The Levitt committee just completed its third round of talks around reformation of the US audit market.

The committee, led by former Securities and Exchange Commission chairman Arthur Levitt, considered 17 reports by different figures in the industry, ranging from regulators and academics to practitioners and firm heads.

Among those who commented in panels was the UK's Richard Fleck, the chairman of the Auditing Practices Board, who told the US Treasury committee that financial statements are likely to decline in importance and so impact on the value of the auditor's report.

Fleck said further that while annual financial statements are an important source of information to investors, their relative importance has probably declined during the last twenty years.

'… and will probably continue to decline in the next twenty. The value of the auditor’s report can not be higher than the financial statements themselves,' Fleck said.

Fleck was speaking on a panel discussing issues relating to the structure and finances of accounting firms.

Fleck also told the panel, chaired by former Securities and Exchange Commission chairman Arthur Levitt that auditors needed to 'increase the relevance of their work to the financial community'.

Fleck made the point in discussions around the long term sustainability of the profession.

'I believe the quality of the staff available to audit firms can only be maintained or enhanced if auditors increase the relevance of their work to the financial community,' he said.

Other commentators, such as the US Centre for Audit Quality's Cynthia Fornelli called on the committee to dedicate funds and people to work with accounting professors 'to ensure that the curriculum is keeping pace with developments in business transactions, international economics and financial reporting.'

'Areas of specific attention include the persistent need to impart high ethical standards and the evolving need for instruction on international accounting and auditing standards… to prepare current and future auditors for any transition to international accounting and auditing standards is important to the stability of our markets,' she said.

The CAQ also called for the establishment of a 'professional judgment rule'.

'A well-crafted professional judgment rule would benefit investors, auditors and issuers. By adopting such a rule, the SEC would formally recognize the essential role of good-faith professional judgment in the financial reporting and audit processes,' Fornelli said.

Grant Thornton International's chairman, Edward Nusbaum, called for the committee to consider comprehensive disclosures about reasons for auditor switches, restrictive contracts with underwriters, and audit committees’ processes for choosing, evaluating and compensating the auditor.

'Such transparency would create incentives for audit committees to optimize their auditor choice and help clarify that size is not always the best criterion when selecting an auditor. Removal of entry barriers by reducing unnecessary complexity of global regulation and financial reporting standards,' he said.

Further reading:

'Compelling' need to tackle Big Four issue

UK hands audit reform baton to US

US Treasury to investigate audit market