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Responses to ACSPC Request for Public InputAccounting/AuditingQuestion 18. Would auditors providing assistance with accounting and reporting for unusual or infrequent transactions impair the auditors' independence as it relates to smaller companies? Would providing such assistance reduce the cost of compliance for smaller companies? What would be the impact on the quality of audits, investors or markets? Please explain.The following answers have been received: 08/02/2005 13:57:44 Auditors are generally honest people trying to do their jobs well, at least in my experience as a corporate lawyer. I can't imagine allowing them to render assistance with such projects would have an impact on the quality of an audit, unless you are assuming that all auditors are susceptible to baser instincts. 08/02/2005 17:44:12 Helping on an infrequent basis would not harm independent. Small companies rely on outside auditors to fill in the gap of expertise that they do not have in house. It would save money and time and would not have any impact in the public markets as long as the efforts were disclosed. 08/02/2005 23:36:32 No There needs to be agreement between auditors and the company on accounting treatment. 08/03/2005 01:39:17 Having auditors help with something that should not be done in the first place is putting a bandaid on this. These are the solutions being promoted by the auditors themselves. How can everyone not see the tremendously self-serving aspect of all of this. 08/03/2005 08:55:04 It does not appear it would affect it. Hopefully it would reduce the cost. That is yet to be seen. Do not feel it would impact the audit since they operate within accounting standards so do not feel investors etc would be overly concerned. 08/03/2005 08:58:39 No. Again we are regulated. the regulators are going to keep the auditors straight. 08/03/2005 10:40:26 NO. Not by much. No impact on investors. 08/03/2005 12:17:58 sec impedes auditors as noted by influence noted in items above 08/03/2005 13:55:42 Cannot see where it would hurt, may even help. 08/03/2005 15:01:40 No, It should not impair independence. Auditors have traditionally assisted smaller companies with more complex accounting issues. Why should they be prohibited from assisting since they have to sign off on what is done anyway. If an external auditor bends the rules, they should be heavily fined or peanlized. 08/03/2005 15:22:49 Having separte public accounting firms for Internal and External Audits, I see no harm in the Internal Auditors providing this type of assistance. The External Auditors who are responsible for shareholder reporting should not compromise their independance. 08/03/2005 16:58:51 Auditors should be able to help with unusual or infrequent transactions. They end up auditing the transaction anyway and giving it approval or not. Unusual transactions is a small part of SOX. Allowing audtiors to help with unusual transactions wouldn't help reduce our cost very much at all. 08/03/2005 18:01:35 Please look into item no 29 08/03/2005 18:05:44 The auditors independence should not be impaired in such a case. Providing such assistance would reduce the cost of compliance. It should have no impact on the quality of audits, investors or markets. 08/03/2005 18:30:29 x 08/03/2005 19:54:33 Yes. No opinion. If an auditor goes beyond the scope of his duties and finds (what he considers) unusual or infrequent transactions, then reports them (I assume tothe SEC), it removes his ability to be independent. It makes him an informant for the SEC, and in effect, an enforcement officer, rather than an auditor. Furthermore, his discoveries become subject to illegal search and siezure laws in my opinion. This would have a chilling effect on the quality of audits, since it would set up an atmosphere of suspicion between parties. 08/03/2005 19:55:50 THERE IS NOTHING WRONG WITH CHECKS AND BALANCES! 08/04/2005 09:17:19 I don't think this assistance should be taken away. If the auditors are held to certain standards and reviewed by their piers, I think they should still be allowed to assist. 08/04/2005 09:39:15 Auditors should be able to provide assistance for unusual or infrequent transactions. Many times small companies do not have qualified internal resources to handle those transaction as they arise. This would not reduce the cost of compliance significantly. 08/04/2005 10:40:16 I think getting their opinion early reduces issues later and eliminates the need to make corrections to accounting records before the auditors will issue an unqualified opinion on the company's financial statements. 08/04/2005 12:09:05 No, it would not impair their independence. And yes, it would make compliance much less costly. Plus, it would lead to more correct information. 08/04/2005 13:38:24 N/A 08/04/2005 14:20:27 I will have our CFO give his opinion here. 08/04/2005 18:05:44 No 08/05/2005 10:54:31 I do not think it would impair independence but it would reduce costs 08/05/2005 12:38:34 Auditor Independence = Integrity! See item #5 above 08/05/2005 12:44:28 I do not believe this would impair independence 08/05/2005 15:34:53 I do not believe the assistance would cause a conflict. I do not believe using the accountants will change the costs. We have been charged regardless of who gave us assistance. 08/05/2005 15:43:46 STRONGLY HELD FEELING. For decades the external auditors have provided management and boards of small banks with critically needed expertise on accounting standards and issues leading to year-end numbers such as tax figures, lease accounting, bond portfolio accounting, etc. and their independence has not been impaired. The PCAOB has shown data in their Fourms that strongly indicate that the recent FR problems COULD be indications that the loss of this expert advice is generating more FR problems and the "independence" is improving. It might be well to consider management and the board still need the expertise of the CPA firm and the QA operations of the firm could assure the accuracy of the advice. 08/05/2005 16:45:38 Auditors should ALWAYS be a separate entity from accounting. There simply should be an audting business and an accounting business, and the two should not be in the same firm. Independence is the only sensible option. Non-independence leads to the temptation to be less than honest, and should be denied as a possibility. that is what led to the Enron debacle. 08/05/2005 19:33:08 No it would not. It would be very helpfull if the companies auditors could assist the company and has been the practice up until recently. It would substantially reduce the cost associated with compliane. No adverse effect on quality, investors or on the markets. 08/06/2005 13:52:06 Would not adversely affect independence. Would reduce costs. See response to #17. 08/08/2005 11:10:11 no. yes. no impact. being able to turn to the auditor for assistance in these situations is critical because a small company usually does not have the personnel or hours available to adequately research an issue, by tapping the auditor the answers researched and guidance provided ensure that the transaction is reported correctly the first time, that when it is audit time there will be no difference of opinion to slow the audit down. Auditors are very conscious of the independence standards so their research to assist a client is, in my opinion, always objective. 08/08/2005 11:39:29 Our auditors refuse and such assistance now. If an auditor's independence is going to be impaired, it is due to his ethics and not the assistance on a minor matter 08/08/2005 14:06:10 I do not think it would impair independence. I think it would reduce costs and I do not think it would impact the quality of audits whatsoever. 08/08/2005 15:43:24 No. Yes. None. The new SEC / PCAOB / Sarbox regulatory environment creates a lot of incentive to "do the right thing" from all perspectives. I believe that companies, auditors, investors and the markets know that. 08/08/2005 21:39:10 Auditors are typically called in to provide guidance for any unusual or infrequent transactions due to managements need to assess the accounting impact of these transactions and decisions. Since the accounting treatment will be reviewed by the auditing firm during the audit, it is advisable to get their advice as part of the decision making process. We don't believe that this affects the auditor/client relationship at all. This activity would not reduce the cost of SOX compliance as it appears to be a somewhat unrelated matter with the accounting treatment of such transactions being more closely tied to the audit process. 08/09/2005 09:30:31 Our knowledge is focused on small banks. This should not apply to banks. 08/09/2005 16:26:34 The auditors should be able to work with companies in determining correct accounting treatment of unusual transactions...it makes little sense to have the auditor sit on the sideline and jump in to assess an accounting decision once it has been made...any logic system would say that is conterproductive. 08/09/2005 17:25:10 Outsdie auditors are the experts and I believe their help on front end with controls, policies and procedures could only enhance small company and as noted above, allow small company to use it's resources for operations and not spinnig trying to comply with difficult accounting and reporting matters. 08/10/2005 09:04:41 no comment 08/10/2005 13:44:39 It should not affect the auditor's independence for them to provide assistance with "unusual or infrequent" transactions. For a small company to take on the research themselves is time consuming and to hire an outside firm can be an expensive proposition. 08/10/2005 16:00:18 Up until SOX we have always viewed our auditors as there to help us be a better organization and have valued their input and assistance. Now it's frustrating that we have to have two audit firms and it seems as though we're constantly trying to sort out who can do what--and getting billed for that process. 08/10/2005 17:18:15 No impairment of independence - the auditors are assisting in finding the right answer. Cost would be reduced significantly as another set of costly experts are not brought into the equation to get to the correct answer. 08/10/2005 22:09:27 I think this is a great question. I think we have to rely on people being honest and we have to set the tone within the company that we will not tolerate anything less. It is up to the executives to drive this home and not be understanding when that standard is not met. I think it would be a huge benefit to the company and the investor if the auditor could provide greater assistance in establishing standards an assisting in compliance. 08/11/2005 08:35:22 No. The auditors have the resources to properly advise the client. Under the current situation a client is required to pay an outsider (or hire added staff) to obtain assistance--from an organization who is less familiar with the client than the auditor. 08/12/2005 13:12:10 I don't think such assistance would impair the auditor's independence in and of itself. Probably such assistance would tend to reduce cost, and I don't see the relation of such assistance to the quality of audits, investors, or markets. I think independence is driven by the relationship between the company and the audit firm, and it is a top-down driven relationship. It has nothing to do with assistance in my opinion. 08/12/2005 16:35:01 Again, I don't think that the rules or independence are the problem. I believe it is the people. 08/13/2005 12:39:43 Do not believe that it would impair the auditor's independence. It would reduce the cost of compliance for smaller companies. Do not see any impact on the quality of audits. 08/15/2005 13:08:27 Independence was traditionally defined as a lack of economic interest in a client or direct responsibility for maintaining accounting records. There is no impairment from an accountant sharing expertise with respect to how a transaction should be accounted for. The inability of companies to access their auditors' expertise is expensive and inefficient. 08/15/2005 14:27:30 I represent two such companies. One of them has worked out a process with its auditors that seems to be working fairly well and involves the question being researched internally and a conclusion presented to the auditors, with which the auditors may agree or disagree. The rules are less important than the relationship and it was primarily the breakdown in the relationship that hurt last year. 08/15/2005 15:10:05 No. Yes. Who else is an expert that the companies could go to? I think it's more important for the transaction to be recorded correctly the first time for shareholders. When i see a physician i allow him to diagnois and treat me concurrently. 08/15/2005 15:13:01 I don't believe so for all questions. The liklihood is that a correct decision will be achieved quicker and the auditor will be familiar with the transaction from the beginning. Will it reduce costs? Maybe from the 404 side but the client will have to pay for the "consultation", so chances are that they are a wash at best. 08/15/2005 15:14:45 No. Yes. Do not believe quality would be at all different; it gets back to the quality of the accounting firm. 08/15/2005 16:33:43 yes it would - again our company cannot afford a staff of CPAs, and the rules are constantly changing. We used to work closely with our auditors. Last year, the answer was- figure it out yourself since we are not allowed to provide guidance. 