AICPA Statement on New Auditor Independence Position

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The following is the text of an e-mail distributed to AICPA members on Friday, February 1, 2002 outlining the change in position where the AICPA now opposes the practice of a firm providing certain kinds of consulting and internal audit services to a public client which the firm audits. It outlines the plans for a significant public relations campaign in the next few weeks, and includes the commitment to go forward with the student outreach campaign without delay.

Dear AICPA Member,

Our profession enjoys a sacred public trust and for more than one hundred years has served the public interest. Yet, in a short period of time the stain from Enron's collapse has eroded our most important asset: public confidence.

For the last two weeks, we have been working around the clock to improve the perception of the accounting profession. During this period we have been called upon to speak for the profession in literally scores of broadcast and print interviews. We have communicated our zero tolerance of violations of the ethics and standards of our profession, which tarnish us all. And we are attempting to focus scrutiny on where we believe the most basic problem lies - the current and outdated financial reporting model and the accounting principles that surround it.

What our observations of the current debate have driven home to us is that because scope of services has become such an issue, it must be addressed before the real issues will ever be considered. For that reason, your Board approved a resolution to support prohibitions on auditors of public companies from providing financial systems design and implementation and internal audit outsourcing in order to restore the public's confidence in the financial reporting system. While necessary to restore the public confidence, the Board does not believe that prohibiting non-audit services will improve the quality of audits nor prevent business failures. We will therefore continue to work on substantive improvements to the financial reporting and regulatory process.

To this end, we have already begun to focus others on the benefits that will accrue from a reporting model that is suitable to Information Age companies, whose earning assets are often not accurately valued by traditional, manufacturing-based measures.

We will work with the SEC to strengthen regulation of the profession as it implements a system that incorporates active public participation to enhance discipline and quality monitoring.

We will continue to marshal support for moving from rules-based to principles-based accounting.

Finally, we will focus attention on addressing inherent inequities in the auditing process, for example, that it is a felony to lie to a prosecutor, but not to one's auditor.

Let us reaffirm and be perfectly clear that the Board recognizes that the reporting needs of private companies and their auditors are very different and should not be subjected to the same restrictions on non-audit services. It is the tradition of CPAs throughout the U.S. to provide a range of services including audit, tax, business advisory and information technology, to their privately held clients.

In the coming weeks, you will see advertisements in The Wall Street Journal, New York Times, Washington Post and USA Today that we believe will begin the process of restoring confidence. We will not delay launching our student website and recruiting efforts, as our integrated marketing consultants advise us that the profession's heightened visibility makes this an opportune time to convey our messages regarding its viability, dynamism and high standards. We will use every communications vehicle at our disposal, including mail, e-mail, our website, CPA Letter and Journal of Accountancy, to keep you apprised of developments and to provide you with the information that you need.

This has been a difficult time for all of us, but we look forward to restored public confidence in our profession. As always, please feel free to contact us with your comments and suggestions.

Yours sincerely,

James G. Castellano, CPA
Chair of the Board

Barry C. Melancon, CPA
President and CEO

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