by Glenn Cheney
New York - The American Institute of CPAs is pulling together a forum of high-profile speakers including David M. Walker and former Andersen chief executive Joseph Berardino, who will address a range of issues affecting contemporary auditing and implications for the audit practice of the future in a three-day conference themed, "The State of the Profession ... Preparing Today for Tomorrow."
If the pre-conference thoughts of Walker are any indication, the confab should bring out some of the profession’s most pressing issues. Walker sees a real need for a major overhaul of auditing, accounting, and audit practices.
"I’m going to be talking about modernizing accounting and the reporting model for the 21st century, and conforming to an economy that is knowledge-based rather than industrial-based," Walker said. "I’m going to be talking about the need to modernize and transform the auditing profession and to maintain strong standards of independence in order to maintain our credibility and the trust of the public. I’m going to talk about the need for change in other areas, such as corporate governance, because though our profession holds certain responsibility for recent events, it holds by no means all responsibilities."
The conference is scheduled for Nov. 11-13 in Phoenix.
Meanwhile, Berardino is slated to share his insights on the Enron crisis and the devastating impact on his former firm.
Walker said he hopes the new federally mandated oversight body - the Public Company Accounting Oversight Board - will be operational by the time of the forum.
The challenges, he said, will be related to the recent events involving corporate and audit firm collapse due to accounting improprieties. The opportunities will relate to transforming the accounting and audit model to make it able to add more value, manage more risk, restore public trust and endow the profession with more value.
"Intellectual property is driving value," Walker said. "We are now in the knowledge age, yet the accounting and reporting model, by and large, is based on the industrial age and its tangible assets. Furthermore, the time when there was a tremendous value ascribed to annual audited financial statements is over. It’s not that they aren’t valuable, they just aren’t as valuable as they used to be. People are making investment and lending decisions every day based on what they see on the Internet. The amount of information and assertions available is virtually limitless, but we need a way to separate the wheat from the chaff and convert the limitless information and assertions into facts and knowledge that can be relied on."
Walker sees the situation as an opportunity to put more emphasis on controls, broaden the types of attestation, to provide for more continuous auditing and frequent reporting, and to get into areas such as performance reporting and compliance reporting. He says that the big CPA firms have spent too much time trying to grow revenues through non-audit consulting fees and not enough time and effort in modernizing the attest and assurance model.
The time to do so, he said, has come.
James G. Castellano, 2001-2002 chair of the AICPA and managing partner of St. Louis-based Rubin, Brown, Gornstein & Co., will speak on "the firm of the future." His message will be aimed at the less-than-Big-Four audit firms that might be a lot like his, with a mostly local clientele and a handful of public companies that must meet the requirements of the Securities and Exchange Commission and the provisions of the Sarbanes-Oxley Act.
"I’m going to talk about how firms can increase the value of their audit services," Castellano said. "At our firm we’ve been working on a concept by which we hope to move up the value chain in our traditional foundation services of audit and tax and at the same time move out on the value chain by complementing those services with non-traditional services."
Castellano’s firm has been able to increase the value of its audit service by developing expertise in specific industry sectors. The firm also writes special advisory reports for audit clients. The reports are based on the deep and detailed knowledge of a client’s business that an auditor gains through, in Castellano’s words, "the incredible privilege" of scrutinizing the most intimate details of the finances and operations of a company, something virtually no one else is allowed to see.
Castellano will also discuss how firms can make improvements in their quality control systems and how those systems must react to new legislative and regulatory requirements.
Castellano said he would also explore the touchy subject of how CPA firms must assess potential clients before accepting them, and how they must terminate client relationships when the client appears to be of dubious integrity. If CPA firms are more demanding of ethical standards, companies that have trouble finding an auditor will make the changes necessary to participate in the American business arena. That, said Castellano, is good.
"That could cause companies to make the changes they need to make," he said. "That’s what our profession needs to do - stand up and say ‘No, we’re not going to serve you’ or ‘No, we’re not going to sign off on that accounting treatment,’ and cause companies to change."
Other speakers slated for the forum include AICPA president and chief executive officer Barry Melancon, who will discuss the future of the profession.
