The Treasury Department's Advisory Committee on the Auditing Profession has released its final report outlining recommendations on how to improve the sustainability of the audit profession, including a dissenting statement from one of its members.
The committee voted to approve the report last week by a margin of 14-1, with the lone opposing vote cast by former SEC chief accountant Lynn Turner (see Treasury Committee Finalizes Audit Profession Report). In his dissenting statement, he explained that the committee members were only given the choice of voting for or against the report in its entirety. His main objection was to a recommendation that the audited financial statements of the larger firms be provided to the Public Company Accounting Oversight Board on a confidential basis.
"At a time when the U.S. capital markets are reeling from a lack of transparency, trust and confidence, such a recommendation will not build trust in the auditing profession, but rather raise further doubts," he wrote.
Turner wants to see those financial statements made public, as they are by law in the United Kingdom. He also cited several other areas where he would have beefed up the final report. He wants to see more immediate action taken to change accounting education programs to provide students with more information about areas such as derivatives and finance, management information systems, marketing, and the exercise of sound judgment.
He also said he did not believe the report adequately addresses how to increase competition among auditing firms. Turner believes the report should have addressed the quality of international auditing standards for global companies and the independence of the standards-setting process. He wanted the report to discuss conflicts of independence that arise from auditors being paid by the same companies they audit. He also thought that consideration should be given to whether or not an audit-only firm is a more appropriate business model for the profession than the current model, which often combines regulated auditing functions with non-regulated consulting services.
Turner was on Capitol Hill on Tuesday to testify to the House Committee on Oversight and Government Reform on the collapse and government rescue of insurance giant AIG. There too he cited lack of transparency as a fundamental problem. "Trust and confidence in markets and any company begins with, and ends with, transparency," he said in his prepared remarks.
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