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State of the Audit Profession Virginia Accounting Auditing Conference Presented by Chuck Landes CPA Agenda How did we get to where we are today The provisions and implications of Sarbanes Oxley The cascade effect what s the next front Honoring our heritage and moving forward Overview of significant assurance initiatives What went wrong corporate culture and reporting model Simple greed or arrogance Market pressure on short term earnings Lack of transparency or timely disclosures in the reporting model Lack of mandated disclosures on management s accounting policies Too many rules leading to connect the dots accounting and auditing What went wrong the work of auditors Some auditors did not step up to their responsibilities Some auditors assumed good intent on part of management Inherent weaknesses in our disciplinary and monitoring processes Auditor dependency on fees from major clients What was the response of Congress The Sarbanes Oxley Act Oversight Board New Public Company Accounting Oversight Board PCAOB Requires 2 CPAs but only 2 to serve Power to set auditing rules inspect firms and discipline wrongdoers Funding from accounting firms and registrants The Sarbanes Oxley Act Standards Setting PCAOB has authority to adopt amend modify repeal or reject standards Includes provisions for SEC oversight governance and funding of FASB The Sarbanes Oxley Act Independence Scope of Services Proscribes eight specific services to public company audit clients Gives PCAOB authority to prohibit others Other nonaudit services not banned must be pre approved by audit committee The Sarbanes Oxley Act Banned Services Bookkeeping Information systems design and implementation Appraisals or valuation services Actuarial services Internal audits Broker dealer and investment banking services Legal or expert services related to audit services Management and human resources services Other services as determined by the board The Sarbanes Oxley Act Liability Concerns Statute of limitations

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