Draft Report of the Advisory Committee on the Auditing Profession, 28190-28208 [E8-10818]

Agencies

• DEPARTMENT OF THE TREASURY
• Department of Treasury

[Federal Register Volume 73, Number 95 (Thursday, May 15, 2008)]
[Notices]
[Pages 28190-28208]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-10818]


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DEPARTMENT OF THE TREASURY


Draft Report of the Advisory Committee on the Auditing Profession

AGENCY: Office of the Undersecretary for Domestic Finance, Treasury.

ACTION: Notice; request for comments.

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SUMMARY: The Advisory Committee on the Auditing Profession is 
publishing a Draft Report and soliciting public comment.

DATES: Comments should be received on or before June 13, 2008.

ADDRESSES: Comments may be submitted to the Advisory Committee by any 
of the following methods:

Electronic Comments

     Use the Department's Internet submission form (https://
www.treas.gov/offices/domestic-finance/acap/comments); or

Paper Comments

     Send paper comments in triplicate to Advisory Committee on 
the Auditing Profession, Office of Financial Institutions Policy, Room 
1418, Department of the Treasury, 1500 Pennsylvania Avenue, NW., 
Washington, DC 20220.
    In general, the Department will post all comments on its Web site 
(https://www.treas.gov/offices/domestic-finance/acap/comments) without 
change, including any business or personal information provided such as 
names, addresses, e-mail addresses, or telephone numbers. The 
Department will also make such comments available for public inspection 
and copying in the Department's Library, Room 1428, Main Department 
Building, 1500 Pennsylvania Avenue, NW., Washington, DC 20220, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. You can make an appointment to inspect comments by telephoning 
(202) 622-0990. All comments, including attachments and other 
supporting materials, received are part of the public record and 
subject to public disclosure. You should submit only information that 
you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Kristen E. Jaconi, Senior Policy 
Advisor to the Under Secretary for Domestic Finance, Department of the 
Treasury, Main Department Building, 1500 Pennsylvania Avenue, NW., 
Washington, DC 20220, at (202) 927-6618.

SUPPLEMENTARY INFORMATION: At the request of the two Co-Chairs of the 
Department of the Treasury's Advisory Committee on the Auditing 
Profession, the Department is publishing this notice soliciting public 
comment on the Advisory Committee's Draft Report. The text of this 
Draft Report is found in the appendix to this notice and may be found 
on the Web page of the Advisory Committee at https://www.treas.gov/
offices/domestic-finance/acap/index.shtml. The appendices to the Draft 
Report are not included in this notice, but may be found on the Web 
page of the Advisory Committee at https://www.treas.gov/offices/
domestic-finance/acap/index.shtml. The Draft Report contains the 
Advisory Committee's developed proposals on improving the 
sustainability of a strong and vibrant public company auditing 
profession. All interested parties are invited to submit their comments 
in the manner described above.

    Dated: May 8, 2008.
Taiya Smith,
Executive Secretary.

Appendix: Advisory Committee on the Auditing Profession, Draft Report--
May 5, 2008, The Department of the Treasury

Draft Report of the Advisory Committee on the Auditing Profession to 
the U.S. Department of the Treasury

Table of Contents

I. Transmittal Letter [Placeholder]
II. Executive Summary [Placeholder]
III. Committee History
IV. Background [Placeholder]
V. Human Capital
VI. Firm Structure and Finances
VII. Concentration and Competition
VIII. Separate Statements [Placeholder]
IX. Appendices
    A. Official Notice of Establishment of Committee
    B. Committee Charter
    C. Treasury Secretary Henry M. Paulson, Jr., Remarks at the 
Economic Club of New York, New York, NY on Capital Market 
Competitiveness (Nov. 20, 2006)
    D. Treasury Secretary Henry M. Paulson, Jr., Opening Remarks at 
the Treasury Department's Capital Markets Competitiveness Conference 
at Georgetown University (Mar. 13, 2007)
    E. Paulson Announces First Stage of Capital Markets Action Plan, 
Treasury Press Release No. HP-408 (May 17, 2007)
    F. Paulson: Financial Reporting Vital to U.S. Market Integrity, 
Strong Economy, Treasury Press Release No. HP-407 (May 17, 2008)
    G. Paulson Announces Auditing Committee Members To Make 
Recommendations for a More Sustainable, Transparent Industry, 
Treasury Press Release No. HP-585 (Oct. 2, 2007)
    H. Under Secretary for Domestic Finance Robert K. Steel, Welcome 
and

[[Page 28191]]

Introductory Remarks Before the Initial Meeting of the Department of 
the Treasury's Advisory Committee on the Auditing Profession, 
Treasury Press Release No. HP-610 (Oct. 15, 2007)
    I. Committee By-Laws
    J. List of Witnesses
    K. List of Committee Members, Observers, and Staff
    L. Working Discussion Outline
    M. Working Bibliography

I. Transmittal Letter

Advisory Committee on the Auditing Profession

[July 2008].

The Honorable Henry M. Paulson, Jr., Secretary, U.S. Department of 
the Treasury, 1500 Pennsylvania Avenue, NW., Washington, DC 20220.

    Dear Secretary Paulson: On behalf of the Department's Advisory 
Committee on the Auditing Profession, we are pleased to submit our 
Final Report.

    [Contents of letter to be included in Final Report.]

    Respectfully Submitted on behalf of the Committee,

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Arthur Levitt, Jr.,

Committee Co-Chair.

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 Donald T. Nicolaisen,

Committee Co-Chair.
Enclosure.
    cc: Undersecretary for Domestic Finance
Robert K. Steel.

II. Executive Summary

    [Contents of Executive Summary to be included in subsequent 
drafts of this Report.]

