What has been done and what more can be done to restore the public trust in the auditing profession and in the nations financial reporting system?

Answer 1

This question is designed to encourage students to think creatively about issues for which there are no uniquely correct answers. Some of the issues students may raise are as follows. Congress recently passed the Sarbanes-Oxley bill that makes it illegal for auditors to perform external audit and internal audit or management consulting services at the same time. This bill also introduced other measures that attempt to restore confidence in the country's capital markets. For instance, the bill mandated the creation of a new public company accounting oversight board (the PCAOB) that is under the jurisdiction of the SEC, essentially ending the profession's long-standing tradition of self-regulation. The board has power over audit firms auditing SEC clients in the U.S. Unfortunately, these measures ultimately cannot by themselves completely restore confidence in the capital markets. The NYSE and NASDAQ are currently considering numerous reforms to listing requirements to strengthen board of director governance over senior management. Companies must consistently demonstrate their commitment to accurately disclose financial and operating information, and a continuous process must be established to enhance and maintain the quality of information provided to investors and creditors.