Academic journal article Journal of Accountancy

POB Annual Report Stresses Liability Crises

Academic journal article Journal of Accountancy

POB Annual Report Stresses Liability Crises

Article excerpt

The Public Oversight Board's (POB's) 14th annual report focused on the profession's response to the growing liability crisis. The five-member POB oversees the activities of the SEC practice section (SECPS) of the American Institute of CPAs division for CPA firms.

According to POB Chairman A. A. Sommer, Jr., the POB determined it will support efforts to pass legislation restoring the balance between accountability and liability.

Auditors, said Sommer, should be accountable for harm caused when they fail to meet their responsibilities, but not for "the frauds, the failures, the shortcomings of others" and not for "the failures of government polices."

Sommer also proposed that if such legislative relief is secured, the profession should amend the charter of the AICPA quality control inquiry committee (QCIC), which currently limits that body's inquiry solely to whether the allegations in cases suggest a flaw in the accused firm's quality controls or compliance with them or a fault in the profession's standards.

Sommer recommends permitting inquiry into whether there was a failed audit and, if so, the reasons for it. If the QCIC functioned like the National Transportation Safety Board (NTSB), Sommer said, "skilled and experienced auditors and insightful academics would examine the records of the firm to determine whether the allegations reported to the QCIC indicate there may have been a faulty audit and, if so, what caused it, what measures should be taken by the profession to avoid a recurrence and how similar problems can be avoided. …

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