Wednesday was a major turning point for the accounting profession as the SEC unanimously approved the revised independence rules, curbing consulting work auditors can provide to their audit clients.

While the rules, which will be effective 60 days after being posted in the Federal Register and new restrictions taking hold after 18 months, are a softer version than the SEC's original proposal, the accounting profession has yet to greet the rules with open arms.

Larry Shapiro, a partner of professional services organization BDO Seidman and head of the firm's independence initiative, said the rule "is more positive that what the staff started with" and "addresses the concerns we had and many in the profession had."

Under the rules approved Wednesday, an audit firm would be allowed to perform up to 40 percent of an audit client's internal work. And because many, including the American Institute of CPAs, had expressed concern on the impact the rule may have on smaller firms, the Commission included a provision in which companies with less than $200 million in assets are excluded.

The rules also state that auditors can provide IT consulting services, if a half-dozen criteria are met, including a provision that management must make all the significant decisions with respect to the IT project and does not rely on the accountant's work as the primary basis for determining the adequacy of its financial reporting system. In addition, the issuer must disclose the total amount of fees for IT services received from its auditor.

As far as proxy disclosures, companies must disclose in their annual proxy statements all the fees for audits, IT consulting and other services provided by their auditors during the last fiscal year.

SEC officials have stated that they believe the rules will have no major impact on firms. However, not everyone is so certain.

Shapiro expressed concern over the rules' disclosure requirements and stated, "I think the disclosure requirement of non-audit services will have a negative impact."

"We are concerned disclosure will scare companies from engaging accounting firms from providing non-audit services," Shapiro added. "That is probably the single largest concern we have with the rule."

Steve Couturier, manager of the technology division, known as the eSolutions Group, at Dayton, Ohio-based Brady Ware & Schoenfield, said, "I consider it a mildly positive move because most of it does not affect the organization I work for or our clients."

"I believe this will still not have much affect on the local firm, given the exemption for companies with less than $200 million in assets," he added. "However, as the leader of the IT consulting practice for a local firm, we need to review the half-dozen criteria that must be met per the SEC."

Mike Starr, managing partner of assurance and advisory services for New York-based Grant Thornton, did speculate that the ruling may mean the end of the Independence Standards Board, but said the approval of the revised rules was "a step in the right direction."

"I think it was a positive move," Starr said. "For the SEC to reach a compromise is a step in the right direction."

After Wednesday's ruling James J. Schiro, chief executive of Big Five firm PricewaterhouseCoopers, issued a statement that said, "The new rule that the SEC approved will provide greater certainty, enhanced investor protection, needed transparency and the flexibility necessary to adapt our business to the evolving economy and capital markets."

Although BDO Seidman's Shapiro expressed some concern over the rules, he agreed with PwC's sentiments.

"At the end of the day it is a welcomed change and a needed change," Shapiro stated.

-- By Antoinette Alexander

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