Center for Audit Quality

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Center for Audit Quality
Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession May 21, 2008
Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Host Cindy Fornelli, Executive Director, Center
for Audit Quality Guests Neal Spencer, Managing
Partner, BKD, LLP Bob Kueppers, Deputy CEO,
Deloitte LLP and Chair, CAQ Executive Committee
Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Todays Agenda

• Materials
• Advisory Committee Update/Timeline
• Key Issues in Draft Report
• Your Opportunity to Comment
• Questions Answers

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Materials

• Treasury Recommendations and CAQ Analysis
• Link to Treasurys Draft Report
• http//www.treas.gov/offices/domestic-finance
  /acap/
• Link to Advisory Committee comment page
  http//comments.treas.gov/index.cfm?FuseActionHom
  e.Reply

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Advisory Committee Update/Timeline

• Advisory committee issued draft report on May 5
• Federal Register notice published on May 15
• Thirty-day public comment period ends on June 13
• Final report likely to be adopted on July 22

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues

• Transparency
• Key Performance Indicators
• Auditor Independence
• Barriers to Smaller Firms
• Fraud
• Mobility
• Firm Governance
• Partner Rotation
• Engagement Partner Signature

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Transparency
Possible Treasury Recommendation

• Public disclosure of audited financial statements
  by audit firms

• CAQ Analysis (pages 1-2 of Treasury
  Recommendations and CAQ Analysis)
• Could exacerbate concentration issues
• Linkage to audit quality?
• Liability concern

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Key Performance Indicators
Treasury Recommendation

• Explore feasibility of developing key indicators
  of audit quality

• CAQ Analysis (pages 2-3)
• Articulate the objectives consider the cost
  utilize
• other efforts ensure applicability to firms
  of all sizes
• For best practices, not regulatory requirements

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Auditor Independence
Treasury Recommendation

• Promote understanding of, and compliance with,
  auditor independence requirements.

• CAQ Analysis (pages 4-5)
• Single resource needed include requirements of
  
• other authorities
• Incorrect assumption firms dont have
  understanding of,
• compliance with, or training materials for
• No suggested improvements to existing
  independence
• rules?

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Barriers to Smaller Firms
Treasury Recommendation

• Reduce barriers to growth of smaller auditing
  firms (third party agreements representation on
  committees)

• CAQ Analysis (pages 5-7)
• Liability is biggest deterrent insurability a
  key
• consideration institutional bias
• Participation in committees, forums, fellowships
  and
• engagements would improve technical
  proficiencies
• and build brand recognition

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Fraud
Treasury Recommendation

• Strengthen firms fraud detection and prevention
  skills close expectations gap in auditors report

• CAQ Analysis (pages 7-9)
• Support creation of a U.S. Center, preferably
  within
• the CAQ
• Expand recommendation to note managements
• shared responsibility

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Mobility
Treasury Recommendation

• Congressional action if states dont adopt
  mobility provisions by 2010

• CAQ Analysis (pages 9-10)
• Divergent state approaches
• Profession working toward UAA adoption
• Premature Congressional involvement

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Firm Governance
Treasury Recommendation

• Study possibility of firms appointing independent
  board members

• CAQ Analysis (pages 10-11)
• Flexibility on options needed
• Consider independence rules, state regulation,
• personal liability
• Acknowledgement that many firms already have
• advisory boards

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Partner Rotation
Treasury Recommendation

• None to date, but much discussion in hearings

• CAQ Analysis (pages 12-13)
• Major issue for firms of all sizes impact on
  talent
• retention
• Return to two years off would provide greater
• flexibility
• Examine other partner requirements

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Key Issues
Engagement Partner Signature
Treasury Recommendation

• None to date, but much discussion in hearings

• CAQ Analysis (page 13-14)
• Counter to thrust of Sarbanes-Oxley firm-based
  
• QCs over individual audits
• Regulators already have access
• Potential security and privacy issues

Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Your Opportunity to Comment
To submit a comment or feedback, visit the
Advisory Committees web page http//comments.tr
eas.gov/index.cfm?FuseActionHome.Reply Deadline
June 13, 2008
Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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Questions and Answers
Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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For further information, contact
Center for Audit Quality1-888-817-3277, or
membership_at_thecaq.org
Briefing on Draft Report of U.S. Department of
Treasurys Advisory Committee on the Auditing
Profession
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