Volume 4, Issue 4

April 2010

I. Cindy Fornelli Discusses IFRS and PCAOB in First of Three-Part Video Interview with WebCPA

CAQ Executive Director Cindy Fornelli sat down with Accounting Today Editor-in-Chief Bill Carlino recently for a wide-ranging interview. In the first of a three-part series of videos posted on WebCPA, Fornelli discussed the SEC's plans for International Financial Reporting Standards and the U.S. Supreme Court case challenging the constitutionality of the Public Company Accounting Oversight Board (PCAOB).

Noting that the Supreme Court is expected to render a decision sometime this year, Fornelli characterized the PCAOB case as a very narrow constitutional issue about whether the board is appropriately appointed.

The CAQ submitted an amicus brief last October, which looked at the policy reasons for the Board’s oversight function. “We feel it’s important for audit quality and for investor confidence that there be this independent oversight body that looks at how the profession operates and sets audit standards in a way that allows for due process,” Fornelli told Carlino, adding that regardless of the high court’s ruling, the CAQ will continue to support the presence of such an oversight function in the marketplace.

In part two of the interview, Fornelli responded to questions related to financial regulatory reform activity on Capitol Hill.

II. Fornelli Addresses Investment Advisers

In a March 10 speech to investment advisers, Cindy Fornelli addressed the importance of developing, implementing and operating a good valuation program in the midst of a bold new world of compliance.

A featured speaker at the Ascendant Investment Adviser Compliance Conference, she observed that, “Fair value accounting, or mark-to-market accounting, has been one of the favored villains of the financial melt-down, especially by financial institutions that held a number of increasingly toxic assets on their books. Although people like to blame fair value for the credit crisis, there is research that shows that it was not to blame.”

Reflecting on her prior experience as the deputy director of the U.S. Securities and Exchange Commission’s (SEC) Division of Investment Management, Fornelli told the gathering that, “Regardless of your views on the role of fair value accounting in the financial meltdown or its value to investors, as compliance executives for investment advisers you need to care about fair value accounting, if for no other reason than because the SEC does. Valuations by investment advisers are a perennial focus of SEC examinations and enforcement actions and now more than ever due to the increasing numbers of hard to value and illiquid securities in portfolios. The SEC will be focused on whether advisers have valuation procedures, whether they are implementing those procedures and whether they are appropriately disclosing to their clients the risks of investing in illiquid securities.”

Fornelli explained that, “We at the CAQ support fair value accounting because it provides investors with the most reliable and transparent information of an asset’s or a liability’s current value, thus providing investors with valuable information when making investment decisions. Increased transparency in financial reporting enhances investor confidence in the capital markets.”

III. Follow the CAQ on Twitter

The CAQ now has a presence on Twitter, the social networking service, where we share news and views on public company auditing and related public policy issues.

The CAQ’s social media effort complements our traditional stakeholder outreach and allows us to engage in a real-time dialogue with Twitter followers who have an interest in audit quality.

We invite you to follow the CAQ on Twitter now.