In the Enron and Worldcom era, there was an impression that the accounting industry was too close to management, ignoring obvious warning signals about improper financial practices.  Congress took this head on and used SOX to impose a regulatory regime designed to ensure greater auditor independence.  The perception was that accounting firms were too close in part because of the lucrative consulting fees paid to the firms.  SOX addressed the issue by separating auditing and consulting services.  In addition, SOX required the partner in charge of an account to rotate at least every five years.  At the same time, SOX gave the audit committee explicit authority to hire and fire the outside accountants.  In so doing, the Act made the auditors less beholden to officers. 

SOX encouraged greater independence but it wasn't the only source of pressure.  The legal environment helped.  The collapse of Arthur Anderson sent shock waives through the accounting industry.  Thus, even without SOX, some degree of increased distance between management and auditors was likely to occur.

The change in the relationship has drawn complaints.  Some don't like the increased arms length nature of the relationship.  Moreover, auditors raised their rates in part because they were less willing to take management's word for things and in part (according to my friends at the Daniels Business School) because they had used consulting fees to subsidize auditing practices. 

So what are the benefits?  According to the Wall Street Journal, accounting firms are taking a hard line with respect to valuations issues connected to subprime lending.  As the article notes:

• In recent weeks, the accounting firms, operating through a new industry group, have taken views at odds with at least some of their clients about the use of market prices for hard-to-trade securities and over how banks should deal with their exposure to losses in off-balance-sheet lending vehicles.
• This has prompted financial firms to recognize losses in securities that they may have otherwise put down to short-term disruptions in markets. It also prompted, at least in part, moves by large banks and the Treasury Department to bail out structured investment vehicles, or SIVs, which are special lending vehicles that banks keep off their books.
• The firms' unyielding stance has pleasantly surprised some longtime critics such as Mr. Turner, who add that auditors seem to have stood firm on proper -- yet unforgiving -- accounting treatments despite the severity of the problems gripping the markets. The auditors' group, for instance, said companies have to use market prices no matter how depressed they are and can't argue that they should be ignored because they represent a fire-sale valuation.
• That is in contrast to the accounting firms' behavior during previous crises, particularly during the technology-stock boom, when auditors often acted as partners with management and sometimes caved in to corporate demands for aggressive accounting positions.

No doubt the decision by Merrill Lynch to disclose a $7.9 billion write down was part of this tougher stance.  One can expect this to generate vociferous protest.  When SOX caused the number of restatements to increase (in large part due to the discovery of "flat out errors"), some complained about this result, with Treasury Secretary Paulson forming a committee to look into it.  His make weight concern?  "They [the many restatements] have the potential to confuse investors and erode public confidence in financial reporting. Some of these restatements might not be material to investors, and others may simply reflect new accounting standards interpretations." 

So we'll expect to hear the complaints about tougher standards by accounting firms.  Nonetheless, the WSJ article indicates that auditors are acting as gatekeepers, shorn of excessive closeness to management.  This will help improve the integrity of the disclosure system and, in turn, increase investor confidence.