Volume 1, Issue 7

December 2007

I. CAQ Wraps Up First Year

The Center for Audit Quality has wrapped up its first year of operation and is mapping out plans for an even more productive 2008.

As we reflect on all that has transpired since January 2007, the Center has established itself as supportive of investor interests and an influential voice for public company auditors.

The CAQ quickly forged solid relationships with federal regulators, reached out to other stakeholders in the capital markets and encouraged an open and frank discussion on ways to improve financial reporting. In furtherance of these productive activities in 2008, we will continue working in close cooperation with the SEC and PCAOB; actively participate in the deliberations of the Treasury Department’s Advisory Committee on the Auditing Profession and SEC Advisory Committee on Improvements to Financial Reporting, and attend gatherings of individual and institutional investors from coast to coast.

Executive Director Cindy Fornelli has been a guest speaker at events hosted by a variety of organizations interested in the mission of the CAQ, and is frequently interviewed and quoted by the nation’s business media.

All in all, it has been a very productive year. Thank you again for your interest in and support of the CAQ.

II. Public Dialogue Tour Enters Final Phase

After stops in seven cities in 2007, and looking forward to three more in 2008, the CAQ’s Public Dialogue Tour will result in specific recommendations for improving financial reporting. Findings from the tour will be released after the final stop in mid-year, but some important themes have already emerged:

• Investors do not necessarily want more information, they want more useful information;
• There is a strong demand for forward-looking data and financial information that is presented in a meaningful context;
• Complexity is a major concern, but investors also worry that over-simplification could mask the realities of complex business transactions.
• Meeting the diverse needs of investors, from sophisticated institutional investors to casual retail investors, remains a significant challenge; and
• Investors view auditors as an ally, but expect them to find fraud.

The CAQ will continue to work through these issues, with direction from investors, regulators, corporate executives and audit professionals, in the final stages of the tour. 

III.  CAQ Offers Help With Section 404

The CAQ serves as a comprehensive resource for member firms, offering information and serving as a vital forum for addressing issues affecting the auditing profession. During 2007, for example, the Center issued nearly 70 technical alerts that covered a variety of topics. The CAQ received widespread media attention for its white papers providing guidance on illiquidity in the capital markets and as well as the early adoption of FAS 159.

Most recently, the CAQ has offered comment to regulators and advised auditors on smaller public companies that prepare to comply with Section 404 of the Sarbanes-Oxley Act. Although SEC Chairman Christopher Cox has proposed a one-year postponement of smaller company compliance with part of the law, as of December 15th companies were expected to begin including an assessment of their internal controls over financial reporting in their annual reports.

A December 17 CAQ comment letter to the PCAOB offered several suggestions to help clarify the Board’s guidance on audits of internal controls at smaller public companies. Two days later, the CAQ issued an alert containing advice on items for auditors to consider as the deadline for Section 404(a) compliance approaches.

Both documents are available in the “Members Resources” section of the CAQ’s Web site, www.thecaq.org/members.

IV.  New Brochure Created; Adds to Web Site Enhancements

The CAQ has produced a brochure that explains its work on a behalf of a profession dedicated to the core values of integrity, honesty, objectivity and trust. The brochure is available at www.thecaq.org/about.

The CAQ Web site, meanwhile, will continue to expand its offerings in 2008 to serve as a resource for members of the public, the press and the profession.

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.