Printer Friendly

Auditor independence: a new structure is needed.

The Public Company Accounting Oversight Board, set up to check on accounting issues, has already begun to review some accounting firms.

While I feel this is a good first step, I wonder if this type of organization will get to the heart of the problem when it comes to auditor independence.

In my opinion, it is the financial relationship between the corporations and the auditing firms where the real problem lies.

For example, when Enron Corporation paid Arthur Andersen more than $25 million to do the audit, that could have altered the independence between the firm and Enron. One can see how a corporation can have an influence on the audit.

The financial relationship between a corporation and the CPA firm should be examined. Perhaps we need a different structure to obviate this financial relationship.

The structure I envision to mediate the effects of the financial impact on the audit would be what I call the General Auditing Council Board. It would be a seven-member board made up of auditing and legal professionals with offices in each state, reporting to the PCAOB.

The board would release auditing bids to auditing firms to perform the audit. Corporations would remunerate the GACB when the audit work is done and these fees would then be forwarded to the firm completing the audit.

Any problems with the audit would be resolved between the parties participating in the audit, the GACB or the PCAOB. The GACB would make the final resolution and would operate under GAAP and GAAS, as well as SEC and PCAOB rules.

Although there are many questions to be posed, this might be a first step in making the audit truly independent.

DONALD R. SCRIBNER, CPA
COPYRIGHT 2004 California Society of Certified Public Accountants
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:SpeakOut!
Author:Scribner, Donald R.
Publication:California CPA
Article Type:Brief Article
Geographic Code:1USA
Date:Jul 1, 2004
Words:284
Previous Article:Expensing stock options: a recipe for more corporate disaster?
Next Article:Defined benefit plans vs. defined contribution plans.
Topics:


Related Articles
The Big-Five battle: CPAs and non-CPAs square off on auditor independence.
POB Proposes Controversial Changes to Audit Process.
ISB Issues Exposure Draft on Conceptual Framework for Auditor Independence.
Audits will cost more with new guidelines.
Setting a new route for corporate governance. (Cover Story).
Capitol hill proposes post-Enron reforms.
Seizing upon Sarbanes-Oxley.
Are there good reasons for auditor rotation? Auditor rotation remains a concern of regulators and governance activists, and Financial Executives...
AICPA pleased with new PCAOB independence and tax services rules, and remediation standard.

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters