Statement by SEC Commissioner:
Remarks on the Proposed Framework for Enhancing the Quality of Financial Information through Improvement of Oversight of the Auditing Process
Commissioner Cynthia A. Glassman
U.S. Securities and Exchange Commission
SEC Headquarters, Washington, D.C.
June 20, 2002
The best part of a Commissioner's job is taking meaningful actions to benefit investors. The proposal that we are considering to send out for comment today will be an important step in restoring investor confidence by enhancing the accountability of the audit profession. I think it is an excellent proposal, and I am pleased to support it.
The proposal draws heavily on our own internal expertise and experience as well as the input we have received from a wide range of external sources including our Roundtables and Investor Summit. I appreciate all of the effort that Robert Herdman, Giovanni Prezioso, Jonathan Sokobin, their staffs, and staff throughout the Commission have spent in its development.
Under the securities laws, public accounting firms have been given the privilege of auditing public companies. I cannot overstate the importance of the accounting profession to our financial markets. There is a contract of trust between the investing public on the one hand, and public companies and the accountants that audit them on the other. When that contract is broken even if it is by a few bad actors it can erode investor confidence and thereby affect capital raising activities in the United States and beyond.
These proposed rules are not intended merely to improve investor perception of oversight of the accounting profession as important as that is. They would make real, substantive improvements to the quality of the process by which financial statements are prepared.
In my view, the major strengths of the proposed Public Accountability Board are that:
- it is a private sector oversight system that leverages limited SEC resources to accomplish its important objective.
- funding is guaranteed and non-discretionary. In essence, public companies and their auditors would pay for an oversight system to assure the quality and integrity of financial statements.
- it is independent of the accounting profession but retains the accounting expertise needed to properly oversee the auditors and audit firms.
- it has effective quality control review and disciplinary powers.
This is a significant response to the need for reform of the way the accounting profession is overseen.