III. Committee History

    On November 20, 2006, the Secretary of the Treasury, Henry M. 
Paulson, Jr., delivered a speech on the competitiveness of the U.S. 
capital markets, highlighting the need for a sustainable auditing 
profession.\1\ In March 2007, Secretary Paulson hosted a conference 
at Georgetown University with investors, current and former policy 
makers, and market participants to discuss issues impacting the 
competitiveness of the U.S. capital markets, including the 
sustainability of the auditing profession.\2\
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    \1\ Treasury Secretary Henry M. Paulson, Jr., Remarks on the 
Competitiveness of U.S. Capital Markets at the Economic Club of New 
York (Nov. 20, 2006), in Press Release No. HP-174, U.S. Dep't of 
Treas. (Nov. 20, 2006) (included as Appendix C).
    \2\ Treasury Secretary Henry M. Paulson, Jr., Opening Remarks at 
Treasury's Capital Markets Competitiveness Conference at Georgetown 
University (Mar. 13, 2007), in Press Release No. HP-306, U.S. Dep't 
of Treas. (Mar. 13, 2007) (included as Appendix D).
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    On May 17, 2007, Secretary Paulson announced the Department of 
the Treasury's (the Department) intent to establish the Advisory 
Committee on the Auditing Profession (the Committee) to consider and 
develop recommendations relating to the sustainability of the 
auditing profession.\3\ At the same time, Secretary Paulson 
announced that he had asked Arthur Levitt, Jr. and Donald T. 
Nicolaisen to serve as Co-Chairs of the Committee. The Department 
published the official notice of establishment and requested 
nominations for membership on the Committee in the Federal Register 
on June 18, 2007.\4\ Secretary Paulson announced the Committee's 
membership on October 2, 2007, with members drawn from a wide range 
of professions, backgrounds and experiences.\5\ The Department filed 
the Committee's Charter with the Senate Committee on Banking, 
Housing, and Urban Affairs, the Senate Committee on Finance, the 
House Committee on Financial Services and the House Committee on 
Ways and Means on July 3, 2007.\6\
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    \3\ Press Release, U.S. Dep't of Treas., Paulson Announces First 
Stage of Capital Markets Action Plan (May 17, 2007) (included as 
Appendix E); Press Release, U.S. Dep't of Treas., Paulson: Financial 
Reporting Vital to U.S. Market Integrity, Strong Economy (May 17, 
2008) (included as Appendix F).
    \4\ Notice of Intent to Establish; Request for Nominations, 72 
FR 33560 (U.S. Dep't of Treas. June 18, 2007) (included as Appendix 
A).
    \5\ Press Release, U.S. Dep't of Treas., Paulson Announces 
Auditing Committee Members to Make Recommendations for a More 
Sustainable, Transparent Industry (Oct. 2, 2007) (included as 
Appendix G). This press release describes the diverse backgrounds of 
the Committee members. For a list of Members, Observers, and Staff, 
see Appendix K.
    \6\ See Committee Charter (included as Appendix B).
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Committee Activities

    The Committee held its initial meeting on October 15, 2007 in 
Washington, DC.\7\ Under Secretary for Domestic Finance Robert K. 
Steel welcomed the Committee members and provided introductory 
remarks.\8\ Also on October 15, 2007, the Committee adopted its by-
laws \9\ and considered a Working Discussion Outline to be published 
for public comment.\10\ The Working Discussion Outline identified in 
general terms issues for the Committee's consideration. A Working 
Bibliography, updated intermittently throughout the course of the 
Committee's deliberations, provided the members with articles, 
reports, studies, and other written materials relating to the 
auditing profession.\11\ All full Committee meetings were open to 
the public and conducted in accordance with the requirements of the 
Federal Advisory Committee Act.\12\ The meetings of the full 
Committee were also Web or audio cast over the Internet.
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    \7\ The Record of Proceedings of this and subsequent meetings of 
the Committee are available on the Department's Web site at https://
www.treas.gov/offices/domestic-finance//acap/press.shtml. See Record 
of Proceedings, Meeting of the Committee (Oct. 15, 2007, Dec. 3, 
2007, Feb. 4, 2008, Mar. 13, 2008, Apr. 1, 2008, and [--]) 
[hereinafter Record of Proceedings (with appropriate date)] (on file 
in the Department's Library, Room 1428), available at https://
www.treas.gov/offices/domestic-finance/acap/press.shtml.
    \8\ Under Secretary for Domestic Finance Robert K. Steel, 
Welcome and Introductory Remarks Before the Initial Meeting of the 
Treasury Department's Advisory Committee on the Auditing Profession 
(Oct. 15, 2007), in Press Release No. HP-610, U.S. Dep't of Treas. 
(Oct. 15, 2007) (included as Appendix H).
    \9\ The Committee By-Laws are included as Appendix I.
    \10\ The Working Discussion Outline is included as Appendix L.
    \11\ The Working Bibliography is included as Appendix M. The 
Working Bibliography was subsequently updated in December 2007 and 
February 2008.
    \12\ 5 U.S.C. App. 2 Sec.  1.
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    The Committee held its second meeting on December 3, 2007 in 
Washington, DC. The agenda for this meeting consisted of hearing 
oral statements from witnesses and considering written submissions 
that those witnesses had filed with the Committee. The oral 
statements and written submissions focused on the issues impacting 
the sustainability of the auditing profession, including issues 
mentioned in the Working Discussion Outline. Nineteen witnesses 
testified at this meeting.\13\ The Committee held a subsequent 
meeting on February 4, 2008 in Los Angeles, California at the 
University of Southern California. The agenda for this meeting 
consisted of hearing oral statements from witnesses and considering 
written submissions that those witnesses had filed with the 
Committee. The oral statements and written submissions focused on 
the issues impacting the sustainability of the auditing profession, 
including issues mentioned in the Working Discussion Outline. 
Seventeen witnesses testified at this meeting.\14\ The Committee 
held additional meetings on March 13, 2008, April 1, 2008, and [--]. 
All were face-to-face meetings held at the Department in Washington, 
DC, except for February 4, 2008, which was held in Los Angeles, 
California, and the meetings on April 1, 2008, and [--], which were 
telephonic meetings.
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    \13\ Appendix J contains a list of witnesses who testified 
before the Committee.
    \14\ Appendix J contains a list of witnesses who testified 
before the Committee.
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    The Committee, through the Department, published [--] releases 
in the Federal Register formally seeking public comment on issues 
under consideration. On October 31, 2007, the Committee published a 
release seeking comment on the Working Discussion Outline,\15\ in 
response to which we received seventeen written submissions. In 
addition, the Department announced each meeting of the Committee in 
the Federal Register, and in each announcement notice included an 
invitation to submit written statements to be considered in 
connection with the meeting.\16\ In response to these meeting 
notices, the Committee received [--] written submissions. In total, 
the Committee received [--] written submissions in response to 
Federal Register releases.\17\ All of the submissions made to the

