|ABOUT THE POB
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|Charter - February 9, 2001
The United States capital markets are the most liquid markets globally and are a model for
other countries. The fundamental strength of the U.S. markets is sustained by a system of
regulation based on full and fair disclosure. This has created transparency in the sale of
securities which has been enhanced significantly by the accounting profession's audits of
public corporations' financial statements filed with the Securities and Exchange
The accounting profession has had a self-regulatory system for many years. This system of
self-regulation has been improved to maintain public confidence in the integrity and
reliability of the financial reporting process, which is in the public interest. The
activities of self-regulation have included a national uniform entry examination,
coordinated state regulatory statutes, establishing and enforcing accounting, auditing and
behavioral standards and a mandatory peer review process.
Periodically, it is in the public interest to review and improve self-regulation of the
accounting profession to maintain public confidence in the integrity and reliability of
the financial reporting process through improving the quality of independent audits of
financial statements of issuers who are registrants with the SEC.
In 1977, a Senate subcommittee held hearings to determine whether additional governmental
regulation of public accountants was necessary or a system of professional self-regulation
In response, the American Institute of Certified Public Accountants ("AICPA"),
in consultation with the SEC, created a self-regulatory framework by action of the Council
of the AICPA on September 17, 1977 that contained the following key elements:
the creation within the AICPA of a Division for CPA firms;
the creation within this Division of an SEC Practice Section ("SECPS") designed
to enhance the quality of the audit practice of accounting firms that audit financial
statements filed with the SEC in accordance with the federal securities laws; and
the creation of an independent Public Oversight Board ("POB") to assure that the
public interest in independent auditing receives appropriate consideration at all times.2
the AICPA joined four other sponsoring organizations in creating an independent
private-sector initiative, the National Commission on Fraudulent Financial Reporting
("National Commission"). The National Commission, from October 1985 to September
1987, studied the financial reporting system in the United States to identify causal
factors that can lead to fraudulent financial reporting and steps to reduce its incidence.
The National Commission's report included recommendations related to audit quality,
In 1994, the POB formed the Advisory Panel on Auditor Independence ("Advisory
Panel"). The Advisory Panel's 1994 report assessed the working relationship among the
auditing profession and its constituents and identified steps to bolster the objectivity,
independence, and professionalism of auditing firms.
The " [POB] over the years has informally expanded its mandate to monitor and comment
on matters that relate to the quality of auditing and financial reporting in the United
States, because [the POB] believe[s] that it would ill serve the public interest if the
profession's quality control programs were a model of integrity and effectiveness while
other forces and circumstances destroyed the public's confidence in the credibility of
financial reporting in the United States."3 The
POB has made recommendations to the AICPA and the SECPS concerning issues confronting the
accounting profession beyond those strictly comprehended by its oversight of the SECPS
self-regulatory programs, which recommendations have received appropriate consideration
and action from the AICPA and SECPS.4
The General Accounting Office ("GAO") in its September 1996 report summarized
and evaluated the progress made in implementing the recommendations of the National
Commission and the Advisory Panel as well as numerous other initiatives by the AICPA and
others. The GAO report stated that its "analysis of the actions taken by the
accounting profession in response to the major issues raised by the many studies from 1972
through 1995 shows that the profession has been responsive in making changes to improve
financial reporting and auditing of public companies."5 The
report also noted that its "review of the studies' findings shows that the actions of
the accounting profession have not been totally effective in resolving several major
issues."6 A number of these issues have been
resolved since the date of the GAO report. In addition, most of the recommendations
concerning the accounting profession from the National Commission and the Advisory Panel
identified in the GAO report have been implemented.7
September 2000, the POB's Panel on Audit Effectiveness ("Panel")8
issued its Report and Recommendations dated August 31, 2000. The Panel
emphasized that, "while many specific recommendations are made for improvements in
the conduct of audits and the governance of the profession, our report demonstrates that
both the profession and the quality of its audits are fundamentally sound."9
There has been no significant change in the oversight authority of the POB since the late
1970s. At the same time, there have been major developments in the accounting profession,
including the rapid transformation of the business of accounting firms, changes in the
governance structures of self-regulation, and major financial reporting cases.
