Reporting on Internal Control

[Bill]

Title: Message

Julie Anne Dilley

Audit and Attest Standards

American Institute of Certified Public Accountants

1211 Avenue of the Americas

New York, NY 10036-8775

 

Re: Proposed Statement on Auditing Standards – Reporting on a Entity’s Internal Control over Financial Reporting in Conjunction with the Financial Statement Audit

 

Dear Ms. Dilley:

 

I believe the requirements of this Proposed Statement miss the intent of President and Congress.  Further, the Statement appears internally inconsistent, contrary to the public good and self-serving.

When President ushered in Corporate Governance on March 7, 2002 he said, “The bottom line of the balance sheet defines a business's goal, but not the sum of responsibilities of its leaders. Management should respect workers. A firm should be loyal to the community, mindful of the environment.

Reform should begin with accountability, and reform should start at the top. The chief executive officer has a daily duty to oversee the entire enterprise, the entire firm, and therefore, bears a unique responsibility for serving shareholder interests.”

It is interesting to note that the term “shareholder’ does not appear in the referenced document. While the Proposed Statement suggests public documents focus on management’s assertions, it contains little, if any, discussion of the auditor’s review of management’s work, especially in shareholder equity protection. 

 

There seems to be an incredible amount of regulatory efforts on internal controls being documented and attested. Why didn’t internal controls keep any of the litanies of corporate failures from happening? Does a documenting and attestation of internal controls improve that lack of public trust? I suggest a document that does not even recognize the shareholder falls far short of what is requirement.

 

One may suggest the auditor does not have that responsibility for shareholder equity protection, yet the auditor is tasked with meeting these regulatory requirements. Who is to assume these responsibilities?

 

The SEC seems to have stepped up to the plate in Final rules published 8/29/02 but the accounting regulatory efforts seem to ignore these requirements. The SEC redefined internal controls but regulatory efforts want existing internal control documented and attested. There seems to be a major disconnect being the accounting goals and shareholder protection which seems to make public trust farther away than closer.

 

Respectfully,

 

Bill Reid

1-972-886-1350