I want to thank the staff for the thoughtful work that went into this concept release. This idea has attracted considerable attention, including the support of the Treasury Department’s Advisory Committee on the Auditing Profession last year. Given the attention, I think the release does a good job of describing what has been proposed in other circles and environments and asking questions that will help the Board evaluate the merits of implementing it.
For myself, I am particularly interested in the question, what problem would such a requirement solve? Some people have compared the idea to the CEO and CFO certifications that the Sarbanes-Oxley Act now requires. In the past, CEOs and CFOs of companies with accounting problems routinely argued that they did not understand what was in the financial statements. In contrast, engagement partners rarely, if ever, deny responsibility for the audit report. They raise other defenses, but not that one.
Nevertheless, many people believe that requiring partners to sign their own names on the report would enhance their perception of their personal accountability for the opinion. I think the idea is worth exploring, and thus I support issuing the concept release. As in the case of many proposed new requirements, it is often difficult to prove the benefits of a requirement that has no track record in our environment. Therefore, I encourage commenters to focus on two questions: explaining whether engagement partners would perceive that signing their names to audit reports is materially different, or would result in a materially different type or amount of audit work. And, if so, why.
The second of those two questions may be even more interesting than the first. That is, the concept release highlights certain situations in which engagement partners today use work performed by people of varying proximity to the partner, for example, work performed by network affiliates. If auditors report that they would be troubled by a requirement personally to sign the audit report when part of the audit work has been performed by network affiliates, the problem may not be with signing the report. The problem may instead be with whether an engagement partner has a sufficient level of comfort with the work of an affiliate to rely on it in the first place.
This and the other questions in the release are well worth asking. I support publishing it for comment.