SEC proposes auditor independence rule covering lending relationships with clients

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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