Among the panel's recommendations for changes to the audit process: auditors should perform some "forensic-type" procedures on every audit to enhance the prospects of detecting material financial statement fraud; audit firms should put more emphasis on the performance of high quality audits in communications from top management, performance evaluations, training, and compensation and promotion decisions; and a majority of the members of the Independence Standards Board (ISB) should be from outside the profession, and the Securities and Exchange Commission should encourage and support the ISB in carrying out its mission.

The panel's full report, which can be downloaded at www.pobauditpanel.org, was released just in time for the SEC's upcoming public hearings on its proposal to modernize the auditor independence rules. The hearings are scheduled for Sept. 13 at Pace University's Pace Downtown Theatre in New York, and on Sept. 20 at the Commission's headquarters in Washington, D.C.

"We are trying to improve audits and the way audits are done, planned, and executed," said panel chair Shaun O'Malley. "We are also trying to improve the governance of the profession."

Among those who participated in public hearings and submitted written comments on the Panel's Exposure Draft were the SEC, state boards of accountancy, national and international standards-setters, accounting firms, the American Institute of CPAs, the corporate community, the International Federation of Accountants and the Financial Executives Institute.

"The next step is for the various bodies to begin the process of preparing new rules and standards," added O'Malley. "Then going forward, the POB on an annual basis, if not more, will report publically as to the extent the recommendations have been implemented and if not, why. The public eye will be on the these groups."

While the eight-member panel focused on improving the current auditing model, in the report it also addressed obstacles facing the profession such as technology, the demand for new and timely information, finding and retaining the best people and globalization of business.

-- By Antoinette Alexander

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