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Committee will be archived and available to the public through the 
Department's Library.
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    \15\ Request for Comments, 72 FR 61709 (U.S. Dep't of Treas. 
Oct. 31, 2007).
    \16\ Notice of Meeting, 72 FR 55272 (U.S. Dep't of Treas. Sept. 
28, 2007); Notice of Meeting, 72 FR 64283 (U.S. Dep't of Treas. Nov. 
15, 2007); Notice of Meeting, 73 FR 2981 (U.S. Dep't of Treas. Jan. 
16, 2008); Notice of Meeting, 73 FR 10511 (U.S. Dep't of Treas. Feb. 
27, 2008); Notice of Meeting, 73 FR 13070 (U.S. Dep't of Treas. Mar. 
11, 2008); Notice of Meeting, 73 FR 21016 (U.S. Dep't of Treas. Apr. 
17, 2008).
    \17\ All of the written submissions made to the Committee are 
available in the Department's Library, Room 1428 and on the 
Department's Committee's Web page at https://www.treas.gov/offices/
domestic-finance/acap/press.shtml. To avoid duplicative material in 
footnotes, citations to the written submissions made to the 
Committee in this Final Report do not reference the Department's 
Library, Room 1428.
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    In addition to work carried out by the full Committee, fact 
finding and deliberations also took place within three Subcommittees 
appointed by the Co-Chairs. The Subcommittees were organized 
according to their principal areas of focus: Human Capital, Firm 
Structure and Finances, and Concentration and Competition.\18\ Each 
of the Subcommittees prepared recommendations for consideration by 
the full Committee.
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    \18\ For a list of members and their Subcommittee assignments, 
see Appendix K.
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IV. Background

    [Contents of Background to be included in subsequent drafts of 
this Report.]

V. Human Capital

    The Committee devoted considerable time and effort surveying the 
human capital issues impacting the auditing profession, including 
education, licensing, recruitment, retention, and training of 
accounting and auditing professionals. The charter of the Committee 
charged its members with developing recommendations relating to the 
sustainability of the public company auditing profession. Likewise, 
the Committee directs the following recommendations and related 
commentary to those practicing public company auditing. However, the 
Committee recognizes that several of its recommendations regarding 
human capital matters would have impact beyond the public company 
auditing profession, impacting the accounting profession as a whole. 
The Committee views the accelerating pace of change in the global 
corporate environment and capital markets and the increasing 
complexity of business transactions and financial reporting as among 
the most significant challenges facing the profession as well as 
financial statement issuers and investors. These are directly 
impacted by human capital issues. To ensure its viability and 
resilience and its ability to meet the needs of investors, the 
public company auditing profession needs to continue to attract and 
develop professionals at all levels who are prepared to perform high 
quality audits in this dynamic environment. It is essential that 
these professionals be educated and trained to review, judge, and 
question all accounting and auditing matters with skepticism and a 
critical perspective. The recommendations presented below reflect 
these needs.
    After receiving testimony from witnesses and from comment 
letters, the Committee identified specific areas where the Committee 
believed it could develop recommendations to be implemented in the 
relatively short term to enhance the sustainability of the auditing 
profession. These specific areas include accounting curricula, 
accounting faculty, minority representation and retention, and 
development and maintenance of human capital data. The Committee has 
also developed a recommendation to study the possible future of 
higher accounting education's institutional structure.
    The Committee recommends that regulators, the auditing 
profession, educators, educational institutions, accrediting 
agencies, and other bodies, as applicable, effectuate the following:
    Recommendation 1. Implement market-driven, dynamic curricula and 
content for accounting students that continuously evolve to meet the 
needs of the auditing profession and help prepare new entrants to 
the profession to perform high quality audits.
    The Committee considered the views of all witnesses who provided 
input regarding accounting curricula at educational 
institutions.\19\ The Committee believes that the accounting 
curricula in higher education are critical to ensuring individuals 
have the necessary knowledge, mindset, skills, and abilities to 
perform quality public company audits. In order to graduate from an 
educational institution with an accounting degree, students must 
have completed a certain number of hours in accounting and business 
courses. Accounting curricula typically include courses in auditing, 
financial accounting, cost accounting and U.S. federal income 
taxation. Business curricula typically include courses in ethics, 
information systems and controls, finance, economics, management, 
marketing, oral and written communication, statistics, and U.S. 
business law.\20\ Since the 1950s, several private sector groups 
have studied and recommended changes to the accounting 
curricula,\21\ but notwithstanding these pleas for reform, curricula 
are characteristically slow to change.\22\
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    \19\ See, e.g., Record of Proceedings (Dec. 3, 2007) (Written 
Submission of Joseph V. Carcello, Director of Research, Corporate 
Governance, University of Tennessee, Knoxville, 8), available at 
https://www.treas.gov/offices/domestic-finance/acap/submissions/
12032007/Carcello120307.pdf (noting the market's expectations that 
university accounting curricula will expose students to recent 
financial reporting developments, such as international financial 
reporting standards and eXtensible Business Reporting Language); 
Record of Proceedings (Feb. 4, 2008) (Written Submission of Cynthia 
Fornelli, Executive Director, Center for Audit Quality, 3) available 
at https://www.treas.gov/offices/domestic-finance/acap/submissions/
02042008/Fornelli020408.pdf (stating the need to ``[d]edicate 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'' and 
specifying the need to focus on ethical standards and international 
accounting and auditing standards); Record of Proceedings (Dec. 3, 
2007) (Written Submission of Dennis Nally, Chairman and Senior 
Partner, PriceWaterhouseCoopers LLP, 4), available at https://
www.treas.gov/offices/domestic-finance/acap/submissions/12032007/
Nally120307.pdf (stating the need to ``[m]odernize and enhance the 
university accounting curriculum, which should include consideration 
of other global curriculum models to increase knowledge of 
International Financial Reporting Standards (IFRS), finance and 
economics, and process controls'').
    \20\ Record of Proceedings (Feb. 4, 2008) (Written Submission of 
Phillip M.J. Reckers, Professor of Accountancy, Arizona State 
University, 13), available at https://www.treas.gov/offices/domestic-
finance/acap/submissions/02042008/Reckers020408.pdf (commenting that 
business students typically take two sophomore-level introductory 
accounting classes and accounting majors take six additional 
accounting courses in their final two years of schooling).
    \21\ See e.g., Franklin Pierson, et al., The Education of 
American Businessmen (1959) (noting that the main goal of a business 
education should be the development of an individual with broad 
training in both the humanities and principles of business); Robert 
A. Gordon and James E. Howell, Higher Education for Business (1959) 
(suggesting that accounting curriculum abandon its emphasis on 
financial accounting and auditing while emphasizing humanities); 
Robert H. Roy and James H. MacNeill, Horizons for a Profession 
(1967) (emphasizing the importance of a humanities background for 
accountants and recommending accounting graduate study); American 
Institute of Certified Public Accountants, Committee on Education 
and Experience Requirements for CPAs, Report of the Committee on 
Education and Experience Requirements for CPAs (1969) (recommending 
a five-year education requirement for accounting students); American 
Institute of Certified Public Accountants, Education Requirements 
for Entry into the Accounting Profession: A Statement of AICPA 
Policies (1978) (recommending a change from five years to 150 
semester-hours and recommending that a graduate degree requirement 
at the conclusion of the 150-hours should be explicitly stated); 
American Accounting Association, Committee on the Future Structure, 
Content, and Scope of Accounting Education, Future Accounting 
Education: Preparing for the Expanding Profession, Issues in 
Accounting Education (Spring 1986) (examining accounting education 
and accounting practice since 1925 and concluding that since 1925, 
the profession has changed while accounting education has not 
changed); American Institute of Certified Public Accountants, 
Education Requirements for Entry into the Accounting Profession: A 
Statement of AICPA Policies, Second Edition, Revised (1988) 
(requiring that at least 150 semester hours are needed to obtain a 
CPA license); Perspectives on Education: Capabilities for Success in 
the Accounting Profession (1989) (noting that graduates entering 
public accounting need to have greater interpersonal, communication, 
and thinking skills as well as greater business knowledge); and 
Accounting Education Change Commission, Objectives of Education for 
Accountants: Position Statement Number One, Issues in Accounting 
Education (Fall 1990a) (awarding grants to schools as a catalyst for 
curricula changes in accounting programs).
    \22\ Record of Proceedings (Dec. 3, 2007) (Written Submission of 
Ira Solomon, R.C. Evans Distinguished Professor, and Head, 
Department of Accountancy, University of Illinois, 14-15), available 
at https://www.treas.gov/offices/domestic-finance/acap/submissions/
12032007/Solomon120307.pdf (lamenting the slow pace of change in 
accounting curricula and education).
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    In this regard, the Committee makes the following 
recommendations:
    (a) Regularly update the accounting certification examinations 
to reflect changes in the accounting profession, its relevant 
professional and ethical standards, and the skills and knowledge 
required to serve increasingly global capital markets.
    Accounting and auditing professionals commonly complete the 
requirements of professional examinations in order to comply with 
legal or professional association requirements. To become licensed 
at the state level as a certified public accountant, an individual 
must, among other things, pass the Uniform CPA Examination. 
Professional examinations, such as the Uniform CPA

