Chair's corner.

• Author: Castellano, James G.
• Position: Disciplinary processes of the American Institute of Certified Public Accountants - Brief Article

I have received many comments and questions lately from members and the media concerning the programs the AICPA has in place to investigate alleged audit failures and discipline its members. In light of these inquiries, I thought it would be helpful to describe the processes as they currently exist.

The more commonly known component of the AICPA's disciplinary process is the Professional Ethics Division. The Division enforces technical and ethical standards by investigating and adjudicating disciplinary charges against AICPA members.

The lesser-known component of our disciplinary process is the SEC Practice Section's Quality Control Inquiry Committee. The QCIC has been in existence since 1979, and investigates the implications of an alleged audit failure of a public company client on a firm's quality control system. The quality control inquiry process complements the peer review process. While peer reviews evaluate and test the firm's quality control system, no system can guarantee that isolated audit failures will not occur.

Member firms of the SEC Practice Section are required to report to QCIC all litigation alleging deficiencies in the conduct of an audit of an SEC client within 30 days of service. The QCIC then investigates and analyzes the allegations of audit failure to determine the need for corrective measures by the member firm involved, or changes in or additional guidance on generally accepted auditing standards or generally accepted accounting principles.

The QCIC does not duplicate the work of the courts, the Securities and Exchange Commission, state boards of accountancy, or other regulatory agencies. These other bodies determine whether the firm or individual auditors were at fault and impose punishment, and are empowered to punish firms and individuals when it is appropriate under the law. However, the QCIC does make referrals to the Ethics Division if it believes there may be engagement personnel issues of significance. If a case is...