CRE Regulatory Action of the Week
On July 12, 2000, the Securities and Exchange Commission issued a proposed rule that would impose sweeping changes on the accounting industry. The SEC's Revision of the Auditor Independence Requirements, 65 Fed. Reg. 43148 (July 12, 2000), would generally prohibit accounting companies from simultaneously performing both audit and non-audit services for the same SEC registrant company.
The CRE seriously questions both the value of this rule and the SEC's compliance
with applicable procedural requirements. Using a matrix of 48 legal requirements
that govern agency rulemaking proceedings, CRE has prepared a detailed "Report
Card" examining the SEC's compliance with what we refer to as "good
government" laws. These laws include the Paperwork Reduction Act, the Regulatory
Flexibility Act, the Technology Transfer and Advancement Act, and other
statutes, in addition to Executive Orders on regulatory planning and review,
federalism and civil justice reform.
As the CRE Report Card details, there are a number of significant violations and inadequacies in the SEC's proposed Auditor Independence Rule. Principal among these deficiencies are:
The SEC's failure to demonstrate a compelling public need for the rule;
The failure to consider less costly alternatives (e.g., a limited disclosure requirement) to command-and-control regulation;
Inaccurate estimates of the burdens the rule will impose on the regulated community;
Failure to consider adoption of available voluntary consensus standards in lieu of a government-unique standard;
Lack of clarity regarding the scope of the rule's application; and
Inadequate opportunity for interested parties to comment on the rule, including the recordkeeping requirements and other burdens the rule will impose.
The CRE has submitted its Report Card to the Office of Management and Budget, as well as to the SEC. The cover letter enclosing the Report Card highlights some of the key substantive and procedural defects with the rule and offers a series of recommendations that we believe are necessary before the SEC rule may legally be adopted.
CRE ISSUES REPORT CARD ON SEC AUDITOR INDEPENDENCE RULE
- Read cover letter
- Read report (pdf- HTML version available
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Regulatory Action of the Week items