Auditor independence: A burdensome constraint or core value?

The US Securities and Exchange Commission (SEC) delegates to private standards-setting bodies much of its accounting-related rule-making authority under the securities act. It has long delegated, while maintaining oversight, authority to set generally accepted accounting principles (GAAP) to the Financial Accounting Standards Board, and authority to regulate generally accepted auditing standards to the AICPA's Auditing Standards Board. Accounting and auditing standards have been the subject of much scholarly research, but independence standards are relatively unexplored. All three are essential to determining the value of our system of audited financial reporting for investor protection, as well as its value for corporate governance, and for facilitating capital formation. A commentary explores two views of independence, and how the views might be applied by practitioners, regulated by regulators, and studied by scholars.