The Regents - University of California | Office of The President

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New responsibilities for a new century– an introduction
Id, page 4 (App B-6).
As we start this new century, audit committees face new
responsibilities and requirements. They must meet new
standards for membership, independence, and financial
literacy. They must comply with new requirements to
draft or update their chargers and certify their
compliance with the rules. And most importantly, they
have a new obligation each quarter to discuss with the
independent auditor the quality of the company’s
financial reporting. . . . [] These new standards are a
mandate for audit committees (and through them,
auditors) to raise the bar and enhance their effectiveness
as investors’ representatives in financial reporting
oversight. Audit committees can respond to these
changes in many ways to build substantive
improvements into their processes.
The White Paper also recognizes that the independent auditors also have
increased responsibilities to communicate with the audit committee:
Discussion of the quality of financial reporting: the new
requirement ASB requirement In connection with each
SEC audit engagement, independent auditors are
required to discuss with the audit committee the auditors’
judgments about the quality, not just the acceptability, of
the company’s accounting principles as applies in its
financial reporting (the annual quality discussion).
Id. at 9 (App B-11). See also id. at 13 (App B-15) (amended Statement of
Auditing Standards (SAS) 61 requires auditor to meet with audit committee to
discuss quality not just the acceptability of a company’s accounting principles).
Andersen also recognizes that under new SEC requirements, “independent
auditors are required to review interim financial statements before the company
files its Form 10-Q or 10-QSB.” Id. at 11 (App B-13); see also id. at 49 (App. B-
51) re SAS 71, Interim Financial Information).
158. Andersen, in contracting to perform its audit of WorldCom’s financial
statements, assumed all of the responsibilities and obligations.
159. As part of its planning for and implementation of various
engagements for WorldCom, Andersen was required to be thoroughly familiar
with the nature of WorldCom’s business, the manner in which senior management
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COMPLAINT