SEC Sets Higher Bar to Trigger Auditor Independence Violations

The SEC wants to ease its auditor independence rules to focus better on relationships and lending activities that could sway an auditor’s judgment and weaken financial reporting.

Targeted rule changes the commission proposed Dec. 30 would relax some restrictions and reduce the time-consuming work of tracking conflicts of interest among audit team members, clients’ affiliates, and the myriad of related funds in investment complexes.

The changes to the SEC’s 2003 rules could also increase the number of qualified audit firms available for hire, Chairman Jay Clayton said.

A key protection for investors, the SEC’s rules—which were strengthened after the collapse ...