What seems like a century ago, my father arrived home one night with a Nehru jacket. The Nehru was a single-breasted jacket from India that sported a band collar and was often accompanied by a string of beads. It straddled the line between hip and conformity. The problem was that by the time my father bought one, the Nehru had long faded out of style.I learned two things from Pop's sartorial misstep. One was to stick to things that never go out of fashion, like T-shirts and blue jeans, and the other was to jump on something before it has the chance to go out of style.
But let's stick to more profession-centric issues that (hopefully) won't have the fickle shelf-life of fashions, i.e., audit quality and investor confidence. Recently, a new Washington, D.C.-based group, backed by eight of the country's top firms and the American Institute of CPAs, is looking to wield a big stick of influence around the Beltway when it comes to matters of auditing and investor policy.
The group - the Center for Audit Quality - supplants the AICPA's Center for Public Company Audit Firms, whose membership totals nearly 800 and, according to the nonprofit entity, is open to both firms that have Securities and Exchange Commission practices and those that don't.
The group's executive director, Cynthia Fornelli, a former deputy director at the SEC and compliance executive with Bank of America, remarked, "Accounting firms recognize that people lost confidence in our public marketplace" - a reference to the spate of massive accounting scandals resulting in the names Enron and WorldCom becoming a permanent part of a vernacular, as well as erecting a tombstone for Arthur Andersen.
She indicated that those in the public accounting arena intend to work toward reversing that trend by working closely with regulators and investors to hone the financial reporting process. A laudable mission statement, to be sure, but for some reason I'm picturing a room full of accountants and regulators wearing Nehru jackets.
I'm wondering what the auditing landscape would look like today if a similar group had been formed six or seven years ago, when accounting problems at companies such as MicroStrategy sent less-than-subtle hints that maybe something was amiss in the way that firms conducted SEC audits. When then-SEC chair Arthur Levitt initially proposed audit independence rules, only two of the then-Big Five firms supported him - Ernst & Young and PricewaterhouseCoopers - and neither for entirely altruistic reasons. E&Y was awaiting approval for the sale of its consulting unit, and PwC had been called on the carpet for numerous instances of its auditors purchasing clients' stock.
Had a group like this been formed circa 1999 or 2000, perhaps there would have been no need for the Public Company Accounting Oversight Board or Sarbanes-Oxley.
But that's past history, much like the Nehru jacket. Let's hope the trend of improving the audit profession hangs around for a bit longer.
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