Accordingly, the Panel, the POB, the Board of Directors of the AICPA ("AICPA
Board"), the Executive Committee of the SECPS ("EC") and the SEC believe
that it is in the public interest to have one organization, i.e., the POB, with
strengthened authorities in a charter,10 exercising
expanded oversight11 with respect to the audit process
to implement effective self-regulation of the profession as it relates to audits of
publicly-traded companies. The effectiveness of the development of auditing and
independence standards can be enhanced by having a system of cooperative self-regulation,
with closer coordination with other elements of self-regulation and public oversight.
The Panel recommended that the POB, AICPA, SECPS and SEC work together to develop a formal
charter for the POB, and that these bodies and the major firms should agree to the Charter
and cooperate in its implementation.12 The Panel
believed that "a newly empowered POB will monitor the progress toward implementing
the recommendations in [the Panel's] report."13
The public interest and investor confidence are enhanced by a system of cooperative
self-regulation whereby the POB in its oversight role works closely with the AICPA, the
profession, the SEC and other government agencies, and the SECPS and its member firms, but
is independent of all of them.
The AICPA Board and the EC, as reflected in the attached resolution which is an integral
part of this Charter and marked Exhibit 1, recognize that it is in the public interest and
that of the accounting profession to strengthen cooperative self-regulation through the
enhanced authority and activities of the POB set forth in this Charter and pledge their
support for this expanded role for the POB in achieving more effective self-regulation.
THEREFORE BE IT RESOLVED
The POB's role is oversight and not management. The POB shall oversee the audit and
independence standard-setting, peer review, quality control and monitoring bodies relating
to SECPS member firms, in order to represent the public interest on all matters that may
affect public confidence in the integrity, reliability and credibility of the audit
process. The POB shall have the authority to take any other action related to its
oversight activities, including authorizing any oversight reviews it may determine to be
appropriate in order to carry out its responsibilities, while noting the factor of
confidentiality and having consulted with the EC.
In fulfilling its responsibilities, the POB shall provide an open avenue of communication
between itself and members of the public, the accounting profession, the AICPA Board, the
Auditing Standards Board ("ASB"), the Congress, the Independence Standards
Boards ("ISB"), quality control and monitoring organizations, the SEC, other
regulatory agencies at all levels of government, the SECPS and its member firms, and other
national as well as international professional organizations, both governmental and
II. Membership of the POB
A. Number of Members and Eligibility
The POB shall consist of five members ("Members") except during a reasonable
time period to fill any vacancies. Members shall be drawn from among prominent individuals
of integrity and reputation, including, but not limited to, former public officials,
lawyers, bankers, non-practicing certified public accountants, securities industry
executives, educators, economists and business executives.
B. Nomination of New Members
The POB shall have a Nominating Committee consisting of three persons with the authority
to nominate new Members for the POB for each vacancy on the POB caused by resignation,
removal or death, consistent with the eligibility requirements in II.A. above. The three
persons who serve as the Nominating Committee shall consist of the chair of the POB
("Chair") or her/his designee from among the Members, a former public member of
the AICPA Board to be selected by the AICPA Board, and a person from the private sector.
The Chair of the POB or her/his designee and the former public member of the AICPA Board
will, in turn, jointly select the third member of the Nominating Committee from the
The Nominating Committee shall nominate by a vote of two-thirds of its members three or
more persons for each vacancy for a new Member on the POB.
C. Election of New Members
The POB shall elect by a vote of two-thirds of its Members in office new Members from
among the nominations submitted by the Nominating Committee. In the event no one nominee
receives the required vote, the POB may request the Nominating Committee to submit
additional nominations consistent with the requirements in II.A. and B. above.