08/15/2005 16:41:14 yes 08/15/2005 18:59:52 I don't think that when auditors provide assistance with accoutning and reportign that they are impairing their independence, as long as management provides (and can support) the judgements underpinning the conculsion. I think the "how to" can come from the auditor but the numbers themselves should be the company's responsibility. 08/16/2005 09:51:21 No, it should not. Getting it right the first time is important. In this day and age, no quality accounting firm is going to take a position that they do not feel comfortable with. 08/16/2005 10:10:36 No. The depth of knowledge is important to an unusual or infrequent transaction. 08/16/2005 10:13:05 No it would not impair the auditors independence and it would reduce the cost of compliance. 08/16/2005 10:21:17 No. Yes. Improved quality. 08/16/2005 10:26:28 no comment 08/16/2005 10:42:02 Absolutely not! We prefer to view our audit firm as experts in the field, so assistance with understanding the proper accounting treatment for unusual or complex transactions is a perfectly reasonable way for companies to get it right the first time. 08/16/2005 10:44:16 I miss feeling like I can consult with my auditing firm for info or opinions. We used to rely on their expertise and perspective. As I said above, I now hesitate to ask. I'll generally call someone at another firm. 08/16/2005 10:45:16 No. You are not talking about consulting, but about explaining a given transaction. The audit quality should not be impacted at all. 08/16/2005 11:18:54 It would not impair the auditor's independence and would be cost effective and efficient. No effect on investors or markets for samller companies. 08/16/2005 11:52:16 I do not believe the independence would be impaired at all. I would strongly recommend that the accountants be allowed to discuss matters with clients. IT saves a great deal of frustration and money. 08/16/2005 12:15:34 I don't think so. In fact, when we come across unusual transactions, we get input from our auditors up front so that we end up making correct decisions on reporting in the first place 08/16/2005 12:40:54 No, yes. No impact 08/16/2005 13:04:14 It would depend on the auditors. Perhaps there should be a requirement that the auditing firm obtain a second partner concurrance when the firm provides accounting or reporting advice so one partner at a firm could not act alone and provide advice that is not independent. Clearly in the Enron case, a second partner concurrance may have stopped some of the accounting folly that occured. 08/16/2005 13:12:04 Absolutey no; prohibiting the Auditors from engaging in such is just silly! They ultimately must audit the work and this "SOX" approach of "do it and toss it over the back fence for the other side to guess about" is a waste of resources. 08/16/2005 13:19:29 For smaller companies especially, auditors providing assistance with such things would only nominally impair their independence. Again, with the hightened sense of responsibility they face, I believe this should be left up to the independent auditor to determine. If they feel comfortable that providing such assistance (such as through a different department or individual) does not impune their independence, then they should be allowed to provide such assistance. Audit quality in most cases would not be diminished in the least, and sharehodlers would truthfully not care in our case. 08/16/2005 13:20:23 No. There is a big difference between auditors providing assistance with infrequent/unusual transactions, and management being responsible for how it is ultimately reported. It helps small companies for their auditors to be involved as these transactions occur to provide the technical guidance needed. This does not impair independence in my opinion 08/16/2005 13:25:32 I do not believe the above would impair independence. Costs would definitely be reduced. We must now seek other guidance, then go back to our auditors to see if they approve, paying twice for the same evaluation. In the end, it is our principal auditors opinion which matters. I believe it would have no impact on the quality of the audit or outside perception, just eliminate silly repetition of costs. (If Enron had an opinion from Random & Random, CPA's that their off-balance sheet partnerships were OK, would that have changed Andersen's position?) 08/16/2005 13:27:00 See my answer to question 15. 08/16/2005 13:30:33 No, this was the old system, and it worked. 08/16/2005 14:08:05 Auditors helping clients with difficult accounting issues would greatly help their clients. However, if they were wrong in the application of a principle, the company is still liable. When the misapplication is discovered, the auditor will still require a change to the statements to correct the problem. 08/16/2005 14:23:10 I believe that auditor independence would not be impaired when they provide assistance with infrequent transactions. However, everyone can make a mistake. When an auditor does make a mistake, it would be more difficult for them to be self critical and admit the mistake when they are the auditor. On the other hand most of the areas where the auditors would potentially make a mistake are so judgemental and technical that it would probably not make a material difference. 08/16/2005 14:54:27 Auditors providing assistance with accounting and reporting for unusual, infrequent or complicated transactions does not impair idependence. This assistance provides for better communication between managment and the auditor and thus results in better reporting as well as a more thorough and cost efficient audit. The audit is more thorough in that the auditor would have a better understanding of the company and thus can plan and execute the audit more effectively. 08/16/2005 15:15:12 More auditor assistance would definitely be of benefit and any reputible CPA would not allow his independence or the quality of his audits to be sacrificed. With proper assistance the cost of compliance should go down and I think investor confidence should go up. 08/16/2005 16:08:50 No independence would be impaired. Our goal is to do what is right, which involves the independent auditor. 08/16/2005 16:09:47 It would not impair independence as these issues would likely be presented to the auditors for thier opinion before proceeding with the transaction. This assistance would lower the cost of compliance by reducing the amount of outside assisitance required. 08/16/2005 16:16:04 Not at all. As a small company we don't have the same resourses and need to rely on our auditors for guidance. This has never affected their independence. 