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Calling it another critical step in the sweeping revision of federal securities laws, the Securities and Exchange Commission voted unanimously Tuesday to allow public comment on proposed auditor independence rules. If enacted, the rules would govern auditors’ conduct with their corporate clients. Under the Sarbanes-Oxley Act of 2002, these rules must be finalized by Jan. 26. President Bush signed the legislation into law on July 30. “Without question, my preference would be for the profession to regulate itself, but it has fallen down on the job and Congress has asked us to act,” said SEC Commissioner Paul S. Atkins during the regulator’s open meeting. The proposed rules include a provision that limits to five years the time an audit partner can work for the same client. After this, the partner would have to rotate off to another client for five years. The rules would also prohibit an accounting firm from auditing a client’s financial statements if certain members of that client’s management were part of the accounting firm’s auditing team the previous year. The rules include provisions that require auditors to disclose fees for audit and tax services and to detail components of those fees for a two-year period. “I hope the accounting profession will embrace the intent of these proposals,” said Commissioner Roel C. Campos. He pointed to the proposed rules as proof that the SEC is still intent on formalizing the Sarbanes-Oxley legislation on schedule despite criticism that the agency has been distracted. The SEC has suffered three high-profile resignations recently. Chairman Harvey Pitt has quit, although he has yet to step down, William Webster is leaving his post as chairman of the new Public Accounting Oversight Board and Robert Herdman, the SEC’s chief accountant, is also departing. Also on Tuesday, the SEC voted on rules for keeping documents related to auditors’ reviews of their clients. In particular, the proposed rules would specify that auditors should keep paper work and other auditing documents for five years. Current securities law does not detail a time frame for keeping such documents, leaving it up to individual auditors to develop their own policies. Copyright �2002 TDD, LLC. All rights reserved.
Sarbanes-Oxley Act of 2002: What Corporate Lawyers Need to Know

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