Amended Rule is Designed to Assure the Public of Audit Firms Independence
The staff of the Federal Trade Commission will not object to a change in the professional code of conduct being proposed by a trade group representing accountants nationwide which is designed to assure the public that audits by associated firms are conducted objectively.
In a letter sent to the American Institute of Certified Public Accountants, known as AICPA, the staff said it will not recommend taking action to block a proposed expansion of the group’s “independence rule.” The staff letter stated that the expanded independence rule appears likely to enable small and medium-sized accounting firms to increase their effective size and scope to compete for additional accounting work, while ensuring the public that their audit work is untainted by auditor self-interest.
The independence rule, which is in place to ensure that CPAs act “with objectivity and professional skepticism,” is part of the Institute’s Code of Professional Conduct. The Institute proposes to amend the rule to apply not only to individual firms, but to networks of firms, as defined by the Institute. Under the amended rule, a firm in a network would be precluded from providing audit services to a prospective client if other firms in that network were providing, or had provided, during the period covered by the audit, specified non-audit services to the prospective client that might be seen as potentially compromising the independence of the audit.
Copies of the staff’s letter to the Institute in response to its request for an advisory opinion can be found on the FTC’s Web site and as a link to this press release.
NOTE: The letter sets out the views of the staff of the FTC’s Bureau of Competition, as authorized by the Commission’s Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission’s Rules explain, the staff’s advice is rendered “without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding.”
The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to firstname.lastname@example.org, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.
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