08/16/2005 16:45:09 No!A small company doesn't have the ability to influence its auditors. Small companies have a much greater need for the expertise of its auditors for non-routine matters. Such assistance would definitely reduce the cost of compliance. We see small companies use of auditors for non-routine matters as being beneficial to all parties as it provides a cost effective way to ensure that the literature is properly applied to the specific fact situation. The auditor knows not only the literature but the actual company situation better than anyone else. 08/16/2005 18:21:27 No, small companies do not have the resources to determine the appropriate accounting without consultation. 08/16/2005 18:35:41 It would not impair independence or quality of audits, etc. It would reduce costs. A small company cannot afford to have every expert on payroll and keep them current in their field. Outside help is a reality, and nothing to be ashamed of. The current auditor knows more about the company than any other expert in accounting and related fields, and can provide assistance and advice without the need for startup costs to learn what the company is about. 08/16/2005 21:29:07 Independence could be maintained and the audit quality be maintained. There would be negligble effect on investors. 08/17/2005 10:59:57 I do not believe our auditors independence and professional opinions would be impaired if they are allowed to assist our company more fully. 08/17/2005 12:28:22 No, yes, no. These are indepent auditors, reporting to the audit committee (independent board members). Their quality would not diminish. 08/17/2005 12:36:00 This is the optimum way to handle such reporting and it would greatly enhance the quality of the audit. In the vast majority of cases, all the parties involved want nothing more than to find and report the right answer. This is easiest, most efficient, and most likely to be correct when management and the auditors can work together. It would indeed reduce the cost of compliance Perhaps the appropriate test to guage auditor independence would be to compare the company's audit fee to the firm's overall revenue stream. For those companies who comprise only a small portion of the auditing firm's revenue, most questions of independence are moot. 08/17/2005 12:48:33 Depends on the auditor. 08/17/2005 13:25:50 If you are dealing with people of integrity, there would be no impact. Crooks do not care. 08/17/2005 18:49:27 I prefer to keep them in their truly independent role rather than muddy the waters of help vs. audit. The real issue is what is material and how often do our stockholders want to pay to have someone independent say we have properly accounted for all material transactions. 08/17/2005 19:31:08 I don't believe it would impair their independence. I don't think it would reduce the cost of oompliance nor do I believe it would impact the quality of audits. 08/17/2005 21:27:12 No. It is impossible for smaller companies to staff their accounting grpups with the expertise necesarry to properly account for and disclose infrequent transactions. Prior to SOX smaller companies were able to engage their audotrs as GAAP experts to ensure that the accounting and disclosure was accruate and complete. As long as the auditors are not involved in the structuring of the transaction their is little risk of impairing their independence. 08/17/2005 22:55:14 I don't believe audit quality would suffer if the auditors were allowed to provide assistance with accounting or reporting unusual or infrequent events or transactions with respect to smaller companies. Providing such asistance would reduce compliance costs of smaller companies through the use of fewer expert firms and the use of a firm already familiar with the client. 08/18/2005 08:03:31 No Answer. 08/19/2005 02:56:12 Absolutely. While I have sufficient expertise for nearly every area of accounting and reporting, if I left my company, they would have to rely on an outside expert for reporting and accounting assistance. The interaction between a company and its auditors is improved the more freely they can communciate, discuss and debate reporting and accouting alternatives. 08/19/2005 11:44:44 Independence would not be impaired, and costs would be reduced. Quality would improve due to having dialogue on these issues. Access to qualified accounting firms can be quite limited for small companies - a requirement to look for independent consulting on these issues could be costly. 08/19/2005 12:28:03 I believe that this assistance would enhance the knowledge of both the auditor and the entity. 08/19/2005 13:49:01 As professionals, with knowledge of unusual and/or infrequent transactions, it only makes sense to permit auditors to render assistance to their clients as these unusual events occur. In doing so, it is not felt that any loss of independence would occur. Up until now the auditor has been viewed as a “business partner” for the company, much like the banker has been a “business partner,” giving guidance as required. When a person is sick they go to see a doctor, a professional in their field; when a company becomes sick it also becomes necessary to see a professional; that professional is the company´s auditing firm. The rendering of any professional advice would not impact the quality of the audit if it is done with the focus of the proper presentation of the company´s financial statements in accordance with GAAP. Nor would it impact the investors or markets; to the contrary, a company that seeks advice and becomes stronger from having done so would create a positive impact on both. 08/19/2005 14:40:28 With proper boundaries between auditor and client, and a well-documented communication trail, auditor assistance on unusual or infrequent transactions would improve financial reporting smaller public companies. 08/19/2005 14:50:07 See #17 above. For small companies in heavily regulated industries such as banking, the regulatory process serves as a test-check. 08/19/2005 17:03:28 Providing assistance to the smaller companies may actually improve the quality of the audits since the transactions would not be new information for the auditors at that point. Accountants in smaller companies usually need more help with GAAP since they have fewer experienced personnel to help them with accounting issues. 08/21/2005 03:34:34 I believe the company should be able to be assisted by the auditors also in unusual transactions, because the auditoes know the company and this will save some costs. I don't think it impairs thae auditors independence, because as it is anyhow there are only 4 big accounting firms, and I guess eventually these firsm get the same share of deals.It will not impair the quality of audits, because auditors in general are more careful, whether on ordinary audits or in unusual transactions 08/21/2005 04:46:26 In special cases you have to get advice from the auditors. It does not make sense to take a decision and find later the auditors do not approve it. 08/21/2005 22:19:50 I don't think it would impari their independence and it would improve the quality of compliance with accounting standards. 