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Reporting a change in auditors.

Representatives from the Securities and Exchange Commission and the American Institute of CPAs SEC regulations committee recently completed a joint project designed to facilitate the reporting of a change in auditors under AICPA SEC practice section (SECPS) rules. This month, Thomas L. Milan, CPA, a committee member and national director of SEC practice for Ernst & Young in Washington, D. C., describes how the project has simplified the reporting process.

The SECPS notification process in an important part of the CPA profession's overall quality control. The process aids in preserving the public's perception of the profession's integrity and objectivity, thereby helping to protect the recognized value of CPA services. It is very important each member firm promptly comply with the notification requirement whenever the client-auditor relationship ceases.


SECPS rules require a member firm to confirm in writing with a former client that the client-auditor relationship has ceased. A copy of this SECPS notification letter should be sent simultaneously to the SEC Office of the Chief Accountant.

The letter must be sent to the former client and the SEC by the end of the fifth business day following the member firm's determination the client-auditor relationship has ceased or will cease on completion of the current year's engagement.


Listed below are steps member firms can take to facilitate compliance with SECPS notification requirements:

* The SECPS notification letter must be sent directly to the SEC Office of the Chief Accountant even if the registrant has already reported the change in auditors in a timely filed form 8-K.

* The letter can be sent to the Office of the Chief Accountant via fax at (202) 504-2724 (attention: SECPS Letter File-Mail Stop 9-5); a hard copy of the letter also should be sent to the SEC by regular mail. The SEC strongly encourages sending the letter by fax and will accept the fax date as the notification date. However, a copy of the fax log should be retained to document that SECPS notification requirements have been met.

* The following address should be used for the letter, both for the inside address and on the envelope: Office of the Chief Accountant SECPS Letter File Securities and Exchange Commission 450 Fifth Street, N.W. Mail Stop 9-5 Washington, D.C. 20549

* The former client's exact name and commission file number as it appears on the cover page of form 10-K should be used. When multiple entities are involved, the exact name of each registrant and each commission file number should be provided in the letter.

* If fax transmission is not available, alternatively (in order of preference), the letter should be sent via (1) U. S. Postal Service overnight delivery, (2) commercial overnight courier or (3) certified mail, return receipt requested.

* Compliance with SECPS notification requirements should be monitored through a centralized firm resource to oversee issuance of letters and follow up on reporting a change in auditors in accordance with item 4 of form 8-K.


The above recommendations should facilitate the timely reporting and delivery of notification letters to the SEC. They have been approved by the SECPS executive committee and incorporated into the SECPS manual.
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Article Details
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Author:Milan, Thomas L.
Publication:Journal of Accountancy
Date:May 1, 1993
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