United States Government Publishing Office publisher pbl distributor dst United States National Archives and Records Administration Office of the Federal Register author aut Government Organization text government publication eng FR Regulatory Information 2003_register executive 2011-05-11 article Part III Rules and Regulations D09002ee1c8185536 D09002ee1c8185694 United States Securities and Exchange Commission originator org United States Government Agency or Subagency The Securities and Exchange Commission ("SEC" or "Commission") is adopting amendments to its existing requirements regarding auditor independence to enhance the independence of accountants that audit and review financial statements and prepare attestation reports filed with the Commission. The final rules recognize the critical role played by audit committees in the financial reporting process and the unique position of audit committees in assuring auditor independence. Consistent with the direction of Section 208(a) of the Sarbanes-Oxley Act of 2002, we are adopting rules to: revise the Commission's regulations related to the non-audit services that, if provided to an audit client, would impair an accounting firm's independence; require that an issuer's audit committee pre-approve all audit and non-audit services provided to the issuer by the auditor of an issuer's financial statements; prohibit certain partners on the audit engagement team from providing audit services to the issuer for more than five or seven consecutive years, depending on the partner's involvement in the audit, except that certain small accounting firms may be exempted from this requirement; prohibit an accounting firm from auditing an issuer's financial statements if certain members of management of that issuer had been members of the accounting firm's audit engagement team within the one-year period preceding the commencement of audit procedures; require that the auditor of an issuer's financial statements report certain matters to the issuer's audit committee, including "critical" accounting policies used by the issuer; and require disclosures to investors of information related to audit and non-audit services provided by, and fees paid to, the auditor of the issuer's financial statements. In addition, under the final rules, an accountant would not be independent from an audit client if an audit partner received compensation based on selling engagements to that client for services other than audit, review and attest services. As described further in the release, these rules also will have an impact on foreign accounting firms that conduct audits of foreign subsidiaries and affiliates of U.S. issuers, as well as of foreign private issuers. Many of the modifications to the proposed rules, such as those limiting the scope of partner rotation and personnel subject to the "cooling off period," have the added benefit of addressing particular concerns raised about the international implications of these requirements. Moreover, additional time is being afforded to foreign accounting firms with respect to compliance with rotation requirements. The release also provides guidance on the provision of non-audit services by foreign accounting firms, including the treatment of legal services and tax services. 68 FR 6006 https://www.govinfo.gov/app/details/FR-2003-02-05/03-2364 03-2364 fr05fe03-30 RIN 3235-AI73 8010-01-P Release No. 33-8183 34-47265 35-27642 IC-25915 IA-2103, FR-68, File No. S7-49-02 https://www.govinfo.gov/app/details/FR-2003-02-05/03-2364 https://www.govinfo.gov/content/pkg/FR-2003-02-05/html/03-2364.htm https://www.govinfo.gov/content/pkg/FR-2003-02-05/pdf/03-2364.pdf Accountants Accounting Broker-Dealers Issuers Securities Reporting and Recordkeeping Requirements Investment Companies 46 p. 6006 6051 68 FR 6006 Title 17 Part 210 17 CFR Part 210 Title 17 Part 240 17 CFR Part 240 Title 17 Part 249 17 CFR Part 249 Title 17 Part 274 17 CFR Part 274 RIN 3235-AI73 Strengthening the Commission's Requirements Regarding Auditor Independence; Federal Register Vol. 68, Issue RULE 03-2364 III SECURITIES AND EXCHANGE COMMISSION 2003-05-06 Release No. 33-8183 34-47265 35-27642 IC-25915 IA-2103, FR-68, File No. S7-49-02 8010-01-P 03-2364 Final rule.

The Securities and Exchange Commission ("SEC" or "Commission") is adopting amendments to its existing requirements regarding auditor independence to enhance the independence of accountants that audit and review financial statements and prepare attestation reports filed with the Commission. The final rules recognize the critical role played by audit committees in the financial reporting process and the unique position of audit committees in assuring auditor independence. Consistent with the direction of Section 208(a) of the Sarbanes-Oxley Act of 2002, we are adopting rules to: revise the Commission's regulations related to the non-audit services that, if provided to an audit client, would impair an accounting firm's independence; require that an issuer's audit committee pre-approve all audit and non-audit services provided to the issuer by the auditor of an issuer's financial statements; prohibit certain partners on the audit engagement team from providing audit services to the issuer for more than five or seven consecutive years, depending on the partner's involvement in the audit, except that certain small accounting firms may be exempted from this requirement; prohibit an accounting firm from auditing an issuer's financial statements if certain members of management of that issuer had been members of the accounting firm's audit engagement team within the one-year period preceding the commencement of audit procedures; require that the auditor of an issuer's financial statements report certain matters to the issuer's audit committee, including "critical" accounting policies used by the issuer; and require disclosures to investors of information related to audit and non-audit services provided by, and fees paid to, the auditor of the issuer's financial statements. In addition, under the final rules, an accountant would not be independent from an audit client if an audit partner received compensation based on selling engagements to that client for services other than audit, review and attest services. As described further in the release, these rules also will have an impact on foreign accounting firms that conduct audits of foreign subsidiaries and affiliates of U.S. issuers, as well as of foreign private issuers. Many of the modifications to the proposed rules, such as those limiting the scope of partner rotation and personnel subject to the "cooling off period," have the added benefit of addressing particular concerns raised about the international implications of these requirements. Moreover, additional time is being afforded to foreign accounting firms with respect to compliance with rotation requirements. The release also provides guidance on the provision of non-audit services by foreign accounting firms, including the treatment of legal services and tax services.

Effective Date: May 6, 2003. Transition Dates: Provided the following relationships did not impair the accountant's independence under pre-existing requirements of the Commission, the Independence Standards Board, or the accounting profession in the United States, an accountant's independence will not be deemed to be impaired: Samuel L. Burke, Associate Chief Accountant, Paul Munter, Academic Fellow, or Robert E. Burns, Chief Counsel, at (202) 942-4400, Office of the Chief Accountant, or, with respect to questions about investment companies, Brian D. Bullard, Chief Accountant, at (202) 942-0590, Division of Investment Management, U.S. Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. Accountants Accounting Broker-Dealers Issuers Securities Reporting and Recordkeeping Requirements Investment Companies Securities: Auditor independence; Commission requirements, http://www.aicpa.org/members/div/secps/require.htm www.aicpa.org/members/div/secps/require.htm www.sec.gov Vol. 68, no. 24 Office of the Federal Register, National Archives and Records Administration 2003-02-05 continuing daily deposited born digital 282 p. Table of Contents: AE 2.7: GS 4.107: AE 2.106: KF70.A2 https://www.govinfo.gov/app/details/FR-2003-02-05 P0b002ee180cfed2e 0097-6326 0042-1219 0364-1406 769-004-00000-9 000582072 f:fr05fe03 https://www.govinfo.gov/app/details/FR-2003-02-05 https://www.govinfo.gov/content/pkg/FR-2003-02-05/pdf/FR-2003-02-05.pdf https://www.govinfo.gov/content/pkg/FR-2003-02-05/xml/FR-2003-02-05.xml fdlp 5785 6059 DGPO 2011-05-11 2024-06-07 FR-2003-02-05 machine generated eng FR FR-2003-02-05 68 24