COMMENTARY––A Call to Action: The Securities and Exchange Commission and the Auditing Profession's Public Interest Responsibilities

Abstract

As President Franklin Roosevelt recognized more than 70 years ago, the public accounting profession plays an integral role in protecting investors. The SEC was created during FDR’s presidency and, as defined by one of its early chairmen, William O. Douglas, has historically been viewed as the sole government agency that serves as ‘‘the investor’s advocate’’ (Hohenstein 2005). As an individual who has observed virtually every important auditing-related policy debate over the past dozen years from a quasi-inside perspective, but unrestrained by the strictures of a government appointment so, therefore, able to speak freely, I believe that the SEC can do more to empower the PCAOB to advance policy-related initiatives that will serve the auditing profession’s public interest responsibilities. In this commentary, I discuss three auditing policy-related initiatives where I believe that the SEC can provide more support to the PCAOB, and one initiative that the SEC can pursue on its own. Each of these initiatives should lead to better auditing and/or to better communication between the auditor and financial statement users. These initiatives involve: (1) the standard audit report; (2)