The Securities and Exchange Commission (SEC) protects investors and maintains a fair, orderly, and efficient marketplace. While the SEC has historically focused its enforcement efforts on public companies, recent announcements from Acting Chief Accountant Paul Munter suggest the SEC is taking a closer look at other actors who play a role in fair and efficient markets: auditors. In the past decade, the SEC has brought only four enforcement actions for standalone violations of the “auditor independence” rule—a rule that requires auditors to exercise objective and impartial judgment on all issues encompassed by an auditor engagement as evaluated by a fully informed investor. But perhaps more enforcement in this area is on the horizon.

In June, Acting Chief Accountant Munter started making headlines when he issued a statement regarding “The Critical Importance of the General Standard of Auditor Independence and an Ethical Culture for the Accounting Profession.”[1] The statement emphasized the importance of auditors in “the process of providing decision-useful financial information for the benefit of investors” and the vital role they play in “investor protection and investor confidence in financial statements.”[2] The statement also reminded readers of the SEC’s Rule 2-01 of Regulation S-X, which sets forth the “auditor independence requirements and emphasizes the importance of an accountant’s independence from its audit client in both fact and appearance.”[3] The statement was released the same day The Wall Street Journal reported that Deloitte and Ernst & Young, two of the “Big Four” accounting firms, were exploring plans to split their global audit and consulting practices.[4] Munter’s statement warned that new, “complex business arrangements” could “undermine auditor independence” and cautioned firms “to carefully consider the implications for auditor independence when considering alternative practice structures.”[5]

On August 29, Munter released a second statement on the auditor topic and again emphasized the importance of auditor independence, specifically noting concerns regarding restructuring transactions by accounting firms involving private equity investment structures.[6] The statement explained that if a private equity fund holds an investment in an accounting firm, the Office of the Chief Accountant’s would likely believe that such a fund has a financial interest in the accounting firm and by extension the auditing wing.[7] Munter warned that “[i]f, post-transaction, accounting firms are unable to comply with [the auditor independence]requirements, enforcement investigations and proceedings by the Commission, the [Public Company Accounting Oversight Board], or both may result.”[8]

Munter’s latest statement released on October 11 again stressed the importance of auditor independence, while also highlighting another “observed shortcoming related to responsibilities over the detection of material misstatements due to fraud that auditors should keep in mind as they perform their vital role for the public trust.”[9] Munter noted that the SEC had undertaken enforcement actions against audit firms and their personnel for issues in this area.[10] These actions included one against the accounting firm CohnReznick LLP, which agreed to pay a $2 million penalty based on accusations that the firm ignored red flags, resulting in two clients’ filings of false financial statements.[11]

In light of these statements, one thing seems quite clear: Munter and the Office of the Chief Accountant are focused on auditors, and they are willing to take action when it comes to concerns regarding auditor independence or inadequate completion of their duties.

[1] Paul Munter, Acting Chief Accountant, “The Critical Importance of the General Standard of Auditor Independence and an Ethical Culture for the Accounting Profession,” Off. of the Chief Accountant (June 8, 2022),

[2] Id.

[3] Id.

[4] Jean Eaglesham and Corrie Driebusch, “Deloitte Explores Splitting Auditing Consulting Arms, Following Ernst & Young,” The Wall Street Journal (June 8, 2022),

[5] Munter, “The Critical Importance,” supra n1.

[6] Paul Munter, “Auditor Independence and Ethical Responsibilities: Critical Points to Consider When Contemplated an Audit Firm Restructuring,” Off. of the Chief Accountant (Aug. 29, 2022),

[7] Id.

[8] Id.

[9] Paul Munter, “The Auditor’s Responsibility for Fraud Protection,” Off. of the Chief Accountant (Oct. 11, 2022),

[10] Id.

[11] See Press Release, SEC, “SEC Charges CohnReznick LLP and Three Partners with Improper Professional Conduct,” (June 8, 2022),