Discussant's response to "Why the auditing standards on evaluating internal control needed to be replaced";

              Discussant's Response to "Why the Auditing Standards on Evaluating Internal Control Needed to be Replaced"
William R. Kinney, Jr.
University of Texas at Austin
In a way, I feel that I should apologize for not joining Jerry and the AICPA Auditing Division leadership in supporting their response to the alleged expectations gap. One would like to support the profession that one studies and about which one teaches. However, it is traditional for a scholarly discussant to take a position contrary to that of the author. That will be easy for me to do since, as most of you know, I hold a contrary view on the need to replace AU 320.
It is also traditional to critically discuss a paper on the basis of its own criteria and to discuss the topic of the paper from an alternative perspective. I will follow the traditional approach, but in reverse order. I will begin by giving a little background on the role of Statements on Auditing Standards (SASs) in general, and the role and importance of AU 320 or Statement of Auditing Procedure (SAP) No. 54.
GAAS and SASs
As we all know, SASs are codified interpretations of Generally Accepted Auditing Standards (GAAS). They are quasi-legal in nature and help define acceptable practice under the securities acts as well as within the ethical rules of the profession. Codified professional standards play two important and related roles. They serve a before-the-fact educational role of guiding the auditor as to what should be done to conduct a "standard quality" audit under GAAS. They also serve an after-the-fact enforcement role in determining whether an auditor has been guilty of "malpractice." The first helps the profession by facilitating uniform, high quality audits and the second helps the profession by making it easier to disassociate itself from low quality audits. Thus, the SASs are important and they should be clearly worded and be readily interpretable.
Traditionally, SASs have related almost exclusively to the effectiveness of audits—that is, regulation to make sure that audits are effective in achieving appropriately low audit risk that error might exceed material limits. Some practitioners read the SASs as providing minimum requirements for a legal defense, and the minimum is their target. Without auditor quality differentia­tion,
the SASs may also provide the maximum service in a competitive market. Therefore, it is important to have the effectiveness minimum clearly stated.
Efficiency, or the achievement of a given level of audit risk at minimum cost, has, with rare exception, been left unregulated or left without comment by the
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