The Public Company Accounting Oversight Board voted Thursday to adopt a set of
In June 2019, the SEC adopted amendments to its auditor independence requirements in Rule 2-01 of Regulation S-X, Qualifications of Accountants, in terms of the analysis that needs to be done to determine whether an auditor is independent when the firm has a lending relationship with some shareholders of an audit client. Last month, the SEC adopted further amendments to Rule 2-01 relaxing the requirements even more.
Among other things, the SEC’s revisions last month to Rule 2-01 add certain student loans and de minimis consumer loans to the categorical exclusions from independence-impairing lending relationships under Rule 2-01. In some circumstances, those loans aren’t currently allowed under the PCAOB’s interim independence standards. The PCAOB has therefore decided to amend its interim independence standards to avoid inconsistent auditor independence requirements on lending arrangements, in an effort to clarify an auditor’s independence obligations and facilitate compliance with Rule 2-01.
In addition, the SEC has adopted revisions to the definitions of several terms in Rule 2‑01, including “affiliate of the audit client,” “audit and professional engagement period,” and “investment company complex.” The PCAOB is thus also amending the definitions of these terms in Rule 3501 to align with the definitions in Rule 2-01 to avoid any confusion in case the terms used in both the PCAOB’s and the SEC’s independence rules are defined differently.
“The board’s targeted amendments are intended to avoid confusion, differences and duplication between PCAOB and SEC independence requirements,” said PCAOB chairman William Duhnke in a statement Thursday.
The amendments to the PCAOB’s independence standards will take effect after an SEC review. The final rule on auditor independence is