D. Terms of Members, Retirement and Removal
The term of a Member shall be five calendar years ending on December 31. A Member may be
reappointed by a two-thirds vote of Members in office, but shall not serve for more than
two full terms plus the balance of any term filled by that Member as a result of a
vacancy. The terms of Members shall be staggered to ensure continuity so that the term of
one Member shall expire each year. Any Member elected to fill a vacancy created by a
resignation, removal or death occurring before the end of a former Member's term shall
serve out the balance of such former Member's term. Notwithstanding the foregoing, all
Members shall retire on the first day of the year following her/his seventy-fifth
A Member may resign from the POB at any time by delivering her/his resignation in writing
to the Chair. Acceptance of such resignation, unless required by the terms thereof, shall
not be necessary to make such resignation effective.
A Member may be removed, with or without cause, by a two-thirds vote of Members in office.
The POB shall elect, by a majority vote of Members in office, one of its Members as Chair
of the POB to serve for a five-year term. In the case of a vacancy in the Chair, the term
of the new Chair shall be the balance of the term of that Member who is elected to fill
the vacancy. The term of the Chair may be renewed, but the Chair shall not serve for a
period in excess of two full terms plus the balance of any term filled by that Member
because of a vacancy in the Chair. The Chair shall preside at all meetings of the POB at
which he/she is present, may appoint committees, subcommittees or Members to perform
certain activities, and shall perform such other functions as are necessary for the
execution of the duties of the office of Chair or as the POB may designate. The Chair or
her/his designee shall act as a spokesperson for the POB and appear on its behalf before
F. Vice Chair
The POB shall each year elect, by a majority vote of Members in office, one of its Members
to serve as Vice Chair of the POB ("Vice Chair"). The Vice Chair, in the absence
of the Chair, shall preside at meetings of the POB and shall perform such other duties as
the Chair may assign to her/him. In the absence or inability of both the Chair and Vice
Chair to preside at any meeting of the POB, the other Members shall designate a Member to
act as Chair of the meeting in their place.
G. Compensation of Members
Members shall receive reasonable annual compensation for services in their capacities as
Members. Such compensation may be adjusted (up or down) by a majority vote of Members in
office, having given consideration to all the circumstances. Members shall be reimbursed
for out-of-pocket travel and other expenses incurred by them in performing their duties as
Members. The POB may approve additional reasonable compensation to a Member for the
performance of additional services for the POB.
H. Conflicts of Interest
Members and employees of the POB have the responsibility to be sensitive to circumstances
that would adversely affect their integrity or objectivity or the perception of either.
Members and employees of the POB must abide by the POB's Conflict of Interest Guidelines
which are intended to provide guidance on circumstances that could adversely affect their
integrity or objectivity or the perception of either.
III. POB Staff
The POB shall have permanent, full-time employees and others supervised by an Executive
Director to provide assistance in carrying out the POB's functions. The Chair shall
appoint the Executive Director and any other officer with the approval of the POB. The
Chair may terminate any officer or employee, with or without cause, with the approval of
the POB. The responsibilities and compensation of the Executive Director and any other
officer shall be determined by the POB. The POB shall review and approve the compensation
of employees as recommended by the Executive Director.
The Executive Director shall have charge of the minutes of all proceedings of the POB and
shall be responsible for giving notices to Members. The Executive Director also shall have
charge of the records, books and papers of the POB. The Executive Director may delegate
one or more of her/his responsibilities to other persons on the POB staff as he/she deems
Any officer may resign at any time by delivering her/his resignation in writing to the
Chair. Acceptance of such resignation, unless required by the terms thereof, shall not be
necessary to make such resignation effective.
IV. Indemnification and Advancement of Expenses
To the full extent authorized by law for the good faith exercise of judgment in the
performance of assigned duties, the AICPA, to induce each present and future Member to
serve as a Member, has agreed, as reflected in the attached letter which is an integral
part of this Charter and is marked as Exhibit 2, to indemnify and advance related expenses
to any person made or threatened to be made a party to any action, suit, investigation,
inquiry, or proceeding, whether criminal, civil or administrative, by reason of the fact
that he/she, or her/his testator or intestate, is or was a member of the POB or any
committee, trustee, officer, employee, or agent of the POB or serves or served any other
entity as a director, trustee, officer, employee, or agent at the request of the POB.14
Without limiting the foregoing, the AICPA Board has advised the POB in the letter attached
as Exhibit 2 that the AICPA may contract for insurance against all or a portion of any
liabilities and expenses resulting from the indemnification or advancement of expenses of
any of the foregoing persons pursuant to this section or otherwise as permitted by law,
and may also contract for companion insurance directly insuring any or all of such persons
against liabilities and expenses.15
The foregoing right of indemnification and advancement of expenses shall not affect any
rights to indemnification and advancement of expenses to which any persons, including
Members, officers or employees of the POB, may be entitled by contract or otherwise under
V. Meetings of the POB
A. Timing, Notice, Agenda and Record
The POB shall meet seven times per year and at such other times as called by the Chair or
otherwise determined by a majority of Members in office.
