The History of the Divergent Views of AICPA and SEC Regarding the Impact of Auditor Provided Bookkeeping Services on Auditor Independence

• In Event: Accounting History

Abstract

Long ago the Securities and Exchange Commission (SEC) concluded that auditors should not audit their own work. In other words, auditors should not be involved in the preparation of financial statements they audit. The SEC independence rules, as codified in Article 2 of Regulation S-X, specifically identify bookkeeping and financial statement preparation as prohibited services for independent auditors. In contrast, auditors of privately-held companies are permitted to provide such services under the AICPA Code of Professional Conduct. This paper discusses the history of the SEC and AICPA rules related to bookkeeping and financial statement preparation services and questions why the AICPA Code of Conduct has not been amended to align with the SEC’s position.

Author

• John D Keyser, Case Western Reserve University