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DRAFT: Do not cite or quote without permission of the authors.

Audit Standard Setting and Inspection for U.S. Public Companies:

A Critical Assessment and Recommendations for

Fundamental Change

Steven M. GloverMary & Ellis Professor

Douglas F. Prawitt

Glen Ardis Professor

Marriott School of Management

Brigham Young UniversityProvo, UT

Mark H. Taylor*

John P. Begley Endowed Chair in AccountingCreighton University

Omaha, NE

[email protected]

Forthcoming: Accounting Horizons, June 2009

*Corresponding author

We thank the following individuals for their feedback and input on the current draft of this paper:

Andy Bailey, John Brolly, Chuck Landes, Bill Messier, Matt Johnson and others in public

practice, government and industry who have requested to remain anonymous. We also thankEditor Ella Mae Matsumura and two anonymous reviewers for their helpful feedback and

comments.


2/32Electronic copy available at: http://ssrn.com/abstract=1297525

Audit Standard Setting and Inspection for U.S. Public Companies:

A Critical Assessment and Recommendations for

Fundamental Change

Synopsis: The Sarbanes-Oxley Act of 2002 (SOX) established the Public Company AccountingOversight Board (PCAOB) to oversee the public accounting firms that audit publicly traded

companies in the U.S. In this commentary we outline why we believe the PCAOBs auditstandard setting and inspection models are inefficient and dysfunctional. We assert that the

Boards ability to achieve its mission is limited by its early choices, together with its incentives,

organizational composition, and structure. We support our assertions with a number of indicatorsof serious problems and flaws in the current approach. We also present high-level

recommendations for change for policy makers, regulators, and leaders in the profession to

consider in developing better approaches to audit standard setting, inspection, and enforcement.

INTRODUCTION

In this paper we question whether the PCAOBs current approach to standard setting and

inspection represents the most productive and beneficial course going forward. This commentary

primarily represents our own views, which have been formed through extensive interactions with

regulators and members of the accounting profession as well as from experience in accounting

firm policy formulation, audit standard setting, and federal regulation. We acknowledge that the

accounting profession contributed to the problems leading to the Sarbanes-Oxley Act of 2002

(SOX) and that SOX and the Public Company Accounting Oversight (PCAOB) have brought

benefits to the public, the capital markets, and the profession. However, we also believe the

PCAOBs current approaches to standard setting and inspection are seriously flawed. In this

paper we outline the current state of the PCAOBs standard setting and inspection processes and

provide illustrations and examples highlighting what we believe are fundamental flaws in the

PCAOBs current approach. We finish by providing high-level recommendations for change.

In the early 2000s a string of accounting scandals led to a crisis of confidence in the

nations capital markets and in the accounting profession. In response to the Enron and

WorldCom implosions and the failings of the audit profession both real and perceived, the U.S.


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Congress passed SOX into law. SOXs stated purpose is to protect investors by improving the

accuracy and reliability of corporate disclosures made pursuant to the securities laws. This far-

reaching legislation drastically altered the public accounting landscape. Among other things, the

Act established the PCAOB to oversee the public accounting firms that audit publicly traded

companies in the U.S. and gave the U.S. Securities and Exchange Commission (SEC) the

responsibility to oversee the PCAOB.

In the years leading up to SOX, the accounting profession faced a number of criticisms

including: focusing too much on non-audit services provided to audit clients; rewarding partners

more for new business and increased revenues than for quality audits; lacking sufficient

independence from audit clients; allowing clients to manage earnings by abusing the concept of

materiality; being insufficiently skeptical of cookie jar reserves; and implementing insufficient

rigor into audit standard setting and other aspects of self-regulation due to a lack of oversight and

accountability (Zeff 2003). In the wake of the string of massive accounting frauds, key

stakeholders greatly intensified their scrutiny of the audit profession and its primary professional

body, the AICPA, which some argued was unable to stand up to pressure when faced with

controversial issues involving the large firms (Wyatt 2003). In hindsight, leaders in the

profession have acknowledged that at least some of these criticisms were valid. For example, in a

speech before the US Chamber of Commerce, James S. Turley, Chairman and CEO of Ernst &

Young, said:

Certainly the accounting profession, our firm included, has taken some shots from

regulators and others over the last several years, and Im here to tell you that we

deserved some of those shotsThe times have taught us the dangers of being arrogant

of not listening We and others got caught up in a 90s-era rush to become one-stop

global shops, hoping to provide not only our core services, but also hoping to be the

biggest technology consulting firms and even the biggest law firms. Those days are over

(Turley 2005).


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We believe that over time the profession lost sight of its core values such as

independence, high-quality audits, and responsibility to the public trust. We also believe that, in

many ways, SOX led to a justified back-to-basics focus within the largest international

accounting firms (Turley 2005) and in the profession as a whole. This welcome return to core

values has refocused auditors on the basics of independence, professional skepticism, rigorous

audit testing, and documentation. In our view, the audit function has been redefined and

reenergized as a crucial activity in the functioning of the capital markets.1

SOXs establishment of the PCAOB effectively ended the accounting professions long

history of standard setting and self-regulation for public company audits (Kinney 2005). In some

respects the PCAOBs progress from legislative concept to functioning organization has been

remarkable. Furthermore, we recognize that the PCAOB has talented, intelligent, and dedicated

people who do their best to serve the public interest and we acknowledge that the Board has

taken positive steps that demonstrate a commitment to the public interest.2

However, we argue

that the PCAOBs current approaches to audit standard setting and inspection are fundamentally

flawed. Some of the problems that we outline with the PCAOBs approaches to standard setting

and inspection are attributable to flaws inherent in the requirements of the Sarbanes-Oxley Act,

but many can be ascribed to the PCAOBs early choices together with its current incentives,

organizational composition, and structure. We believe that these constraints and choices severely

limit the PCAOBs ability to achieve its mission and we argue that the current approaches to

standard setting and inspections are creating an environment that is inefficient and dysfunctional.

In the sections that follow, we outline the current state of the PCAOBs standard setting

and inspection processes, provide examples that illustrate flaws in these processes, and provide

high level recommendations for fundamental change.


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AUDITING STANDARDS

An Overview of the Current State of Audit Standard Setting

Section 101 of SOX outlines the PCAOBs four principal duties: (1) register public

accounting firms (the PCAOB website indicated that over 1,854 firms were registered as of

September 4, 2008); (2) establish or adopt, or both, auditing standards as well as standards of

quality control, ethics, and independence; (3) conduct inspections; and (4) provide enforcement.