Notice of each POB meeting shall be given by the Executive Director to each Member by
mailing such notice not later than the second day before the meeting, or by personally
delivering, cabling, telephoning, faxing or e-mailing such notice not later than the day
before the meeting.
Meetings of the POB may be held by telephone, only when necessary, or at such place as the
POB may fix or as shall be specified in the respective notices or waivers of notice. Any
Member may, only when necessary, participate in a meeting of the POB by means of a
conference telephone or similar communications equipment allowing all persons
participating in said meeting to hear each other at the same time. Participation in a
meeting by such means shall constitute presence in person at such meeting.
The Chair shall establish an agenda and the Executive Director shall keep a record of each
B. Quorum and Voting
A majority of Members in office shall constitute a quorum for the transaction of any
business. Except as otherwise provided by this Charter, the vote of a majority of the
Members present at a meeting at the time of vote, if a quorum is present at such time,
shall be the act of the POB. However, any action taken pursuant to Section II.E. through
G., and Section V.A. and C. of this Charter shall require the vote of a majority of
Members in office; and any action taken pursuant to Section II.C. and D., Section IX.,
Section X. and Section XI. shall require the vote of two-thirds of Members in office.
C. Written Consents in Lieu of a Meeting
Any action required or permitted to be taken by the POB may be taken without a meeting, if
a majority of the Members in office consents in writing to the adoption of a resolution
authorizing such action. Each resolution adopted in accordance with this paragraph, and
the written consents thereto, shall be filed with the minutes of the proceedings of the
VI. Funding of the POB
The SECPS shall provide the POB with all the resources to perform its activities and
discharge its oversight responsibilities in accordance with this Charter. The POB shall
prepare and submit to the EC, and, if the AICPA Board requests, to the AICPA Board, for
consultation, a budget covering its annual operations. Such annual budget shall not exceed
five million two hundred thousand United States dollars ($5,200,000), which amount shall
be adjusted annually for inflation based on the Consumer Price Index for the most recent
twelve month period ended December 31st as published by the Bureau of Labor Statistics of
the United States Department of Labor (the "dollar limit"). Notwithstanding the
foregoing, the EC and the AICPA Board may increase the foregoing dollar amount based on
the consideration of all the circumstances and public interest at any time during the
Anticipated oversight reviews shall be included in the determination of the dollar limit16 and shall be included in the annual budget approved by
the POB after consultation with the EC, and if the AICPA Board requests, consultation with
the AICPA Board.
With respect to unanticipated oversight reviews which are not included in the annual
budget and which would cause current period expenditures to exceed the dollar limit in the
year covered by the annual budget, such reviews would be subject to a supplemental budget
after approval by the POB having submitted such budget to the EC for its concurrence, and,
if the AICPA Board requests, to the AICPA Board for its concurrence, their concurrence not
to be unreasonably withheld.
shall monitor expenses incurred with respect to both annual and separate budgets and, at
any time the POB believes there will be material variations, shall communicate such
variations to the EC and the AICPA Board.
Funding for the POB and its officers, employees and others, and all their activities
authorized by the POB, shall be provided by the SECPS and its members through the AICPA.
