SEC HEARING - SEPTEMBER 20, 2000
OUTLINE OF TESTIMONY ON AUDITOR INDEPENDENCE
CHAIRMAN AND CEO - AMERICAN EXPRESS COMPANY
The objective of this testimony is twofold. It is to present observations on the issue of auditor independence - both my personal views, and my views as CEO of a large, publicly traded company, which is a significant consumer of the professional services of auditing firms.
American Express has an interest in both sides of this issue:
Audited financial statements are a key reason for investor confidence in our capital markets. American Express relies on audited financial statements in two capacities:
Questions have been raised as to whether the independence and reliability of audit opinions has weakened as a result of the expansion of services offered by auditing firms. Empirical evidence from the Cohen Commission and the Public Oversight Board conclude that independence has not been impaired. Based on my business experience, I also do not believe that independence has been weakened by this expansion.
There are 6 points I would like to make:
The issue of auditor independence is an important one, but I do not believe it is a problem in serious need of repair. The significant audit failures that occur are failures of competence and quality control, rather than independence lapses. The assurance of audit integrity going forward cannot be successfully addressed by substituting legislation and rules for ethics and principles. I have long believed that the most effective regulation on this kind of issue comes from responsible private sector initiatives. Development of a reasonable conceptual framework should precede any attempt to craft checklists or rules governing every potential conflict that might or might not occur. This framework can then be interpreted and applied to specific situations through professional pronouncements and, where appropriate, in enforcement proceedings.