Independence Reviews on Hold, Pending New Watchdog

While law-makers and regulators hammer out the specifics of the new Public Accountability Board proposed by Securities and Exchange Commission (SEC) Chairman Harvey Pitt and endorsed by President Bush, the Big Five firms may catch a break on long-awaited reviews of their auditor independence systems.

Under a program started two years ago, the Big Five were directed to modernize their internal independence compliance systems according to a timetable set by the SEC. To provide public assurance that the systems improvements were completed on time, the firms agreed to a series of reviews by the Public Oversight Board (POB). But POB's subsequent decision to close its doors by the end of March leaves the reviews unfinished.

According to media accounts, POB Chairman Charles Bowsher has urged the SEC to find a way to complete the reviews as they were originally contemplated, notwithstanding an apparent change in the SEC's thinking. The change in policy was communicated in a letter sent to the Big Five in December 2001. In the letter, SEC's John Morrissey reportedly told the firms that, contrary to the original plan, the POB would not issue a public report that suggested improvements in a firm’s compliance and singled out any firm that didn't have its system up by June 30, 2001. The only exception: if an accounting firm's transgression was so egregious that it would fail a peer review.

With the peer review process slated for extinction as part of the SEC's proposed reform initiatives, Chairman Pitt has reportedly asked the firms for their recommendations as to next steps. "We appreciate Mr. Bowsher's comments and agree fully that it's important for this work to go forward," says SEC spokeswoman Christi Harlan.

Read POB Chairman Bowsher's letter to the SEC.

-Rosemary Schlank

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.