Big 5 show no quarter.

Corporations may get to know their auditors better--after all, they'll be seeing them every 90 days instead of just once a year, according to new firm policies. The Big 5 have agreed to perform financial statement audits only for companies that allow them to review financial statements every quarter. Because these firms audit most of the corporations listed on the New York Stock Exchange, American Stock Exchange and Nasdaq, this policy will affect many companies.

The Journal of Accountancy spoke about this new development with Dan M. Guy, who in his 18 years at the AICPA was at the center of auditing standards setting (see "Former AICPA Vice-President Honored," below). "This is a very, very smart move," he said. "I've been talking to members of corporate boards about this for years. I personally wouldn't serve on any board, especially its audit committee, unless the company agreed to timely reviews of quarterly statements." Guy said quarterly reviews could help detect and prevent fraudulent financial reporting and reduce end-of-year surprises that come with big fourth-quarter adjustments.

Some companies may be concerned about the cost, said Guy, who acknowledged that there would be additional fees. "But the big public benefit that comes with quarterly reviews far exceeds that cost."

What about the others?

A Big 5 agreement is not a SAS; other firms are free to do what they please. Several smaller firms that audit public companies declined to talk with the Journal about their audit policies at this time. However, the magazine did speak with Thomas N. Tone, CPA, who performs annual reviews and quarterly compilations for privately held companies. He commented generally on the value of a quarterly look at a client's books, whether a CPA is performing compilation, review or audit. "Many of our clients have lines of credit approaching $10 million, some of which is unsecured or secured only by receivables. Their banks want to know we have seen what's going on each quarter."