The proposed approach of prohibiting virtually all non-audit services is ineffective when applied in the context of global organizations subject to differing laws and ethical obligations in multiple jurisdictions around the globe. The proposal also has an undesirable extraterritorial effect at a time when the US is already under criticism for the extraterritorial reach of its accounting rules. The auditors job is to determine whether or not, in their opinion, management has done its job. The proposed rule seems to ignore the fact that significant protections already exist, combined with significant liability, to ensure that management, board members and audit committee members carry out their duties to the public of full and fair disclosure of the financial condition of the company for which they are responsible. Heller is particularly concerned with the approach taken in the proposed rule with respect to consulting and legal services performed by audit firms to their audit clients.
Global organizations are extremely complex and are becoming increasingly so in the new economy.
The SEC rule takes a one size fits all approach which will be completely ineffective when applied against the diversity of business models utilized by US publicly traded companies. The proposal also departs significantly from the general premise of our securities laws which demand full and fair disclosure as opposed to a prescription as to how management and Board members should or should not manage. The proposal also seems to ignore the fact that there is a substantial amount of self regulation already occurring in this area. This self regulation is obviously effective since there is virtually no evidence to show that consulting or legal services provided by auditing firms to their attest clients has affected the independence of the auditors. Heller understands that the SEC concurred with the establishment of the ISB as an organization that would provide leadership not only in improving current auditor independence requirements, but also in establishing and maintaining a body of independence standards applicable to the auditors of US public companies.