Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, delivered the following opening statement today at a hearing to examine the state of the accounting and auditing profession:
"Today, we are here to examine the accounting and auditing profession. The hearing is aptly entitled: "Accounting and Auditing Oversight: Pending Proposals and Emerging Issues Confronting Regulators, Standard Setters, and the Economy.'
"Accurate and reliable financial reporting to investors is a key cornerstone to our nation's capital markets. It is essential that investors have the appropriate information needed to make informed decisions on where to invest their capital. As our nation continues to recover from the recent financial crisis, we must work hard to restore the vitality to our markets and foster an environment where American public companies can do what they do best--create jobs.
"There are three broad areas that I hope to explore in greater detail today with our esteemed panelists.
"First, I'd like to hear from the SEC where we stand with international convergence of accounting standards. I know this is a top priority for many in the business community. I also realize that there is some disagreement between large and small companies as well as different industries as to what the preferable outcome of convergence will be. I am interested in discussing the steps the chairman and staff are taking to overcome these various obstacles and how we can ensure the harmonization of these standards creates an atmosphere where U.S. companies and investors have the best information possible.
"Second, I look forward to learning more about the current process that FASB and GASB go through to develop their standards. I agree that the integrity and independence of the standard setting process is essential and that Congress should not legislate accounting standards. I have seen some positive statements from market participants about the improvement in standard setting process and I appreciate both FASB and GASB balancing the delicate line of listening to the business community's concerns while ensuring an independent process.
"Finally, I would like to discuss some of the PCAOB's current proposals and how and why those proposals came to pass. I think it is important to remind the PCAOB that it is not a policy-making entity; Congress and this committee are the policy makers. The PCAOB's job is to regulate and oversee the auditing profession.
"I am very concerned about some of the recent activist proposals put forth by the PCAOB. I agree with the Chamber of Commerce and others that believe the PCAOB is "engaged in mission-creep, crossing the threshold of audit regulation in an attempt to regulate corporate governance '
"Specifically, the recent concept release on mandatory audit firm rotation is especially disconcerting. What is the specific problem you are trying to solve for? What data are looking at? What kind of specific cost-benefit analysis was done? What solution does that lead us to? Too many times with many of our regulators, the policy outcome is predetermined before the hard work is done to determine what the best solution should be.
"I would like to commend the gentlemen from Pennsylvania, Mr. Fitzpatrick, for his legislation preventing the PCAOB from moving forward on this policy. This hearing will serve as a legislative hearing for that proposal and it is my hope that the subcommittee will consider this bill at the next possible markup.
"In conclusion, while I believe these three areas, especially the concerns around an overactive PCAOB, are the most pressing issues--I realize there are also many other issues that require further discussion and I look forward to a constructive hearing."