The Treasury Department convened an initial meeting of its Advisory Committee on the Auditing Profession as the department aims to improve the competitiveness of the U.S. capital markets.

The committee, co-chaired by former Securities and Exchange Commission Chairman Arthur Levitt and former SEC Chief Accountant Donald T. Nicolaisen, is tasked with developing recommendations for issues that affect the sustainability of the auditing profession.

In introductory remarks before the initial committee meeting, Robert K. Steel, undersecretary for domestic finance at the Treasury Department, reminded the committee of the establishment of the Public Company Accounting Oversight Board as a result of the Sarbanes-Oxley Act.

"Five years have passed since the passage of this landmark legislation," said Steel. "The profession continues to adapt to these changes as it reasserts its role in enhancing investor confidence and the competitiveness of our capital markets. At the same time, the profession faces considerable challenges."

Steel noted that Treasury Secretary Henry Paulson described some of those challenges in a speech last year.

'Given the importance of accounting to our financial system, is there enough competition?" Paulson asked. "Will our reformed accounting system produce the high-quality audits and attract the talented auditors we need? Do auditors seek detailed rules in order to focus on technical compliance, rather than using professional judgment that could be second-guessed by the PCAOB or private litigants?"

The committee is expected to draw up a list of recommendations for addressing these challenges.

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