The SEC has issued a Proposed Rule, Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships, which is designed to amend certain provisions of the auditor independence requirements under Regulation S-X, Rule 2-01.

The SEC believes the amendments will refocus the analysis that must be conducted to determine whether an auditor has a lending relationship with certain shareholders of an audit client at any time during either the audit or the professional engagement period.

The proposed amendments include:

  • focusing the analysis solely on “beneficial ownership” instead of the current requirement to consider both “record ownership” and “beneficial ownership”:
  • replacing the existing 10 percent bright-line shareholder ownership test with a “significant influence” test
  • including a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities
  • modifying the definition of “audit client” for a fund under audit to exclude funds that would otherwise be considered affiliates of the audit client

The proposal also includes a general request for comment on other potential amendments to the SEC’s auditor independence rules.

Comments on the proposal are due on or before July 9.


Grant Thornton, On the Horizon, May 10, 2018.

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