Guidance on translation services and auditor independence

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07 Sep 2007

The Office of Chief Accountant of the US Securities and Exchange Commission has updated their Frequently Asked Questions on Auditor Independence to address an issue relevant to foreign companies registered with the Commission and foreign subsidiaries of US registrants – namely whether translation services performed by an auditor in connection with filings with the SEC impair the auditor's independence:

Prohibited Non-audit Services - Question 8 (issued August 06, 2007)
Q: Regulation S-T Rule 306 and Exchange Act Rule 12b-12(d) require foreign private issuers to provide all filings, related exhibits and all documents under the cover of Form 6-K using the English language. In connection with filings with the Commission, is an accountant independent if at any point during the audit and professional engagement period the accountant provides translation services to SEC audit clients based in foreign jurisdictions or US clients with foreign operations?

A: No. Translation services require the accountant to make decisions and judgments on behalf of the client's management on the selection and application of words, phrases, and specific accounting, business and industry terms, in order to appropriately convey the meanings as expressed by management in the original language. This might create a mutual or conflicting interest between the accountant and the audit client and might put the auditor in a position of auditing its own work.

Click to view the SEC's Frequently Asked Questions on Auditor Independence.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.