Second Draft Report of the Advisory Committee on the Auditing Profession, 44315-44350 [E8-17441]

Agencies

• DEPARTMENT OF THE TREASURY

[Federal Register Volume 73, Number 147 (Wednesday, July 30, 2008)]
[Notices]
[Pages 44315-44350]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-17441]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY


Second Draft Report of the Advisory Committee on the Auditing 
Profession

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

ACTION: Notice; request for comments.

-----------------------------------------------------------------------

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

DATES: Comments should be received on or before August 26, 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

[[Page 44316]]

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 Second Draft Report. The text of 
the Second 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 Second 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 Second 
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: July 25, 2008.
Taiya Smith,
Executive Secretary.

Appendix: Advisory Committee on the Auditing Profession

Second Draft Report--July 22, 2008

The Department of the Treasury

Second 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. Committee History
III. Background [Placeholder]
IV. Human Capital
V. Firm Structure and Finances
VI. Concentration and Competition
VII. Separate Statements [Placeholder]
VIII. 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 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

Transmittal Letter

I. Advisory Committee on the Auditing Profession

    [September 2008]
The Honorable Hank 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,
-----------------------------------------------------------------------

Arthur Levitt, Jr.
Committee Co-Chair
-----------------------------------------------------------------------

Donald T. Nicolaisen
Committee Co-Chair
Enclosure

CHAPTER I: 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 policymakers, 
and market participants to discuss issues impacting the competitiveness 
of the U.S. capital markets, including the sustainability of the 
auditing profession.\2\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    On May 17, 2007, Secretary Paulson announced the Department of the 
Treasury's (the ``Department's'') 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

[[Page 44317]]

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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

Committee Activities

    The Committee held its initial meeting on October 15, 2007 in 
Washington, D.C.\7\ Then 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.
---------------------------------------------------------------------------

    \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, May 5, 2008, June 
3, 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, 
February 2008, and July 2008.
    \12\ 5 U.S.C.--------App. 2 et seq.
---------------------------------------------------------------------------

    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, 
May 5, 2008, June 3, 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. No 
witnesses testified at these additional meetings, expect for the June 
3, 2008 meeting. The agenda for the June 3, 2008 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 mentioned in 
the Draft Report and Draft Report Addendum. Twenty-one witnesses 
testified at this meeting.\15\
---------------------------------------------------------------------------

    \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.
    \15\ Appendix J contains a list of witnesses who testified 
before the Committee.
---------------------------------------------------------------------------

    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,\16\ in response to which the Committee received seventeen 
comment letters. On May 15, 2008 and on June 12, 2008, the Committee 
published releases seeking comment on the Draft Report \17\ and Draft 
Report Addendum,\18\ respectively, in response to which the Committee 
received [--------] comment letters. 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.\19\ In 
response to these meeting notices, the Committee received [--------] 
written submissions. In total, the Committee received [--------] 
written submissions in response to Federal Register releases.\20\ All 
of the submissions made to the Committee will be archived and available 
to the public through the Department's Library.
---------------------------------------------------------------------------

    \16\ Request for Comments, 72 FR 61709 (U.S. Dep't of Treas. 
Oct. 31, 2007).
    \17\ Request for Comments, 73 FR 28190 (U.S. Dep't of Treas. May 
15, 2008).
    \18\ Request for Comments, 73 FR 33487 (U.S. Dep't of Treas. 
June 12, 2008).
    \19\ 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); Notice of Meeting, FR 28208 (U.S. Dep't of Treas. May 15, 
2008); Notice of Meeting, FR 39088 (U.S. Dep't of Treas. July 8, 
2008).
    \20\ 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 or repeat the file number.
---------------------------------------------------------------------------

    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.\21\ Each of the Subcommittees 
prepared recommendations for consideration by the full Committee.
---------------------------------------------------------------------------

    \21\ For a list of members and their Subcommittee assignments, 
see Appendix K.
---------------------------------------------------------------------------

III. Background

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

IV. 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

[[Page 44318]]

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 continue to 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.\22\ 
The Committee believes that the accounting curricula in higher 
education are critical to ensuring that 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.\23\ Since the 1950s, 
several private sector groups have studied and recommended changes to 
the accounting curricula,\24\ but notwithstanding these pleas for 
reform, curricula are characteristically slow to change.\25\
---------------------------------------------------------------------------

