By Rodney F. Tonkovic, J.D. The SEC has proposed to amend its auditor independence rules concerning the independence of an accountant who has a lending relationship with certain shareholders of an audit client. Among other changes, the proposed amendments to Regulation S-X Rule 2-01 would focus the analysis solely on beneficial ownership, and the existing 10 percent bright-line shareholder ownership test would be replace with a "significant influence" test. A "known through reasonable inquiry" standard with respect to identifying beneficial owners would also be added. Finally, the proposal would also amend the definition of "audit client" for a fund under audit to exclude funds that otherwise would be considered affiliates of the audit client (Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships, Release No. 33-10491, May 2, 2018). The Rule 2-01 loan provision. Rule 2-01 of Regulation S-X sets forth the…
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