December 17, 2019
December 17, 2019
Throughout my career, I’ve been fortunate to have worked in the capital markets at some pretty interesting times: as a lawyer in Silicon Valley during the late-‘90s dot-com boom, at the US Securities and Exchange Commission just after the passage of the Sarbanes-Oxley Act of 2002, and at Citigroup as it emerged from the financial crisis of 2007 to 2009.
As of this posting, I’ve been at the Center for Audit Quality (CAQ) for just over seven months. And this position is yet another example of my being in an interesting place at an interesting time. Why? I see three reasons:
Although I am not a certified public accountant, my experiences in the capital markets have ingrained in me a deep appreciation for the audit profession’s purpose and value.
I often say that the public-company auditing profession is one of those “assumed” or unremarked-upon institutions in the capital market system. The profession largely operates behind the scenes, and people tend not to notice when things are going right.
Yet there is so much taking place behind the scenes, and there is also so much that is going right for this profession. Every day, auditors contribute to high-quality, reliable financial statements, which many have referred to as the bedrock of our capital markets system. Auditors do this by reviewing a company’s financials and internal controls; by serving as an independent check on management and as a resource for audit committees; and by bringing their critical thinking, standards-based analytical skills, and skepticism to those complex areas of the financials, such as fair value. The state of audit quality today is high, thanks in no small part to the profession’s enormous efforts to maintain trust and continuously strive to improve.
The health and stability of the US capital markets depend on consistent, reliable, and comparable information. But much of the company-reported information I referred to above—on which stakeholders are relying—does not go through the rigor of independent third-party assurance.
At the CAQ, we believe auditors can help fill these existing and growing gaps in assured information. It’s a natural evolution for a profession with unique competencies in standards-based analysis, objectivity, professional skepticism, and critical thinking. Auditors can enhance confidence in areas such as:
Learn More: To help directors and other market participants get a handle on this evolving environment, the CAQ has released a new resource, The Role of Auditors in Company-Prepared Information: Present and Future. In clear terms, the paper delineates where the auditor’s role begins and ends today in the context of the audit of financial statements. It also highlights the need for the auditor’s role to evolve for the benefit of stakeholders, public company board members, company management, and the markets.
Of course, expanding the auditor’s role will not happen overnight, and it won’t occur without considerable effort and dialogue. My CAQ colleagues and others in the auditing profession look forward to engaging in this dialogue with all of the stakeholders in our capital markets system, especially our friends in the director community.
We are fortunate to find ourselves in interesting times. Let’s prepare ourselves now to make the most of them.
Julie Bell Lindsay is the executive director of the Center for Audit Quality.