    \22\ 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'').
    \23\ 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).
    \24\ 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 (Mar. 1969) 
(recommending, among other things, a five-year education requirement 
to be adopted by states by 1975); American Institute of Certified 
Public Accountants, Education Requirements for Entry into the 
Accounting Profession: A Statement of AICPA Policies (May 1978) 
(preferring a 150 semester-hour education requirement rather than a 
five-year education requirement to acquire the common body of 
knowledge and sit for the CPA examination); American Accounting 
Association, Committee on the Future Structure, Content, and Scope 
of Accounting Education, Future Accounting Education: Preparing for 
the Expanding Profession, 1 Issues in Accounting Education, No. 1, 
168-95 (Spring 1986) (examining accounting education and accounting 
practice since 1925 and concluding that, among other things, the 
current state of accounting education is inadequate to meet the 
dynamic needs of the profession and accounting education must be 
reassessed to meet these needs); American Institute of Certified 
Public Accountants, Education Requirements for Entry into the 
Accounting Profession: A Statement of AICPA Policies, 2nd Ed., 
Revised (Feb. 1988) (reaffirming the 150 semester-hour requirement); 
Arthur Andersen & Co., Arthur Young, Coopers & Lybrand, Deloitte 
Haskins & Sells, Ernst & Whinney, Peat Marwick Main & Co., Price 
Waterhouse, and Touche Ross, Perspectives on Education: Capabilities 
for Success in the Accounting Profession (1989), available at http:/
/aaahq.org/aecc/big8/cover.htm (stating that the chief executive 
officers of the eight largest public accounting firms believe that 
graduates entering public accounting need to have greater 
interpersonal, communication, and thinking skills as well as greater 
business knowledge and that the accounting curriculum must be a 
dynamic experience); and Accounting Education Change Commission, 
Objectives of Education for Accountants: Position Statement Number 
One, 6 Issues in Accounting Education, No. 2, 307-12 (Fall 1990) 
(describing the education objectives for accountants in an 
environment where accounting education has not kept pace with the 
changing demands upon the accounting profession).
    \25\ 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).
---------------------------------------------------------------------------

    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

[[Page 44319]]

accountant, an individual must, among other things, pass the Uniform 
CPA Examination. Professional examinations, such as the Uniform CPA 
Examination, influence the content of the technical, ethical, and 
professional materials comprising the accounting curricula.\26\
---------------------------------------------------------------------------

    \26\ 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.'').
---------------------------------------------------------------------------

    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 both the 150 
semester hour curriculum \27\ as well as examination content reflect in 
a timely manner important ongoing market developments and investor 
needs, such as the increasing use of international financial reporting 
standards (IFRS),\28\ expanded fair value measurement and reporting, 
increasingly complex transactions, new Public Company Accounting 
Oversight Board (PCAOB) auditing and professional standards,\29\ risk-
based business judgment, and technological innovations in financial 
reporting.
---------------------------------------------------------------------------

