Work of the Special Investigations Committee;

              The Work of the Special Investigations Committee
R. K. Mautz
In describing the work of the Special Investigations Committee, I must assume that you already have some understanding of the SEC Practice Section of the American Institute of Certified Public Accountants, its purpose, structure, and self-regulatory program. If that is a false assumption, there will be time for questions during the evening. I warn you, however, that you ask at your own peril. My interest in this remarkable effort is such that you may learn a great deal more than you ever wanted to know about the profession's self-regulatory program.
Initiation of the Special Investigations Committee
When the AICPA's Division for CPA Firms was first created by resolution of Council in 1977 with an SEC Practice Section and a Private Companies Practice Section, the organization of the former Section did not include the Special Investigations Committee. The self-regulatory program relied com-pletely on peer review for the improvement of audit practice, supplemented, of course, by the Section's membership requirements. Peer review was an adaptation of the internal inspection programs utilized within many firms to assist them in maintaining a uniformly high quality of audit work throughout what, in some cases, was a dispersed and decentralized practice.
One of the first matters identified by the Section's Executive Committee for consultation with its Public Oversight Board related to the action to be taken by the Section with respect to an alleged or possible audit failure by a member firm. What investigative activity might or should the Section undertake and what possible disciplinary action should be imposed? To provide you with a basis for appreciating the sensitivity of this issue, let me take a few minutes to discuss litigation from the viewpoint of a CPA firm.
The Litigation Problem
With exceptions so rare as to be nearly nonexistent, no one sets out to do a bad audit. Professional opinions differ as to the amount of audit work required under varying sets of conditions, judgments with respect to the propriety of accounting methods, provisions, and estimates are not always the same, and the work is often performed, unavoidably, under pressures of time, client concern, and plain old uncertainty. Consequently, there is almost no audit that is
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