The maneuvering continues as the Big Four accounting firms and the AICPA struggle to absorb the Public Company Accounting Oversight Board’s (PCAOB) decision last month to assume responsibility for setting auditing rules for public companies.
A panel will advise the board and the firms are seeking a place on the panel to help set the rules. The PCAOB, formed to oversee the profession in answer to the recent accounting scandals, also took standard-setting authority away from the AICPA, the industry’s primary trade organization. The board’s move ended the practice of accountants setting their own rules.
The PCAOB agreed to temporarily adopt AICPA auditing standards until they have time to develop their own. The AICPA had been the body responsible for standard setting for the profession for more than six decades, but that responsibility was stripped from the organization following the recent accounting scandals that have emerged over the past eighteen months.
As a result, the country’s Big Four accounting firms—KPMG, Deloitte & Touch, Ernst & Young and PricewaterhouseCoopers—are trying to define their role in the new order. The firms have written to the board requesting that their auditors be part of the advisory group, rationalizing that the idea makes sense since most public companies in America are audited by one of them.
For instance, Ernst & Young wrote that it supports permanent representation from all the top accounting firms on the advisory board.
"The public interest will best be served if the advisory group includes those persons in a position to become aware of emerging auditing issues as they arise, before issues become widespread and before divergent practices become entrenched," Ernst & Young wrote.
The AICPA further called for more than one advisory board. Specifically, the organization seeks advisory boards in the areas of auditing standards; quality control standards; and ethics and independence.
The AICPA and firms further requested the advisory board or boards hold open and public meetings and give more time for public input to their proposals — beyond the 21 days that the board has stated it will give for replies. The AICPA, along with PwC, Ernst and Deloitte further requested that the board clarify that its rules will apply only to audits of public companies performed by accounting firms.
A board spokesman said the board plans to include members with expertise in all relevant areas, including accounting, auditing and governance, investing and other related interests.