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Examination, influence the content of the technical, ethical, and 
professional materials comprising the accounting curricula.\23\
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    \23\ Gary Sundem, The Accounting Education Change Commission: 
Its History and Impact Chapter 6 (1999), available at https://
aaahq.org/AECC/history/index.htm (``[T]he CPA examination has 
certainly had a major influence on the accounting curriculum and on 
other aspects of accounting programs.'').
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    The Committee believes that evolution of professional 
examination content serves as an important catalyst for curricular 
changes to reflect the dynamism and complexity of auditing public 
companies in global capital markets. The American Institute of 
Certified Public Accountants (AICPA) already regularly analyzes and 
updates its examination content, through practice content analysis 
and in conjunction with the AICPA Board of Examiners, which 
comprises members from the profession and state boards of 
accountancy. The Committee recommends that such changes remain a 
focus to ensure that examination content reflects in a timely manner 
important ongoing market developments and investor needs, such as 
the increasing use of international financial reporting standards 
(IFRS), expanded fair value measurement and reporting, increasingly 
complex transactions, new Public Company Accounting Oversight Board 
(PCAOB) auditing and professional standards,\24\ risk-based business 
judgment, and technological innovations in financial reporting.
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    \24\ See e.g., An Audit of Internal Control Over Financial 
Reporting That Is Integrated with An Audit of Financial Statements, 
Auditing Standard No. 5 (Pub. Company Accounting Oversight Bd. 
2007).
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    Moreover, the Committee believes that professional \25\ and 
ethical standards \26\ and subject matter relating to their 
application are an essential component of the accounting curricula 
and accordingly should be reflected in the professional examinations 
and throughout business and accounting coursework.
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    \25\ See PCAOB Standards and Related Rules, available at https://
www.pcaobus.org/Standards/Standards_and_Related_Rules/index.aspx.
    \26\ See PCAOB Interim Ethics Standards, availabe at https://
www.pcaobus.org/Standards/Interim_Standards/Ethics/index.aspx.
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    Finally, the Committee recommends that the market developments 
outlined in this section be reflected in professional examination 
content as soon as practicable, but not later than 2011. In 
addition, the Committee recommends that new evolving examination 
content be widely and promptly communicated to college and 
university faculty and administrators so that corresponding 
curricular changes in educational institutions can continually occur 
on a timely basis.
    (b) Reflect real world changes in the business environment more 
rapidly in teaching materials.
    Students are expected to use a variety of sources, such as 
textbooks and online materials, to learn. Such materials are an 
important element of higher education. The Committee learned that 
these commercial materials are generally conservatively managed and 
follow rather than lead recent market developments.\27\ Because 
developing accounting materials involves a significant investment of 
time and resources, commercial content providers carefully consider 
the potential risks and rewards before publishing new materials, 
even where a more prompt response to new developments might be 
beneficial to students.
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    \27\ Subcommittee on Human Capital Record of Proceedings (Jan. 
16, 2008) (Oral Remarks of Bruce K. Behn, President, Federation of 
Schools of Accountancy, and Ergen Professor of Business, Department 
of Accounting and Information Management, University of Tennessee, 
Knoxville).
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    The Committee believes that accounting educational materials can 
contribute to inducing curricular changes that reflect the dynamism 
and complexity of the global capital markets and that commercial 
content providers should recognize the importance of capturing 
recent developments in their published materials. Specifically, the 
Committee recommends that organizations, such as the AICPA and the 
American Accounting Association (AAA), meet with commercial content 
providers and encourage them to update their materials promptly to 
reflect recent developments such as the increasing use of IFRS, new 
PCAOB auditing and professional standards, risk-based business 
judgment and expanded fair value reporting, as well as technological 
developments in financial reporting and auditing such as eXtensible 
Business Reporting Language (XBRL).
    Further, in order to ensure access to such materials, the 
Committee recommends that authoritative bodies and agencies should 
be encouraged to provide low-cost, affordable access to digitized 
searchable authoritative literature and materials, such as Financial 
Accounting Standards Board (FASB) codification and eIFRS, to 
students and faculty members. Moreover, since the content of 
professional examinations, such as the Uniform CPA Examination, is 
based upon research using digitized materials, students need to have 
access to, among other things, searchable accounting standards.\28\ 
The Committee believes that low-cost affordable access to such 
primary materials would thus enhance student learning and 
performance and technical research.
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    \28\ See Record of Proceedings (Feb. 4, 2008) (Written 
Submission of Phillip M.J. Reckers, Professor of Accountancy, 
Arizona State University, 14), available at https://www.treas.gov/
offices/domestic-finance/acap/submissions/02042008/Reckers020408.pdf 
(affirming the need for student access to digitized searchable 
accounting and auditing materials).
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    (c) Require that schools build into accounting curricula current 
market developments.
    A common theme of our first set of recommendations is that 
accounting curricula should reflect recent developments, including 
globalization and evolving market factors. As a further catalyst to 
curricula development and evolution by educational institutions, the 
Committee recommends ongoing attention to responsiveness to recent 
developments by the bodies that accredit educational institutions. 
Accrediting agencies review institutions of higher education and 
their programs and establish that overall resources and strategies 
are conformed to the mission of the institutions. For example, the 
Association to Advance Collegiate Schools of Business (AACSB) and 
the Association of Collegiate Business Schools and Programs (ACBSP) 
accredit business administration and accounting programs. Since 
1919, the AACSB has accredited business administration programs and, 
since 1980, accounting programs offering undergraduate and graduate 
degrees. The AACSB has accredited over 450 U.S. business programs 
and over 150 U.S. accounting programs. Since 1988, the ACBSP has 
accredited business programs offering associate, baccalaureate and 
graduate degrees. As of February 2008, over 400 educational 
institutions have achieved ACBSP accreditation. The accreditation 
standards at both accrediting agencies relate to, among other 
things, curricula, program and faculty resources, and faculty 
development.
    The Committee believes that the accreditation process and 
appropriate accreditation standards can contribute to curricular 
changes. In particular, accreditation standards that embody 
curricular requirements to reflect the dynamism and complexity of 
the global capital markets and that evolve to keep pace in the 
future can be helpful in maintaining and advancing the quality of 
accounting curricula. The AACSB has emphasized in its accreditation 
standards that accounting curricula should reflect recent market 
developments. For example, educational institutions must include in 
their curricula international accounting issues in order to receive 
AACSB accreditation. The Committee supports the accrediting 
agencies' efforts to continually develop standards specifically 
emphasizing the need to update accounting programs.
    Recommendation 2. Improve the representation and retention of 
minorities in the auditing profession so as to enrich the pool of 
human capital in the profession.
    The auditing profession presents challenging and rewarding 
opportunities for those who pursue a career in auditing and the 
profession actively recruits talent from all backgrounds. Yet, the 
Committee was concerned by what it heard from individuals with 
various backgrounds about minority representation and retention in 
the auditing profession.\29\ In 2004, minorities accounted for 23% 
of bachelor's degrees awarded in accounting, 21% of master's 
graduate degrees awarded in accounting, and 38% of doctoral

