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SEC and PCAOB Leadership Announce Potential Relief to Companies Affected by the Coronavirus

Yesterday, senior leaders of the Securities and Exchange Commission (SEC) and the Chairman of the Public Company Accounting Oversight Board (PCAOB) issued a joint statement (Statement) noting the potential effect that the coronavirus (COVID-19) may have on reporting companies, reminding companies of their disclosure obligations and notifying companies affected by the virus that they may contact the SEC for guidance or a determination of their eligibility for relief from filing deadlines.
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Implications for Issuers from Recent Auditor Independence Enforcement Cases

The SEC recently found that EY violated the auditor independence rules in two cases based on the audit partners’ close personal relationships with members of the issuer finance teams.  In addition to a specific list of prohibitions, the SEC rules on auditor independence includes a catch-all that an accountant is not independent if a reasonable investor with knowledge of all relevant facts and circumstances would conclude that the accountant is not capable of exercising objective and impartial judgment. 
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Audit Committees Continue to Expand Reporting in 2015 Proxy Statements

The SEC’s recent concept release on possible revisions to audit committee disclosure has ignited debate about whether additional information, and the type of information, that would be useful to investors regarding the audit committees’ oversight of external auditors. Our memo on the concept release is here, and our comment letter to the SEC is here.
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SEC Fines Accounting Firm for Auditor Independence Violations and an Unrelated Company Pulls Prior Financial Statements Audited by Same Firm Due to Inappropriate Personal Relationship

For actively helping two public company clients lobby congressional staff members about pending legislation, the SEC charged Ernst & Young (EY) with violating the auditor independence rules by unlawfully advocating on behalf of audit clients. Although the clients were involved with EY in the lobbying activities, neither were named in the SEC cease-and-desist proceedings against EY, and there appears to be no impact on the companies’ financial statements.   
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