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The newly constituted Independence Standards Board has begun the process of self-education and issue identification as part of its formative period. The ultimate purpose of the board is the establishment of standards for auditors of public companies in the area of independence. Interested parties were requested to provide the ISB with materials that would help educate board members and identify the issues needed to be addressed.

In response, on October 20, 1997, a white paper was submitted to the Independence Standards Board on behalf of the AICPA entitled "Serving the Public Interest: A New Conceptual Framework for Auditor Independence." The paper was prepared by partners of the law firm, Fried, Frank, Harris, Shriver & Jacobson, and included several academic research papers in support of the material in the white paper.

The white paper, however, not only provides educational and issue identification material but also proposes a conceptual framework for the ISB to adopt to address the concerns that gave rise to the formation of the ISB.

CPA Journal editor Douglas R. Carmichael, in this month's issue, analyzes the white paper and its potential contribution to the work of the ISB. In December 1997, the SEC issued a lengthy letter also commenting on the white paper. A summary of the SEC's comments is presented as a sidebar to the Carmichael article.

The staff of the ISB expressed the view that the white paper was appropriate for broad circulation similar to a discussion memoranda or invitation to comment of the FASB. Based upon the SEC commentary and for other reasons, however, the board decided broad circulation under its auspices would be premature at this time. Instead, board chairman William T. Allen established a number of task forces to begin the work of the board. The white paper is available for downloading from the AICPA's website aicpa.org.

Next month in The CPA Journal, an article by Robert Elliot and Peter Jacobson will discuss some of the concerns and observations of the SEC on auditor independence and continue exploring the issues surrounding the notion of "appearance of independence." The article is a sequel to one by Elliot and Jacobson that appeared in the March 1992 issue of The CPA Journal. Some of the thinking from the 1992 article made its way into the AICPA white paper. Next month's piece continues to demonstrate the breadth and depth of their understanding of the important issues surrounding auditor independence.

Arthur Siegel, executive director of the Independence Standards Board, informed The CPA Journal that meeting notices, minutes, and other information on the work of the Independence Standards Board are now available for viewing at its website cpaindependence.org. *

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

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