[[Page 28194]]

degrees awarded in accounting-related studies.\30\ In 2004, African 
Americans represented 1% of all CPAs, Hispanic/Latino, 3%, and 
Asian/Pacific Islander, 4%.\31\ African Americans accounted for 5.4% 
of new hires in 2007 in the largest six accounting firms, Hispanics, 
4.6%, and Asians, 21.3%.\32\ In 2007, 1.0% of the partners in the 
six largest accounting firms were African American, 1.6% were 
Hispanic/Latino, 3.4% were Asian, and less than 1.0% were Native 
Hawaiian/Pacific Islander or American Indian/Alaska Native, 
aggregating less than 7% of the total partners.\33\
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    \29\ See, e.g., Record of Proceedings (Dec. 3, 2007) (Written 
Submission of Ira Solomon, R.C. Evans Distinguished Professor, and 
Head, Department of Accountancy, University of Illinois, 13), 
available at https://www.treas.gov/offices/domestic-finance/acap/
submissions/12032007/Solomon120307.pdf; Record of Proceedings (Dec. 
3, 2007) (Questions for the Record of George S. Willie, Managing 
Partner, Bert Smith & Co., 2 (Jan. 30, 2008)), available at https://
www.treas.gov/offices/domestic-finance/acap/submissions/12032007/
Willie120307.pdf; Record of Proceedings (Dec. 3, 2007) (Written 
Submission of Julie K. Wood, Chief People Officer, Crowe Chizek and 
Company LLC, 2) available at https://www.treas.gov/offices/domestic-
finance/acap/submissions/12032007/Wood120307.pdf.
    \30\ Beatrice Sanders, and Leticia B. Romeo, The Supply of 
Accounting Graduates and the Demand for Public Accounting Recruits--
2005: For Academic Year 2003-2004 10 (2005), available at https://
ceae.aicpa.org/NR/rdonlyres/11715FC6-F0A7-4AD6-8D28-6285CBE77315/0/
Supply_DemandReport_2005.pdf.
    \31\ Beatrice Sanders, and Leticia B. Romeo, The Supply of 
Accounting Graduates and the Demand for Public Accounting Recruits--
2005: For Academic Year 2003-2004 1 (2005), available at https://
ceae.aicpa.org/NR/rdonlyres/11715FC6-F0A7-4AD6-8D28-6285CBE77315/0/
Supply_DemandReport_2005.pdf.
    \32\ Center For Audit Quality, Report of the Major Public 
Company Audit Firms to the Department of the Treasury Advisory 
Committee on the Auditing Profession 59 (Jan. 23, 2008).
    \33\ Center For Audit Quality, Report of the Major Public 
Company Audit Firms to the Department of the Treasury Advisory 
Committee on the Auditing Profession 60 (Jan. 23, 2008).
---------------------------------------------------------------------------

    The Committee recognizes that important groups within the 
minority population are significantly under-represented in the 
accounting and auditing profession, especially at senior levels, and 
this under-representation of minorities in the profession is 
unacceptable from both a societal and business perspective. As the 
demographics of the global economy continue to expand ethnic 
diversity, it is imperative that the profession also reflect these 
changes. The auditing profession's historic role in performing 
audits in an increasingly diverse global setting and in establishing 
investor trust cannot be maintained unless the profession itself is 
viewed as open and representative. To ensure the continued health 
and vibrancy of the profession, it is imperative that all 
participants in the financial, investor, educator, and auditor 
community adopt and implement policies, programs, practices, and 
curricula designed to attract and retain minorities. In order for 
minority participation in the accounting and auditing profession to 
grow and sustain itself, minority recruitment and retention needs to 
be a multi-faceted, multi-year effort, implemented and championed by 
community leaders, families, and most importantly business and 
academic leaders who educate, recruit, employ, and rely on 
accountants and auditors.
    In this regard, the Committee recognizes the importance of 
setting goals and measuring progress against these goals and thus 
makes the following recommendations:
    (a) Recruit minorities into the auditing profession from other 
disciplines and careers.
    The Committee heard from witnesses that the auditing profession 
has ``fallen short'' on its minority recruitment goals.\34\ 
Accordingly, the Committee recommends that auditing firms actively 
market to and recruit from minority non-accounting graduate 
populations, both at the entry and experienced hire level, utilizing 
cooperative efforts by academics and firm-based training programs to 
assist in this process. Generally, auditing firms hire individuals 
for the audit practice who are qualified to sit for the Uniform CPA 
Examination.\35\
---------------------------------------------------------------------------

