The Commission on Auditors' Responsibilities: An Independent Commission stablished by the merican Institute of Certified . ublic Accountants Report, . Conclusions, . and Recommendations THE COMMISSION ON AUDITORS' RESPONSIBILITIES Manuel F. Cohen (1912-1977), Chairman Lee J. Seidler, Deputy Chairman Walter S. Holmes, Jr. LeRoy Layton William C. Norby Kenneth W. Stringer John J. van Benten Jeremy Wiesen, Counsel Douglas R. Carmichael, Research Director Henry R. Jaenicke, Principal Research Consultant Robert H. Temkin, Staff Director Patricia McConnell, Project Coordinator Research Staff Alan N. Certain Eugene F. De Mark Ann Gabriel Thomas W. McRae John Grant Rhode Paul Rosenfield Brian Zell In researching and developing its conclusions ~nd recommendations on the various issues it studied, the Commission on Auditors' Responsibilities h,ad to examine and comment on aspects of past, present, and future auditing and financial reporting. The Commission's charge and its enUre orientation, however, were toward improvements in the future auditing environment. The Commission did not attempt to provide a definitive assessment of the performance of auditors, individually or collectively, in relation to past or current standards of the profession. Nor has the Commission tried to provide a definitive statement of the responsibilities of auditors for any period before the date 'of this final report. Therefore, it is inappropriate to cite this report as an,authoritiltive indication of appropriate auditing or financial reporting standards, or appropriate ;perform- ance of auditors or others, for any period prior to the report's issuance. ' , Photo of Manuel F. Cohen by Paul Conklin for Business Week Copyright © 1978 by The Commission on Auditors' Responsibilities 1211 Avenue of the Americas, New York, N.Y. 10036 "He never forgot the public interest" MANUEL F. COHEN October 9, 1912 - June 16, 1977 Chairman Commission on Auditors' Responsibilities Stanley Sporkin New York Law Journal June 20, 1977 Table of Contents Page Introduction xi Summary of Conclusions and Recommendations. . . . . . . . . . . . . . . . . . xvii SECTION 1 The Independent Auditor's Role in Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Need to Clarify the Auditor's Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Expectations of Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Legal and Economic Bases of the Auditor's Role. . . . . . . . . . . . . . . . . . 2 The Audit Function 3 Society's Use of Accounting and Auditing for Control _ . . . . . 3 The Relationship of Accounting, Auditing, and Entity Activities . . . . . 4 The Consequences of an Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Constraint of the Accounting Framework . . . . . . . . . . . . . . . . . . . . . . . 7 The Auditor's Relationship to Parties Interested in the Audit Function. . . . . . . . 8 The Auditor's Relationship to Management . . . . . . . . . . . . . . . . . . 8 The Auditor's Relationship to Financial Statement Users . . . . . . . . . . . . . . 11 The Auditor's Relationship to the Board of Directors . . . . . . . . . . . . . . . . . . 11 SECTION 2 Forming an Opinion on Financial Presentations . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The Expectations of Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The Guidance Provided by Generally Accepted Accounting Principles. . . . . . 14 The Role of Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The Importance of Judgment. . . . . . . . . . . . . . . . . . . . . . . . •. . . . . 15 Deficiencies in Generally Accepted Accounting Principles. . . . . . . . . . . . . 16 Limited Conception of Generally Accepted Accounting Principles . . . . . . 17 Recommendations on Extension of Guidance in Auditing Standards . . . . 17 Guidance in the Absence of Detailed Accounting Principles. . . . . . . 18 Guidance for Selecting Among Alternatives. . . . . . . . . . . . . . . . . . . . . . . . • 19 Guidance for Evaluating Cumulative Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 3 Reporting on Significant Uncertainties in Financial Presentations . . . . . . . . . . . 23 Present Reporting Requirements for Uncertainties 23 Uncertainties and Imprecision in Financial Statements . . . . . . . . . . . . . . . . 23 Effect of Uncertainties on the Auditor's Opinion . . . . . . . . . . . . . . . . . . . . . . 23 Deficiencies in Present Audit Requirements for Uncertainties . . . . . . . . . . 25 The Need to Clarify the Auditor's Role in Reporting on Uncertainties. . . . . . . . 26 The Needs of Users for Adequate Information to Evaluate Uncertainties. . 27 The Auditor's Inability to Predict the Outcome of Many Uncertainties. . . . 27 The Qualified Opinion and Protection for Auditors . . . . . 28 Recommendations for Improving Reporting on Unt:ertainties . . . . . . . . . . . . . . . 28 Recommended Changes in Audit Requirements . . . . . . . . . . . . . . . . . . . . . 28 Recommended Changes in Financial Accounting Standards . . . . . . . . . . . 29 v The Implications of the Recommended Changes for Reporting "Going-Concern" Uncertainties 29 SECTION 4 Clarifying Responsibility for the Detection of Fraud . . . . . . . . . . . . . . . . . . . . . 31 The Expectations of Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 The Concept of Fraud and the Auditor's Evolving Approach to Its Detection. . . 