United States

Auditor independence: Certain loans and debtor-creditor relationships


In Release No. 33-10648, the SEC recently adopted amendments to its auditor independence rules to refocus the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period. The amendments related to this “Loan Provision” in S-X Rule 2-01(c)(1)(ii)(A):

  • Focus the analysis solely on beneficial ownership rather than on both record and beneficial ownership
  • Replace the existing 10 percent bright-line shareholder ownership test with a “significant influence” test
  • Add a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities
  • Exclude from the definition of “audit client,” for a fund under audit, any other funds that otherwise would be considered affiliates of the audit client under the rules for certain lending relationships

The final rule is effective 90 days after publication in the Federal Register.