    \34\ See e.g., Record of Proceedings (Dec. 3, 2007) (Written 
Submission of Julie K. Wood, Chief People Officer, Crowe Chizek and 
Company LLC, 2), available at https://www.treas.gov/offices/domestic-
finance/acap/submissions/12032007/Wood120307.pdf (admitting an 
auditing firm had not met its goals in minority recruitment).
    \35\ See Record of Proceedings (Dec. 3, 2007) (Questions for the 
Record of James S. Turley, Chairman and Chief Executive Officer, 
Ernst & Young LLP, 4 (Feb. 1, 2008)), available at https://
www.treas.gov/offices/domestic-finance/acap/QFRs-12-3-07.pdf (noting 
that since 1997, Ernst & Young LLP has typically hired individuals 
qualified to sit for the Uniform CPA Examination).
---------------------------------------------------------------------------

    Further, the Committee recommends that auditing firms expand 
their recruitment initiatives at historically black colleges and 
universities (HBCUs), and explore the use of proprietary schools as 
another way to recruit minorities into the profession. Currently 
over 100 educational institutions established before 1964 to serve 
the African American community are designated as HBCUs and over 
fifty of these HBCUs maintain accounting programs. Approximately 
290,000 students are enrolled in HBCUs \36\ and HBCUs enroll 14% of 
all African American students in higher education.\37\ Twenty-seven 
HBCUs have one or more of the six largest accounting firms 
recruiting professional staff on their campus.\38\ Both the number 
of these schools visited by the largest firms and the number of 
firms recruiting at these schools should increase. Proprietary 
schools are for-profit businesses that teach vocational or 
occupational skills and there are over 2,000 proprietary schools in 
the United States.\39\ In 2005, these schools enrolled over 1 
million students: African Americans accounted for 23% of these 
students, Hispanics, 13%, and Asian/Pacific Islander, 4%.\40\
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    \36\ Stephen Provasnik and Linda L. Shafer, Historically Black 
Colleges and Universities, 1976 to 2001 2 (NCES 2004-062), available 
at https://nces.ed.gov/pubs2004/2004062.pdf.
    \37\ White House Initiative on Historically Black Colleges and 
Universities, available at https://www.ed.gov/about/inits/list/
whhbcu/edlite-index.html.
    \38\ Center For Audit Quality, Supplement to Report of the Major 
Public Company Audit Firms to the Department of the Treasury 
Advisory Committee on the Auditing Profession 1 (Mar. 5, 2008).
    \39\ Thomas D. Snyder, Sally A. Dillow, and Charlene M. Hoffman, 
Digest of Education Statistics 2007 Table 5 (NCES 2008-022), 
available at https://nces.ed.gov/pubs2008/2008022.pdf.
    \40\ Thomas D. Snyder, Sally A. Dillow, and Charlene M. Hoffman, 
Digest of Education Statistics 2007 Table 220 (NCES 2008-022), 
available at https://nces.ed.gov/pubs2008/2008022.pdf.
---------------------------------------------------------------------------

    (b) Emphasize the role of community colleges in the recruitment 
of minorities into the auditing profession.
    Community colleges are a vital part of the postsecondary 
education system. They provide open access to post-secondary 
education, preparing students for transfer to four-year 
institutions, providing workforce development and skills training, 
and offering non-credit programs. Moreover, as the cost of higher 
education continues its upward climb, more and more high-achieving 
students are beginning their post-secondary study through the 
community college system.
    As of January 2008, approximately 11.5 million students were 
enrolled in the 1,200 community colleges in the United States: 
African Americans accounted for 13% of these students, Hispanics, 
15%, and Asian/Pacific Islander, 6%.\41\
---------------------------------------------------------------------------

    \41\ American Association of Community Colleges, available at 
https://www2.aacc.nche.edu/research/index.htm.
---------------------------------------------------------------------------

    In August 1992, the Accounting Education Change Commission 
(AECC), created in the late 1980s by the academic community to 
examine potential changes to accounting education, recognized the 
importance of two-year colleges in accounting education. The AECC 
noted that over half of all students taking their first course in 
accounting do so at two-year colleges and that approximately one-
fourth of the students entering the accounting profession take their 
initial accounting coursework at two-year colleges. The AECC called 
for ``greater recognition within the academic and professional 
communities of the efforts and importance of two-year accounting 
programs.'' \42\
---------------------------------------------------------------------------

    \42\ Accounting Education Change Commission, Issues Statement 
Number 3: The Importance of Two-Year Colleges for Accounting 
Education (Aug. 1992) available at https://aaahq.org/aecc/
PositionsandIssues/issues3.htm.
---------------------------------------------------------------------------

    The Committee also heard from witnesses emphasizing the need to 
expand minority recruitment initiatives at community colleges.\43\
---------------------------------------------------------------------------

    \43\ Record of Proceedings (Feb. 4, 2008) (Written Submission of 
Gilbert R. Vasquez, Managing Partner, Vasquez & Company LLP, 4), 
available at https://www.treas.gov/offices/domestic-finance/acap/
submissions/02042008/Vasquez02042008.pdf (noting that auditing firms 
overlook community colleges where minorities, and specifically 
Latinos, represent a large student population); Record of 
Proceedings (Dec. 3, 2007) (Questions for the Record of George S. 
Willie, Managing Partner, Bert Smith & Co., 2 (Jan. 30, 2008)), 
available at https://www.treas.gov/offices/domestic-finance/acap/
QFRs-12-3-07.pdf (recommending that the auditing profession increase 
it visibility at community colleges).
---------------------------------------------------------------------------

    The Committee believes that more attention to community colleges 
may provide, in addition to an increase in the overall supply of 
students, another avenue for minorities to become familiar with and 
attracted to the auditing profession. Currently none of the largest 
auditing firms recruit at community colleges because ``individuals 
who only have associate degrees typically will not have sufficient 
qualifications to satisfy state licensing requirements.'' \44\ The 
Committee recommends that accreditation of two-year college 
accounting programs at

