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March 27, 2008


Robert F. Kelley

Re: the question of "Independence"...perhaps, it needs to be properly referred to as the "concept" of independence...actually the "concept" is a vacuum creating the contemplation [intention or expectation]of "independence".

Sheila Keefe

How about tenure for auditors?

Granting tenure to professors in academia allows them to express their opinions openly without fear of reprisal. Why not try tenure for auditors?

SOX attempted to promote independence by prohibiting auditors from acting as both an auditor and a management consultant. Unfortunately, legislators did not effectively free auditors to express their opinions because auditors must still woo their clients to get the job the following year.

Granting tenure to auditors would ensure independence by freeing auditors from the worry that they will be fired if they express an adverse opinion. Including a non-renewable provision would further guarantee auditor independence because auditors won’t be tempted to modify their opinion in the hopes of pleasing the client. Four years is a good length for a tenured audit contract because auditors incur significant costs in the early years of an audit, and giving them a four-year contract allows them to spread the costs out.

The Dodd bill is currently under consideration in Congress. It's doubtful that it will be able to restore public trust unless further steps are taken to ensure auditor independence.

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