Volume 2, Issue 4

April / May 2008

I. Treasury Advisory Committee Issues Draft Recommendations

On May 5, the Treasury Department’s Advisory Committee on the Auditing Profession released its draft report of recommendations for sustaining a strong and vibrant auditing profession. There are a total of 15 broad-based recommendations in three areas: human capital, firm structure and finances, and concentration and competition.

Key human capital recommendations include: implementation of market-driven curricula and content for accounting students that continuously evolve to meet the needs of the auditing profession; improvement of the representation and retention of minorities in the auditing profession; and ensuring a robust supply of qualified accounting faculty to help prepare new entrants for the profession.

With regard to firm structure and finances, the committee recommends auditing firms strengthen their fraud detection skills. To assist with this effort, the committee encourages the creation of a national center to facilitate the sharing of fraud-related best practices and is urging regulators to clarify the auditor's role in detecting fraud under current auditing standards.

Recommendations contained in the draft report's "Concentration and Competition" section include reducing barriers to the growth of smaller auditing firms with an overall goal of promoting audit quality, creating a mechanism for the preservation and rehabilitation of troubled larger public company auditing firms in the event of threatening circumstances, and exploration of the feasibility of developing key indicators of audit quality and effectiveness.

We encourage you to share your views on the recommendations with members of the Advisory Committee. For details on how to submit an email comment or comment letter, visit the Committee's comment web page. Please note that the deadline for comments is June 13, 2008.

II. A Conversation With Cindy Fornelli

Yes, I believe so. Not only does the study indicate that efficiencies can be gained from more standardization, it illustrates the invaluable benefits of having robust systems. Internal controls benefit everyone; from companies of all sizes to investors and the market. Changing long-held practices is hard, but we are seeing the benefits of persistence as people have gotten more comfortable with the process. Our surveys of investors and audit committee members also show these stakeholder groups are seeing the benefits of SOX. Any regulation evolves over time and SOX has definitely become more effective, especially with the guidance of the SEC and the PCAOB.

Q: There seems to be a growing belief among stakeholders that the audit process has improved significantly since the enactment of SOX. Can you speak to the profession's commitment to further improve audit quality?

The creation of the CAQ by the profession is a great illustration of its commitment to further improve audit quality. Also, many members of the profession have volunteered their time and dedication to help ensure that effective regulations and policies are enacted that protect the integrity of audit quality for all stakeholders. Among other things, they have provided expert testimony before the Treasury Advisory Committee on the Auditing Profession, and provided important and unprecedented levels of audit firm data for the Committee’s consideration. Moreover, the CAQ has submitted numerous comment letters to regulators on behalf of the audit profession on important issues affecting investors, auditors and the markets. These letters are the result of collaborative efforts among cross-sections of our members who work together to develop thoughtful solutions. The CAQ and our members are constantly working to identify areas of improvement and solutions that advance audit quality.

III. CAQ Shares Governing Board Members' Perspectives on the Profession

The CAQ’s 12-member Governing Board includes some of the profession's leading thinkers. Knowing their insights on auditing and related topics have broad interest, the CAQ has made major speeches, articles, and presentations by CAQ board members available on its web site in the new Governing Board Perspectives section, where visitors can simply click on the name of a board member to view his or her perspectives.