[[Page 28195]]

community colleges be explored and implemented when viable, so that 
these programs can be relied upon as one of the requisite steps 
toward fulfilling undergraduate educational requirements. Further, 
the Committee recommends that auditing firms and educational 
institutions at all levels support and cooperate in building strong 
fundamental academic accounting programs at community colleges, 
including providing internships or financial support for students 
who begin their studies in two-year programs and may be seeking 
careers in the auditing profession. The Committee also recommends 
that auditing firms and four-year colleges and universities and 
their faculty focus on outreach to community college students in 
order to support students' transition from community colleges to 
four-year educational institutions.
---------------------------------------------------------------------------

    \44\ Center For Audit Quality, Supplement to Report of the Major 
Public Company Audit Firms to the Department of the Treasury 
Advisory Committee on the Auditing Profession 1 (Mar. 5, 2008).
---------------------------------------------------------------------------

    (c) Emphasize the utility and effectiveness of cross-sabbaticals 
and internships with faculty and students at Historically Black 
Colleges and Universities.
    As discussed above, African Americans are significantly under-
represented in the auditing profession.
    The Committee recommends encouraging a concerted effort to 
increase the focus upon HBCUs in order to raise the number of 
African Americans in the auditing profession and urging the HBCUs, 
auditing firms, corporations, federal and state governments, and 
other entities to emphasize the use of cross-sabbaticals. Cross-
sabbaticals are interactive relationships where faculty and seasoned 
professionals are regularly represented in the practice and academic 
environments through exchanges. Evidence suggests that such 
exchanges can be beneficial, and continued development of such 
exchanges is expected to provide substantial benefits for all 
parties.\45\ Cross-sabbaticals present an opportunity for 
``reflective thinking'' for seasoned professionals.\46\
---------------------------------------------------------------------------

    \45\ See Record of Proceedings (Feb. 4, 2008) (Written 
Submission of Cynthia Fornelli, Executive Director, Center for Audit 
Quality, 2), available at https://www.treas.gov/offices/domestic-
finance/acap/submissions/02042008/Fornelli020408.pdf (recommending 
encouraging sabbaticals, internships, and fellowship opportunities, 
structured to give faculty opportunities to conduct research for 
promotion and tenure); Record of Proceedings (Feb. 4, 2008) (Oral 
Remarks of Phillip M.J. Reckers, Professor of Accountancy, Arizona 
State University, 68), available at https://www.treas.gov/offices/
domestic-finance/acap/agendas/minutes-2-4-08.pdf (stating that 
sabbaticals deliver professors ``a wealth of knowledge they could 
bring back in the classroom'').
    \46\ See Record of Proceedings (Mar. 13, 2008) (Oral Remarks of 
H. Rodgin Cohen, Chairman, Sullivan & Cromwell LLP, 69), available 
at https://www.treas.gov/offices/domestic-finance/acap/agendas/
minutes-03-13-08.pdf (noting that spending time in the classroom 
should ``give the [practicing accountant] the time to do the 
reflective thinking.''); Record of Proceedings (Mar. 13, 2008) (Oral 
Remarks of Zoe-Vonna Palmrose, Deputy Chief Accountant, SEC), 
available at https://www.treas.gov/offices/domestic-finance/acap/
agendas/minutes-03-13-08.pdf (commenting that sabbaticals provide 
the ``opportunity for reflective thinking'').
---------------------------------------------------------------------------

    In addition, the Committee recommends that the over fifty HBCUs 
with accounting programs require one member of their accounting 
faculty annually to participate in a cross-sabbatical with a private 
or public sector entity. The Committee also recommends that the 
private and public sector entities provide these opportunities, as 
well as focus on other arrangements to build relationships at these 
educational institutions.
    The Committee received testimony regarding the lack of minority 
mentors and role models \47\ and notes that the profession has 
recognized this situation.\48\ Thus, the Committee also recommends 
that public company auditing firms intensify their efforts to create 
internships and mentoring programs for students in accounting and 
other complementary disciplines, including those from HBCUs and 
community colleges, as a means to increase the awareness of the 
accounting profession and its attractiveness among minority 
students.
---------------------------------------------------------------------------

    \47\ See Record of Proceedings (Feb. 4, 2008) (Written 
Submission of Gilbert R. Vasquez, Managing Partner, Vasquez & 
Company LLP, 4), available at https://www.treas.gov/offices/domestic-
finance/acap/submissions/02042008/Vasquez02042008.pdf (highlighting 
the lack of Hispanic role models and mentors in the accounting 
profession).
    \48\ See Record of Proceedings (Dec. 3, 2007) (Questions for the 
Record of George S. Willie, Managing Partner, Bert Smith & Co., 2 
(Jan. 30, 2008)), available at https://www.treas.gov/offices/
domestic-finance/acap/submissions/12032007/Willie120307.pdf 
(recommending the establishment of a mentor program for minority 
accounting students); Record of Proceedings (July 12, 2006) (Written 
Testimony of Manuel Fernandez, National Managing Partner--Campus 
Recruiting, KPMG LLP, to the Subcommittee on Oversight and 
Investigations of the House Financial Services Committee, 5), 
available at https://financialservices.house.gov/media/pdf/
071206mf.pdf (identifying the lack of minority faculty mentors and 
role models and noting ``[w]hen students of color do not see 
professors of their own ethnic background on the accounting faculty, 
they are less apt to consider the option of a career in 
accountancy'').
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    (d) Increase the numbers of minority accounting doctorates 
through focused efforts.
    Some dedicated programs have succeeded in attracting minorities 
to enter and complete accounting doctoral studies.\49\ In 
particular, the PhD Project, an effort of the KPMG Foundation, has 
worked to increase the diversity of business school faculty.\50\ The 
PhD Project focuses on attracting minorities to business doctoral 
programs, and provides a network of peer support. Since the PhD 
Project's establishment in 1994, the number of minority professors 
at U.S. business schools has increased from 294 to 889.\51\ Ninety 
percent who enter the PhD Project earn their doctorates, and 99% of 
those who completed their doctorates go on to teach.\52\ The PhD 
Project has received over $17.5 million \53\ in funding since 1994 
from corporations, foundations, universities, and other interested 
parties.\54\
---------------------------------------------------------------------------

