Report of U.S. Treasury Committee on the Auditing Profession

Source: Accounting Today

Ed Kliegman, retired founding partner of Marcum & Kliegman CPAs, comments on this 28-page preliminary report.

• The report calls for a “mechanism for the preservation and rehabilitation of troubled larger public company auditing firms.” Kliegman says neither the PCAOB, the SEC, or any other entity is currently able to handle such a problem with the speed that would be required.
• The report stresses the necessity of quality audits without fraud. But they don’t recommend any system for improving the ethics of the larger auditors. Kliegman believes the quality of audits is dependent on higher ethical standards of the firms, and that those ethical standards should permeate the firms. He decries the fact that audits became loss leaders. In their pursuit of higher profits, firms cut back on audit procedures and failed to adequately supervise audits.
• The report suggests auditors should address the differences between what the public expects in terms of fraud discovery, and how the firms deal with fraud. He believes the large firms know how to discover fraud but aren’t trying to implement fraud programs through auditing.
• The report calls for “market-driven, dynamic curricula” for accounting students. Kliegman believes college education cannot prepare students to be competent auditors when they graduate. He suggests colleges develop internship programs as part of their curricula.

For the complete article, click here and select the article Commentary: Report on Auditing Should be a Must-Read in the May 19, 2008, issue.

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