey, Deputy Chief 
Accountant or Samuel L. Burke, Associate Chief Accountant, Office of 
the Chief Accountant, at (202) 942-4400, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-1103.

SUPPLEMENTARY INFORMATION:

I. Introduction and Summary

    Accounting firms and registrants have asked the Commission whether 
accounting firms may assist audit clients that had offices in and 
around the World Trade Center by participating in the recovery process 
to facilitate a timely, effective and efficient revitalization of their 
audit clients' records and systems that were destroyed in the events of 
September 11, 2001, without impairing the auditor's independence from 
those clients. The Commission believes that accounting firms may 
perform such services without impairing their independence.

II. Discussion

    In November 2000, the Commission substantially revised Rule 2-01 of 
Regulation S-X,\1\ which addresses auditors' independence from their 
audit clients filing financial statements with the Commission.\2\ As 
amended, Rule 2-01(c)(4)(i)(A) states that, among other things, 
maintaining or preparing an audit client's accounting records or 
preparing or originating source data underlying an audit client's 
financial

[[Page 48336]]

statements will impair an auditor's independence from that client. Rule 
2-01(c)(4)(i)(B)(1), however, permits such bookkeeping services ``in 
emergency or other unusual situations, provided the accountant does not 
undertake any managerial actions or make any managerial decisions.''
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    \1\ 17 CFR 210.2-01.
    \2\ [Release No. 33-7919; 34-43602, 35-27279; IC-24744; IA-1911; 
FR-56 (November 20, 2000).]
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    The Commission believes that the events of September 11, 2001, 
clearly meet the definition of an unusual situation and an emergency 
situation for those companies that have been directly affected by the 
destruction of the World Trade Center and damage to surrounding 
buildings.
    Accordingly, this event qualifies as an ``emergency or other 
unusual situation'' under Rule 2-01(c)(4)(i)(B)(1) of the bookkeeping 
rule and, provided that the accounting firm does not undertake 
managerial actions or decisions, an accounting firm's independence will 
not be deemed to be impaired where a firm is providing bookkeeping 
services to those entities directly affected by the destruction of the 
World Trade Center and damage to surrounding buildings. The Commission 
understands that in this unique situation an auditor may be best 
suited, because of its knowledge of its client's financial systems, to 
participate in the recovery process and facilitate a timely, effective 
and efficient revitalization of its clients' records and systems. 
Services under this exception may continue until the client's host or 
destroyed records are reconstructed and its financial systems are fully 
operational, and the client can effect an orderly and efficient 
transition to management or other service providers.

List of Subjects in 17 CFR Part 211

    Securities.

Amendments to the Code of Federal Regulations

    For the reasons set forth in the release, we are amending title 17, 
chapter II of the Code of Federal Regulations as follows:

PART 211--INTERPRETATIONS RELATING TO FINANCIAL REPORTING MATTERS

    1. Part 211, subpart A, is amended by adding Release No. FR-57 and 
the release date of September 14, 2001 to the list of interpretive 
releases.

    Dated: September 14, 2001.

    By the Commission.
Jonathan G. Katz,
Secretary.
[FR Doc. 01-23434 Filed 9-19-01; 8:45 am]
BILLING CODE 8010-01-M