Volume 2, Issue 6

July 2008

I. CAQ Highlights Three Key Themes in Comment Letter to Treasury Advisory Committee

• International Considerations – considering international developments with a view toward aligning major capital markets;
• The Litigation Risk for Audit Firms – addressing the pervasive threats to the U.S. capital markets that arise due to catastrophic liability risks confronted by the profession; and
• Interaction among Various Recommendations – determining how the recommendations will work as a whole to assure the sustainability of the profession.

In the letter, CAQ Executive Director Cindy Fornelli wrote, “Although the CAQ supports many of the Committee’s recommendations in the Draft Report, we also believe certain recommendations need further exploration and some issues have not yet been adequately addressed, particularly in light of the recent actions of the European Commission (EC) in recommending liability reform for auditors.” She further urged the committee to continue its deliberations, with the EC’s recent actions as a backdrop, given that the EC’s actions were published on June 5, 2008, after the Committee issued its report and Addendum.

To read what others have said regarding the Treasury Advisory Committee’s recommendations and addendum, or to submit your own comment, visit the Advisory Committee’s website. The comment deadline is July 9, 2008.

II. CAQ to Conclude its Public Dialogue Tour in Washington, D.C.

The CAQ’s 10-city Public Dialogue Tour will return home for its final stop in Washington, D.C. on July 22 at the National Press Club. In the last year-and-a-half, the CAQ has heard from stakeholders, including investors, regulators, academics, and corporate executives across the nation about how to improve the quality, transparency and relevance of audited financial information.

Event host Cindy Fornelli, Executive Director of the CAQ; and special guest Harvey Goldschmid, CAQ Board Member and Dwight Professor of Law at Columbia University, look forward to welcoming the distinguished D.C. panel to what is sure to be a dynamic and enlightening discussion. Washington, D.C. Public Dialogue Tour Panelists include:

• Dr. Charles M. Elson, Professor of Law and Director, John L. Weinberg Center for Corporate Governance, University of Delaware
  
• Robert H. Herz, Chairman, Financial Accounting Standards Board
  
• Nell Minow, Editor and Co-Founder - The Corporate Library
  
• Mark Olson, Chairman, Public Company Accounting Oversight Board
  
• Gene Riechers, General Partner, Valhalla Partners
  
• Arne M. Sorenson, Chief Financial Officer, Executive Vice President, President - Continental European Lodging, Marriott International, Inc.

After the final stop in D.C., the CAQ will continue its work to summarize the input provided during each Tour event and prepare a final report to be shared with participants and policymakers later this year.

III. CAQ Webcast Examines Auditors’ Role When Illegal Acts Are Suspected

On June 27, the Center for Audit Quality hosted a webcast entitled, “Auditors' Responsibility When Illegal Acts are Suspected: How 10A Really Works in Practice,” regarding Section 10A of the Securities Exchange Act of 1934, which dictates what auditors should do if they suspect an illegal by their client.

Section 10A includes three important steps an auditor should take if he or she suspects an illegal act has been committed: evaluate the impact of the act on the company’s financial statements; make sure the audit committee is adequately informed; and evaluate whether the audit committee is taking timely and appropriate remedial actions.

Visit the CAQ’s website to view the webcast.

IV. Fornelli Pens Directors & Boards Article

A guest article, “Enhancing audit quality: The CAQ is on the case,” by CAQ Executive Director Cindy Fornelli, was published in the June issue of Directors & Boards, a magazine devoted to corporate governance and designed to facilitate the relationship between management and boards by discussing issues critical to companies and shareholders. Fornelli’s article, which was featured in the publication’s “The Year in Governance” issue, introduces this important audience to the work of the CAQ and discusses the organization’s mission to make public company audits even more reliable and relevant for investors, enhance audit quality, and modernize business reporting.

You can read Fornelli’s guest article on the CAQ’s website.