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PCAOB member speaks about “protecting investors, the public interest, and prosperity”

  • Speech — Deloitte green Image

Jul 17, 2013

In a speech given at the Association of Government Accountants 62nd Annual Professional Development Conference in Dallas, Texas, PCAOB member Jeanette Franzel addressed the current economic environment and the need for accountability, transparency, and integrity in financial reporting in both the public and private sectors.

Ms. Franzel discussed the critical role that reliable financial reporting and auditing play in promoting the public interest, the PCAOB's role in protecting investors through independent auditing of public companies and broker-dealers, and innovation in the accounting profession.

Reliable financial reporting and auditing

Ms. Franzel stressed the idea that confidence and integrity in financial reporting are essential to the nation’s overall governing processes. She underscored that reliable financial reporting and auditing in the public sector promote confidence in the government’s efficiency. She recognized that financial reporting can serve different needs for governments and private companies. However, she stated, “To varying degrees, these objectives serve the fundamental democratic need of a free market system for accountability, transparency, and integrity.”

PCAOB’s role in protecting investors and the public interest

Ms. Franzel outlined certain topics that consistently arise in PCAOB inspections, such as auditing revenue recognition, auditing fair value of hard-to-value financial instruments, auditing management estimates, auditing allowance for loan losses, testing and evaluating internal controls, and the auditor's assessment of and response to fraud risk. However, she noted limited improvements in the 2011 and 2012 PCAOB audits. Ms. Franzel emphasized that the PCAOB’s “overriding goal is to ensure that auditors who commit serious violations of our auditing standards face appropriate and real consequences.” To further improve audit quality and eliminate audit deficiencies during PCAOB inspections, the PCAOB has begun a project to identify audit quality indicators.

Opportunities for “bigger thinking”

Ms. Franzel concluded her speech by pointing out that although accountants must heed certain technical requirements, they can add value through skeptical thinking and the application of judgment in financial reporting and auditing. She touted the use of “big thinking” to meet new challenges in protecting both taxpayers and investors. In addition, she identified the need for a diverse workforce to keep pace with the increasingly global and complex demands of the future.

The speech is available on the PCAOB’s Web site.

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