Although SOX section 103 provides the PCAOB with the option to establish auditing

standards on its own or to adopt standardsproposed by one or more professional groups of

accountants, the Board asserted full control over establishing auditing standards for public

company audits. An immediate challenge the PCAOB faced after assuming control of public

company auditing standards was the absence of any existing PCAOB standards. After

considerable negotiation, the American Institute of Certified Public Accountants (AICPA)

granted the PCAOB permission to use existing standards promulgated by the Auditing Standards

Board (ASB), and on April 25, 2003, the PCAOB received approval from the SEC to adopt

existing ASB auditing standards as PCAOB interim standards, to be used on an initial

transitional basis.3

The ASB continues to establish standards used for audits of non-issuers (private

companies, educational institutions, etc.) and provides the foundational standards used in the

Yellow book audits of governmental entities. Subsequent to the PCAOBs adoption of ASB

interim standards, the ASB and the International Auditing & Assurance Standards Board

(IAASB) have maintained an ambitious, jointly determined agenda to converge and improve

existing auditing standards. However, the vast majority of improvements to the ASBs standards

are not reflected in the PCAOBs interim standards, and while there appears to be some recent


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movement in that direction, there is still essentially a complete lack of coordination between the

two U.S. auditing standard setters.

An unintended consequence of the developments in the auditing standards environment

since 2003 is the loss of the United States leadership role with respect to auditing standards.

Prior to the early 2000s, the U.S. was the clear world leader in audit standard setting. The

International Auditing and Assurance Standards Board (IAASB) was established in 1978 to

promulgate standards for the European Community and a growing number of other nations, but

the IAASB borrowed heavily from U.S. auditing standards, essentially adapting them to the

needs of the international environment. Subsequent to the PCAOBs assumption of standard

setting for public company audits, the ASB aligned itself with the IAASB.4 In modifying its own

standards, the ASB now uses international auditing standards (ISAs) as a foundation, departing

from them only when necessary to adapt them to the U.S. environment. In light of the ASBs

revised role and the PCAOBs lack of momentum in improving auditing standards, the IAASB

has leveraged its own increasing credibility and momentum to take the leading role in

establishing auditing standards. In our view, the PCAOBs actions have effectively forfeited to

the IAASB, without deliberation or debate, the United States role as the worlds audit standards

leader. Ironically, as we explain in more detail below, in ceding the audit standards leadership

role to the IAASB, the PCAOB has effectively delegated, at least to some extent, leadership over

public company auditing standards back to a board that is not independent of the profession.

Although we acknowledge serious shortcomings in the professions efforts to self-

regulate over the decades leading up to SOX, we believe that the PCAOBs audit standard setting

approach suffers from insufficient input and participation by outside experts and from the non-

expert nature of the Board itself. In the remainder of this section, we outline a number of


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problem areas that we believe indicate the need for fundamental change. The list is not intended

to be comprehensive.

Structural Flaws and Misguided Choices in Audit Standard Setting

Three Sets of Standards. As IAASB and ASB standards increasingly diverge from the

PCAOBs interim standards over time, unnecessary burdens are placed on public companies,

auditors, academics, and students. Large accounting firms that practice both domestically and

internationally must comply with standards from the PCAOB, the ASB, the GAO, and the

IAASB, and educators both within the firms and in universities across the country face an

increasingly difficult challenge deciding which set(s) of standards to teach and how to teach

them. The existence of multiple sets of standards is inefficient and problematic for companies,

practitioners, and educators, and impedes progress toward a single set of effective global

auditing standards (Nally 2007, Walker 2007).

The ASB has maintained an ambitious agenda since 2002, issuing over fifteen new

Statements on Auditing Standards (SASs). The ASB has made significant progress toward

converging its standards with international auditing standards, and is in the process of

conforming its entire body of existing standards to a new, more understandable and rigorous

clarity format. A significant number of additional clarified and new ASB standards are

forthcoming in 2009 and 2010, including a proposed SAS titled Overall Objectives of the

Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted

Auditing Standards. Further, a proposed new preface to the codification will replace the 10

Generally Accepted Auditing Standards with an improved set of Principles Governing the

Conduct of an Audit. We believe these new standards represent some of the most significant

advances in auditing standards in decades. However, the PCAOB has not participated in the


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development of these new pronouncements. In fact, despite repeated invitations, the PCAOB has

declined to even observe the ASBs standard setting activities.5

The PCAOB might argue that its concern is only with public company audits. However,

ironically, by falling behind other standard setting advances, the PCAOB has in a very real sense

ceded leadership over U.S. public company auditing standards back to the profession via the

ASB and the IAASB since most board members of both organizations are audit firm

representatives. The large public accounting firms that audit over 95% of U.S. public company

revenues are international in scope and serve both public and private clients across numerous

jurisdictions. These firms revise their methodologies and policies to respond not only to PCAOB

standards, but also to ASB and IAASB standards. To accomplish this, the firms must choose

between designing a single audit methodology based on the highest quality auditing standards

available or attempting to navigate multiple audit methodologies depending on the nature of the

client. Not surprisingly, to the extent that new IAASB and ASB standards raise the bar or are

considered to be of higher quality, firms integrate these standards into their audit methodologies

and apply them to all audits, including audits of U.S. public companies. Thus, ironically, many

aspects of the ASBs risk assessment standards, for example, have been incorporated and applied

on public company audits since 2006 even though the PCAOB has adopted similar standards as

of early 2009.

At a time when accounting and auditing standards are increasingly technical, complex,

and onerous, we believe the PCAOBs insistence on maintaining a separate set of standards that

are essentially frozen in an increasingly distant past places a significant and unnecessary burden

on public companies, the profession, and accounting education. David Walker, former

Comptroller General of the United States, said the following in a May 2007 GAO comment letter

to the PCAOB:


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We strongly believe that U.S. auditing standard setters should work together to

achieve agreement and consistency on core auditing standards, which are used by

almost all auditors of U.S. entities. Where there is a clear and compelling reason,

the standard setters should develop additional standards necessary to meet the

needs of their constituencies... GAOs Government Auditing Standards uses the

same core field work and reporting standards as the ASB, and supplements themwith additional standards to satisfy the greater accountability needs of

government entities.Inconsistencies in such core standards increase audit costsand lead to potential confusion and misapplication of the standards(emphasis

added).

