The Department of Labor today announced guidelines for determining
when a qualified public accountant is independent for purposes of
auditing and rendering an opinion on the financial information required
to be included in the annual report filed with the Department.
Section 103(a)(3)(A) requires that the accountant retained by an
employee benefit plan be ``independent'' for purposes of examining plan
financial information and rendering an opinion on the financial
statements and schedules required to be contained in the annual report.
Under the authority of section 103(a)(3)(A) the Department of Labor
will not recognize any person as an independent qualified public
accountant who is in fact not independent with respect to the employee
benefit plan upon which that accountant renders an opinion in the annual
report filed with the Department of Labor. For example, an accountant
will not be considered independent with respect to a plan if:
(1) During the period of professional engagement to examine the
financial statements being reported, at the date of the opinion, or
during the period covered by the financial statements, the accountant or
his or her firm or a member thereof had, or was committed to acquire,
any direct financial interest or any material indirect financial
interest in such plan, or the plan sponsor, as that term is defined in
section 3(16)(B) of the Act.
(2) During the period of professional engagement to examine the
financial statements being reported, at the date of the opinion, or
during the period covered by the financial statements, the accountant,
his or her firm or a member thereof was connected as a promoter,
underwriter, investment advisor, voting trustee, director, officer, or
employee of the plan or plan sponsor except that a firm will not be
deemed not independent in regard to a particular plan if a former
officer or employee of such plan or plan sponsor is employed by the firm
and such individual has completely disassociated himself from the plan
or plan sponsor and does not participate in auditing financial
statements of the plan covering any period of his or her employment by
the plan or plan sponsor. For the purpose of this bulletin the term
``member'' means all partners or shareholder employees in the firm and
all professional employees participating in the audit or located in an
office of the firm participating in a significant portion of the audit;
(3) An accountant or a member of an accounting firm maintains
financial records for the employee benefit plan.
However, an independent, qualified public accountant may permissably
engage in or have members of his or her firm engage in certain
activities which will not have the effect of removing recognition of his
or her independence. For example, (1) an accountant will not fail to be
recognized as independent if at or during the period of his or her
professional engagement with the employee benefit plan the accountant or
his or her firm is retained or engaged on a professional basis by the
plan sponsor, as that term is defined in section 3(16)(B) of the Act.
However, to retain recognition of independence under such circumstances
the accountant must not violate the prohibitions against recognition of
independence established under paragraphs (1), (2) or (3) of this
interpretive bulletin; (2) the rendering of services by an actuary
associated with an accountant or accounting firm shall not impair the
accountant's or accounting firm's independence. However, it should be
noted that the rendering of services to a plan by an actuary and
accountant employed by the same firm may constitute a prohibited
transaction under section 406(a)(1)(C) of the Act. The rendering of such
multiple services to a plan by a firm will be the subject of a later
interpretive bulletin that will be issued by the Department of Labor.
In determining whether an accountant or accounting firm is not, in
fact, independent with respect to a particular plan, the Department of
Labor will give appropriate consideration to all relevant circumstances,
including evidence bearing on all relationships between the accountant
or accounting firm and that of the plan sponsor or any affiliate
thereof, and will not confine itself to the relationships existing in
connection with the filing of annual reports with the Department of
Labor.
Further interpretive bulletins may be issued by the Department of
Labor concerning the question of independence of an accountant retained
by an employee benefit plan.
[40 FR 53998, Nov. 20, 1975, as amended at 40 FR 59728, Dec. 30, 1975.
Redesignated at 41 FR 1906, Jan. 13, 1976]
