The final rule, which is several hundred pages in length, can be accessed at http://www.sec.gov/rules/final/33-7919.htm.

Last week marked the end of long negotiations -- and at times heated debates -- as the Commission voted to modernize the auditor independence rules, curbing the consulting work auditors can provide to their audit clients.

The rule, which is a watered-down version of the Commission's original proposal, will be effective 60 days after being posted in the Federal Register, while new restrictions will take hold after 18 months. SEC officials speculate it could take a week to two weeks before the rule is published in the Federal Register.

Representatives from the American Institute of CPAs and Big Five firm Arthur Andersen said they are still reviewing the lengthy document and it is too early to comment on the final language. Most likely executives at Big Five firms KPMG, PricewaterhouseCoopers and Deloitte & Touche and are doing the same, however, representatives from those firms could not be reached for comment.

Les Zuke, a spokesman for Ernst & Young, said the firm has not yet seen the final rule, but he did say, "Ernst & Young worked very hard with the SEC and the entire profession to get a workable solution that worked for everybody and Ernst & Young was delighted to have been a catalyst in getting this accomplished."

Under the rule, an audit firm would be allowed to perform up to 40 percent of an audit client's internal work. The Commission said it included a provision in which companies with less than $200 million in assets are excluded.

The rule also states that auditors can provide IT consulting services, if a half-dozen criteria are met, including that management makes 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.

In addition, the SEC outlined nine non-audit services "deemed inconsistent with an auditor's independence," with seven of the nine being already restricted by the Commission or the profession.

Accounting firms may not be slapped with an independence violation if an employee is unaware they violated an independence rule, the violation was corrected immediately and the firm has quality controls in place that provide reasonable assurance that the firm and its employees maintain their independence.

Also, 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. Companies must also state whether the audit committee has considered whether a provision of the non-audit services is compatible with maintaining the auditor's independence.

-- By Antoinette Alexander

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