The Securities Industry Association and the Bond Market Association sent a letter to the US Securities and Exchange Commission (SEC) requesting that the Association of International Certified Public Accountants, an auditors’ trade group, should withdraw a draft white paper on due diligence discussions or risk seriously harming investors.
The white paper advises auditors involved in due diligence discussions with underwriters to refrain from answering basic questions about an securities issuer’s financial statements, including whether or not the auditor suspects fraudulent activity.
“We were dismayed by the remarks made by the representatives of the Big Four audit firms who spoke as members of the AICPA task force. Despite having received our letter last week that clearly expressed our concerns that White Paper II would withdraw auditors from a vital investor protection function and jeopardize the quality of financial disclosure, and despite reports of SEC staff concerns, the AICPA continued to press the themes espoused in White Paper II, ” the letter stated.
The SIA and BMA stated that they found the AICPA’s stance on auditing standards for written reports govern oral discussions, auditor participation in due diligence, and its belief that “investors and regulators should continue to be excluded” to be incorrect.
“These statements of the AICPA illustrate to us that the AICPA is not yet prepared to return to the collaborative approach to due diligence in crafting good disclosure that had prevailed for decades, ” it said.