So the prospect of sanctions like losing your license, various types of sanctions are likely to be very remote, even more remote than the possibility of sanctions were for the Price Waterhouse Coopers partners who were actually warned.
Bogle’s comments, because he tied this issue to the mutual fund industry, which is focused much on marketing, and the interesting effect is that index funds out perform three-quarters of the mutual funds out there.
And if you got honest opinions from mutual fund managers, most of them believe that they’re going to out-perform the market not because they’re liars but because they’re biased in their interpretation.
CHAIRMAN LEVITT: None of us have talked about, however, what I regard to be a very real disincentive to not manifesting obvious independence standards or standards of obvious independence. And that is the very fact that their reputations are on the line every time they provide astatement, and I don’t want to disregard that.
This is not that clear cut an issue. We’re not dealing with a bunch of hide binders on one side and a group of moralists on another side. We’re dealing with what I regard to be a very subtle cultural change, an important one. In spite of what you have said, I do not think that the only answer or the best answer is a take it or leave it regulatory fix. I think there is more to it than that.
I think there has to be some greater understanding of the problem and greater understanding that, like so many other things, it’s in the long-term interest of the profession to avoid the fortress mentality that presently exists in denying what is a real perception and standing apart from being part of the solution.
And I think only when the sides can get together and work towards this constructively are we going to make any progress.
BAZERMAN: I think it’s important to recognize that we weren’t accusing any auditors of being corrupt, just being human. And because they’re human, that means that they’re going to be biased as long as the firms that hire them and can fire them are one and the same with who they are auditing.
VERSCHOOR: This issue has been researched. The Scottish Institute of Chartered Accountants back in 1993 issued a report called “Auditing Into the 21st Century” in which they said that this issue was so strong that there should be a panel from the stock exchanges that appoints the auditor, determines their compensation, so on and so forth.
They’ve also come out with a follow-up that the Scottish Institute and the Dutch Institute have worked together on. They asked me to write a preface, and I did it back in March, and it was supposed to be published in May. Here it’s July, and I haven’t heard about it. But still, this is on the literature front.
MR
CHAIRMAN LEVITT: We greatly appreciate your testimony and the sincerity with which you speak and the very different kind of analysis that you bring to this issue, which is very helpful for us. Thank you very much.
Session 9
Okay. Last but not least we have Dan Goldwasser of Vedder, Price, Kaufman Kammholz; Alfred M. King, who is Chairman of the Board of the Valuation Research Corporation; and Nimish Patel of Pollet Richardson.
GOLDWASSER: Thank you, Mr. Chairman. I am Dan Goldwasser of Vedder, Price, Kaufman Kammholz. I https://installmentloansindiana.com/cities/schererville/ want to thank you for inviting me here today to testify and also for listening to the comments that have been made before me, mostof which were very interesting and actually helped me change some of my views so that the materials which I previously sent down to you will not completely parallel the remarks which I’m about to make.