In December 2003, Douglas R. Carmichael, Director of
Professional Standards at the Public Company Accounting
Oversight Board (PCAOB) was invited to speak about professionalism at the AICPA Annual National Conference in Washington,
DC. In his presentation, he noted that: “Most organized professions have duties
to clients and to the public. A lawyer has responsibilities to the court and
the law as well as to individual clients. A doctor has responsibilities for
public health as well as to individual patients. Poor management of duties to
the public versus to individual clients can cause a lack of respect for a
profession.”
Furthermore, “Some would say that is what happened to
independent auditors. Intense pressure on the management of public companies to
meet the earnings expectations of analysts led to intense pressure on auditors
to help clients meet those expectations. There were economic incentives to
preserve the relationship with the client. Building the client relationship had
become the service ideal. Accommodation on questionable accounting practices
was one result. There was a widespread erosion of professionalism and the
profession lost the confidence of investors. This decline in professionalism
did not happen overnight. Some would say it started decades ago.”
In concluding his presentation, he suggested:“One step that
could be taken is to amend the ten basic auditing standards to add a new
general standard that might be worded as follows: The auditor shall, in all matters related to the audit, act in a manner
that places primary emphasis on protection of investors and the furtherance of
the public interest in the issuance of informative, fair, and independent audit
reports. This would make dedication to professionalism an overriding and
mandatory obligation for the auditor of a public company.”
Learn more about professionalism by reviewing the
presentation on Professionalism
is Primary. Also,
refer to previous postings about professionalism as part of this blog on
Professional Judgment Matters.