    \27\ See, e.g., Record of Proceedings (Written Submission of 
Jean C. Bedard, Timothy B. Harbert Professor of Accounting, 
Department of Accountancy, Bentley College, 1), available at https://
www.treas.gov/offices/domestic-finance/acap/submissions/06032008/
Bedard060308.pdf (observing that using the CPA Examination as a 
catalyst for curricula change will only be effective if the CPA 
Examination is written assuming completion of 150 hours); Record of 
Proceedings (June 3, 2008) (Questions for the Record of Joseph V. 
Carcello, Chair, AAA Task Force to Monitor the Activities of the 
Treasury ACAP, Professor and Director of Research--Corporate 
Governance Center, University of Tennessee, Jean C. Bedard, 
Professor of Accountancy, Bentley College, and Dana R. Hermanson, 
Chair of Private Enterprise and Professor of Accounting, Kennesaw 
State University, 2 (June 20, 2008)), available at https://
www.treas.gov/offices/domestic-finance/acap/agendas/QFRs-6-3-08.pdf 
(noting that recent developments suggest a trend away from requiring 
150 hours to sit for the CPA examination since eighteen states allow 
candidates to sit for the exam after 120 hours); Edward P. Howard, 
Senior Counsel, and Julianne D'Angelo Fellmeth, Administrative 
Director, Center for Public Interest Law, Comment Letter Regarding 
Draft Report and Draft Report Addendum 2-4 (June 13, 2008), 
available at https://comments.treas.gov/_files/ACAP_Draft_Report_
Comments.pdf (providing background on the issue of requiring 150-
hours for licensure while allowing 120-hours to sit for the CPA 
Examination in California); Record of Proceedings (June 3, 2008) 
(Oral Remarks of Anne M. Mulcahy, Chairman and Chief Executive 
Officer, Xerox Corporation, and Alan L. Beller, Partner, Cleary 
Gottlieb Steen & Hamilton LLP, 70-71, 77), available at https://
www.treas.gov/offices/domestic-finance/acap/agendas/minutes-06-03-
08.pdf (noting the tension between updating the curricula in order 
to keep current with the changing environment and fitting these 
changes into a four-year program).
    \28\ Samuel K. Cotterell, CPA, Chair, NASBA, and David A. 
Costello, CPA, President and CEO, NASBA, Comment Letter Regarding 
Draft Report and Draft Report Addendum 1 (June 29, 2008), available 
at https://comments.treas.gov/_files/
June2908LetterheadTreasuryAdvisoryCommitteeontheAuditingProfession.pd
f (agreeing that IFRS should be reflected in the CPA examination); 
Arnold C. Hanish, Chair, Committee on Corporate Reporting, Financial 
Executives International, Comment Letter Regarding Draft Report and 
Draft Report Addendum 2 (July 3, 2008), available at https://
comments.treas.gov/_files/
FEICCRTreasuryACAPCommentLetterFiled73080.pdf (suggesting a greater 
emphasis of IFRS in the accounting curriculum).
    \29\ 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).
---------------------------------------------------------------------------

    Moreover, the Committee believes that professional \30\ and ethical 
standards,\31\ fraud examination and forensic auditing, financial risk 
management, and valuation, and subject matter relating to their 
application, are an essential component of the accounting and auditing 
curricula and accordingly should be reflected in the professional 
examinations and throughout business and accounting coursework.\32\
---------------------------------------------------------------------------

    \30\ See PCAOB Standards and Related Rules, available at https://
www.pcaobus.org/Standards/Standards_and_Related_Rules/index.aspx.
    \31\ See PCAOB Interim Ethics Standards, available at https://
www.pcaobus.org/Standards/Interim_Standards/Ethics/index.aspx.
    \32\ See. e.g., Samuel K. Cotterell, CPA, Chair, NASBA, and 
David A. Costello, CPA, President and CEO, NASBA, Comment Letter 
Regarding Draft Report and Draft Report Addendum 1 (June 29, 2008), 
available at https://comments.treas.gov/_files/
June2908LetterheadTreasuryAdvisoryCommitteeontheAuditingProfession.pd
f (agreeing that ethics should be included in the accounting 
curriculum); Deloitte LLP, Comment Letter Regarding Draft Report and 
Draft Report Addendum 9 (June 27, 2008), available at https://
comments.treas.gov/_files/DeloitteLLPCommentLetter.pdf 
(recommending that the Committee state that the following courses 
should be included in the curricula: ethics, fraud examination and 
forensic auditing, problem solving, finance, negotiation and 
communication skills, financial risk management, global business, 
taxation, and valuation); Record of Proceedings (Written Submission 
of Anne M. Lang, Chief Human Resources Officer, Grant Thornton LLP, 
3), available at https://www.treas.gov/offices/domestic-finance/acap/
submissions/06032008/Lang060308.pdf (asking the Committee to 
specifically cite the need for curricula that teach specialized 
knowledge, such as risk management, computational finance, valuation 
theory, and sophisticated modeling techniques).
---------------------------------------------------------------------------

    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.\33\ In 
particular, the CPA examination should test a candidate's knowledge 
consistent with practice needs and the highest contemporary level of 
education required based on those practice needs. 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.
---------------------------------------------------------------------------

    \33\ See, e.g., Samuel K. Cotterell, CPA, Chair, NASBA, and 
David A. Costello, CPA, President and CEO, NASBA, Comment Letter 
Regarding Draft Report and Draft Report Addendum 1 (June 29, 2008), 
available at https://comments.treas.gov/_files/
June2908LetterheadTreasuryAdvisoryCommitteeontheAuditingProfession.pd
f (agreeing with the Recommendation to keep the CPA examination 
current).
---------------------------------------------------------------------------

