Public companies have a responsibility to ensure that the auditors of their financial statements are independent, as do the auditors themselves. Regulation S-X sets forth the form and content of and requirements for financial statements required to be filed with the Commission, including the requirements for auditor independence. Ensuring auditor independence is as important as ensuring that revenues and expenses are properly reported and classified. If the auditor's independence is impaired then the company has not satisfied the requirement to file financial statements audited by an independent accountant. Discovery of an independence issue at the last minute can adversely affect an otherwise timely filing and call into question the reliability of the company's financial reports.
Because auditor independence matters often involve unique and complex fact patterns, OCA staff is able to provide the clearest guidance when companies or auditors provide a written submission outlining the factual details of the auditor independence issues under consideration. The staff believes this process is best accomplished through written submissions on a named basis because of concerns that a clear understanding of the facts may not be accomplished solely through oral and/or anonymous communications. However, in some situations, particularly when asked to clarify certain independence rules, oral communication is acceptable.
Modified: Sept. 28, 2018