You’re not taking an advocacy position. You’re not going to wind up auditing your own work. I think it’s much more important to stratify the issue by the kind of services that we’re talking about rather than dollar amounts.
CHAIRMAN LEVITT: The next panel consists of the chairman and members of the Independence Standards Board: William T. Allen, who has taken on this thankless assignment; John C. Bogle, a very symbol of independence personally, founder of Vanguard fund; Robert E. Denham and Manuel Johnson, former vice Chairman of the Federal Reserve Board.
First, I want to thank all of you for doing the Lord’s work, being as thoughtful and as committed and concerned and sensitive as you have been. Surely, you recognize full well the difficult task confronting the Commission, and we very much appreciate your perspective. Chairman Allen.
MR. ALLEN: Thank you, Mr. Chairman. If it pleases you, we will proceed in the following way. I’ll take 10 or 12 minutes, and each of my colleagues will take two or three minutes for an introductory statement and then be available for any questions you might have.
I’m here today, as Chairman Levitt said, in my role as Chairman of the Independence Standards Board, but I don’t speak for the board this afternoon. Each of us brings our own views to the questions that you have before you.
My background is as a judge and currently as a professor of law and business at New York University. I was asked to serve as chairman of the Independence StandardsBoard in 1997, and I thought it was an opportunity for some public service, and I agreed to serve, and I’m happy that I did.
The ISB has commissioned studies on the perceptions of the investing public realizing the quality of financial reporting and the issues of auditor independence
We public members of the Independence Standards Board are, unlike any other witnesses you’ve heard today, really non-expert in the accounting profession except insofar as we have some business experience or, in my case, legal experience with the world of auditing and express installment loans Valparaiso IN have learned over the course of the three-year term of the Independence Standards Board.
So we’re available to help answer any questions you have, thinking that we have been addressing these questions for a little longer, perhaps, than you’ve been thinking –not you, Chairman Levitt. I know you’ve been thinking about the independence issue for a very long time.
One thing we agree, the members of our group all agree, the clear importance of auditor independence in fact and in appearance as a vital precondition to the workings of efficient capital markets in the United States. There’s universal agreement on this.
We also agree, I think, on the evolution of the auditing profession into multi-service professional firms has given rise to reasonable concerns that the integrity of financial data is being or may be adversely affected or at least that markets may become suspicious of that fact andimpose an additional risk premium.
The most recent report of findings was delivered to the board last week by the research firm Earnscliffe Research Communications stated very briefly the results of that study were rather similar to an earlier study done by the same firm.
And the conclusion was that there’s a high degree of trust in the integrity of financial statements and in the auditing process, but nevertheless there is important concern about the existence of non-auditing services being a significant part of the business of many accounting firms.
Now, that’s not a very satisfying report in the sense if anyone wants a clear answer, but I think it confirms the other reports that we have commissioned, that there’s high degree of confidence in the integrity of existing financial statements, but there is a level of concern.