Who should be the Governing Authority for Independent
Audits?
The Governing Authority should include selected individuals
with specific audit profession expertise, including the capability to require
audit service adequacy and excellence. This Governing Authority would not
necessarily be part of the Federal bureaucracy; it could be an autonomous
private sector effort. In addition to hiring and paying for public company
independent auditors, a logical additional mission of the Governing Authority would
be to identify and communicate methods to improve independent audits.
The Governing Authority could be responsible for responding
to questions that should be addressed by the auditing profession:
* How can auditor credibility and accountability be improved?
* What currently is considered audit service adequacy?
* What should be considered audit service adequacy?
* What is/should be considered audit service excellence?
* Should there be a classification for external audits
(not truly independent with adequate service) and a classification for independent
audits (truly independent with excellent service)?
A potential source for participants would be professional
organizations (American Institute of CPAs, SEC, PCAOB), together with active
and retired professional auditors.
The idea of a Governing Authority could be a “disseminated
reality”. Public companies could select, for example, the AICPA, an AICPA
member, the IIA, an IIA member, or someone with auditing experience and
specific criteria/questions to pose to the potential service provider. The
important aspect would be that the Governing Authority would be absolutely
independent from the public company and any prospective audit firms, and would
possess the expertise previously described.