SEC Rebukes AICPA on Standards-Setting Posture

The SEC wants the AICPA - and its members - to know, in no uncertain terms, who's in charge of standard setting.

Last week AccountingWEB reported that the American Institute of CPAs had issued an Exposure Draft on Internal Control Reporting in an effort to help auditors understand and implement Section 404 of the Sarbanes-Oxley Act - "Management Assessment of Internal Controls". Acknowledging initially that responsibility for standard setting rests with the PCAOB, James Gerson, Chair of the AICPA's Auditing Standards Board indicated in an AICPA press release that, "In the interest of the public, we need to prepare auditors for the SEC's final rule."

But following the release of the Exposure Draft, the SEC expressed strong concerns that the AICPA is sending the wrong message to its members.

In a sharp letter to Charles Landes, AICPA Director of Audit and Attest Standards, SEC Chief Accountant Jackson Day expressed concern over the mistaken perception that the AICPA is more involved in the standard setting process than they really are.

He particularly takes issue with the AICPA's declaration that it is taking a "first step to implement a provision of the Sarbanes-Oxley Act," and that "the proposed auditing standard … would apply to audits of public companies that are affected by the Sarbanes-Oxley Act." Mr. Day further points to the AICPA's indication that "the effective date for these proposed changes would be for periods on or after September 15, 2003."

Mr. Day writes, "The [Securities and Exchange] Commission staff is concerned that these quotes create the misleading impression that the ASB will adopt final standards in this area that will be applicable to the audits of public companies' financial statements. As you know, the Sarbanes-Oxley Act grants the Public Company Accounting Oversight Board ("PCAOB") the authority to set auditing standards to be used by registered public accounting firms in the preparation and issuance of audit reports required by that Act or by the rules of the Commission. "

Mr. Day points out that April 26, 2003 is the date that the SEC expects to adopt initial or transitional auditing standards put forward by the PCAOB, and that adoption of these initial standards are provided for in Sarbanes-Oxley without going through the statutory rulemaking process.

Since the AICPA has asked its members to comment on the exposure draft by May 15, 2003, Mr. Day points out that any proposed rules in the AICPA version will not be included in the initial standards to be adopted by the SEC.

Mr. Day also took issue with the AICPA's initial assertion that he or anyone on the SEC gave the ASB the "green light" to publish the exposure draft. He restated his position to the AICPA that the SEC would not "stand in your way" in engaging in a public dialogue about the auditing standard.

You may like these other stories...

Optimism about the US economy continues to grow among CPAs and financial executives, and with that, more companies are expecting to increase hiring in the near future, according to results of a new survey released by the...
Planning has begun to determine the content, design, and structure of the next version of the Uniform CPA Examination – and the American Institute of CPAs (AICPA) is asking the accounting profession for its feedback on...
In a letter sent to Congress last week, the American Institute of CPAs (AICPA), the Virgin Islands Society of CPAs (VISCPA), and the Guam Society of CPAs (GSCPA) sought clarification regarding net investment income tax (NIIT...

Already a member? log in here.

Upcoming CPE Webinars

Oct 9In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards.
Oct 15This webinar presents the requirements of AU-C 600, Audits of Group Financial Statements (Including the Work of Component Auditors).
Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.