AICPA President Testifies Before Panel On Audit Effectiveness.

NEW YORK--(BUSINESS WIRE)--Oct. 7, 1999--

Barry Melancon, President and CEO of the American Institute of Certified Public Accountants, today told the Public Oversight Board's Panel on Audit Effectiveness that the accounting profession has appropriate controls in place to regulate the work of auditors, thereby protecting investors.

Testifying before the specially convened panel, Melancon said that SEC Chairman Arthur Levitt's proposal for a separate self-regulatory organization to monitor the profession was unnecessary.

"The Public Oversight Board was created expressly to oversee our self-regulatory activities," Melancon said. "In fact, in its annual report to Congress, the SEC commented favorably on the Oversight Board's work."

The Public Oversight Board is an oversight board consisting of individuals who are not involved in the audit profession.

Alluding to media coverage of recent audit failures, Melancon said, "Everyone wants zero defects, and the fact remains that 99.7 percent of the 15,000 audits done annually have no problems. This is a track record the profession is proud of."

Melancon noted that the AICPA is cooperating fully with the Securities and Exchange Commission to strengthen the audit process. He enumerated the steps the AICPA has taken to protect the investor. In 1997, the Institute's Auditing Standards Board (ASB) issued Statement on Auditing Standards No. 82, Consideration of Fraud in a Financial Statement Audit, which clarifies the auditor's role in detecting fraud. The ASB has also published guidance on such topics as the Year 2000 Issue and revenue recognition.

Melancon took exception to Levitt's comment today that the AICPA's Board of Directors lacked adequate public membership.

"We do have public members on our board," he said. "But more importantly, the AICPA's SEC Practice Section, which firms that audit SEC registrants must belong to, is monitored by the Public Oversight Board, which consists entirely of public members."

Michael Conway, Chair of the AICPA's SEC Practice Section and a partner with KPMG LLP, also addressed the panel today. Speaking on behalf of the Practice Section, he said, "Looking back in history, the SEC Practice Section was instrumental in creating several unprecedented self-regulatory activities."

Conway identified these as mandatory peer review, compulsory continuing professional education, investigation of member firms charged with audit failures, and independent oversight by the SEC and the Public Oversight Board.

Melancon and Conway were two of a number of speakers testifying today before the Public Oversight Board's Panel on Audit Effectiveness. The panel's hearings continue tomorrow.

On a related matter, the AICPA Auditing Standards Board earlier this week issued a proposal for a new standard that would improve communication between the outside auditor and audit committee. The proposal is a response to recommendations put forth last February by the SEC's Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees.

The American Institute of Certified Public Accountants is the national professional association of CPAs, with more than 330,000 members in business and industry, public practice, government, and education. It sets U.S. auditing standards and, with the Financial Accounting Standards Board, U.S. accounting standards. It is the first professional association to be ISO 9001-certified, in recognition of its quality management and assurance practices.