A Non-Expert Model. By choosing to promulgate public-company auditing standards,

the PCAOB signaled that it desired its standards to be free from the influence of accounting

firms or existing standard-setters. However, the Board, which has ultimate responsibility for the

standards the PCAOB issues, is largely composed of political appointees who lack expertise or

experience in auditing, accounting and technical standard setting. SOX stipulates that no more

than two Board members can be CPAs and that if the chairperson is a CPA, he or she may not

have practiced in public accounting for at least five years prior to his or her appointment to the

Board. Surprisingly, the Boards initial composition was even more extreme than was required

by the law, with the appointment of a former bank regulator, attorneys, and former members of

congress to the complete exclusion of any individual with financial reporting, auditing, or audit

standard setting experience. Palmrose (2006) comments that the lack of PCAOB expertise

extends beyond the Board itself, noting that most holders of the fourteen major staff positions

listed on the PCAOBs website as of August 2005 lacked meaningful experience in auditing

financial statements (Palmrose 2006, p. 117). This trend has continued through January 2009.6

The Boards composition and the staffs background did signal the intention of

independence and reform, but we believe such a signal should have been made without imposing

a non-expert model, which impedes effective standard setting and thought leadership. Consider,

for example, a Financial Accounting Standards Board (FASB) made up of former politicians and

attorneys lacking specialized accounting knowledge. Similarly, imagine the reaction from the


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American Medical Association or the Federal Drug Administration (or the public) if Congress

were to stipulate that leadership of those bodies could not include expert physicians or scientists;

instead, these organizations were to be led by lawyers, politicians, and accountants. Most would

dismiss these hypothetical examples as absurdyet in our view these examples adequately

analogize the current composition of the board charged with overseeing the formulation of

auditing standards for U.S. public companies.7

The costs and benefits associated with establishing expert vs. non-expert standard setting

bodies are adroitly articulated in a letter from Katherine Schipper, former member of the FASB,

to Stig Enevoldsen, then Chair of the Strategic Working Party focused on Shaping the

International Accounting Standards Committee (IASC) of the Future (Schipper 1998). In her

letter, Professor Schipper indicates there are at least two ways for a professional standard setting

board to achieve legitimacy. The first is through the attainment of what Professor Schipper refers

to as political representative legitimacy, in which legitimacy is derived through the

representation of interested constituencies. Professor Schipper highlights the costs of political

representation:

The cost of political representative legitimacy is a potential sacrifice of expertise

and a nearly certain sacrifice of independence. Political representatives are

chosen to represent a constituency [an interest group] and not because they are

independent experts.

The second approach to legitimacy is what Professor Schipper refers to as the independent

expert approach. Such an approach provides discretion to experts who are:

(1) chosen because they have expertise for the task at hand; (2) held accountable

through an open, publicly observable decision process; (3) required to be

independent of financial and other entanglements that could affect their standard

setting judgments; (4) expected to follow the precepts of a conceptual framework

in arriving at their judgments.

The PCAOB approach essentially embodies, in our view, a limited form of the political

representative approach; limited in that the Board fails to adequately represent all interested


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constituencies. In addition to a lack of technical expertise and standard setting experience, the

Board lacks incentives to consider the costs of its standards to auditors and their clients (Kinney

2005). Although cost perhaps should not be the foremost consideration, it must certainly be

considered if the profession is to remain viable. Palmrose (2006) argues:

Unlike self-regulatory standard-setting bodies, which include among their

members currently practicing auditors who either implicitly or explicitly weigh

the market (or personal) impact of their standards, the PCAOB is not constrained

by market considerations (although political considerations matter). Moreover,

SOX does not require the PCAOB to consider the costs and benefits of its rules

and actions, although the Board avows that it does so voluntarily.

Standard Setting Productivity. In its first six years of existence, the PCAOB issued six

auditing standards. Of the five that remain in effect, three are minor standards, addressing

relatively narrow issues (AS No. 1, AS No. 4, and AS No. 6). AS No. 3, Audit Documentation,

was approved by the SEC in August 2004 and superseded the interim standard adopted from the

AICPA, Audit Documentation (SAS No. 96).8

AS No. 2, An Audit of Internal Control over

Financial Reporting Performed in Conjunction with an Audit of Financial Statements, was

released in 2004. AS No. 2 was the Boards first effort at significant standard setting in response

to Section 404. After a firestorm of controversy it was superseded in 2007 by AS No. 5, An

Audit of Internal Control over Financial Reporting that is Integrated with An Audit of Financial

Statements.9

In its first significant move toward updating the interim standards to incorporate

improvements in other sets of auditing standards, the PCAOB proposed a set of seven new

auditing standards related to the auditor's assessment of and responses to risk in October, 2008.

These proposed standards borrow extensively from the risk assessment suite produced by the

IAASB and the ASB, which became effective in the U.S. for non-issuers at the end of 2006.

Though we applaud this move, we find it telling that, while the risk assessment project was a

joint project of the IAASB and the ASB, the PCAOB fails to acknowledge either the IAASB or


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the ASB in its list of factors and developments (that) influenced the development of (its)

proposed standards and only refers to the IAASB in passing, indicating that there is a degree of

commonality between the proposed standards and the IAASBs risk assessment standards.10

The bottom line is that nearly six years of PCAOB standard setting has resulted in the

issuance of two significant, in-force auditing standards and a set of proposed risk standards, all

of which borrow significantly from preceding standards. Interestingly, despite the fact that SOX

has heightened investors expectations that auditors will detect financial reporting fraud (Kinney

2005), the PCAOB has done little with respect to revising existing auditing standards in this

area.

11

Despite an early assertion from the PCAOB that the interim standards were written in

disappearing ink and would be replaced in short order,12 the reality is that PCAOB interim

standards have essentially remained frozen in the increasingly distant past.

