POB Panel Surveys Audit Effectiveness

The Public Oversight Board's audit effectiveness panel will hold hearings in August and September on the results of surveys of users of financial reporting about the value of audits. The panel was established to address SEC Chair Arthur Levitt's concern about the decline in the quality of reported earnings by some publicly held corporations.

The panel, chaired by Shaun O'Malley, past executive partner of Price Waterhouse, has been studying the audit practices of the eight largest CPA firms--the Big Five plus McGladrey & Pullen, BDO Seidman, and Grant Thornton--as part of its charge to see whether basic audit methodologies need to be overhauled in order to properly protect investors in public companies.

David Pearson, retired partner of a Big Five firm, heads the project's staff. According to Pearson, the goal is a report by the end of 1999. In commenting on the findings to date, Pearson indicated that there are a number of differences--and similarities--between how the large firms do audits.

"The firms are trying to be more effective and are trying innovative ways to do this," Pearson said. "There is a strong emphasis on risk-based approaches to conducting audits." *

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