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Comment Letter

SEC: Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships

Tuesday, July 3, 2018

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In this letter to the US Securities and Exchange Commission (SEC), the CAQ provides views on an SEC proposal to improve certain aspects of Rule 2-01(c)(1)(ii)(A) of Regulation S-X, referred to as the “Loan Provision.” The CAQ notes that the Loan Provision, as conceived, was designed to curb potential self-interests arising from a debtor/creditor relationship that could affect auditor objectivity. However, the CAQ’s letter states, “the current Loan Provision as applied to certain situations can result in non-compliance with the rule even though there is plainly no impact on the auditor’s objectivity and impartiality.” In its letter, the CAQ outlines practical challenges confronted in addressing the current Loan Provision, provides detail regarding the CAQ’s support for the specific elements of the SEC’s proposal, and offers additional considerations in response to questions posed by the Commission.