For purposes of implementing this Charter, subject to the provisions of the first
paragraph of this Section, funding shall be made available to the POB to pay all
expenditures of the POB which will be at the sole discretion of the POB. The POB shall
have adequate "no-strings" funding.17 Once
the POB submits and consults on its annual budget, as called for above, the EC and the
AICPA Board shall not withhold funding for any reason. With respect to any separate budget
subject to concurrence of the EC, and, if the AICPA Board requests, concurrence of the
AICPA Board, once approved by the POB with such concurrence, the EC and the AICPA Board
shall not withhold funding for any reason, subject to the provisions of the first
paragraph of this Section.
In furtherance of financial accountability, the POB shall have its expenses audited by an
independent public accountant on an annual basis and included in the POB's annual report.
Officers, Employees and Consultants
Consistent with the provisions in VI.A. above, the POB shall have the authority in its
sole discretion to select and retain its own officers, employees, counsel, accountants and
other consultants to assist it in performing its activities and discharging its oversight
VII. Oversight Responsibilities of the POB
A. In furtherance of the POB's oversight role as stated in Section I, the POB shall
oversee the following standard-setting organizations, peer review, and quality control and
a. The POB shall have oversight authority with respect to the SECPS.
b. The POB shall provide oversight with respect to the processes and activities
conducted by and through the SECPS, including the EC, the Peer Review Committee, the
Quality Control Inquiry Committee, the SEC Regulations Committee, and the Professional
Issues Task Force. The staff of the POB shall continue to oversee peer reviews, quality
control inquiries and other matters relating to the quality of audits of the SECPS member
c. Nominations for the members of the EC shall be made by the SECPS in consultation
with the POB, and all nominations for the chair of the EC shall be approved by the AICPA
Board and the EC with the concurrence of the POB, which will not be unreasonably withheld.
The evaluation review in Section VIII.F. at the end of three years after adoption of this
Charter shall include an assessment of the effectiveness of this provision and whether
such provision should be revised.18
d. The POB shall oversee the activities of the SECPS's committees and task forces
to assure their effectiveness, and representatives of the POB, as part of its oversight
activities, may attend meetings of such committees and task forces to express views
relating to its oversight responsibilities. Representatives of the SECPS, at the
invitation of the POB Chair, may attend and participate in meetings of the POB. One or
more representatives of the POB shall meet periodically with the EC.
e. The POB may recommend issues for inclusion on the agenda of the EC.
f. The POB shall, on the basis of its oversight activities, evaluate the
effectiveness of the SECPS, including the qualifications and performance of EC members and
the adequacy of resources, and set forth its evaluation in its annual report.
a. The POB shall have oversight authority with respect to the ISB, but the POB's
authority shall not include setting independence standards.
b. The POB shall consult and advise on all nominations for the members and chair of
c. Representatives of the POB, as part of its oversight activities, may attend
meetings of the ISB and have the opportunity to express views relating to its oversight
responsibilities. Representatives of the ISB, at the invitation of the POB Chair, may
attend and participate in meetings of the POB.
d. The POB shall evaluate the implementation of the ISB standards through the peer
review process and report to the ISB and the public concerning such evaluation.
e. The POB shall, on the basis of its oversight activities, evaluate the
effectiveness of the ISB, including the adequacy of resources and set forth its evaluation
in its annual report.
a. The POB shall have oversight authority with respect to the ASB and its
activities with respect to SEC registrants, but the POB's authority shall not include
setting auditing standards.
b. Nominations for the members of the ASB shall be made by the AICPA Board in
consultation with the ASB and the POB. All nominations for the chair of the ASB shall be
approved by the AICPA Board with the concurrence of the POB, which will not be
unreasonably withheld. The evaluation review in Section VIII.F. at the end of three years
after the adoption of this Charter shall include an assessment of the effectiveness of
this provision and whether such provision should be revised.
c. Representatives of the POB, as part of its oversight activities, may attend
meetings of the ASB and have the opportunity to express views relating to its oversight
responsibilities. Representatives of the ASB, at the invitation of the POB Chair, may
attend and participate in meetings of the POB.
d. The POB shall evaluate the implementation of the ASB standards through the peer
review process and report to the ASB and the public concerning such evaluation.
e. The POB may recommend issues for consideration for inclusion on the agenda of
f. The POB shall, on the basis of its oversight activities, evaluate the
effectiveness of the ASB, including the qualifications and performance of professional
members and the adequacy of resources and set forth its evaluation in its annual report.
