The Securities and Exchange Commission is no threat to the independence of the Financial Accounting Standards Board, the SEC’s chief accountant said at a conference Thursday.
“FASB is independent as far as we are concerned,” said SEC chief accountant Conrad Hewitt. “We do not appoint board members.”
Hewitt’s comment came in response to a question from a reporter in the audience who asked whether the SEC was committed to an independent FASB. According to recent reports on CFO.com, the SEC had held up its review of FASB’s budget until the accounting-standard setter’s parent organization agreed to a memo giving the SEC a more formal role in nominating candidates.
Hewitt appeared to deny any connection, noting, “The budget coincidentally came at the same time as we were [evaluating] candidates,” adding that the SEC’s role over FASB is outlined in a 2003 agreement between the two organizations.
Hewitt made the comments during a morning panel that he shared with FASB chairman Robert Herz at the Sixth Annual Financial Reporting Conference, held at Baruch’s Robert Zicklin Center for Corporate Integrity.
In remarks at a similar conference a week earlier at Pace University’s Lubin School of Business, Herz conceded that the SEC’s actions had created concerns among FASB board members, and said FASB’s relationship with the SEC had changed since current SEC chairman Christopher Cox was appointed. “Chris, or his staff, do operate differently than former [SEC administrations],” Herz said last week, admitting that there were “control” issues that “bothered me.”
In his comments at the Zicklin School today, Hewitt conceded, there is a “delicate balance” between maintaining FASB’s independence and the SEC’s oversight role. That comment echoed Herz’s remarks the week before, when the FASB chairman said it can be “a difficult balance” to remain independent under the funding structures created by the Sarbanes-Oxley Act in 2002. “We get our authority through the [SEC] and now we take public money,” explained Herz at the time. “With that comes accountability and oversight, but there has to be respect for independence,” he said.