Poor Standard Setting Quality and Unclear and Delayed Guidance. Standard setting

problems at the PCAOB can be seen not only in the Boards limited productivity but also in the

quality of its standards and other guidance. In the wake of the crisis of the early 2000s, the

profession faced unparalleled scrutiny and the new reality of regulatory oversight. Section 404 of

SOX required the audit of internal control over financial reporting (ICFR), but provided no

guidance for conducting such audits. Released in March 2004, AS No. 2 was approved by the

SEC in June 2004 effective for fiscal years ending on or after November 15, 2004. The following

quote from retired Congressman Michael Oxley illustrates his dissatisfaction with how the

PCAOB implemented the bill he co-authored, specifically referring to AS No. 2:

Of the complaints you hear [about SOX], 99.9 percent are about [Section] 404. It

was two paragraphs long [in the bill], but by the time the PCAOB was done, it

was 330 pages of regulations. It was far too prescriptive and [more] expensive

than anyone anticipated. (Taub 2007)

As noted above, AS No. 2 was released in March 2004, approved by the SEC in June,

and effective for fiscal years ending on or after November 15, 2004. In other words, the standard


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was released during the first year of implementation while auditors were in the process of

planning their year-end audits; thus, auditors and companies were essentially expected to comply

real time.13

Further, the meanings of critically important but ambiguous new terms such as

deficiency, significant deficiency, material weakness, auditors direct evidence,

making up a significant portion of the evidence, using the work of others, evaluation of

deficiencies, and the particularly vague more than inconsequential, were unclear. The

profession repeatedly sought to obtain clarity from the PCAOB while at the same time

attempting to learn, train, incorporate, and implement the standard. In many instances,

practitioners questions clearly pointed to important practice and conceptual matters that the

PCAOB staff had not adequately considered in the formulation of the standard.

When it became clear that clarification was not readily forthcoming, the firms cooperated

in an attempt to develop consistent interpretations and working practices. On more than one

occasion the firms brought these interpretations and practice aids to the PCAOB to determine

whether they would be seen as consistent with the intent of AS No. 2.14

However, the PCAOB

refused to recognize or condone outside parties efforts to develop tighter guidance around AS

No. 2, and instead eventually issued the lengthy Staff Questions and Answers on AS No. 2.

Though supposedly unofficial, the questions and answers became critical appendages to an

already highly complex and overly prescriptive standard. The first set of questions and answers

(1-26), was issued in June 2004 and then revised again in July 2004. Recall that that by the fall

of 2004, registrants and auditors were already struggling through the first-year implementation of

404 and AS No. 2. Additional questions and answers were provided very late in the process in

October and November of 2004 and January 2005, with the final set of staff questions and

answers (38 to 55) released in May 2005.


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Although some of the problems and inefficiencies associated with 404 and AS No. 2

reasonably can be attributed to auditors, many of whom lacked experience in testing internal

controls, AS No. 2 was a seriously flawed standard, developed and written behind closed doors

by a handful of people, most of whom had little or no experience in standard setting and in

conducting audit/attestation engagements related to ICFR. The prescriptive and onerous AS No.

2 was superseded by AS No. 5 less than three years after its adoption, under enormous pressure

from various stakeholders.

Political Motivations. Despite AS No. 2s flaws and the firms unsuccessful efforts to

obtain guidance from the PCAOB in implementing the standard, on May 16, 2005, the PCAOB

laid the blame for the difficulties and huge costs associated with implementing AS No. 2

squarely on the auditors. The PCAOB indicated that additional guidance issued concurrently

with the statement (Staff Questions and Answers 38-55) should correct the misimpressions that

auditors had regarding the implementation of certain provisions of AS No. 2, which caused

inefficiencies. Palmrose comments that the PCAOB:

Ignored early warnings that AS No. 2 went beyond SOX requirements and would

be very costly, and when those warnings proved true, the Board publicly aligned

itself with clients complaining about audit fees (Palmrose 2006).

A number of factors likely led to the high costs of implementing AS No. 2, including: (1)

registrants years of neglect and underinvestment in controls and systems, (2) the PCAOBs

hasty development and implementation of AS No. 2, and (3) the enormous pressure on auditors

from the public and the PCAOB to enhance effectiveness. Given public companies state of

readiness and the lack of clarity and delays in guidance relating to AS No. 2, it was simply not

possible for firms to effectively integrate the audit of ICFR with the financial statement audit in

the first year of implementation. It was widely expected that efficiencies would follow in future


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years through increased integration, experience, and improved guidance and there was reason to

believe a renewed focus on controls would eventually prove worthwhile.

It is unfortunate that the PCAOB failed to take a leadership role by acknowledging the

factors leading to the high costs of AS No. 2 implementation and laying out a vision for the

future of the integrated audit. But for the Board to blame the costs on the misimpressions of

accounting firms while the firms were pleading for guidance and clarity is both disappointing

and indicative of the Boards political motivations.

Given the Boards composition, motives, and choices to date, we believe the PCAOBs

standard setting process is likely to continue to reflect such motivations. In fact, such an outcome

was presciently predicted by the Wheat Committee (1972), tasked with studying the accounting

standard setting model that existed under the Accounting Principles Board, which was quickly

losing its credibility at the time. The committee came solidly down on the side of retaining

accounting standard setting in the private sector, concluding that if standards were established in

the public sector, the standard setting process would be subject to undue political pressures that

would pollute the process; the rules would likely be inflexible and unresponsive to investors

needs; the profession would be sapped of its vitality; and the public would be robbed of

professional talents that otherwise could be employed to improve standards (Magill et al, 1998,

p. 96). The Wheat report presciently predicted that another major disadvantage of such a course

would likely be the emergence of two sets of accounting standardsone for public companies

and one for private companiesalong with all of the inefficiencies, confusion, and problems

inherent in such a course. Incidentally, the FASB was established as a result of the Wheat

Committees recommendations and has outlasted any predecessor accounting standard setting

body.15


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Summary: Audit Standard Setting

The problems associated with multiple sets of standards, inconsistencies and quality

concerns with PCAOB-issued standards, and increasing pressure for worldwide convergence in

both accounting and auditing standards lead us to the conclusion that the PCAOBs current

standard setting model is inefficient and dysfunctional. We believe that the Board has

demonstrated that it has neither the resources nor the expertise to create standards that can

effectively replace or compete with ASB or IAASB standards in terms of timeliness and

relevance. The Board apparently also lacks the political latitude or will to directly adopt

standards from, or even to cooperate with, other standard setting bodies.

The time has come for U.S. policy makers to reconsider the current auditing standards

environment and to map a course towards convergence to a single set of standards, first within

the U.S. and then internationally. We present our recommendations for fundamental change in

audit standard setting in the U.S. in the final section of the paper.

