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Newsletter - September 2009 Independence Issue UpdateI feel the need to communicate the status of the Foundation’s efforts to address the issue of audit independence, as explained within the Foundation website.
There is strong resistance, apathy, disregard and/or unbelief concerning this issue at high levels of the audit profession, regulators and the federal government; however, there are company shareowners and professional auditors who have a definite concern about the resolution of this significant gap, indeed a chasm, between what does occur and what should be happening regarding auditor independence.
There are people who believe that improving the independence of audits by use of a governing authority would reduce audit effectiveness because the existing close (sharing) and “friendly” relationship between the auditor and client would be disrupted. The intent by the Foundation would be for the governing authority to specifically improve audit effectiveness as an important part of their oversight responsibility. We think that improved independence, coupled with active governance geared toward audit excellence would provide a better environment for the proper sharing, trust and professional/ethical relationships that should exist between the auditor and the client.
There are also individuals who think that the comparative lack of catastrophic audit failures during the economic downturn indicates that the current state of matters, including independence, is “acceptable” - why fix something that is not broken. The Foundation’s efforts are indeed proactive - this real impediment needs to be addressed before more Enron-scale failures occur; if this would happen, the federal government would probably move very quickly to nationalize broad elements of the auditing profession. Such a solution, being done under extreme duress, may be more political than practical and favorable.
Foundation news and commentary…I sincerely appreciate the column about the Foundation that recently appeared in SmartPros Ltd - The Accounting Cycle (http://accounting.smartpros.com/x34679.xml). The column was written by Professor J. Edward Ketz, who is an accounting professor at The Pennsylvania State University.
I also am thankful for the support and encouragement that the Foundation has received; it is gratifying to know that others share an interest in what we are trying to accomplish!
Richard J. Hamill, Sr.
President
Foundation for Audit Excellence
E-Mail: rjhamill@excellentauditing.com
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