08/22/2005 14:21:23 As previously mentioned, these individuals are certified professionals and should be permitted to help smaller companies. It would reduce costs and due to their certification it should not impact on quality of audits. 08/22/2005 15:20:23 Same answer as #17 above. I believe auditors should be able to assist with implementation and that it does not affect the quality of the audit. 08/22/2005 15:47:02 No. Yes. No impact on quality of audits. 08/22/2005 15:47:34 I don't see why it would. The representation letter always let's us know whose financial statements they are. 08/22/2005 17:54:28 One of our biggest problems is how to get expert help on infrequent transactions. We MUST have help from our auditors on this. This would improve quality, not reduce it. Right now we have a Catch-22 in trying to get advice without "shopping" for opinions. 08/22/2005 17:56:59 Yes, this would be a positive, and a do not believe would impair quality. 08/22/2005 19:27:18 No. The reality is we can't do it without their help. There is just too much to keep track of in GAAP to know all the accounting for infrequent items. 08/22/2005 20:10:17 Don't know 08/23/2005 00:42:38 would not impair. would reduce the cost. would improve the quality of audits as auditors could focus on issues that matter rather than finding errors. 08/23/2005 15:56:30 auditor assistance with these matters does NOT impair independence. Such assistance would reduce the cost of compliance. Impact would be positive on all points. 08/23/2005 16:49:34 It should not. If it is a reputable firm they have to maintain their integrity also. 08/23/2005 18:10:00 No, doesn't impair. We need help and our Auditors know our business. 08/23/2005 21:11:03 An auditor of record can and should provide guidance on unusual or infrequent transactions. To prevent impairment the company and auditor could seek a second opinion on the specific transaction treatment in order to substantiantiate the validity of the guidance and the audited results. In such and event the "transaction opinion" would be seperate letter included in the annual filing. Where the transactions are to be recurring, albeit infrequently, standardized process/methodolgy with a concurring opinion could be done with out the need for public disclosure beyond the initial design and review. 08/24/2005 10:14:02 Yes auditor assistance is appropriate in some cases. This assistance and determination should be disclosed. 08/24/2005 12:24:07 there should be much more freedom for auditors to provide advice and assist with transactions, taxes etc. this should not reduce the quality of work. 08/24/2005 14:30:13 Market Cap is just a measure the stock price times the number of shares and has nothing to do with the size of the company and therefore is not a great measure for determining the size (large or small) for a company. I think that there should be some sort of formula derived based on various factors such as revenues, employees, market cap that determines what is small. There are too many factors other than just market cap to define a company size. No, providing assistance does not impair independence. Its a collabrative approach to solving issues rather than wasting time on both sides. It would reduce the cost of compliance as you are both on the same page. It would improve quality of audits. 08/24/2005 16:19:27 NO WAY. YES THEY WOULD BE BETTER. I just don't understand the questions. I worked at KPMG as a manager. Before the Arthur Andersen case, auditors garnered some respect in this country. Then, a company gets put out of business for following a record retention policy that ALL the firms followed. NOW we ask these ridiculous quesitons about independence and quality of audits. This is mindless. WE ARE ALL PROFESSIONALS AND THE MAJORITY OF US ARE HONEST. A FEW BAD APPLES DOESN'T MEAN THE SYSTEM IS RUNNING AMOK. 08/24/2005 16:26:56 No. Yes. The quality of audits would improve. 08/24/2005 16:54:47 No 08/24/2005 20:16:09 We rely on our accountants to help us with accounting and reporting questions. If we could not ask for help from them our costs would increase. We do not feel it impairs their independence. Again, as a small company we lack the expertise on complex accounting and tax issues. 08/25/2005 15:23:41 N/A 08/25/2005 16:04:36 Auditing your own work is a dicey proposition. The market will solve this issue with speciality accounting advisory firms. 08/25/2005 16:26:29 This assstance in the past has not appeared to impair independence. If a smaller company has to hire a seperate accounting firm for guidance on implementation issues for new pronouncements, etc.; then what happens if the accounting and auditing firms disagree with the approach? Who should "win"? And theg company would have to foot the bill to hire yet a third company as a tie-breaker... 08/25/2005 17:02:43 I don't believe this would generally impair independence for smaller companies and would sigificantly increase the quality of audits and investor information. 08/26/2005 12:41:42 As the CFO for a small public company, there are a handful of accounting questions that come up throughout the year. Traditionally, the company's auditors would assist management in determining the appropriate accounting. This is now more difficult. I believe that this is a detriment to the investor. We need to realize that the accounting and SEC environment has become increasingly complex, even large comapnies are challenged to determine the appropriate accounting. 08/26/2005 13:07:22 No, it would not impair auditors' independence, we need their input and cost would be reduced. The rules now result in a "gotcha" game. 08/26/2005 15:31:29 N/A 08/26/2005 16:22:08 No. 08/26/2005 17:28:04 It would not impair independence. It would reduce the cost of compliance by eliminating the need to engage other experts. I belive the quality of audits would benefit from a dailed review of such transactions on a timely basis. 08/26/2005 17:46:13 Samller companies need to be able to continue to receive sconsulting and help from their auditors. The audits today are quite meaningless. Just mechanics. Investors do not benefit from the fact that the companies no longer have financial advisors and partners that can help in best practices and sound advice. 08/27/2005 11:21:03 No. Small public company auditors do need oversight on their skills, which is more efficiently provided by PCAOB and SEC report reviewing, not by hiring other accounting firms to provide the initial judgment which would then be reviewed by the auditors. This isn't about auditor integrity, because the fees aren't so huge. This is about auditor skills only. Costs of compliance can drop a lot by allowing flexibility in the 'independence' rules for auditors of smaller public companies. 