SEC Chief Accountant Paul Munter emphasized the importance of setting the right "tone at the top" at audit firms to maintain the integrity of capital markets. The leaders of these firms play a crucial role in ensuring that professionals within the firm uphold integrity and professionalism over profit and growth.

The "tone at the top" determines whether a firm's culture focuses on delivering high-quality audits or prioritizing short-term profits. It influences the firm’s capacity to exercise professional skepticism and have an effective quality control system. Unfortunately, there have been instances where audit firms have neglected this, resulting in violations that undermine public trust.

The SEC Chief Accountant argues that setting the right tone at the top involves more than just having appropriate policies. “Senior partners must lead by example through their actions. This includes supporting staff when difficult calls need to be made, admitting mistakes, taking corrective action, and holding individuals accountable for unethical behaviour. Moreover, ethics and character should be fundamental to the firm’s hiring, retention, and promotion criteria. Firms should reward technical excellence and integrity at least as much as billing, profitability, and business development. Transparency and the empowerment of staff to report misconduct are also essential.”

In conclusion, he emphasizes that the “tone at the top” is crucial in maintaining the integrity of audit firms and the capital markets. Leaders of public accounting firms must prioritize integrity and professionalism over profit and growth.

Access the statement on the SEC’s website.