At a time when many prominent accounting opinion leaders seem to be focusing externally on the audit reforms others should undertake, Deloitte & Touche (D&T) CEO James Copeland took the lead in publicly addressing the audit improvements his firm has undertaken on its own. Speaking to the Economic Club of Detroit on April 29, 2002, Mr. Copeland explained five specific audit improvement initiatives.
- D&T is considering a rotation requirement for client service personnel below the partner level and for audit partners who lead subsidiary audits. This initiative goes beyond the policy set by the Securities and Exchange Commission (SEC), which pertains only to the partner who leads the overall audit effort.
- D&T has already incorporated into its audit process virtually all the recommendations of the Panel on Audit Effectiveness created by the Public Oversight Board at the request of the SEC.
- D&T is attempting to provide leadership in improving auditing for fraud. Although the new fraud standard is not scheduled to take effect until 2003, the firm is moving quickly to implement the standard as soon as possible. It is also adding forensic auditing resources and putting groups together to brainstorm ways that frauds can be perpetrated and, most importantly, prevented or discovered.
- While D&T audit professionals are not directly compensated for helping grow the revenues of other service lines, the firm is conducting a thorough analysis of its evaluation and compensation systems to be sure that those who perform the highest quality audit work are appropriately rewarded.
- D&T has already put in place an analytical risk management program designed to focus on its largest clients, particularly those with high price-earnings (P-E) ratios as well as large market capitalizations.
In addition, Deloitte is working on other improvements in cooperative efforts involving standard-setters, regulators, lawmakers and other firms. Summing up the audit improvement initiatives underway at D&T and within the profession, Mr. Copeland quoted Tomita-san, the founder of Tohmatsu & Co., as saying, "There's nothing worse than an accountant without a conscience." Audit improvements and reforms add value by helping to "keep an honest man honest," explained Mr. Copeland, "and Deloitte wants to be part of our profession's leadership in helping to improve audits and restore confidence in the American financial system."
Download Mr. Copeland's speech.