INSPECTION AND ENFORCEMENT

An Overview of the Current State of Public Company Inspection and Enforcement

Section 104 of SOX requires the PCAOB to conduct a continuing program of inspections

of registered public accounting firms. Under its adopted rules, the PCAOB describes its

inspection authority as follows:

The Board and its staff may conduct investigations concerning any acts or practices, or

omissions to act, by registered public accounting firms and persons associated with such

firms, or both, that may violate any provision of the Act, the rules of the Board, theprovisions of the securities laws relating to the preparation and issuance of audit reports

and the obligations and liabilities of accountants with respect thereto, including the rules

of the Commission issued under the Act, or professional standards.16

SOX requires the PCAOB to conduct inspections annually for firms that provide audit reports for

more than 100 issuers and at least triennially for firms that provide audit reports for fewer


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issuers. In 2003, the Board conducted limited inspections of the four largest U.S. public

accounting firms and released related reports in August, 2004. In 2004, the Board conducted

inspections of 2003 (non-integrated) audits and in 2005 the Board conducted inspections of 2004

audits including limited inspections of integrated (404) audits.

The inspection process covers a broad spectrum of activities from the evaluation of an

audit firms tone-at-the-top, partner compensation, training, policies, communication, foreign

affiliate arrangements, compliance with professional codes of conduct, and conformance with

technical standards, to proper application of audit procedures and documentation as well as

assessing the sufficiency and appropriateness of the audit evidence collected.

We support a rigorous, authoritative inspection process by a body that has appropriate

enforcement authority. Properly implemented, such processes place significant and necessary

accountability on providers of auditing services who are aware that the inspector will examine

the quality and sufficiency of their work. We acknowledge that the infusion of PCAOB

inspectors has brought an unprecedented and healthy focus on audit quality. The firms clearly

understand that they either address and quickly fix areas of weakness, or risk potentially painful

consequences. Though the profession had instituted and conducted peer reviews under the

auspices of the AICPA prior to SOX, the peer review system lacked (and still lacks)

independence and the enforcement authority invested in the PCAOB by federal law.

Although a federal inspection process has considerable potential for good, in our view the

PCAOBs inspection model is not capable of delivering many of the benefits that could be

associated with an authoritative inspection process. In the section that follows, we outline a

number of indicators highlighting problems with the PCAOBs current inspection approach. This

discussion is not intended to be comprehensive, but rather to illustrate and provide support for

our call for change. In the final section of the paper we provide suggestions for improvement.


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Indicators of Flaws in Public Company Inspection and Enforcement

Inspector Staffing ModelExpertise and Incentives. The PCAOBs decision to discard

the strengths of the existing peer review process and use only PCAOB staff in its inspections

leads to what we consider the most serious flaw in the PCAOBs staffing model: inadequate

expertise to effectively conduct risk-based inspections. Most PCAOB inspectors do come from

public practice and have some audit experience. However, that experience becomes dated very

quickly. Furthermore, the PCAOB has encountered and we believe will continue to encounter

difficulty in hiring and retaining industry experts and top-level professionals as PCAOB

inspectors. Given the limitations inherent in the PCAOBs inspection career model, we believe it

will be extremely difficult to develop an attractive long-term career model for large numbers of

qualified inspectors.

The professional landscape is increasingly complex, requiring firms experts in technical

auditing and accounting areas to have increasingly deep knowledge together with a

correspondingly narrow focus. Experts in derivatives, for example, focus on a subset of

specialized transactions; it is quite literally a full-time job to stay current on the application of

standards to such complex transactions. Similarly, IT audit experts must continually update their

skills for new technologies.When the PCAOB does hire individuals from public practice they

quickly become out-of-date on technical issues or become spread too thin across different

areas.17

Several auditors who have had engagements inspected by the PCAOB have told us that

the inspectors often fail to look at the riskiest areas of an audit because the technical complexity

of such areas is beyond the inspection teams expertise. We are also aware of instances where

field inspectors were assigned to examine audit areas in which they had little or no technical

expertise. For example, recently a PCAOB inspector without prior experience in auditing


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software revenue recognition came to the conclusion that the auditors procedures were incorrect

and thus deficient. The firms national office experts reviewed the facts and confirmed that the

testing in fact had been correctly performed. After the audit team and national office could not

make headway with the field inspector, the national office experts explained the situation to

PCAOB superiors, who agreed that the field inspector was wrong and simply did not understand

accounting for software revenue recognition. These sorts of events are costly and unnecessary,

and our discussions with members of several different firms indicate to us that they unfortunately

are not uncommon.

Lack of Process and Accountability. In the wake of the high-profile accounting scandals

and SOX, the expectation was that the PCAOB would publicly report deficiencies identified by

the inspection process. However, under the current system of inspection reporting, the public

cannot easily distinguish between trivial and significant inspection issues. Further, the public is

unable to determine whether all the issues reported by the PCAOB are credible since the Boards

inspection process lacks clarity and transparency.18

The PCAOB produces inspection reports behind closed doors. Based on discussions with

audit firm partners who oversee and coordinate the inspection process, firms sometimes cannot

directly link comments in public reports back to specific engagements or inspection findings.

When a firm is able to link a deficiency listed in the report to a particular audit client, the firm is

sometimes surprised to see a deficiency listed in the report because the firms understanding was

that the issue had been resolved after an explanation was provided to the PCAOB inspection

team. Firms responses to these public reports by the PCAOB are indicative of these problems.

For example, PricewaterhouseCoopers 2007 response filed with the 2005 PCAOB inspection

report includes the following statement: In addition, the comment within the Report indicating

that we had identified deficiencies in all of the key controls that the issuer had identified is


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factually incorrect. Rather, within this business unit, a majority of the key controls were not

considered deficient.19

Certainly honest differences of opinion between firms and the PCAOB regarding

deficiencies and matter sheets (i.e., inspection findings) are to be expected. But the PCAOB,

using a non-interactive, closed-door approach, takes the matter sheets related to a particular firm

and simply writes the report according to the inspection teams view. Our understanding, based

on conversations with representatives of multiple firms, is that at the report drafting stage there is

little follow-up with the audit firm, little reconciliation between the formal report and related

matter sheets, and no consistently applied mechanism in place for firms to appeal or seek

mediation or arbitration. Further, the PCAOB does not report to the firms about which matter

sheets, if any, have been dismissed as a result of the firms responses relating to those matters.