B. The POB may have a Coordinating Task Force which would be a standing committee
consisting of the chairs of each body within the POB's oversight or their designees and
which would be responsible for exchanging information relating to each body's activities.19 The Task Force would meet periodically, but at least
semi-annually. A POB Member designated by the Chair of the POB would be a member and the
first chair of the Task Force in order to set up its organization. Thereafter, the chair
of the Task Force will be selected among and by its members.
Activities of the POB
In furtherance of the POB's role as stated in Section I above, the POB is authorized:
To oversee and advise on the selection and retention of peer review firms;
B. To conduct oversight reviews and to undertake other projects and actions, after
consulting with the EC, on matters covered by the POB's activities that the POB deems
appropriate to protect the public interest;
C. To issue a written annual report containing a description of the POB's
activities. The report shall include, because of the importance of the disciplinary
process to self-regulation, summary statistics of the (i) status of all AICPA Professional
Ethics Division investigations on audits of SEC registrants when the civil litigation and
public regulatory investigations have been published and concluded;20
and (ii) the actions taken by and reported to the POB by SECPS member firms with respect
to the foregoing.21
The report shall also include, among other matters, an audited statement of expenses and
any evaluations and recommendations with respect to those organizations subject to the
POB's oversight. The report shall be made publicly available to all interested parties;
To hold an Annual Meeting open to the public;
E. To issue and make public such other written reports as the POB may deem
necessary with respect to its activities;
F. To arrange for the conduct of a review and issuance of a written report by a
panel containing an evaluation of the effectiveness of the POB's oversight role and
process at the end of three years after the adoption of this Charter and periodically
thereafter, for purposes of evaluating the POB's accountability. This report shall cover
an evaluation of the activities of the POB, including the adequacy of the budget and staff
resources of the POB as well as the POB's accountability for such resources. To the extent
relevant to the evaluation of the POB's activities, the panel shall consult with the
organizational bodies subject to POB oversight. In addition, the report shall cover an
evaluation of the effectiveness of the provisions in Section VII.A.1.c. and Section
VII.A.3.b. and whether such provisions should be revised. The report shall also cover a
review of the effectiveness of the annual outreach meeting in Section VIII.H. and whether
this annual outreach meeting alleviates the need for an advisory council.22
As to the
selection and composition of the review panel, the POB shall select two members of the
review panel. The public members of the AICPA Board shall select two former public members
to be members of the review panel. These four members shall select the fifth member of the
panel. The five members of the review panel shall be independent of the POB, SEC and the
accounting profession. The members of the review panel shall select the chair of the
To review and reassess this Charter on a periodic basis to assure its continuing adequacy
and relevancy in the light of changing circumstances and, if appropriate, take steps to
H. To hold an annual outreach meeting to solicit views and recommendations about
the accounting profession's self-regulatory program and the POB's oversight process. This
meeting may include, among others as appropriate, representatives from the private sector,
profession, government, professional organizations and public. Reference to such meetings
will be made in the POB's annual report; and
I. To establish liaisons with national and international organizations regarding
setting national and international auditing and independence standards, and other matters
relevant to the cooperative self-regulation of the profession.
The existence of the POB shall continue unless terminated by a vote of two-thirds of
Members in office after consultation with the AICPA Board and the EC.
Amendment of Charter
The Charter may be amended by a vote of two-thirds of Members in office at a meeting duly
called for that purpose, with the concurrence of the AICPA Board.
This Charter shall become effective as of the date approved by a two-thirds vote of the
Members in office after receipt of a resolution of approval from the AICPA Board (Exhibit
1) and the AICPA letter relating to indemnification (Exhibit 2).
1 See "Professional Self-Governance: An Interim
Report", speech of SEC Chair (Jan. 4, 1978) at 2.
