The Treasury Department's Advisory Committee on the Auditing Profession has released its final report with recommendations on how to improve the sustainability of the profession - but not without some dissension.The committee approved the report by a vote of 14-1, with the lone dissenting vote cast by Lynn Turner, a former chief accountant of the Securities and Exchange Commission.
In his dissenting statement, he explained that 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 U.K.
He also cited several other areas where he would have beefed up the final report, which he said he did not believe adequately addresses how to increase competition among auditing firms. He wanted the report to discuss conflicts of independence that arise from auditors being paid by the same companies that they audit, and he thought that consideration should be given to whether or not an audit-only firm is a more appropriate business model for the profession.
Turner also wanted to see more immediate action taken to change accounting education programs.
Robert Glauber, chair of the Subcommittee on Firm Structure and Finances, said that his group could not reach a consensus on the section of the report on catastrophic liability risks, so it instead consists of bullet points expressing various views from auditors and investors.
"The firms felt that the threat to the profession coming from catastrophic liability could kill one of the [Big Four] firms," said committee co-chair and former SEC chair Arthur Levitt. "Part of the dialogue involved this threat of litigation."
"It would be hard to see one of the big firms disappear," said the other committee co-chair, Don Nicolaisen, another former chief accountant of the SEC. "It's important that the regulator be aware of those risks."
Other changes in the final report include further recommendations for improving the representation of minorities at auditing firms. "The firms cited that over and over again," said Levitt. "The firms have that as a very important priority."
The recommendations in the report focused on three specific areas: improving accounting education and strengthening human capital; enhancing auditing firm governance, transparency, responsibility, communications and audit quality; and increasing audit market competition and auditor choice.
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