08/29/2005 07:07:37 Won't impair and will reduce cost. Quality won't suffer. 08/29/2005 10:21:15 We do not believe it would impair independence. In most cases, smaller companies do not provide a significant portion of revenue to the Big 4 audit firms, as well as in many cases the next tier of audit firms. If the Big 4 felt that management of a small company was improperly influencing audit results, wouldn´t they more likely resign from the audit rather than take the financial risk? Audit firms being able to provide such assistance simply helps smaller companies get it “right” where there is a lack of full-time subject matter experts in-house. 08/29/2005 10:21:25 We do not believe it would impair independence. In most cases, smaller companies do not provide a significant portion of revenue to the Big 4 audit firms, as well as in many cases the next tier of audit firms. If the Big 4 felt that management of a small company was improperly influencing audit results, wouldn´t they more likely resign from the audit rather than take the financial risk? Audit firms being able to provide such assistance simply helps smaller companies get it “right” where there is a lack of full-time subject matter experts in-house. 08/29/2005 11:21:29 No, I don't believe it would impair their independence. The accounting firms are now "regulated" by the PCAOB. Providing this assistance would help ensure that the small company reports correctly and may save them from have to refile later or face litigation. 08/29/2005 14:18:47 Yes, if the auditors provide assistance, it would create an impairment of independence. They could wind up auditing their own work. Furthermore, it is nonsense to believe that this would not create conflicts for auditors of smaller firms - but would create conflicts for auditors of large firms. 08/29/2005 14:53:30 No. Would providing such assistance reduce the cost of compliance for smaller companies? Yes. What would be the impact on the quality of audits, investors or markets? Please explain. More productivity, higher profits and better penetration of markets versus foreign competition. 08/29/2005 15:31:21 Without doubt, allowing auditors to provide assistance to small companies with certain transactions would reduce the cost of compliance. I do not feel that this would negatively impact independence or the quality of the audit. Auditing firms have a peer review process that should include the review of assistance provided to clients. This would help ensure that auditors stay within allowed assistance guidelines. 08/29/2005 16:10:53 No---to the first question. No---the oosts will not be reduced. The market has changed and auditing firms have found a new profit center---auditing! The base cost of our audit has increased from a little over $100,000 to over $200,000. To the third question---no negative impact on the quality with the possibility of better reporting. 08/29/2005 16:20:53 It might impair their independence however it would reduce the overall cost to smaller companies. 08/29/2005 17:09:27 No, it would not impair independence. It would reduce the cost of compliance because the smaller company could rely on the auditors for accounting assistance instead of hiring another firm for assistance. 08/29/2005 17:12:26 No I beleive the company and the outside auditor could handle it in a professional manner. I beleive it could save some money since currently we have to seek advice from other outside accountants who generally cost more when used on an ad hoc basis. 08/29/2005 17:36:32 unable to comment 08/29/2005 19:02:32 Having the outside auditor for a small company assist in all accounting issues could only help a small company. He becomes more familiar with the business and offers guidance. 08/29/2005 19:05:24 Given the complexity of the current accounting rules, it is critical that auditors be allowed to provide assistance with accounting and reporting for unusual or infrequent transactions. The perception that this type of assistance creates an independence issue represents a disconnect from the “real world”. From a real world perspective, we believe this has no impact on auditor independence as these types of transactions are routinely reviewed by the auditor´s National Office, and the conclusions of the National Office are routinely accepted by company management. The only difference from current practice is that smaller companies, which may lack the requisite expertise to evaluate unusual and complex transactions, will no longer be forced to consult with a third party firm to obtain advice prior to submitting the issue to their auditors for evaluation. 08/29/2005 21:00:01 Assistance provided by auditors should not impair the auditors' independence as long as the assistance only included discussions, recommendations, guidance. Such guidance should decrease costs and increase the quality of audits since concurrence on unusual/infrequent transactions would be obtained prior to entering into such transactions. 08/29/2005 22:40:58 The auditors providing assistance to small companies would in no way impair their independence. Small companies do not have the internal resources to deal with many issues that their auditors can easliy assist with, and actually did assist with before SOX was required. 08/30/2005 15:04:16 As a $10 million company we would say absolutely not. The auditors are professionals who manage themselves to high standards. They would not compromise their independence - if they were allowed to assist companies on "infrequent" transactions. In fact, this is a helpful collaborative way to improve efficiency. Investors would benefit because of improved efficiencies and less risk of audit exceptions 08/30/2005 15:07:00 I don't believe independence is impaired by a firm providing technical guidance. Such assistance would improve the financial reporting, reduce distraction for the smaller company, but would probably not be less from a cost standpoint. The impact on the quality of published financials would be a positive. 08/30/2005 16:27:18 I believe there would be no impairment. Both have a role and a job to present accurate statements. Assistance from experts should not be construed as impairment. 08/30/2005 17:08:46 We do not believe that by providing assistance with accounting and reporting for unusual or infrequent transactions that auditors would impair their independence as it relates to smaller companies. Not sure whether providing such assistance would reduce the cost of compliance for smaller companies, other than perhaps eliminating the cost associated with seeking out the guidance of another accounting firm and the inherent inefficiencies in that process. Do not know what the impact on the quality of audits, investors or markets would be. 08/30/2005 17:23:36 No, I don't think it impairs the auditor's independence to proved assistance with unusual transactions. Yes, it could help reduce the cost of compliance. 