Audit Committee Leadership Network, March 2011
On February 3–4, 2011, members of the Audit Committee Leadership Network (ACLN) met in New York. In one session, members engaged in a dialogue with Daniel L. Goelzer, who is a member of the Public Company Accounting Oversight Board (PCAOB). Mr. Goelzer served as acting chairman of the PCAOB from August 2009 through January 2011.
This document summarizes the key points that members raised in that discussion, along with background information and perspectives that members shared before the meeting. While Mr. Goelzer’s remarks were off the record, this document refers to certain public speeches and statements by Mr. Goelzer and other PCAOB officials.
Members engaged in a lively conversation about the PCAOB and several themes emerged:
Audit chairs believe the PCAOB can add more value
The PCAOB faces the challenge of overseeing a profession that is under scrutiny in the United States and abroad. It is taking steps to improve the quality of the audit and address the many issues that emerged from the financial crisis. ACLN members encouraged the PCAOB to continue exploring new ways of providing value, such as by focusing more on identifying and promulgating best-practice insights drawn from its inspections of the audit firms and assessing the state of the profession each year. At the same time, some members emphasized that a significantly expanded scope for the regulator was unwelcome and that greater accountability was desirable, especially better measures of success. Many members favored greater input from audit committees, particularly as new standards are being developed.
Audit chairs want more visible results from the inspection process
ACLN members discussed the inspection process and the reports produced on audit firms, especially those issued annually for the largest auditors. Audit chairs who had been interviewed as part of an inspection suggested interviews should be mutually beneficial and entail more rigorous questions. Several members urged the PCAOB to think about ways to make the reports more useful (e.g., by identifying thematic findings that cut across the audit profession).
Audit chairs are wary of changes to the auditor’s reporting model and audit committee communications
ACLN members voiced concerns about possible improvements to the auditor’s reporting model, which the PCAOB is currently considering revising.5 Members warned that expanded disclosures were not really in the best interests of the largest investors. A radically reformed auditor’s report represents a fundamental change in corporate governance, and members would prefer the audit committee to be responsible for oversight of financial reporting on behalf of investors. They were also skeptical of the PCAOB’s proposed standard on audit committee communications, which they believe is unnecessary at best and potentially distracting for audit committees.