President's Progress Report Omits Audit Lessons Learned

President Bush released a fact sheet showing the government's response to recent accounting scandals. It was part of an on-going effort to restore confidence in the U.S. capital markets and the economy. But this effort left market indexes at four- and six-year lows. Some say the markets may not fully recover until investors see a report of lessons learned by the accounting profession.

  • President Bush's report. The government reports a record number of investigations. In July, a multi-agency Corporate Fraud Task Force was formed with members from the Justice Department (DOJ), Securities and Exchange Commission (SEC), and others. Since then, the DOJ has opened more than 100 investigations into suspected corporate fraud. The SEC has already filed 156 actions for financial fraud and disclosure violations.

  • Audit lessons learned. The American Institute of CPAs may have taken action, too. Investigations of audits are assigned to the Quality Control Inquiry Committee, a unit of AICPA's SEC Practice Section. Any lessons learned are passed along to the appropriate AICPA standards-setting body. But don't expect any fast progress reports. AICPA spokespersons say current systems and policies prohibit communication of any information regarding the cases under investigation or the lessons learned from specific cases. Transition Oversight Board staff did not return phone calls.

The accounting profession's silence stands in stark contrast to President Bush's message. He said, "The American people need to know we're acting, we're moving, and we're moving fast." Will the process of communicating accounting and audit lessons learned change in the future? It could, depending on the policies adopted by the new Public Accountability Oversight Board. The SEC had hoped to announce the new chairman of the board by September 30th, but the effort met with an intense lobbying blitz from accounting firms. In a searing editorial, the Wall Street Journal said, "Beyond Mr. Biggs, the issue is whether the accounting industry has learned anything from its recent travails."

-Rosemary Schlank

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