Simply put, the PCAOB inspection process lacks accountability. By analogy, it seems that the

PCAOB serves as sheriff, prosecutor, jury, judge, and executioner. In our view, it is not

surprising that recent research suggests that many auditors believe the PCAOBs inspection

process needs substantial improvement (Hill et al. 2007) and that audit clients do not perceive

that the PCAOBs inspection reports are valuable for signaling audit quality (Lennox and

Pittman 2008).

Political Motivations and Flawed Incentives. The establishment of the PCAOB was the

direct result of a perceived lack of audit quality. Consistent with this theme, early speeches by

Board members were critical of audit firm approaches that they alleged were insufficient and

ineffective, and inspection feedback focused on issues relating to audit quality. The 2003, 2004,

and 2005 PCAOB inspection reports are highly critical of the firms audit quality and highlight

multiple instances in which the firms allegedly collected insufficient audit evidence. In fact,

according to our discussions with representatives of several large firms, of the numerous matter


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sheets they had collectively received for the 2003 and 2004 audit-year inspections, not a single

matter sheet alleged that auditors had done too much work.

After being highly critical both privately and through formal reports regarding the

sufficiency of auditors work in the first year of inspections, as noted earlier, on May 16, 2005,

the PCAOB responded to political pressure with an abrupt about-face and immediately began to

publicly criticize audit firms for inefficiency and over-auditing (Palmrose 2006).20

Registrants and other stakeholders predictably began to complain that AS No. 2 was not

scalable and was unnecessarily costly, and that the costs of compliance far exceeded the benefits

in what Palmrose (2006) refers to as a public relations nightmare for auditors. The PCAOBs

guidance and observations issued May 16, 2005, regarding the implementation of AS No. 2 were

based on very limited direct knowledge from PCAOB inspection teamsbecause inspectors had

not yet inspected any audits of ICFR. The divergence in the Boards private and public posture

continued into 2006 with inspection teams and Board members outlining audit deficiencies

related to effectiveness with no specific mention of ways the firms could have or should have

improved audit efficiency.

Ineffective, Untimely Inspection Feedback. The PCAOBs inspection feedback has been

exceedingly slow and, we believe, ineffective. This is especially troubling given that the

PCAOBs overall inspection burden will increase with the addition of inspections of firms that

audit foreign filers and non-accelerated filers (the latter of which outnumber accelerated filers by

approximately 2 to 1 and which, by early indications, may be significantly more problematic).

The inspection reports for the largest 5 accounting firms were delivered as follows:


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Calendar Year Inspected

Dates of Inspection Report Delivery for Largest 5

Registered Accounting Firms

2003 September 2005 to January 2006

2004 November 2006 to January 2007

2005 May 2007 to October 2007

2006 April 2008 to September 2008

Obviously, a report released in late 2005 relating to a 2003 audit was too late to have any effect

on the firms 2004 audits (since the 2004 audits were already completed) or even its 2005 audits,

because changes in performance are predicated on changes in firms audit policy, methodology

and training. As a result, it is not surprising that some of the same deficiencies that were

identified in the first year PCAOB inspections were repeated in reports released in 2006 and

2007.21

InspectionSummary. We have outlined some important deficiencies in the PCAOBs

current inspection program. We believe that effective authoritative inspections are important to

the future health of the auditing profession and that meaningful enforcement is a critical part of

the equation. We also believe that the auditing firms have substantial room for improvement.

However, in our view, the current system of PCAOB inspections is incapable of achieving the

available benefits. We believe that the PCAOB made a serious mistake when it decided to go it

alone with in-house inspectors rather than building upon the inspection processes already in

place. In the next section we provide our recommendations for improving the PCAOBs

inspection processes.

RECOMMENDATIONS TO IMPROVE AUDITSTANDARD SETTING AND INSPECTION

We believe that the current U.S. audit standard setting and inspection environment is

inherently inefficient and ineffective, and will ultimately prove unsustainable. In our view, a

non-expert, reform-minded PCAOB entered the scene with a myopic underlying assumption that


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prior standard setting and inspection structures had little or no value. As a result, the PCAOB

unfortunately set aside numerous synergies that could have been captured by reforming and

leveraging the strengths of existing structures and processes. We believe that a serious and

substantial change in direction is needed to improve the current audit standard setting and

inspection processes in the United States.

Recommendations to Improve Audit Standard Setting

Within the structure of SOX, policy makers should consider ways to address the

problems in audit standard setting outlined above by looking to other models that are relatively

efficient and functional. Specifically, we suggest that policy makers consider the model currently

used in promulgating financial accounting standards. Since 1975 the SEC has overseen the

FASB, which is comprised of accounting experts who, for purposes of enhanced independence

and objectivity, have severed ties with their former firms or employers. The SEC is actively

involved in the accounting standard setting agenda and in developing guidance. The Commission

communicates with the FASB regarding troublesome practice matters and SEC investigation

findings, as well as the SECs thoughts and opinions. If SEC staff believes the FASB is moving

too slowly or has not moved far enough in a given standard, the staff has the option to issue

technically non-binding but highly influential guidance in the form of Staff Accounting Bulletins

(e.g., see recently issued SAB 108 on accounting adjustments or SAB 101 and SAB 104 on

revenue recognition).

We call on regulators to similarly delegate and oversee the development and

promulgation of auditing standards to a private-sector standard setting board made up of

independent experts. As Professor Schipper states in her letter to the IASC:

Choosing the independent expert approach requires interest groups to cede decision

rights to the experts. That is, the interest groups can set up the system, can provide input

through whatever due process procedures are imposed on the experts, and can demand

accountability [because the decision process is open], but ultimately, the interest groups


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must relinquish the right to intervene in the standard setting decisions of the experts.(Schipper 1998)

We see an immediate need for an independent board of experts to establish auditing

standards in the U.S. Such an auditing standards board would be funded similarly to the FASB

and would be comprised of experts who are independent from professional service firms. Note

that an independent expert U.S. board currently does not exist: The PCAOB is comprised of non-

experts and the AICPAs current ASB members are not required to be financially or otherwise

independent from current providers of auditing services.22

A reengineered U.S. board with independent members and funding could be established

and could work with the AICPA to leverage that organizations existing body of standards,

logistical expertise, and access to experts in the profession. The boards mandate should include

working with the IAASB to develop a solid base of global auditing standards while tailoring U.S.

auditing standards for the U.S. environment. The base of auditing standards developed by the

reengineered U.S. board could then be modified by the PCAOB only as necessary for specific

needs of public companies, similar to how U.S. governmental auditing standards are based on

ASB standards. The regulatory overseer would provide input into the newly formed auditing

boards agenda based on the results of inspection findings, and, similar to the SECs current

approach, would continue to have ultimate oversight responsibility as well as the latitude to issue

additional auditing guidance as necessary. We believe an independent board of experts subject to

authoritative public oversight would be significantly less vulnerable to most of the pitfalls

associated with the PCAOBs current approach.

