A recent news article in the Wall Street Journal states that, much to the dismay of representatives from the accounting industry, the SEC may have switched gears on the computer-consulting issue and will ban "most computer-system consulting."

The WSJ reports that "people close to the matter" say the measure "includes a ban on computer-system consulting to audit clients and a partial ban on having an accounting firm perform both a corporate client's outside audit and preparing audits used internally by management and the board."

Christopher Ullman, an SEC spokesman, declined to comment on the specifics of the proposal, but did express discontentment over the news report. He added that, "Discussions continue and everything is still on the table."

Ullman stressed that no one can be certain what the final proposal will look like until the Commission votes on it Wednesday morning. He added that "blow-by-blow" reporting, such as the WSJ article, is not beneficial for readers.

Last week, Commission chairman Arthur Levitt took the profession by surprise when he announced that the SEC had scheduled an open meeting for Nov. 15 at 10 a.m. EST to consider the adoption of the controversial proposed independence rules. Several members of the accounting community, including the American Institute of CPAs and Big Five firm KPMG, believed that negotiations were still underway.

Days after Levitt's announcement, Public Accounting Report said that it had learned that the SEC placed only two consulting services in the line of fire: information technology systems and internal audit outsourcing. PAR said the SEC would not prohibit auditors from offering consulting services to publicly traded clients.

PAR stated that the "Commission would limit restrictions on internal audit outsourcing by keeping the rule from applying to clients whose revenue exceeds a cap, or allowing firms to undertake outsourcing work equal to 40 percent of hours spent on the public audit."

In addition, there would be no absolute prohibitions and audit clients would have to publicly discuss the non-audit services they purchase from their auditors, PAR reported.

Speculations on what the final proposal will look like have been circulating for sometime. However, if the SEC approves the proposed rules in Wednesday's meeting as expected,  speculations can finally come to a rest.

-- By SmartPros News Staff

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