Report Says Auditing Review Process Lacks Discipline

In the second of a series [1] of two articles about the accounting profession, The Washington Post staff writers investigate the disciplinary process in place in the accounting profession.

The reporters examined hundreds of cases of disciplinary action against accountants and found, for the most part, that accountants rarely face public accountability. "The deterrent effect that's necessary is just not there," according to Douglas R. Carmichael, a professor of accountancy at City University of New York's Baruch College. That "makes investing like Russian roulette."

The layers of discipline facing accountants who are accused of overlooking or covering up include sanctions by the SEC, expulsion from the AICPA, and revocation of licenses by state accountancy boards. In reality, the manpower to effectively implement disciplinary procedures is small, and only the most egregious examples of auditing abuse result in action against the auditors, according to the report.

The previous article [2] in the series addressed the role of accountants as public watchdogs.