AUDITING - US Chamber of Commerce

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Auditing: A Profession at Risk• There remain significant misunderstandingsabout the meaning andnature of accrual accounting systemsand the level of precision inherent insuch systems. Changes of 1 or 2 centsper share in a company’s earnings canhave a great market impact — andcreate significant litigation risk — evenif such changes indicate nothing aboutthe health of a company’s underlyingbusiness.• The profession — through voluntarymergers as well as through theelimination of Andersen — is severelycontracted, with only four major firmsserving a large majority of the listedand actively traded public companiesin the United States. While fourappears to be a sustainable number,any further contraction in this industrywould present a major challenge tothe viability of the profession, withpotential for a negative effect on publicconfidence in our markets. WilliamMcDonough, former chair of thePCAOB, said, “None of us [regulators]has a clue what to do if one of the BigFour failed.” He also said that if one ofthe Big Four were to collapse, the bestaccountants could choose to quit theprofession 1 .There continue to be debates about therole that the auditing profession itself hasplayed in bringing about some of these1Financial Times, September 28, 2005, p. 26.5
Auditing: A Profession at Riskcircumstances, and what it can do on itsown to address the current challenges.Nevertheless, the simple facts are that(i) confidence and stability are critical tothe success of capital markets, and (ii)auditing helps bring these attributes to ourmarkets. Instead of risking a crisis, it isimportant to act now to try to bring somestability back to the auditing profession.At the same time, action must be takento ensure that the needs of companiesare met and that they have access tohigh-quality, reasonably priced auditingservices.ACTION PLANThe U.S. Chamber of Commerce iscommitted to supporting policies thatenhance the value of audits and ensurethe long-term viability of the auditingprofession. In that regard, we propose thefollowing three-part action plan:6• Help the profession become insurable• Clarify PCAOB standards• Support expansion of and competitionamong the Big Four firmsThis plan will require a broad-based effort,involving coordinated support amongpolicymakers, Wall Street, the auditingprofession, and the broader businesscommunity. The U.S. Chamber stands
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AUDITING - US Chamber of Commerce

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