2 At that time, the SEC noted: "[T]he jury is out whether the AICPA program of
self-regulation will be successful. But clearly the key to success lies in the Public
Oversight Board and its ability to function effectively. If the quality, stature, and
commitment to independence of the individuals selected to the [POB] are sufficiently high;
if the [POB] can devote the time and is provided with adequate staff and budget; if it is
not impeded in performing its functions and responsibilities; and if it can effectively
oversee the disciplinary framework; then the overall program should contain the major
necessary ingredients." Id. at 12; and "[T]he Commission believes that the
conceptual and practical obstacles to a successful self-regulatory program necessitate
strong leadership to the self-regulatory effort. That leadership should come from the POB.
The POB should serve as the conscience and critic of the self-regulatory effort."
Staff of Senate Comm. on Governmental Affairs, 96th Cong., 2d Sess., SEC Report to
Congress on the Accounting Profession and the Commission's Oversight at 22 (1980).
POB Annual Report 1997-1998 at 2. The POB has reported on its oversight of the
profession's self-regulatory programs each year in its annual reports.
4 In the POB's March 5, 1993 Special Report, In The Public Interest - Issues
Confronting the Accounting Profession, the POB, among other things, recommended that steps
be taken to improve auditor performance for detecting management fraud. The AICPA Board
endorsed all the Board's recommendations in its June 1993 statement titled, Meeting the
Financial Reporting Needs of the Future: A Public Commitment From the Public Accounting
Profession. That statement strongly articulated the profession's responsibility for the
detection of fraud. The AICPA's Auditing Standards Board issued a Statement on Auditing
Standards, Consideration of Fraud in a Financial Statement Audit in February 1997.
GAO report, The Accounting Profession - Major Issues: Progress and Concerns, at 4.
7 See Appendix II to the GAO report at 32-34, 38-39.
8 The Panel was established
by the POB at the request of the SEC Chair, and performed a "comprehensive review and
evaluation of the way independent audits are performed and assessed the effects of recent
trends in auditing on the public interest." Cover letter dated August 31, 2000 with
the Panel Report and Recommendations ("Panel Report") at 1 (Aug. 31, 2000).
9 Cover letter dated August 31, 2000 with the Panel Report at 1.
10 The POB has been operating pursuant to Bylaws and organizational documents, but
no Charter, since its formation in 1977.
11 As the SEC Chair stated: "I also strongly endorse the notion of enhanced
POB oversight of the accounting profession, and urge the profession to endorse it as
well". Speech of SEC Chair (May 10, 2000) at 9.
12 Panel Report at Section 6.24.
13 Panel Report at Section 8.14.
is comparable to an indemnification provision in the AICPA's by-laws and extends coverage
to officers and others. Currently, the AICPA has agreed to indemnify past, current and
future Members in a letter from the AICPA to the POB dated September 10, 1987.
expenditures for the oversight reviews, reports, and any testing by the POB referred to in
the "Term Sheet for Independence Look-Back Testing Program" and letter dated
September 13, 2000 from the SEC's Chief Accountant to the POB's Chair, currently
anticipated, shall be excluded in determining the dollar limit.
Panel has stated that it "strongly believes that such 'no-strings-attached funding'
is absolutely essential if the POB is to be effective and independent of the profession
and if the profession's self-regulatory system is to be viable. The profession must not be
able to control or cut off the POB's financial resources and thereby cause irreparable
harm to the profession's self-regulatory system by destroying the POB's independence and
others' confidence in it. The POB's annual statement of expenditures should be audited and
included in the POB's Annual Report to evidence its financial accountability." Panel
Report at Section 6.25.
historic practice has been for the AICPA, EC and POB to be consulted and to give input on
nominations for the chair of the EC. In effect, the POB concurred with the approval by the
AICPA Board of the chair of the EC. This Charter provision confirms the substance of past
practice and documents to the public the responsibilities of the AICPA, EC and POB.
POB will monitor the agenda of the SEC and the Professional Ethics Executive Committee to
identify rule-making, regulatory and standard-setting activities that relate to the audit
of public companies for the purpose of communicating information relating to such
activities to the Coordinating Task Force for appropriate consideration.
Panel Report at Section 6.29.
21 It should be noted that there are issues of confidentiality with respect to
22 The Panel specifically discussed this in its Report. See Panel Report
at Section 6.26.
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