AUDITING - US Chamber of Commerce

Auditing: A Profession at Risk10has occurred — only evidence thatreasonable and thorough efforts havebeen made to detect fraud. In thatrespect, we recommend that thePCAOB promulgate a safe harborstandard for fraud detection, whichclearly defines the nature and extentof procedures that an auditing firmmust employ to detect fraud.A safe harbor would provide clarityto the investing public about themeaning of an audit opinion, andit would allow firms to determinewhen they have satisfied theirresponsibilities. Such a standardwould also protect auditing firmsfrom legal liability when thePCAOB-prescribed procedures havebeen reasonably performed.Without such a standard, auditingfirms are effectively asked to becriminal investigators and insurers ofthe character of corporate managers.This is not only unfair; it is alsoa strong disincentive for firms toaccept new and entrepreneurialclients with unproven management.The reluctance to accept suchclients places a significant burdenon the many innovative smallcompanies that are led by good, butunknown, managers. This ultimatelyundermines the future growth anddevelopment of the U.S. economy.