The Statement of Auditing Standards 90 (SAS90), which is scheduled to take effect on December 15, 2000, has broadened the requirements and duties of the accountants who are reporting to a corporation's Audit Committee. With SAS90, auditors will now be required to make more subjective judgments about the financial health of a corporation, determining whether or not its financial model is generally sound and viable.

Uncharted Territory
In the past, auditors have been commissioned exclusively to report internal control problems such as fraud, misappropriation of funds, or general mismanagement of capital. While these occurrences are not always easy to find, they are always factually based. They can be explained through the additions and subtractions that occur in the columns of an account ledger.

Now, however, auditors will venture into uncharted territory. They will make less quantitative judgments, and more unpredictable prescriptions about the quality of a corporation's standards and internal controls.

This expansion of the accountant's role comes at a time when many members of the profession feel overwhelmed by new regulations and developments in every part of the auditing process.

Technology-sector start-ups demand knowledge of a slew of newer principles, ranging from data corruption processes to system development life cycles to COBIT guidelines. Consensus among accountants seems to be that these will mean more uncertainty.

"I came to accounting in search of definitive answers, of black and white, left and right," said Warren Grigsby, a partner at Briscoe, Burke & Grigsby LLP in Tulsa, Oklahoma. "Of course, I soon recognized that, like most other disciplines, accounting contains a lot of subjective analysis. These new regulations, I think, will only add to that gray area."

Grigsby continued, "With auditing, we hope that if two independent auditors were to audit the same client, they would come to the same, prudent conclusions. But when they ask us to report on quality, it concerns me. It concerns me because of the simple fact that two auditors may have different ideas of what quality is."

The Committee's Burden
While the audit has always been a vital part of any business infrastructure, it has become even more important in the current investment climate, in which investors want assurances that their capital will be handled prudently. The burden of projecting the future success of an organization has fallen, increasingly, on its Audit Committee.

The American Institute of Certified Public Accountants (AICPA) has accepted the fact that these new requirements could present something of a difficulty. The lead story of their January 2000 newsletter covered the changes brought about by SAS 90, and acknowledged that "some of the terminology used in SAS No. 90 differs from that of the February 1999 Blue Ribbon Committee report, specifically with respect to the terms: degree of aggressiveness, and conservatism."

The ASB has not issued a glossary of terms, or any other sort of information to accompany its new regulations. Without these accompanying materials, many accountants feel they will be forced to venture alone into regions that they never anticipated as a possible part of their job. While auditing concentrates on the dependability, disclosure and presentation of financial data furnished, investigations deal with the uncovering of fraud.

Uncovering fraud requires sleuthing, as well as an investigative discovery of the identity of the perpetrator. Many accountants are quick to point out that this is a far cry from ensuring compliance with relevant statutory provisions. Some are hopeful that the ASB will give them a helping hand.

"Unless we get something by year's end, there will be a lot of people scrambling to get a handle on this terminology," said Dan Haltz, of Samuels, Carnegie, and Flint LLP. "It will take platform-level organization, a real comprehensive effort."

A variety of circumstances prompted the changes, not the least of which was the worry that some registrants had been, as Securities & Exchange Commission Chairman Arthur Levitt, Jr., said: "misapplying accounting principles to manage earnings and meet analysts' expectations." The pressures of the new economy, with its hot market and rapidly shifting financial priorities, necessitated regulatory response of some sort.

Audit Committee effectiveness, it is widely believed, will be enhanced by these new regulations geared towards assessing internal control. While the judgments of the Audit Committees are critical, they must be considered in the overall operating framework in which the committee functions - one that includes details such as independence, training, and understanding of oversight responsibilities.

These new regulations will undoubtedly extend the responsibilities of both Audit Committee members and accountants. Though this extension will result in a broadening of workload and add ink to most accountants' daily planners, the rewards will be manifold. Accountants will be even more crucial to the new world of the internal auditing process. Preparation, study, and proactive thinking will be necessities of auditing in the 21st century.