    (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.\34\ 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.
---------------------------------------------------------------------------

    \34\ 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).
---------------------------------------------------------------------------

    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

[[Page 44320]]

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).\35\
---------------------------------------------------------------------------

    \35\ See, e.g., Aram Kostoglian, Eastern Region Attest Practice 
Leader, and Ernest Baugh, National Director of Professional 
Standards, Mayer Hoffman McCann P.C., Comment Letter Regarding Draft 
Report and Draft Report Addendum 1 (June 13, 2008), available at 
https://comments.treas.gov/_files/
MayerHoffmanMcCannCommentLetter.pdf (noting that textbooks lack a 
thorough discussion of current market developments); 
PricewaterhouseCoopers LLP, Comment Letter Regarding Draft Report 
and Draft Report Addendum 4 (June 30, 2008), available at https://
comments.treas.gov/_files/
PwCCommentLtrTreasCmtDraftandAddendum63008.pdf (noting support for 
updating teaching materials promptly to reflect recent developments 
such as the increasing use of IFRS).
---------------------------------------------------------------------------

    Further, in order to ensure access to such materials and 
recognizing the benefits of technological innovations,\36\ 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.\37\ The Committee 
believes that low-cost affordable access to such primary materials 
would thus enhance student learning and performance and technical 
research.
---------------------------------------------------------------------------

    \36\ See Stephanie Woodruff, Chief Revenue Officer, AverQ, Inc, 
Comment Letter Regarding Draft Report and Draft Report Addendum 
(June 2, 2008), available at https://comments.treas.gov/
index.cfm?FuseAction=Home.ViewPopup&Topic--id=9&FellowType--
id=1&Reply--id=95&SuppressLayouts=True (suggesting the use or study 
of ``technology'' to address auditing profession challenges).
    \37\ 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).
---------------------------------------------------------------------------

    (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.\38\ Yet, the 
Committee was concerned by what it heard from individuals with various 
backgrounds about minority representation and retention in the auditing 
profession.\39\ In

[[Page 44321]]

2004, minorities accounted for 22% of all bachelor's and masters' 
degrees awarded in accounting, while in 2007, minorities accounted for 
21%.\40\ In 2004, African Americans represented 1% of all CPAs, 
Hispanic/Latino, 3%, and Asian/Pacific Islander, 4%.\41\ See Figure 1. 
These percentages changed very little in 2007 when African Americans 
represented 1% of all CPAs, Hispanic/Latino, 2%, and Asian/Pacific 
Islander, 4%.\42\ See Figure 2.
---------------------------------------------------------------------------

