CHAIRMAN LEVITT: Is it fair to characterize an audit as a critique?
Again, from my experience on audit committees, I’ve found that an audit is a very constructive process in and of itself.
STRANGE: It is, Chairman Levitt. And it really goes to what you intend with these rules when you talk about prohibition of — you don’t use the word “consulting.” You say “non-audit services.”
BERARDINO: I think, Commissioner Hunt, we would welcome, as a profession, the opportunity to sit down with the staff of the Commission, whoever you designate, and try to work out what would be a workable set of rules
What I’m suggesting is an environment where, in the process of the audit, we are a lot more engaged in thesystems and processes and that we’ve got to go farther than just writing a letter and saying, “Oh, by the way, you should try to fix this.”
We’ve got to be engaged in helping build these systems and monitor them so that we know that they are functioning, and it takes these kinds of skill sets. And if we tell our people that all you can be engaged in is the oversight role — you can’t be engaged in the crafting of the solution and the implementation of the solution — I think it’s going to be very difficult to hold them.
CHAIRMAN LEVITT: Some of the solutions, not all of the solutions. Just some of them. This is not intended to be —
STRANGE: I’ve online title loans NC got to tell you I was very baffled by the — because I have a different view of the world, I guess — by the prohibition on internal audit out-sourcing.
I see it as a continuum of auditing, and I see this out-sourcing phenomenon as having the potential to put the external auditor in a better position than they’ve ever been in in terms of knowledge about the enterprise. I never sawit as standing in management’s shoes as part of making management decisions.
I saw it as an extension of the role deeper into the enterprise. I really would like to have a theoretical conversation with someone about that one because I am totally on the other side of the fence. I think it’s a bad answer for the business community because I think ultimately you get a better total risk management product for the price than you do with two separate firms.
And I don’t see that anything is necessarily gained in objectivity. I think you lose a tremendous amount in terms of understanding and knowledge of the business at hand.
BERARDINO: I agree with the earlier comments, and as to the percentage of our firm that is within Assurance, it’s about half.
COMMISSIONER HUNT: Gentlemen, do you think the proposed rules are workable if they are modified and narrowed in some way?
I think that’s a far preferable answer than mandate a set of rules that we are very uncomfortable with and don’t think are workable.
CHAIRMAN LEVITT: The intent of the release was to serve as a broad array of ideas and concepts and questions. But as I said before, nothing happens in a vacuum, and the tension between the profession and the Commission goes back long before this group here got into the issue.
And I think that’s an unfortunate byproduct of all of this, but I would say to you that I think your testimony today has been very helpful.
You’ve been very candid and forthcoming, and I really would welcome the opportunity of having you come forward and saying, “Look, this is too broad. We should focus on that.”