08/30/2005 18:26:14 Due to the limited resources with accounting expertise in unusual or infrequent complex areas, assistance from auditors to determine the proper accounting treatment and provide the appropriate GAAP guidance is extremely helpful. This level of assistance should not impair the auditors´ independence; management is still ultimately responsible for the ownership of the financial reporting process and is responsible for qualifying, engaging, and overseeing independently engaged resources, just as they are responsible when utilizing internal resources. The cost of compliance would be reduced by precluding smaller companies from having to outsource their accounting expertise to a separate accounting firm. 08/30/2005 18:48:02 Again, let's keep the independent auditors independent. 08/30/2005 18:51:48 We believe that this assistance and expertise is a great benefit to smaller companies. We have seen our auditors and tax professionals back away from giving any advice or assistance whatsoever. It is very difficult for a small company to develop this expertise. We believe that the work of public accounting firms should be reviewed by the PCAOB to determine their independence, but who would be best to develop this expertise than the accounting firms – it would be a great savings to US companies to rely on that expertise. 08/30/2005 19:47:16 Please see item 17 above. 08/30/2005 21:07:56 No, auditor assistance would not impair independence. Yes, such assistance would reduce cost of compliance. Impact - assurance that unusual or infrequent transactions are accurate. 08/30/2005 23:57:28 Don't believe audtiors' independence impair. Auditor can further understand the background and currect develop of the company, It may even improve the quality of their work. 08/31/2005 10:19:14 No, auditor assistance with such transactions would not impair auditor independence and would reduce the cost of compliance for smaller companies. there would not be a material impact on the quality of the audits. The Enron nad WorldCom type situations mainly stem from the fact that the Board of Directors and the Audit Committees of the Board are improperly aligned with the executives. If the Boards and Audit Committees of public companies were true representatives of the shareholders, they would be more comfortable taking the executive leadership to task on questionable practices. 08/31/2005 10:21:37 The marginal impairment to independence would be offset by reduced cost of compliance and a lower risk of misstatement. 08/31/2005 14:00:12 It would be helpful to smaller companies without impacting audit quality. Costs would be similar. 08/31/2005 14:00:16 Auditing quality is a perception - of investors, etc. Quality is only in question when one becomes aware of problems at the company. Allowing auditors to assist with unusual transactions does not, in itself, create problems (independence and other), and could reduce compliance costs because the auditor would already be familiar with the issue. This is a reaction to Arthur Andersen's failure to properly act on the Enron case. All auditors and companies are now paying for AA's inappropriate actions. The issue there was that AA was asked to hide some things and given the fees they were being paid, they compromised. In reality, how independent can the auditors be given that they're being paid by the company? The relationship between auditors, companies and investors works most of the time - assuming all parties involved hold themselves to the highest standard. The breakdown in the system occurs when one or more parties compromises their duties and obligations. 08/31/2005 14:12:37 It seems unlikely that auditor assistance would negatively impact the quality of audits – in today´s environment auditors are well aware of the penalties for audit failures. We believe auditors would do their best to achieve the correct accounting without regard to whether the company, a third party or the auditors themselves conducted much of the underlying research and analysis. Clearly, any items requiring estimation or judgment would need to be the sole responsibility of management, but the technical research to support a position could be conducted by the auditors. This assistance would undoubtedly reduce the costs of compliance for smaller companies as it would eliminate a layer of review for those companies lacking the in-house expertise to address technical accounting issues (and who must engage third-party specialists to provide this assistance). 08/31/2005 14:25:37 Auditors and accounting groups working with a company is essential to the well being of that company and the communiciation with the Board , audit company, executive management can only improve the investor position. With proper communication and honest management you can only improve a company. 08/31/2005 14:32:46 In a smaller company, many times the expertise is not in place to handle or evaluate unusual or infrequent transactions. That is why you engage outside sources for guidance to ensure proper reporting. I don't believe this creates an independence issue for the auditor. In a small company, you desire input from the auditor to ensure reporting is accurate. What may be unusual or infrequent to the small company may be standard and day-to-day for an auditor. I don't think costs of compliance would be reduced because if you are not sure how to handle certain transactions, you are going to engage someone for assistance, whether it's your auditor or another third party. In our case, the assistance provided would not have an impact on the quality of the audit, nor an impact on investors or our market for capital units. 08/31/2005 15:19:27 No, these are difficult transaction to account for, for many small companies. Help on the front end would be more beneficial and prevent issues on the back end. Again compliance costs would be reduced as the auditor is more familiar with the transaction. 08/31/2005 16:05:33 Impacts on quality shouldn't be affected as long as the company does a good job of hiring an honest accounting firm. 08/31/2005 16:13:45 Assistance with accounting and reporting transactions would not impair the auditors' independence and would assist in reducing the cost of compliance for smaller companies? Such assistance would improve the quality of audits and financial reporting thus increasing value to investors. 