Association of Chartered Certified Accountants
Jonathan G. Katz
Our ref: jr301cd.321
13 January 2003
Dear Mr Katz
Proposed Rule, Strengthening the Commission's Requirements Regarding Auditor Independence, File No. S7-49-02
The Association of Chartered Certified Accountants (ACCA) welcomes the opportunity to comment on the proposed strengthening of the Commission's Auditor Independence Requirements (the proposed rule).
ACCA is the largest global professional accountancy body, with nearly 300,000 members and students in 160 countries. Its headquarters is in London and it has an extensive network of 70 staffed offices and other centres around the world.
As a significant participant in the European accountancy profession, ACCA has actively contributed to responses to this and other proposed rules made by the European Federation of Accountants1 (FEE) and to the positions taken by the European Commission (EC). We give general support to the responses of the EC (8 January) and FEE (of today's date) to this proposed rule. ACCA specifically endorses the letter of 20 December 2002 from the President of FEE, in which he writes on behalf of FEE's 41 member bodies in 29 countries.
ACCA is a global professional accountancy body and we urge the Commission to consider the proposed rule and its extra-territorial effects in a global context. SEC registrants and their auditors increasingly operate in a global marketplace. While retaining confidence in capital markets is highly important, a national response, such as the Sarbanes-Oxley Act of 2002 (the Act), is difficult to reconcile to the requirements of different legal systems.
When, in 2000, ACCA responded to the consultation over the proposed revision of the Commission's auditor independence requirements (File No. S7-13-00), we drew attention to the development of the independence provisions of the Code of Ethics for Professional Accountants of the International Federation of Accountants (the IFAC Code). At the time, we argued that the principles-based framework approach of the IFAC Code was more appropriate than a rules-based approach to independence. In the intervening time, accountancy bodies and firms have moved to implement and enforce the IFAC Code and the acceptance of its approach has been commended by many, including the International Organisation of Securities Commissions (IOSCO) in its Statement on Principles of Auditor Independence.
ACCA believes strongly that a principles-based framework approach to independence is to be preferred over rules. We draw attention to the separate response to the proposed rule from FEE in which the advantages of the approach are recited. In the long term, the needs of capital markets, including those of the United States, will be best served by auditor independence issues being resolved globally by reference to the IFAC Code.
At this time, we recognise that the Commission is tasked with creating rules which provide a clear interpretation of the letter and spirit of the Act. In view of the need for international convergence, we urge the Commission not to go beyond that remit nor to depart unnecessarily from the principles developed internationally.
The Commission has already received requests for recognition of the way in which equivalent or stronger independence approaches are in place in certain jurisdictions. There are other jurisdictions, however, which may not currently have made such representations. The absence of such responses may be, for example, because of the short consultation period or, in some cases, because few entities in a jurisdiction are SEC registrants. If the Commission moves to accommodate current requests, we believe that it is important that this is done transparently and by reference to appropriate 'equivalent approach' criteria, not the political and economic significance of a jurisdiction.