On High Standards of Auditing Ethics and Behavior

By Landes, Charles E. | The CPA Journal, February 2004 | Go to article overview

On High Standards of Auditing Ethics and Behavior


Landes, Charles E., The CPA Journal


personal viewpoint

Editor's Note: This article is based on Mr. Landes ' remarks delivered before the Conference on Credible Financial Disclosures at the Kellogg School of Management, Northwestern University, on Wednesday, june 26, 2002. It has been modified from its original form to reflect current events. His remarks are his own and are not necessarily reflective of the AlCPA or the Auditing Standards Board.

It is not my intention to discuss or provide a technical overview of the AICPA or Auditing Standards Board's new auditing standards or our projects, nor to point fingers of blame. Nor do I suggest that auditing standards cannot be improved, for I believe they can. I am here to discuss the audit standards-setting process and what I believe to be the inappropriate belief of some that auditing standards are broken to the point that having someone else set the standards will cure the problem. second, I'd like to discuss rules and behavior.

For those who may not fully understand the different standards-setting bodies, the Auditing Standards Board (ASB) sets auditing and quality-control standards, those standards and procedures that are to be followed by all auditors and CPA firms when performing audits. Currently, the Public Company Accounting Oversight Board (PCAOB) sets auditing and other professional standards for audits and reviews of sec registrants and the ASB sets auditing and quality control standards as they pertain to audits of non-SEC registrants. The ASB issues these standards after a great deal of deliberation in public meetings; public exposure; and thorough discussions that include gaining the views of the Transition Oversight Staff, formed after the dissolution of the POB, and sec staff who attend our board meetings.

I need to respond to remarks that have been made here today and that I've seen printed recently that are critical of the AICPA, suggesting it is not in favor of reforms. The AICPA and the ASB are not opposed to reforms, and the ASB is certainly not opposed to oversight. In fact, the ASB believes that the POB staff and the Panel on Audit Effectiveness (the O'Malley Panel) staff, as well as the sec's staff, have been very helpful in the standards-setting process and add greatly to the quality of auditing standards.

The ASB is made up of 15 of the most knowledgeable, hard working, and ethical individuals you could ever meet. I would say the same for my staff that assists the ASB. The makeup of the board consists not only of practicing CPAs from firms of all sizes but also a member from government (who until just recently was from the GAO, and the government member prior to that was from the OMB), as well as an academic member. The ASB does not set independence or ethical standards, nor does it set the accounting standards that public companies must follow in preparing their financial statements and disclosures. Likewise, the ASB does not investigate, peer review, or otherwise have anything to do with enforcement actions taken against CPAs that do not follow generally accepted auditing standards.

Following the Rules and Serving the Client

We ascribe too much blame to the wrong cause. As James Largay says in "Lessons From Enron" (Accounting Horizons, june 2002): "I doubt there is a group of standard setters on this earth that can enumerate enough rules to contain those who are intent on circumventing full and fair disclosure. The only answer is the rebirth of professional judgment in an environment characterized by incentives that make the prudent exercise of judgment the only viable alternative."

As someone described it, we sometimes seem to make our most important obligations perfunctory, even trivial, by the very steps we take to observe them. Take religion, for example. Nothing could be more important than a person's beliefs about the nature of the world, its origin, and the purpose and role we play in it. Organized religions exist to perpetuate their doctrines, by creeds and other forms, to focus the attention of their followers and others on fundamental tenets, and to ensure faithful transmittal of these to future generations.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

On High Standards of Auditing Ethics and Behavior
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.