The Public Oversight Board, the group that, among other tasks, oversees the peer review process required of all public accounting firms that audit publicly held companies, has decided to take an active role in the expanded peer review that Deloitte & Touche is providing to Andersen.
Andersen announced last week it has requested the expanded review as a result of the recent news of Enron's misstated financial statements.
"We're looking at the systems and specific areas affected by the Enron type of business," stated Charles Bowsher, chairman of the Public Oversight Board.
It is not unusual for the Public Oversight Board to have one or two staff members monitor the Big Five peer reviews. In this case, however the group will send three or four accountants to work alongside Deloitte & Touche in the Andersen review.
According to Mr. Bowsher, the peer review process will not attempt to specifically examine the Enron audit. Rather, the expanded review will look at "the systems, process, and procedures" applied by Andersen with audit clients such as Enron.
Mr. Bowsher explained that the reviewing auditors will attempt to find out how Andersen handles complex derivative transactions such as the type that contributed to Enron's collapse, and what accounting principles Andersen generally uses when faced with the types of partnerships used by Enron's chief financial officer.
Part of the Public Oversight Board's reason for participation in this particular review will be to determine if the peer review process needs to be changed.