Volume 2, Issue 2

February 2008

I. CAQ Issues Year in Review

The CAQ recently marked its first anniversary by releasing a report on the Center’s activities and accomplishments during its initial year. The report, distributed to CAQ members, key stakeholders and other interested parties, recapped the CAQ’s emergence as a leading voice on issues related to public company auditing.

“We’ve launched an ambitious effort to improve financial reporting; reached out to investors and other market stakeholders; forged solid relationships with federal regulators; and offered real-world advice to CAQ members. Perhaps most importantly, we’ve enabled our profession to speak with one voice at a critical time,” Executive Director Cindy Fornelli wrote in the report’s cover letter.

II. CAQ Surveys Audit Committee Members

On March 18, the CAQ released the results of a recent survey of audit committee members, independent board members who oversee the audit process and have the authority to hire and fire auditors. The CAQ commissioned the survey [link to findings on CAQ site]as part of its ongoing effort to communicate with a variety of stakeholders affected by public company auditing. The results showed that more than three-quarters of audit committee members rated overall audit quality “very good” or “excellent,” and 82 percent said it has improved in recent years.

The findings indicate audit committee members have high confidence in the quality of financial statements and consider the Sarbanes-Oxley Act a positive influence. This is consistent with the results of a CAQ poll of investors released last July showing 80 percent of investors had confidence in audited financial information and a majority thought Sarbanes-Oxley was a positive change.

III. Public Dialogue Tour Heads to Boston

The CAQ’s Public Dialogue Tour travels to Boston on April 8 as the 10-city tour enters its final phase. Scores of investors, academics, government officials, corporate leaders and other market stakeholders offered their ideas on ways to improve financial reporting at eight earlier tour stops. Those suggestions, and ideas gathered in Boston and at a final stop in Washington, D.C., will form the basis for specific recommendations later this year.

Terence Smith, special correspondent for the NewsHour with Jim Lehrer, will continue to facilitate the conversation in the final 2008 stops. The dialogue tour, one of the Center’s first major initiatives, has focused on modernizing financial reporting, specifically discussing the quality of audits, combating fraud and the role of technology.

Complete details on the CAQ’s Public Dialogue Tour can be found at the CAQ’s Web site.

IV. What is Audit Quality?

In addition to generating ideas on ways to improve financial reporting, the Public Dialogue Tour has sparked some interesting discussion about audit quality. Regulations and technical guidelines typically describe audit quality by focusing on outcomes and goals. We know that quality audits enhance investor confidence by offering credible assurance that financial statements are reliable, but that’s not a definition.