Volume 1, Issue 5

October 2007

I. Public Dialogue Tour

The CAQ's public dialogue tour traveled to New York and Chicago as forum participants sharpened their focus on specific recommendations to improve financial reporting.

In New York, about 30 guests joined CAQ Executive Director Cindy Fornelli for a September 27 dinner discussion at the St. Regis Hotel. Much of the conversation examined the need for forward-looking reporting and the prospects for global convergence.

James Turley, chairman and CEO at Ernst & Young LLP and chairman of the CAQ's governing board, said the effort to agree on international standards is moving into a challenging phase.

Cindy Fornelli and James Turley

"We have made a lot of progress. But from my perspective, we are at both a very exciting time and a very sensitive time," said Turley. "No one around this table should underestimate the level of emotion that is in the last yards of this discussion."

In Chicago, approximately 50 stakeholders joined Fornelli at The Chicago Club. The discussion included ideas on how to provide relevant information to both institutional and individual investors.

"The key to modernization is the Internet, in terms of financial and business reporting," Illinois Attorney General Lisa Madigan said. But like Madigan, other participants also cautioned against the risk of overwhelming investors with too much information.

Next stop: San Francisco, Nov. 9 >>

II. CAQ Webcast

On October 4, hundreds of public company auditors from across the country participated in the CAQ's first live, interactive Webcast. The well-received event focused on the implementation of the PCAOB's Auditing Standard No. 5 in advance of the approaching deadline for thousands of smaller public companies to comply with Sarbanes-Oxley Section 404.

Moderated by CAQ Executive Director Cindy Fornelli, the Webcast's guests were the PCAOB's Tom Ray and Sharon Virag and Trent Gazzaway of Grant Thornton.

III. CAQ White Papers

The "liquidity crisis" that began in the subprime mortgage-related markets, and has spread to other corners of the credit markets, presents unique challenges in performing audits and quarterly reviews of public company financial statements.

In response, the CAQ issued three white papers discussing topics related to current market conditions. The papers, shared with CAQ members on October 3, address the measurement of fair value, the consolidation of commercial paper conduits, and accounting for underwriting and loan commitments.

In an October 17 article, The Wall Street Journal cited the white papers as more evidence that the CAQ's creation in January "has allowed accounting firms to speak with one voice."

The papers are available on the CAQ Web site at http://www.thecaq.org/members/index.htm.

IV. CAQ Governing Board Announcements

On October 3, James S. Turley, chairman and CEO at Ernst & Young LLP, was announced as chair of the CAQ's governing board. Co-Vice Chairs Michele J. Hooper, co-founder of The Directors' Council, and Barry Melancon, president and chief executive officer of the American Institute of Certified Public Accountants (AICPA), were also named to the governing board leadership.

"We are very excited to have such distinguished leaders for our governing board," said Cindy Fornelli, executive director of the CAQ. "Serving as co-vice chairs, Michele and Barry will bring the perspectives of the investing public and smaller audit firms, respectively, to the governing board’s deliberations."

V. CAQ Welcomes Treasury Panel

In an October 2nd press release and a letter to the editors of The Wall Street Journal, the CAQ welcomed the appointment of the Treasury Department's newly created Advisory Committee on the Auditing Profession.

Two of the CAQ's governing board members -- KPMG Chairman and Chief Executive Tim Flynn and the AICPA's Barry Melancon, a co-vice chair on the CAQ's board -- were named to the panel by Treasury Secretary Henry Paulson. The profession is also represented by Ehrhardt Keefe Steiner & Hottman Audit Partner Gaylen Hansen and Bailiwick Data Systems, Inc. President and CEO -- and McGladrey & Pullen board member -- Bill Travis.

The Center for Audit Quality has developed this monthly newsletter, designed to keep you up to date each month on ways the organization is addressing the topic of modernizing business reporting and other critical information facing investors, issuers, company executives and the public company auditing profession.