CPA Journal Symposium to Examine Auditor Independence

By Danielle D'Angelo

Prompted in part by the recent scrutiny of the accounting profession by the Securities and Exchange Commission (see related story on page 1), the next CPA Journal Symposium will examine auditor independence. The event, which will take place on December 17 in New York City, will address the SEC's actions and the progress of the Independence Standards Board (ISB).

Speakers include ISB Chair William Allen, ISB Executive Director Arthur Seigel, incoming AICPA Vice Chair Robert Elliott, and representatives from the SEC, Association of Management and Investment Research, and the Financial Executives Institute.

In addition to the broad action plan proposed by the SEC to improve the financial reporting process, the Commission also is taking a closer look at how performing consulting work for audit clients affects auditor independence. SEC Chief Accountant Lynn Turner has expressed concern that an auditor who discovers an accounting problem may be reluctant to direct management to rectify the error, for fear of possible loss of consulting revenue for the CPA firm.

The Independence Standards Board proposed that auditors send a form letter to directors every year stating they are independent. Turner wants further action, requiring auditors to meet with audit committees annually and detail the CPA firm's consulting services and other ties to the company, specifically pointing out why those services do not impede independence.

At a press conference to announce the SEC's action plan, Turner and SEC Chairman Arthur Levitt said the Commission is concerned with the growing number of companies ­ Cendant and Sunbeam are among the most recent, highly-publicized cases ­ found to have significant accounting irregularities in their financial statements.

Turner pointed out that since he began his term in July, the SEC has met with a variety of groups to better understand and work with the private sector, including analysts, standards-setters, and chief financial officers. Input from these meetings influenced some of the recommendations in the action plan. (See page 11 for the SEC's proposals.)

"We wanted to make sure that if we developed an action plan to address some of these concerns, that we hit the bull's eye," said Turner.