AUDITOR INDEPENDENCE: ILLUSION OR REALITY?
SEC Director of Enforcement Richard H. Walker made it unequivocal that, from his perspective, the appearance of auditor independence matters: "Investors know that they can trust our auditors because they are--and of equal importance--they appear to be independent." These were his words in a December 17, 1998, speech at a symposium on auditor independence sponsored by The CPA Journal and the New York State Society of CPAs.
Not all panelists at the symposium agreed with Walker. James L. Cochrane, chief economist and senior vice president, strategy and planning of the New York Stock Exchange, expressed his view that disclosure is the most important ingredient in investor protection; presumably, when given all the information, investors can decide for themselves on independence issues. Panelist Robert K. Elliott, KPMG partner and AICPA vice chair, reiterated his conviction that it is the fact of independence that matters. He said he believes there should be a system at audit firms that provides reasonable assurance that independence in fact exists. Moreover, panelist John Wulff, vice president, chief financial officer, and controller of Union Carbide Corporation, agreed with Elliott, stating that those on the Financial Executive Institute's committee on corporate reporting would probably join him in that conclusion.
Appearance of independence versus fact of independence was one of many aspects of auditor independence discussed at the symposium. Full coverage of the event will be presented in the March issue of The CPA Journal. *
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