On December 30, 2019, the SEC issued a release containing proposed amendments to its
auditor independence rule, Rule 2-01 of Regulation S-X. Among other
things, the proposed amendments would amend the definitions of
“affiliates of the audit client” and “investment
company complex” by adding “materiality”
qualifiers to the common control provisions within these
definitions. This would have the effect of narrowing the number of
common control affiliates of the audit client that an auditor must
monitor for relationships that can impair the auditor’s
independence.
This Alert summarizes key aspects of these proposed
amendments.
BACKGROUND
Under the current auditor independence rule, the term
“audit client” includes any
“affiliates of the audit client”
(each, an “AAC”). An AAC is defined to include:
