SEC Commissioner Lists Top Two for 1998
This year, Securities and Exchange Commissioner Isaac C. Hunt, Jr., has two accounting and auditing priorities: monitoring the development of high-quality, cross-border accounting standards and promoting auditor independence.
Hunt told attendees at the American Institute of CPAs Conference on Current SEC Developments in Washington, D.C., that he supports the initiative of the International Accounting Standards Committee (IASC) to develop a core set of accounting standards for cross-border securities listings. The IASC had reached an agreement with the International Organization of Securities Commissions (IOSCO) in 1995 to complete a core set of standards the IOSCO could endorse for cross-border offerings and listings. The IASC intends to have final rules on financial instruments completed in November.
The commissioner emphasized that the SECs acceptance of IASC standards was not a foregone conclusion. He said any set of accounting standards issued for global acceptance must provide full disclosure. They must be transparent, said Hunt.
He said the SEC remains, nonetheless, enthusiastic about the IASCs standards project and that any delay in producing a final set of standards would not be consequential. According to Hunt, the content of the standards is of far more significance than the issue date.
Independence: perception and reality
Auditor independence was the most popular issue among senior SEC staff speaking at the AICPA conference. At issue is whether the professions initiatives to provide clients with new services adversely affects its ability to be independent when auditing financial statements.
Hunt said auditors must avoid all suggestions of mutuality of interest with the management of public companies for which an auditor provides services. At other conference sessions, William R. McLucas and Walter P. Schuetze of the SEC Division of Enforcement reiterated the commissioners remarks and added that the Enforcement Division would confront the accounting profession about independence issues more frequently in 1998.
Challenging the profession about this is not an attempt to limit the growth or development of an accounting firms scope of services, said Hunt. But if an auditor provides a particular service to an SEC audit client, we may find it impairs the auditors independence with respect to the audit of that clients financial statements.
Hunt said the SEC would work closely with the Independence Standards Board (ISB) on the issue.
New Loophole for ERISA Practitioners
Recent changes in investment adviser registration, which generally gave the states responsibility for smaller advisers and the SEC authority over larger ones, resulted in an unintended problem for smaller advisers who worked with plans under ERISA: On one hand, the new regulations required them to register with their states; on the other hand, ERISA still required SEC registration. Dual registration was not allowed. Caught in a Catch-22violating the new regulations or ERISAthe smaller practitioners faced a loss of their practice niche. (See Registration for ERISA Practitioners , JofA, Oct.97, for details.)
As generally expected, however, Congress quickly passed a law solving the problem: Now, these small ERISA practitioners will register with their states and are exempt from SEC registration. S 1227 received virtually no opposition and became PL 105-72 when President Clinton signed it on November 10. The complete text of the new law (approximately two pages) is available through the federal governments THOMAS Web site ( http://thomas.loc.gov/home/thomas.html ) or in the Congressional Record (Senate-September 26, 1997, page S10026).