Editor’s Note: James R. Doty
is chairman of the Public Company Accounting Oversight Board. This post is based on Chairman Doty’s remarks at the Practising Law Institute’s 44th Annual Securities Regulation Conference, available here
. The views expressed in this post are those of Chairman Doty and do not necessarily reflect the view of the PCAOB as a whole or any other Board members or staff.
I am here to talk about the regulatory initiatives of the Public Company Accounting Oversight Board. The PCAOB is deeply engaged in examining ways to enhance the relevance, credibility and transparency of the audit to better serve investors.
The auditing profession has developed a highly skilled body of experts capable of analyzing accounts in a way that draws out truths and insights and sheds light on confused or misleading claims. It plays an indispensable role in making our capital markets fair and strong.
But I believe we are in a high risk period that merits more attention to the audit, not less. When companies make lay-offs, as we’ve seen recently, they often affect the internal audit and compliance staff — the first line of defense for fraud and other corporate malfeasance. This should be a concern to the legal community.
Although we have never needed it more, the audit too has, in the minds of some, become a commodity to be contained with other compliance costs.
In the United States, large audit firms’ revenues from consulting are growing 15 percent a year. Audit fees have stagnated at, basically, the inflation rate. Thus audit practices have shrunk in comparison to audit firms’ other client service lines.
This can weaken the strength of the audit practice in the firm overall. The problem is compounded when audit firms turn their talents to other endeavors that may further damage public views on the relevance and value of audit.
To be relevant, the auditor must speak to and for investors. Fair or not, that is in question today.
…continue reading: PCAOB Regulatory Initiatives