The PCAOB has been much in the news as this issue of The CPA Letter goes to press. We have repeatedly stated that we stand ready to work with the newly appointed members of the PCAOB, whoever they might be, to increase confidence in the capital markets and our role in attesting to investor information. There has been much turmoil in the process of selecting qualified members to serve on the PCAOB. The accounting profession deliberately did not get involved in the selection process. From the beginning, the AICPA stated its intent not to speak out in favor of or against any person reported to be under consideration by the SEC for a position on the board. To this day, we continue not to enter into useless speculation about who would or would not be an appropriate member. That decision was for others to make.
Shortly before writing this column, the current chairman of the SEC, Harvey Pitt, announced his resignation from the SEC. Pitt entered the office with a deep understanding of our profession, its complexities, and its pivotal role in supporting the capital markets. We hope that whoever his successor may be, he or she will bring in-depth knowledge of accounting and the issues that must be addressed to restore confidence in both auditing and the capital markets. Modernized financial reporting, and transparent and continuous auditing are fundamental objectives that must be on the SEC's and the profession's agenda.
Change is necessary, and we intend to be full partners in driving meaningful and purposeful change. We will give the PCAOB our dedicated assistance and support in all its aspects and dimension. We will work hard to expedite changes in corporate governance that facilitate the audit and the detection of fraud. As we look forward, let there be no doubt about this profession's commitment to implementation of the Sarbanes-Oxley Act. In fact, let me remind you that the AICPA proposed the concept of a public board to take over the disciplinary and quality monitoring functions of public company auditors in Jan. of this year, before any legislation was drafted.
At the same time that we embrace reform, however, we must be wary of possible unintended consequences. During 2002, legislators in many states proposed sweeping legislation before the Sarbanes-Oxley Act was finalized. Many of these state proposals went well beyond the prohibitions in the Act and would have been applicable to all CPAs serving any client, public or private. No doubt, there may be good and valid reasons for duplicating some of the provisions of the Act to audits of non-public entities, but such changes demand careful and thoughtful consideration.
In light of the current crisis, state legislators and regulators are as concerned about doing the right thing as any other body dedicated to the public interest. Doing the right thing requires a reasoned approach.
We face the real possibility that congressional legislation, intended to apply only to auditors of publicly held companies, will cross the line and cascade down to the state level and impact ALL auditors of companies large and small, public and private. Smaller firms and companies would be hardest hit. Smaller organizations would have to engage more than one firm while losing the expertise and know-how of a seasoned and trusted advisor.
We need to assess seriously the potential dangers of taking federal legislation--meant for SEC registrants--and applying it across the board. And more dangerously, applying it inconsistently from state to state. It makes absolutely no sense that a CPA who has adhered to all legislative and regulatory requirements in one state could put his or her license and livelihood at stake simply because he or she has crossed state lines. Addressing and remedying the fallout for smaller CPA firms and their clients will be an ongoing issue--and a high priority--for the profession.
In closing, let me take this opportunity to remind us all that we need to approach our responsibilities with a renewed sense of vigilance and purpose. We all know we can do everything right, and still not do the fight thing. Without question, the overwhelming majority of us never stopped believing in our values. But we must remember to make them part of our fundamental dialogue with those working beside us and those coming behind us. Honorable behavior and good ethics are every bit as contagious as their opposites. Acting on this all-important troth will go a very long way in restoring the good name of our profession. And we WILL restore our reputation if we all pull together.
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|Author:||Ezzell, William F.|
|Date:||Dec 1, 2002|
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