08/31/2005 16:16:33 18. Auditors should be not just be allowed, but be encouraged, to assist smaller companies with accounting and reporting for unusual transactions. With GAAP being so difficult to navigate these days, the Big Four are, more often than not, the only parties qualified. This consultation will significantly improve the quality of financial results. 08/31/2005 16:29:59 This is the way it use to be. In 20 years never had a poor quality audit. The questions with management and auditors was always " is this correct and right, not how can accounting make revenue or profits" Small companies want to rely on informed experts ( their audit firm) so they can spend their time competing for business, which is why they were created to begin with. How can we believe that $200,000 to $600,000 more in yearly costs improve investor confidance. 08/31/2005 17:16:33 No for us. We don't have that many ususal items and the ones that we do have we can account for under existing rules. 404 excluded. 08/31/2005 18:22:30 We believe the external auditor can provide education and feedback for unusual or infrequent transactions without impairing independence. Clearly, public companies must take responsibility for their financial statements and application of accounting standards. It is difficult to determine the cost impact to a smaller company. The shift would be from decreased internal costs, difficult to quantify in many cases, to increased external costs in the form of additional auditor fees. However, we believe that the existing guidance affords auditors the ability to appropriately assist companies with implementation and already benefits smaller companies. Preparers and auditors have the same goal of accurate and reliable financial reporting. We believe the quality of the audit is enhanced when the auditor is able to provide education and offer feedback as a company develops its positions, especially in unusual and infrequent transactions. We believe the more the auditor knows about the process and transaction while the appropriate accounting treatment is being determined, the greater chance the auditor has to assist companies to issue financial results that are in compliance with GAAP. The auditor should certainly not be restricted to only making sure the entries are right after the fact. Not only should unusual or infrequent transactions have more auditor involvement, but also the accounting in many other areas could benefit from a greater auditor presence. It would reduce the cost of compliance, as well as ensure that the difficulties noted in the prior paragraph are encountered less often. With the advent of Section 404, we have observed many companies taking increased ownership of their accounting systems and applaud this shift. However, we believe the auditor must continue to be engaged in the process and be available to educate and offer guidance to positively affect audit quality which is paramount to reliable financial reporting. 08/31/2005 18:23:08 I do not believe that an external auditor´s assistance (guidance) with accounting and reporting for unusual or infrequent transactions impairs the auditors´ independence as long as management is responsible for making the final decision as it relates to how the company accounts for the transaction and the external auditor is not involved in the implementation of the accounting policy. The cost of compliance would be reduced because a company would not be paying two firms to cover the same topic…one to provide guidance and one to audit. Regardless, management would still need to perform research on the topic and be responsible for the decision made. Overall, it would help, not hurt because of the access to technical experts, common goal of accurate and timely reporting. The quality of audits would be better because there would be full understanding of the decision-making and process surrounding the transaction. Investors would benefit from management and auditors discussion on infrequent or unusual accounting transaction because there would be more assurance that the complex accounting issues were handled properly. Plus it is expected that CPA firms have the highest level of expertise, with access to extremely knowledgeable advisors. 08/31/2005 19:16:05 18. Allowing outside auditors to provide assistance on unusual or infrequent transactions is very necessary to us as a small company. We quite often do not possess the broad range of experiences that our auditors have and dealing with two entities is ineffective since the auditing firm still must review and concur with the accounting treatment. Smaller companies do not provide the same level of fees and dependence on those fees with their auditors that a much lager company might so the issues of independence are not the same. Also, I believe that frequent changes in auditors or disagreements with auditors have a disproportionate impact on the value of smaller companies, which lessens the risk from independence issues for investors, since smaller companies would have more incentive to avoid these types of situations. 08/31/2005 20:55:07 I see no reason that obtaining specialized asssistance from the auditors should impair an auditors independence. However it should be done under the management of the company and not a carte blanche to perform tasks. 09/01/2005 00:55:31 N/A 09/01/2005 11:40:19 No, I think such assistance should be given by the auditors. 09/01/2005 14:30:54 Auditor´s assistance with accounting and reporting for unusual or infrequent transactions would only enhance the quality of accounting and reporting in a couple of ways. First, these transactions would most likely be discussed at the time they occur or soon thereafter rather than an after the fact discovery at the time of audit or quarterly review. Second, auditors typically have more experience with a wide variety of transaction, accounting issues and an in depth knowledge of all new accounting pronouncements. This assistance would lead to more accurate reporting and a smaller likelihood of restatement. In our judgment his would far outweigh any perceived independence question. 09/01/2005 17:12:34 Auditor's providing assistance would not impair the auditors independence and it would reduce the cost of compliance. The audit firms knows its client. If the client seeks advice from another firm it is inefficient and the advice would not be as high quality. There sould be no impact to quality of the audit, it might actually be better quality, no impact for investors or markets. Again better information would be positive for the investors and markets. 09/04/2005 07:42:16 No. Auditors assistance with accounting and reporting can be obtained without impairing their independence if proper precautions (like using separate departments ) will be taken and such assistance will reduce costs.
http://www.sec.gov/info/smallbus/acspc/acspc_rpc18.htm
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