chair's corner.

• Author: Eddy, Kathy G.

Throughout this year, we have remained focused on our commitment to self-regulation and the cornerstone of the CPA profession -- auditor independence. While public company auditors comprehend the impact of new Securities and Exchange Commission rules on auditor independence, the U. S. General Accounting Office in May of this year proposed new auditor independence standards in Government Auditing Standards (known as the "Yellow Book").

Many of you have come to know these standards because you follow them in audits of many governments, non-profits and for-profits that receive federal assistance or participate in federal programs. Understandably so, the GAO has a fiduciary interest and duty to ensure that federal activities and programs are audited, whether by CPAs or government auditors, with independent professional skepticism. While the GAO-proposed standards are comparable to the AICPA's in some ways, they differ in several significant ways. Ways that may be particularly detrimental to smaller entities that rely on the expertise of their (usually smaller) CPA firms.

An additional set of independence standards also feeds in to standards overload, resulting in additional costs both to entities subject to the Yellow Book and to the firms that audit those entities.

Our response? The AICPA initiated an all-out communications effort with state societies, members and firms on the potential effects of the proposal. We also prepared a comparative analysis of the AICPA, SEC and proposed GAO independence rules, and developed an issues summary on the GAO proposal. The Professional Ethics Executive Committee and PCPS Technical Issues Committee developed our written response to the GAO. Incoming chairman...