    \38\ The Committee discussed the issue of representation and 
retention of females in the profession and the Committee found that 
the profession is undertaking significant efforts to hire and retain 
females and notes that these issues are being much better managed 
today. See, e.g., Record of Proceedings (June 3, 2008) (Oral Remarks 
of Amy Woods Brinkley, Global Risk Executive, Bank of America 
Corporation, 57), available at https://www.treas.gov/offices/
domestic-finance/acap/agendas/minutes-06-03-08.pdf (noting that the 
Committee spent considerable time discussing this issue of females 
in the profession); Record of Proceedings (June 3, 2008) (Written 
Submission of Kayla J. Gillan, Chief Administrative Officer, 
RiskMetrics Group, 2), available at https://www.treas.gov/offices/
domestic-finance/acap/submissions/06032008/Gillan060308.pdf (urging 
the Committee to examine the issue of females in the profession); 
Record of Proceedings (June 3, 2008) (Oral Remarks of Anne M. Lang, 
Chief Human Resources Officer, Grant Thornton LLP, 100-101), 
available at https://www.treas.gov/offices/domestic-finance/acap/
agendas/minutes-06-03-08.pdf (stating that ``* * * certainly 
recruiting women into the profession is something that [Grant 
Thornton LLP has] done extremely well for the last several years * * 
* [the] advancement of * * * women is something that [Grant Thornton 
LLP] still need[s] to pay attention to''). The Committee notes the 
following statistics: In 2007, at the partner level, females 
represented 23% of partners on average, while in 2004 they were 19% 
and in 1994 they were just 12% of all partners. See American 
Institute of Certified Public Accountants, A Decade of Changes in 
The Accounting Profession: Workforce Trends and Human Capital 
Practices 5 (Feb. 2006) and Dennis R. Reigle, Heather L. Bunning And 
Danielle Grant, 2008 Trends In The Supply of Accounting Graduates 
And The Demand For Public Accounting Recruits 60 (2008), available 
at https://ceae.aicpa.org/NR/rdonlyres/C1E23302-17D3-4ED5-AE81-
B274D9CD7812/0/AICPA_Trends_Reports_2008.pdf. According to Public 
Accounting Report surveys, the percentage of female professionals at 
the largest firms was 47.3% in 2007 and 44.2% in 2004. See Women at 
Big Four Gain Ground in Partnership Percentage, Public Accounting 
Report 6 (Oct. 31, 2004) and Women Post Gains in Partnership 
Percentage, Public Accounting Report 11 (Jan. 31, 2008). From 2005 
to 2007, women represented about half of the new hires at the six 
largest firms. See Center For Audit Quality, Report Of The Major 
Public Company Audit Firms To The Department Of The Treasury 
Advisory Committee On The Auditing Profession 58 (Jan. 23, 2008). 
The Committee also considered the effects of workload compression on 
retention in the profession. Some Committee members believe that 
audit firms and their clients could benefit from spreading tax 
preparation work throughout the year. See, e.g., Record of 
Proceedings (Oct. 15, 2007) (Oral Remarks of William D. Travis, 
Director and Former Managing Partner, McGladrey & Pullen LLP, 71), 
available at https://www.treas.gov/offices/domestic-finance/acap/
agendas/minutes-10-15-07.pdf (noting that ``[a] significant 
challenge for retention of personnel in mid-size and small audit 
firms is the extreme seasonality * * * during the winter season. 
This reality places enormous pressure on audit quality and balanced 
lives of * * * professionals''); Record of Proceedings (Mar. 13, 
2008) (Oral Remarks of Barry C. Melancon, President and Chief 
Executive Officer, American Institute of Certified Public 
Accountants, 118), available at https://www.treas.gov/offices/
domestic-finance/acap/agendas/minutes-03-13-08.pdf (noting that the 
Human Capital Subcommittee discussed workload compression issues).
    \39\ 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.
    \40\ Dennis R. Reigle, Heather L. Bunning And Danielle Grant, 
2008 Trends In The Supply Of Accounting Graduates And The Demand For 
Public Accounting Recruits 30 (2008), available at https://
ceae.aicpa.org/NR/rdonlyres/C1E23302-17D3-4ED5-AE81-B274D9CD7812/0/
AICPA_Trends_Reports_2008.pdf.
    \41\ Beatrice Sanders, And Leticia B. Romeo, The Supply Of 
Accounting Graduates And The Demand For Public Accounting Recruits-
2005: For Academic Year 2003-2004 35 (2005), available at https://
ceae.aicpa.org/NR/rdonlyres/11715FC6-F0A7-4AD6-8D28-6285CBE77315/0/
Supply_DemandReport_2005.pdf.
    \42\ Dennis R. Reigle, Heather L. Bunning And Danielle Grant, 
2008 Trends In The Supply Of Accounting Graduates And The Demand For 
Public Accounting Recruits 61 (2008), available at https://
ceae.aicpa.org/NR/rdonlyres/C1E23302-17D3-4ED5-AE81-B274D9CD7812/0/
AICPA_Trends_Reports_2008.pdf.
[GRAPHIC] [TIFF OMITTED] TN30JY08.038

[GRAPHIC] [TIFF OMITTED] TN30JY08.039

    African Americans accounted for 5.4% of new hires in 2007 at the 
largest

[[Page 44322]]

six accounting firms, Hispanics, 4.6%, and Asians, 21.3%.\43\ See 
Figure 3.
---------------------------------------------------------------------------

    \43\ 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), available 
at https://www.thecaq.org/publicpolicy/data/TRData2008-01-23-
FullReport.pdf.
[GRAPHIC] [TIFF OMITTED] TN30JY08.044

    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.\44\ See Figure 4.
---------------------------------------------------------------------------

