Tuesday, January 24, 2006

USCoC: National Auditors Too Concentrated and Too Regulated

The United States Chamber of Commerce released a statement today claimed that the contraction of any other large CPA firms (now down to the Big Four) would undermine public confidence in the audit profession. Among proposals to bolster competition is to allow Big Four firms to bid on audits where they have recently provided services disqualifing under Sarbanes-Oxley, better access to legal liability insurance for auditors and incentives to encourage publicly-traded companies to use large but not "Big Four" auditors. The Chamber also criticized the treatment of Arthur Andersen after Enron, called for tort reform in the auditing industry and asked that implementation of PCAOB Standard 2, which instructs auditors on the implementation of Sarbanes-Oxley, be clarified or modified.

In my opinion, some but not all of the Chamber's comments are valid. Greater competition for audits probably would be beneficial to the profession and there is some evidence that large, non-"Big Four" firms are being engaged for an increased number of public company audits--along the same line, the PCAOB should be encouraged to continue its forums for smaller CPA firms and small public companies. In some states, tort reform is still a valid issue, although some improvement has already occurred on this front. There are also legitimate questions about the cost-benefit of some facets of implementing Sarbanes-Oxley. On the other side, something akin to Sarbanes-Oxley and the PCAOB probably is necessary to maintain confidence in the accounting profession and the concept of allow companies recently providing disqualifying services to bid on public company audits may damage the perception of auditor independence just when the auditing profession was making a comeback in public credibility.


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