Potential alternatives to the establishment of an independent, expertauditing standards

board would be for the PCAOB to (1) adopt IAASB/ASB standards, providing additional

guidance only as necessary for the U.S. public company environment, or (2) to reengineer the

PCAOB to be comprised of independent experts.23

However, the latter approach, assuming a


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workable process could be found, would provide only a partial solution because the PCAOB has

authority only for public company audits; thus, the problems and inefficiencies associated with

multiple standards and standard setters would continue.

Recommendations to Improve the Inspection Process

In addition to PCAOB inspections, registered audit firms are subject to AICPA-sponsored

peer review of private company auditing and assurance services. Notwithstanding its

weaknesses, one significant advantage of the peer review process is that it leverages industry and

technical expertise. While we are strongly in favor of a rigorous, enforceable, federal inspection

process, a significant opportunity exists to capture enhanced effectiveness and efficiencies by

revising the PCAOB current inspection model. We suggest that the PCAOB revise its approach

to involve peer-enhanced federal inspections. For example, federal inspectors could select and

scope public-company audit engagements for inspection. Federal inspectors could also conduct

the quality control portion of the inspections (i.e., evaluating tone at the top, firm-wide policies

and compensation plans, training and communication). The actual inspection team could include

a chief federal inspector and an appropriate number of PCAOB and peer professionals to

provide the required staffing and technical know-how. The chief inspector would be supported

by PCAOB administrative staff and would lead the inspection team, leveraging the expertise and

knowledge of practicing professionals. In addition to oversight, the federal inspector would

enforce appropriate remediation and penalties as necessary. By leveraging, overseeing, and

adding credible enforcement to a peer-enhanced inspection process, the full-time federal

inspection staff could shrink well below its current levels and at the same time the overall

competence and expertise of the inspection teams, along with the quality of the inspections,

could dramatically increase.


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In addition to moving to a peer-enhanced inspection model, we believe the PCAOBs

inspection processes need to be revised to (1) provide more transparency in findings and in the

initial drafting of PCAOB inspection reports, and (2) outline an arbitration or resolution process

to satisfactorily address disagreements between the inspection team and the audit firm.

SUMMARY & CONCLUSION

We acknowledge that the auditing profession contributed to the crisis of confidence

culminating in the Sarbanes Oxley Act of 2002. We recognize that many individuals at the

PCAOB are capable, competent, and well-intentioned and that the PCAOB has taken some

positive actions. We do not advocate a return to the pre-SOX system of self-regulation. We

recognize that there are considerable logistical and potentially legislative hurdles associated with

improving the current system of public company audit standard setting and inspections and we

do not pretend to have offered a complete solution. However, we believe the problems associated

with the current environment clearly suggest the time has come for a more reasoned approach to

federal oversight of the auditing profession.

We offer several recommendations that would bring fundamental change to the current

accounting oversight model, specifically in terms of audit standard setting and inspection.

Beyond these recommendations, which largely assume the retention of current regulatory

structures, we believe it would be worthwhile to revisit the decision to create a costly accounting

oversight board consisting of five highly-paid, non-expert members. We further suggest that it

may be time to reconsider whether a compelling need exists to maintain a quasi-governmental

accounting oversight body that is separate from the SEC.


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ENDNOTES

1Some observers have questioned how long-lasting the renewed focus of the profession on auditing will be, noting,

for example, that the major firms are once again vigorously pursuing consulting opportunities. We acknowledge that

whether the profession's focus on the audit is other than temporary remains to be seen. However, we argue that (1)

the new consulting services are primarily delivered to non-audit clients (so-called channel-two services), and (2)

the existence of a regulator with enforcement authority has fundamentally changed the likelihood that firms will

again neglect the financial statement audit. We also acknowledge that the implications of the current financial crisis,

including the role of SOX, the SEC, and of financial statement auditors, have yet to be fully realized. Although these

implications might be profound, these unfolding events are beyond the scope of this commentary.

2

For example, the PCAOB has done an effective job of reaching out to and seeking input from the academic

community, including sponsoring an annual symposium and commissioning nine important research syntheses.

3The interim standards adopted by the PCAOB in 2003 are still referenced according to the ASBs SAS and AU

taxonomy as it existed in 2003, although the ASB has modified its codification since 2003. Further, the PCAOB has

indicated that it is considering the possibility of an entirely new codification approach, which we believe would add

further complexity and confusion to the auditing standards environment.

4The ASBs agenda with respect to international convergence and the clarity initiative are described at

www.aicpa.org.

5Interestingly, the SEC does routinely send an observer to ASB meetings.

6Neither the chief of staff nor any of the six staff members that directly advise the five Board members has recent

meaningful audit experience. Few of the PCAOBs other key staffers, many of whom are attorneys, have recent,

meaningful auditing experience. By contrast, the SECs Chief Accountant typically has been selected from the upper

echelons of the accounting profession or accounting academia, and the SEC Fellows program draws expertise from

and strengthens communication with the profession. Additionally, the FASB Chairman is traditionally a highly

accomplished former accountant or auditor and that board consists of individuals with a high degree of expertise in

financial accounting and standard setting. Although some PCAOB staff have some relevant auditing experience, to

the best of our knowledge no employee of the PCAOB has experience as a voting member of an audit standard


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setting body. We also note that most other major standard setters in the accounting/auditing arena (e.g., FASB, ASB,

IASB, IAASB, and COSO) include at least one academic as a voting board member, while the PCAOB does not.

7That some aspects of the PCAOBs charter might be less than suboptimal is not surprising, as aspects of the final

SOX legislation enacted in July 2002 were hastily developed, in what has been characterized by Kinney (2005) as a

fire-alarm approach to regulation. As Arthur J. Radin, Executive Director of the New York State Society of CPAs,

put it, the law was drafted and implemented hastily, but our government needed a symbolan immediate display

of strengththat showed the world we would not tolerate any more Enrons or WorldComs (Radin 2007).

However, there have been few critiques of the design and implementation of the PCAOB (e.g., see Kinney 2005 and

Palmrose 2006).

