Sommer receives AICPA gold medal

When A.A. Sommer, Jr., announced his retirement from the Public Oversight Board earlier this year, it marked another milestone in a distinguished career that includes serving as an SEC commissioner, a member of the AICPA board of directors, a member of the FASB advisory council, and chair of the Public Oversight Board from 1986 to 1999.

Sommer has influenced many in the accounting profession. My earliest recollection of Sommer is when he spoke at Notre Dame in the early 1970s. I was a graduate student contemplating an uncertain future: literature, law school, or accounting? Sommer’s comments on that day were pivotal, and I am glad to have decided on a career in accounting.

While I suppose lurking in the back of my mind is the notion that I may have in some measure earned this award, I regard it as an award to the Public Oversight Board [POB] members and staff, for nearly a quarter-century of service to the profession and to the public interest, which has been the primary beacon guiding the board from its inception.

A lot of thought these days is given to a new regulatory and self-regulatory structure for the accounting profession. On May 10, SEC Chair Arthur Levitt gave a speech at New York University in which he spoke of the POB receiving greater authority to oversee parts of the profession. This is consistent with my conviction that, from its inception, the POB has had a responsibility broader than simply overseeing the peer review program. I have long felt and expressed that we could not abide a situation in which the peer review program was a sterling success but other elements were eroding the integrity of audits. So, on many occasions the board has spoken out on topics outside its technical jurisdiction. The accounting community, rather than protesting, in many instances has urged the POB to undertake special chores that may in the eyes of some lie beyond its technical jurisdiction. For example, several years ago the AICPA SEC Practice Section asked the POB to do something about charges by the SEC chief accountant that the profession, particularly firms that audit publicly held companies, lacks independence. The result was the Kirk Panel Report, which was not intended to adjudicate the charges of the SEC chief accountant, but rather directed his attention to means whereby auditor independence might be further assured. That led to much of the conversation concerning audit committees and culminated in reports from blue ribbon commissions of both the SEC and the National Association of Corporate Directors, the latter of which I had the honor of chairing.

In his May 10 speech, Levitt said, “[M]ore effective oversight must be brought to bear on the professional trade group, the AICPA, which seems unable to discipline its members for violations of its own standards of professional conduct.... In my time at the Commission I have come to appreciate the important role played by an independent oversight program. But, I am also aware of its limitation. However, in the last few months a real opportunity emerged to give the POB the independence and the freedom to fully discharge its public responsibilities, unhindered by special interests.” I think an opportunity has emerged here for the POB to add to its responsibilities, and I hope the public will benefit from that. Moreover, to my mind the POB has never lacked independence or the freedom to fully discharge its responsibilities and has never been hindered by special interests.

I think it both timely and beneficial for the Public Oversight Board to expand its oversight function, such as overseeing the ethics activities of the AICPA or the Auditing Standards Board. However, I think any reform that gives the POB line responsibility—as contrasted with oversight responsibility—would be a terrible mistake. Among other things, it would require an expansion of the board and a significant increase in staff.

I am told that some, including members of the Panel on Audit Effectiveness that the POB created at the behest of Levitt, entertain a notion that has arisen before—that the board should be statutorily established and given powers to do things that it cannot at present legally do. This was incorporated in a piece of legislation, and I was very active in making sure that the provision was not in the final bill. We discussed this notion in 1993, in the POB publication “In the Public Interest,” and I thought we made a very persuasive case against such a statutorily empowered organization. While the POB’s lack of statutory power has sometimes handicapped it, the SEC has never been found wanting in its power to punish wrongdoers.

Even though self-regulation has failed in some respects, as practiced by the POB it has, in my estimation, been a huge success. To refashion it into something it was never intended to be would be another defeat for self-regulation. I staunchly uphold the notion that self-regulation, without the encumbrance of statutory provisions, can work and has worked, so I hope that the Panel on Audit Effectiveness will conclude that statutory tinkering with the POB would be a mistake, and I hope that the SEC would feel likewise.

I do not think that the basic constitution of the board should be changed, except to expand its jurisdiction to the areas indicated. Levitt has been an enthusiastic (and rightfully so) supporter for the idea that most regulatory and self-regulatory bodies should have a majority of public members.

I think one can rightfully say that the POB continues to be composed entirely of laypeople, some of whom incidentally have accounting activity in their backgrounds. When this matter comes up for decision, I hope the historic value of the board will be recognized and possibly its jurisdiction extended. But please, leave it a self-regulatory body free of statutory controls and requirements as to qualifications for membership.

The U.K. body that regulates these matters is truly self-regulatory, and I think if you compare the U.K. and U.S. methods for regulating mergers, counteroffers, and takeovers you will conclude, as others have, that the U.K. system exceeds ours in flexibility and effectiveness.

I leave a closing admonition: Build on the success of the Public Oversight Board, but recognize that it is a self-regulatory organization, and if it is to survive and be effective it should be left in that posture.

In closing, I appreciate more than I can say the honor you have bestowed upon me. I know very well the caliber of people who have received this award previously, and I cannot hope to measure up to them. I am touched not only by the award and text of the scroll, but by the letters and comments I have received from many members of the profession.

Having dealt with members of the accounting profession for almost 50 years in many capacities, I have never encountered an accountant who was less than a competent, dedicated professional. I know that you don’t need words from me to maintain that high quality of achievement.

Thank you all very much.
A.A. Sommer, Jr.

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