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Auditing Research with the SEC in Mind

Auditing Research with the SEC in Mind. Andrew D. Bailey, Jr. Past Academic Accounting Fellow (2000/01) Past Deputy Chief Accounting (2004-2005) U.S. Securities & Exchange Commission AAA Audit Section Doctoral Consortium January 2006. Outline. SEC Organization Research Funding

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Auditing Research with the SEC in Mind

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  1. Auditing Research with the SEC in Mind Andrew D. Bailey, Jr. Past Academic Accounting Fellow (2000/01) Past Deputy Chief Accounting (2004-2005) U.S. Securities & Exchange Commission AAA Audit Section Doctoral Consortium January 2006

  2. Outline • SEC Organization • Research Funding • The SEC’s goals and Attitudes condition its interest • Investor protection • Market effectiveness and efficiency • Disclosure focus • Academic Research most likely to appeal • Capturing the SEC’s Attention • Summary

  3. Structure of SEC • Divisions • Division of Corporation Finance • Division of Enforcement • Division of Market Regulation • Division of Investment Management

  4. Structure of SEC • Offices • Administrative Law Judges • Administrative and Personnel Management • Chief Accountant • Compliance Inspections and Examinations • Financial Management • Economic Analysis • Equal Opportunity Employment • Executive Director • Filings and Information Services • General Counsel • Information Technology • Inspector General • International Affairs • Investor Education and Assistance • Legislative Affairs • Municipal Securities • Public Affairs, Policy Evaluations and Research • Secretary

  5. OCA and DCF Focus on Financial Reporting and Disclosure • Goal-Investor Protection • Provision of relevant, reliable, complete understandable information to the investor • Assure that investors receive quality information from management (broadly defined) • High Quality Audited Financial Statements

  6. Inputs needed for Quality Information: Researchable Issues • Preparation of Information by Management • Governance roles of management, audit and compensation committees, internal audit, etc. • Accounting Standards Setting and Application • Regulation, Oversight, Sanctions and Enforcement • Education of preparers, audit committees, internal auditors

  7. Inputs needed for Quality Information: Researchable Issues • Audits of Management Information • Auditing Standards Setting and Application • Independence Rules Creation and Enforcement • Audit Process (e.g., risk model, fraud focus) • Oversight, Enforcement, Sanctions • Education of auditors (university and continuing education)

  8. The Carnegie Research Model: Value to the SEC • Discovery Research – Interested, but Opportunistic Use • Integration Research – Interested more Systematic Use, but somewhat Unpredictable • Application – Interested, even more Systematic, but still somewhat Unpredictable • Teaching – General concern and specific concern for Investor Education

  9. Capturing the SEC’s Attention • Academic Accounting Fellows Program as a port-of-entry • Send papers of interest in as official commentary on pending concept releases, rules, etc. • Get to know the staff – How? • Consider evolving PCAOB interactions (Research links, academic fellow program, etc.)

  10. Summary • SEC values research that will help it achieve its investor-related goals • Integration and Application Research, but particularly Integration • Teaching Research and Application with particular emphasis on life-time competence and renewal

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