Leaders of the American Institute of CPAs have been traveling the country recently to inform constituents on current audit reform initiatives and to outline the position of the AICPA on behalf of the membership.
After similar presentations in Los Angeles and Dallas last week, AICPA President Barry Melancon addressed an audience of professionals and students in Arkansas on how the Enron scandal has challenged the accounting profession.
"For virtually every [certified public accountant] in this room, it is probably the most significant event in your career," said Mr. Melancon.
As part of the national effort, the AICPA is reiterating its position on several reform initiatives. Specifically, the AICPA supports:
- Developing a new disciplinary system able to punish accountants who break the rules, but it should only be applied to accountants serving major corporations, not smaller, mom-and-pop businesses.
- Ending a practice among accounting firms of offering clients help in preparing their books before auditors from the same accounting firm then check for errors or wrongdoing. This includes the sale of computer software and expertise that helps companies pull their books together.
- Placing more power in the hands of corporate auditing committees to hire and dismiss outside auditors. Melancon said this power should rest with committees -- groups of corporate executives assigned the responsibility of dealing with auditors -- not the individual corporate leaders, who may pursue different agendas.
- Making it a felony to lie to an outside auditor.
- Improving the financial reporting system to better take into account the assets of 21st century corporations. Contemporary reporting standards remain stalled in the atmosphere of older, industrial age industries and do not take into account some vitally important assets, such as a product's popularity in a market place or a corporation's track record in meeting goals.
Mr. Melancon indicated that the AICPA does not support mandatory rotation of auditors every couple of years because the learning curve on understanding a client business is too steep and the opportunities for management fraud too great when breaking in a "rookie."
Additionally, the AICPA opposes any discussion of closing the so-called "revolving door" - the practice of employees of public accounting firms switching to go to work for their former clients.