Investors used to view a company’s appointment of new auditors with suspicion. Did it signal a disagreement between management and the old accountants that could cast doubt on the integrity of the financial statements? Companies never admitted as much, but investors learned to be skeptical; to some, a change in auditor sent a clear signal: sell.
The Sarbanes-Oxley Act is erasing that stigma. That’s partially because new Securities and Exchange Commission rules have required companies to be more careful about the types of projects assigned to their auditors, in some cases forcing them to make changes to leverage their accounting firms. In Jan. 2003, the Securities and Exchange Commission adopted rules promulgated by Section 201 of SOX that listed nine non-audit services that, if provided by the accounting firm, would impair the firm’s independence (see box at right).
