SEC Changes How Loans to Auditors Can Violate Independence Rules

June 18, 2019, 8:46 PM

The SEC has changed its criteria for determining if an auditor’s independence is compromised when it borrows from a shareholder that has a stake in a client.

Auditors will no longer be automatically considered under undue influence of a client when the firm borrows from a company or investor that holds more than 10% of the client’s securities.

“Simply because a lender to an auditor holds 10 percent or less of an audit client’s equity securities does not, in itself, establish that the auditor is independent,” the Securities and Exchange Commission said in a final rule issued June 18.

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