Friday, May 09, 2008

Treasury Department Advice to Auditors (and Others) Regarding Audit Profession

In a four-hour meeting, the Treasury Department came up with a list of recommendations to improve the audit profession; these initial recommendations will have a month-long comment period before being issued in final form. Initial recommendations include: market-based curricula and content in accounting undergraduate and masters' programs, greater representation by minorities in the profession, greater development of fraud detection skills, clarification of the responsibilities which auditors have for fraud detection (special emphasis here on improving PCAOB/SEC guidelines on auditor responsibilities); reducing barriers to smaller auditing firms for auditing publicly-traded firms and annual ratification of auditors by shareholders of all publicly-traded companies.

The Treasury clearly decided to speak out on a wide range of audit-related issues, from auditing education to fraud. While there are many worthy goals, such as greater minority participation or greater auditor competiton, it is far from clear to me HOW the Treasury intends to accomplish these goals--and frankly, it would be scary and a overreach of Federal Government power if the Treasury became authorized to implement these goals. Finally, I am not sure that all goals are internally consistent. One example, Sarbanes-Oxley requirements are a barrier entry for smaller CPA firms attempting to develop the expertise to test internal control.


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