" These four principles are to be used when trying to determine if the actions of an auditor will impair the independence of an auditor and were the basis for forming the new independence requirements. They are rooted in the belief that an auditor must be independent in fact and appearance. .

             The new rule considerably alters the number of people related to the auditor that can invest in the auditor's clients because this would violate the independence requirements released by the SEC. It also limits the number of non- auditing services that can be provided by auditors to their audit clients, but at the same time puts no restrictions on the non- auditing services that can be provided to non-audit clients. The new requirements also call for proxy disclosure in the financial statements of a company. These proxy disclosures state information on certain non-audit services performed by the auditors in the last fiscal year. "The new auditor independence rule will revise the rules for auditor independence in primarily three areas: (1) investments by auditors or their family members in audit clients; (2) employment relationships between auditors or their family members and audit clients; and (3) the scope of services provided by the audit firms to their audit clients."!.

             Investments by Auditors and Family Members in Audit Clients.

             The new rule restricts an auditor or a family member from investing in a firm's audit client. It also restricts an auditor's partner from investing in the client only if the auditor can directly influence the audit work. This new rule is left open for interpretation since if an auditor does not work on the audit he is not restricted as long as he is considered not to be influencing the audit in any way. .

             The subjectivity is in the determining of who can or who does influence an audit. The new rule defines the auditor, family members and certain partners as "covered persons".