    \49\ For a list of educational support programs that auditing 
firms are sponsoring, see Record of Proceedings (Feb. 4, 2008) 
(Written Submission of Barry Salzberg, Chief Executive Officer, 
Deloitte LLP, Appendix A), available at https://www.treas.gov/
offices/domestic-finance/acap/submissions/02042008/
Salzberg020408.pdf.
    \50\ For further information on the PhD Project, see https://
www.phdproject.org/mission.html.
    \51\ Record of Proceedings (Feb. 4, 2008) (Written Submission of 
Barry Salzberg, Chief Executive Officer, Deloitte LLP, Appendix A), 
available at https://www.treas.gov/offices/domestic-finance/acap/
submissions/02042008/Salzberg020408.pdf.
    \52\ See Jane Porter, Going to the Head of the Class: How the 
PhD Project is Helping to Boost the Number of Minority Professors in 
B-schools, BUSINESS WEEK ONLINE, Dec. 27, 2006, available at https://
www.businessweek.com/bschools/content/dec2006/bs20061227_
926455.htm.
    \53\ See Record of Proceedings (July 12, 2006) (Written 
Testimony of Manuel Fernandez, National Managing Partner--Campus 
Recruiting, KPMG LLP, to the Subcommittee on Oversight and 
Investigations of the House Financial Services Committee, 5), 
available at https://financialservices.house.gov/media/pdf/
071206mf.pdf.
    \54\ For further information on the PhD Project, see https://
www.phdproject.org/corp_sponsors.html.
---------------------------------------------------------------------------

    The Committee believes that programs such as these can 
successfully recruit minorities to accounting doctoral studies. The 
Committee recommends that auditing firms, corporations, and other 
interested parties advertise existing and successful efforts to 
increase the number of minority doctorates by developing further 
dedicated programs. Additionally, the Committee recommends that 
auditing firms, corporations, and other interested parties maintain 
and increase the funding of these programs.
    Recommendation 3. Ensure a sufficiently robust supply of 
qualified accounting faculty to meet demand for the future and help 
prepare new entrants to the profession to perform high quality 
audits.
    The Committee heard testimony from individuals regarding the 
need to have an adequate supply of faculty with the knowledge and 
experience to develop qualified professionals for the increasingly 
complex and global auditing profession.\55\
---------------------------------------------------------------------------

    \55\ See, e.g., Record of Proceedings (Dec. 3, 2007) (Written 
Submission of David W. Leslie, Chancellor Professor of Education, 
College of William and Mary), available at https://www.treas.gov/
offices/domestic-finance/acap/submissions/12032007/Leslie120307.pdf 
(noting a 13.3% decline in accounting faculty from 1988 to 2004); 
Record of Proceedings (Feb. 4, 2008) (Written Submission of Edward 
E. Nusbaum, Chief Executive Officer, Grant Thornton LLP, and 
Chairman, Grant Thornton International Board of Governors, 5), 
available at https://www.treas.gov/offices/domestic-finance/acap/
submissions/02042008/Nusbaum020408.pdf (stating that ``recent years 
have seen a reduction in accounting faculty, based on a wave of 
retirements and lack of accounting PhDs coming into the system.''); 
Record of Proceedings (Dec. 3, 2007) (Written Submission of Ira 
Solomon, R.C. Evans Distinguished Professor, and Head, Department of 
Accountancy, University of Illinois, 4), available at https://
www.treas.gov/offices/domestic-finance/acap/submissions/12032007/
Solomon120307.pdf (stating that ``the number of persons entering 
accountancy doctoral programs is too low to sustain the accountancy 
professoriate.'').
---------------------------------------------------------------------------

    The Committee recognizes that there is a high level of concern 
about the adequacy of both the near and the long-term supply of 
doctoral faculty, especially given the anticipated pace of faculty 
retirements. According to National Study of Postsecondary Faculty 
data, the number of

[[Page 28196]]

full- and part-time accounting faculty at all types of educational 
institutions fell by 13.3% from 20,321 in 1993 to 17,610 in 2004, 
while student (undergraduate) enrollment has increased by 12.3% over 
the same period.\56\ Moreover, the current pipeline of doctoral 
faculty is not keeping pace with anticipated retirements. In 
November 2006, it was estimated that one-third of the approximately 
4,000 accounting doctoral faculty in the United States were 60 years 
old or older, and one-half were 55 years old or older.\57\ The 
average retirement age of accounting faculty was 62.4 years.
---------------------------------------------------------------------------

    \56\ Record of Proceedings (Dec. 3, 2007) (Written Submission of 
David W. Leslie, Chancellor Professor of Education, College of 
William and Mary), available at https://www.treas.gov/offices/
domestic-finance/acap/submissions/12032007/Leslie120307.pdf.
    \57\ James R. Hasselback, 2007 Analysis of Accounting Faculty 
Birthdates, available at https://aaahq.org/temp/phd/
JimHasselbackBirthdateSlide.pdf.
---------------------------------------------------------------------------

    In terms of specialization within the accounting discipline, an 
AAA study concluded that only 22% and 27% of the projected demand 
for doctoral faculty in auditing and tax, respectively, will be met 
by expected graduations in the coming years.\58\ However, 91% and 
79% of the projected demand for doctoral faculty in financial 
accounting and managerial accounting, respectively, will be met.\59\
---------------------------------------------------------------------------

    \58\ R. David Plumlee, Steven J. Kachelmeier, Silvia A. Madeo, 
Jamie H. Pratt, and George Krull, Assessing the Shortage of 
Accounting Faculty, 21 Issues in Accounting Education, No. 2, 119 
(May 2006).
    \59\ R. David Plumlee, Steven J. Kachelmeier, Silvia A. Madeo, 
Jamie H. Pratt, and George Krull, Assessing the Shortage of 
Accounting Faculty, 21 Issues in Accounting Education, No. 2, 119 
(May 2006).
---------------------------------------------------------------------------

    In addition to the accounting faculty supply issues, the 
Committee heard testimony from witnesses on the need to ensure 
faculty are qualified and able to teach students the latest market 
developments, such as fair value accounting and IFRS. The Committee 
learned that often new accounting faculty may have little practical 
experience.\60\ Witnesses testified to the difficulty of academics' 
acquiring ``practice-oriented'' knowledge as the bond between the 
profession and academia is underdeveloped. Witnesses did suggest 
improving these relationships with incentives for sabbaticals and 
sharing practice experience.\61\
---------------------------------------------------------------------------

    \60\ Record of Proceedings (Dec. 3, 2007) (Written Submission of 
Joseph V. Carcello, Director of Research, Corporate Governance, 
University of Tennessee, Knoxville, 21), available at https://
www.treas.gov/offices/domestic-finance/acap/submissions/12032007/
Carcello120307.pdf.
    \61\ Record of Proceedings (Feb. 4, 2008) (Written Submission of 
Cynthia Fornelli, Executive Director, Center for Audit Quality, 2), 
available at