James E. Copeland, chief executive officer of Deloitte & Touche, has announced his firm is assembling a team to develop a model for a new approach to restoring investor confidence. The new approach involves creation of a national board to investigate business failures and recommend steps to prevent similar failures in the future.
The concept is reminiscent of a similar initiative for audit failures introduced by the Public Oversight Board in the mid-1990s. Under the leadership of then POB chairman A. A. Sommer, the role of the profession's Quality Control Inquiry Committee was expanded to permit inquiry into whether there was a failed audit, and if so what caused it and how could similar problems be avoided in the future.
Both Mr. Copeland and Mr. Sommer have used the analogy of the National Transportation Safety Board (NTSB), which investigates airplane crashes. Mr. Copeland's concept is broader, encompassing failed businesses, (rather than just failed audits), and he suggests making the new board an independent public agency, (rather than a part of the accounting profession's peer review process). The new agency would work with, but not displace, the investigatory roles of the Justice Department, Congress and Securities and Exchange Commission.
The new board has been tentatively dubbed the National Financial Review Board. It is not clear at this time whether Mr. Copeland envisions a board with subpoena power or one that would specifically address the roles played by auditors prior to business failures. But the details may soon become clearer, as Deloitte's multidisciplinary team completes its study and makes its recommendations on how the new board should be structured, governed and financed. The team will consist of partners, principals and other professionals with auditing, risk management and public administration experience.