Good morning. I am pleased to join in welcoming you to the Public Company Accounting Oversight Board's Roundtable on Communications with Audit Committees. I want to begin by thanking all of the panelists for joining us today and for providing us with the benefit of your insights and experience. The Board appreciates your willingness to devote time, effort, and thought to helping us address this important topic.
This roundtable is a key component of the ongoing Board standards-setting process. I have spoken in the past about the importance of openness and transparency in Board standards-setting. Over the past two years, we have experimented with the use of concept releases, with multiple public comment periods on proposed standards, and with more focused public discussion with our Standing Advisory Group of standards-setting projects. I view roundtables like this one as another tool we can use to make sure that the Board receives the most thoughtful and relevant input available when it writes standards, and that investors, preparers, and auditors all have the chance to contribute to our decision-making.
The Board's proposal to enhance auditor/audit committee communication was published last March. The objective of that proposal was to bring the standards related to auditor communications with audit committees into line with the role that the Sarbanes-Oxley Act assigns to the committee in overseeing the relationship between a public company and its auditor. The provisions of the Act that deal with audit committees are predicated on the idea that independent, informed, and pro-active audit committees are central to protecting the interest of investors in reliable and informative financial disclosure. That vision can only be fully realized if there is robust dialogue between the auditor and the committee. The proposed standard aimed to accomplish that by expanding and clarifying the rules-of-the-road that govern auditor/audit committee communications.
The Board received 34 comments on the proposal, including letters from several of the participants that are here with us today. A primary purpose of this roundtable is to explore in more depth some of the issues that were raised in the comments. One theme that ran through many of the submissions was that, before proceeding further with a new standard, the Board needed to engage in additional outreach, particularly to directors and others with first-hand experience in the work of audit committees. Along those lines, some commenters suggested that the March proposal approached the subject too much from the perspective of what information auditors thought directors should receive, and without enough sensitivity to what information is actually beneficial to audit committees. Others warned against creating requirements that would turn the communications process into a sterile, check-the-box exercise. One goal of this roundtable is to address those concerns and to make sure that the Board understands the dynamics of successful auditor/audit committee communication.
The comments also reminded us that the auditor and the audit committee have a common interest in the reliability of the company's financial reporting. That is why the proposal emphasized two-way communication between the auditor and the committee. If the auditor views meeting the requirements that govern its relationship with the audit committee as just another regulatory hoop that it must jump through, it may deprive itself of an important source of information and insight. The result could be to undermine the effectiveness of the auditor's work. Conversely, if the audit committee treats the audit as just another compliance cost — and one that needs to be minimized as much as possible — the committee may deprive itself of a valuable tool to assist it in assuring the integrity of the company's financial reporting. Accordingly, it is vital that any standards the Board adopts in this area promote a dialogue between the auditor and the audit committee that benefits both parties.
I am looking forward to hearing your thoughts on how we can best accomplish that. Thanks again to the panelists for taking time to be here today. I will now turn the proceedings back over to Marty Baumann, who will introduce the first discussion topic.