8AS No. 3 was adapted from a previously existing governmental Yellow Book auditing standard.

9The ASB had been working on a similar standard, patterned after audits of internal control in large financial

institutions in accordance with requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991

and AT 501, the AICPAs attestation standard for auditing internal controls over financial reporting. The ASB

shared its work with the PCAOB, and from that basis the PCAOB began to develop AS No. 2, though the PCAOB

made the draft considerably more complex and prescriptive.

10Quotes taken from http://www.pcaobus.org/News_and_Events/News/2008/10-21.aspx as of January 15, 2009.

11The PCAOBs Standing Advisory Group (SAG) has criticized the PCAOB's lack of progress on standards relating

to fraud. To hear these and other SAG criticisms, listen to web archives of SAG meetings available at

www.pcaob.org.

12See http://www.pcaobus.org/News_and_Events/Events/2004/Speech/10-18_Gillan.aspx

13This situation was further exacerbated by the fact that neither SOX nor the SEC had provided guidance to

managements of public companies on how to implement or evaluate their own companies ICFR. Managements

were thus left to infer their responsibilities in evaluating and making an assertion regarding their companies ICFR

from an auditing standard, AS No. 2.

14For example, in an effort to interpret AS No. 2s ambiguous guidance on evaluating the severity of a control

deficiency, the eight largest firms and Professor William F. Messier, Jr. wrote a paper, A Framework for

Evaluating Control Exceptions and Deficiencies (Messier et al. 2004). The firms exposed the paper to the PCAOB

on a number of occasions and revised the framework in response to the limited feedback provided. While the


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framework proved to be a valuable tool for firms conducting audits of ICFR, the PCAOB did not recognize the

framework.

15See Beresford (2008) for a brief analysis of the FASBs contributions since its founding nearly four decades ago,

and its success in working with the SEC. See also Atmore et al. (2008).

16http://www.pcaob.org/enforcement/index.aspx.

17As an illustration of how full-time inspectors fall behind in current knowledge, after the issuance of AS No. 2 the

PCAOB did not have inspectors experienced or trained in conducting integrated audit inspections (controls and

financial statement audit) because they had hired away inspectors before the application of AS No. 2. When the

PCAOB began limited inspections of integrated audits, clear signs emerged that the inspectors did not understand

the integrated audit or AS No. 2. For example, inspectors wrote up matter sheets criticizing engagement teams for

using some of the same auditors to gather controls-related audit evidence for both the financial statement audit and

the audit of controls over financial reporting. These criticisms were levied at the same time the PCAOB was publicly

chastising firms for not sufficiently and efficiently integrating their audit teams and evidence gathering techniques

when applying AS No. 2 in an integrated audit.

18Palmrose (2006) notes that there appears to be less publicly available information for gaining insight into the

practice of auditing under government regulation than under self-regulation. In a similar vein, Lennox and Pittman

(2008) summarize their comprehensive study of audit firm supervision since the PCAOB began conducting

inspections by saying that collectively, our evidence implies that less is known about audit firm quality under the

new regulatory regime.

19Although such disagreements do not necessarily indicate that PCAOB inspections were flawed, firms commonly

and publicly disagree with supposed deficiencies reported by the PCAOB and even related statements of fact listed

in PCAOB inspection reports. Deloittes response related to the 2005 inspection report includes, We disagree with

the matter cited in the second bullet point. As indicated in our response to the inspection teams comments, the

review of subsequent activity was not intended to be, and is not, the sole test of the year-end balance. The

engagement team addressed the testing of promotional allowances during the audit, and we believe the procedures

performed and conclusions reached were appropriate. No further documentation or procedures are considered.

20The PCAOBs public criticism regarding over-auditing is particularly vexing in light of the underpinnings of SOX

and the messages PCAOB inspections teams were delivering to the firms. Recall that AS No. 2 was finalized in


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November 2004, and yet by May 2005 the PCAOB began to claim that auditors were doing too much and that the

firms had misimpressions regarding the amount of work required to comply with AS No. 2.

21Although preliminary drafts of the PCAOB inspection reports were provided to the firms prior to the formal

release, they were provided too late to affect the subsequent years audit.

22Although some members of the Board are not employed by accounting firms, such as the academic member, the

government member and other public interest members, most members of the ASB represent accounting firms, both

small and large.

23This may require revisions to SOX legislation.


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Standard Setters.Journal of Government Financial Management(Spring).

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Beresford, D. 2006. The FASBS Accomplishments Since Its Founding. Commentary provided

through Financial Executives Institute.

DiPiaza, S., T. Flynn, D. McDonnell, J. H. Quigley, F. Samyn, and J. F. Turley. 2008. Global

Dialogue with Capital Market stakeholders A Report From the CEOs of the International

Audit Networks. http://www.globalpublicpolicysymposium.com/GPPC_Vision.pdf.

Hill, N., J. McEnroe, and K. Stevens. 2007. Auditors Reactions to Sarbanes-Oxley: Observations

from the Field. CPA Journal (July): 6-11.

Kinney, W. R., Jr. 2005. Twenty-Five Years of Audit Deregulation and Re-regulation: What

does It Mean for 2005 and Beyond? Auditing: A Journal of Practice and Theory

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Lennox, C., and J. Pittman. 2008. Auditing the Auditors: Evidence on the Recent Reforms to the

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Ernst & Young LLP, Grant Thornton LLP, Harbinger PLC, KPMG LLP, McGladrey &Pullen LLP, PricewaterhouseCoopers LLP. A Framework for Evaluating Control Exceptions

and Deficiencies. Unpublished manuscript, December 20, 2004.

Nally, D. 2007. Written Testimony of Dennis Nally, Chairman and Senior Partner,

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Profession, United States Department of Treasury December 3, 2007.http://www.treas.gov/offices/domestic-finance/acap/submissions/12032007/Nally120307.pdf

Palmrose, Z. 2006. Maintaining the Value and Viability of Auditors as Gatekeepers under SOX:An Auditing Master Proposal in Financial Gatekeepers: Can They Protect Investors, edited

by U. Fuchita and R. Litan. Baltimore, MD: The Brookings Institute: 103-135.

Radin, A. J. 2007. Rethinking Sarbanes-Oxley: Taking Stock of Its Pluses and Minuses. CPA

Journal. November. http://www.nysscpa.org/cpajournal/2007/1107/perspectives/ p7.htm.


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