    \44\ 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), available 
at https://www.thecaq.org/publicpolicy/data/TRData2008-01-23-
FullReport.pdf.
[GRAPHIC] [TIFF OMITTED] TN30JY08.040

    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

[[Page 44323]]

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.\45\ 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.\46\ Generally, auditing firms hire individuals for the audit 
practice who are qualified to sit for the Uniform CPA Examination.\47\
---------------------------------------------------------------------------

    \45\ 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.
    \46\ See Ernst & Young LLP, Comment Letter Regarding Draft 
Report and Draft Report Addendum 22 (June 27, 2008), available at 
https://comments.treas.gov/_files/EYACAPCommentLetterFINAL2.pdf 
(supporting this Recommendation).
    \47\ 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.\48\ 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 \49\ and HBCUs enroll 14% of all African American 
students in higher education.\50\ Twenty-seven HBCUs have one or more 
of the six largest accounting firms recruiting professional staff on 
their campus.\51\ 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.\52\ In 2005, these schools 
enrolled over 1 million students: African Americans accounted for 23% 
of these students, Hispanics, 13%, and Asian/Pacific Islander, 4%.\53\
---------------------------------------------------------------------------

    \48\ Record of Proceedings (June 3, 2008) (Written Submission of 
Frank K. Ross, Director, Center for Accounting Education, Howard 
University School of Business, 3), available at https://
www.treas.gov/offices/domestic-finance/acap/submissions/06032008/
Ross060308.pdf (agreeing that this Recommendation will help increase 
minority recruitment).
    \49\ 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.
    \50\ White House Initiative On Historically Black Colleges And 
Universities, available at https://www.ed.gov/about/inits/list/
whhbcu/edlite-index.html.
    \51\ 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), 
available at https://www.thecaq.org/publicpolicy/data/TRData2008-03-
05-Supplement1.pdf.
    \52\ 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.
    \53\ 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) Institute initiatives to increase the retention of minorities 
in the profession.
    The Committee considered testimony on the retention of minorities 
in the profession.\54\ As discussed above, minorities are significantly 
under-represented in leadership and partnership positions within the 
profession. The Committee recognizes the lack of minority mentors and 
role models \55\ in the profession and the profession's awareness of 
this situation.\56\ In a 2006 National Association of Black Accountants 
(NABA) survey, almost 60% of African American respondents stated that 
their mentors come from outside of the profession and almost 55% of 
respondents stated that they had been with their current employer for 
three years or less.\57\ The Committee considered testimony that 
African Americans leave the profession for other careers or do not wish 
to become managers or partners because they see that there are few 
African Americans in leadership positions within the firms.\58\ The 
Committee also heard testimony that the retention rate for Hispanics 
``is low.'' \59\ In 2004, Hispanics represented 3% of the professional 
staff at all CPA

[[Page 44324]]

firms \60\ and this percentage did not change in 2007.\61\
---------------------------------------------------------------------------

    \54\ Record of Proceedings (Dec. 3, 2007) (Written Submission of 
George S. Willie, Managing Partner, Bert Smith & Co., 3), available 
at https://www.treas.gov/offices/domestic-finance/acap/submissions/
12032007/Willie120307.pdf (noting that ``firms must do more to 
retain and promote minority professionals''); Record of Proceedings 
(June 3, 2008) (Written Submission of Frank K. Ross, Director, 
Center for Accounting Education, Howard University School of 
Business, 8), available at https://www.treas.gov/offices/domestic-
finance/acap/submissions/06032008/Ross060308.pdf (noting that 
``auditing firms need to establish aggressive retention programs 
that focus on retention'').
    \55\ 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).
    \56\ 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 (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''); Record of Proceedings (Dec. 3, 2007) (Questions for 
the Record of George S. Willie, Managing Partner, Bert Smith & Co., 
1 (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).
    \57\ The Center for Accounting Education, Howard University 
School of Business, NABA Membership Survey, Analysis of Work 
Experience of NABA Members Table 23 and 5 (Sept. 15, 2006), 
available at https://www.treas.gov/offices/domestic-finance/acap/
submissions/06032008/NABAMembershipSurvey.pdf.
    \58\ Record of Proceedings (June 3, 2008) (Written Submission of 
Frank K. Ross, Director, Center for Accounting Education, Howard 
University School of Business, 5), available at https://
www.treas.gov/offices/domestic-finance/acap/sub