32 Fraud From the Auditor's Viewpoint 32 The Evolution of an Unclear Description of the Auditor's Concern With Fraud 33 Increased Attention in Present Standards for the Detection of Management Fraud 36 A Suggested Explanation of the Auditor's Responsibility for the Detection of Fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Recommendations on a Standard of Care for Fraud Detection . . . . . . . . . . . . . . 37 Establish an Effective Client Investigation Program . . . . . . . . . . . . . . . . . . . 38 Take Immediate Steps if Serious Doubts Arise About Management's Integrity 38 Observe Conditions Suggesting Predisposition to Management Frauds . . 38 Maintain an Understanding of a Client's Business and Industry. . . . . . . . 39 Extend the Study and Evaluation of Internal Control . . . . . . . . . . . . . . . . . . 39 Develop and Disseminate Information on Frauds and Methods of Detecting Fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Be Aware of Possible Deficiencies in Individual Audit Techniques and Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Understand the Limitations of Incomplete Audits . . . . . . . . . . . . . . . . . . . . . 40 SECTION 5 Corporate Accountability and the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 An Evolving Public Concern. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Unclear Expectations of Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Confusion Over the Auditor's Responsibilities Concerning Illegal Acts by Clients. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Limitations on the Auditor's Ability to Deal With Legal Matters . . . . . . . . . 44 Expanding the Role of Lawyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 A Framework for Auditor Participation to Help Achieve Corporate Legal Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Specifying Illegal or Questionable Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Necessary Corporate Actions 46 Recommendations on the Independent Auditor's Responsibilities 46 A Proposal for Increased Involvement of Lawyers .,. . . . . . . . . . . . . . . . . . 49 SECTION 6 The Boundaries of the Auditor's Role and Their Extension. . . . . . . . . . . . . . . . 51 The Setting of the Audit Function and Considerations Affecting Its Extension. . 51 Determinants of the Audit Function 51 Benefit-Cost Analysis to Determine the Scope of the Audit Function . . . . . 52 Toward an Orderly Evolution of the Audit Function . . . . . . . . . . . . . . . . . . . 53 The Need to Expand the Audit Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Changes in Corporate Financial Reporting . . . . . . . . . . . . . . . . . 54 Increased Emphasis on Accountability . . . . . . . . . . . . . . . . . . . . . . . . . 55 vi Page The Need for Corresponding Changes in the Audit Function . . . . . . . . . . 55 The Boundaries of the Audit Function , '. . . . 56 The Responsibility to Report Information : . . . . . 57 The Characteristics of Audited Information ' ; . ',' . 57 Removing the Boundary of Annual Financial Statements '.' , , ; . . . 59 .Need and Mechanism for Expansion of the Audit Function '.," 60 Auditing the Financial Reporting Process . . . . . . . . . . . . . . . . • . . . . . . 60 Expanded Study and Evaluation of Internal Control ' , . 60 Timely Involvement in the Financial Reporting Process, ','.' '. . . . . 63 The Extent of Involvement in the Financial Reporting Process , . . . . . 64 Form of Timely Reporting 65 Other Proposed Extensions of the Auditor's Role . . . . . . . . . . . . . . . . . . . . . 67 Current Releases of Material Information • , 67 Other Information Accompanying Audited Financial Statements. ; " . 68 Financial Forecasts ; . . . . . 69 Efficiency, Economy, and Effectiveness ',' ; . . 69 SECTION 7 The Auditor's Communication With Users ; . . . . . 71 Major Communication Deficiencies '. . . . . . . . . . . . 71 The Drawbacks of Standard Language " ; . . . . . 72 Communication by Inference ; ; ,: : 73 The Hazards of Technical Terminology '," , . 74 The Need for Additional Messages , '; '~ '. 75 A New Approach to Reporting , .' " . . . . . . 75 A Report on the Audit Function ,; . . . 75 A Report by Management , : 76 Illustrations of the Direction of Change '. . . . . . 77 Additional Recommendations on Communication '. ; . . . . . . . . . 80 Confusion of Responsibilities Concerning Reporting on Consistency' ~ . 81 Obscured Responsibility Concerning Use of the Work of Another Auditor ' ~ '. ' '; . . 82 Inconsistent and Uninformative Reporting. on Unaudited Information'. . . . 83 Identification of the Auditor and Communication With Interested Parties . . 84 SECTION 8 The Education, Training, and Development of Auditors ~ ' . . 85 A Schism Between Academic and Practicing Accountants : 85 The Failure of the Academic Conscience. . . . . . . . . . . . . . . . . . . . . . . 86 Educational Preparation for the Profession " : ' : . 86 Status of Accounting Education in Schools of Business ': 86 Lack of Professional Identity '.' ~ . , 87 Entry-Level Training of Professional Accountants '~', '. . : 88 Improving the Educational Process ; : 88 Professional Schools 88 The Lack of a Graduate Professional Option in Accounting , 89 Establishment of Professional Schools of Accounting "., , 90 Professional SOCiety Affiliation for Academics : , 91 The Uniform CPA Examination ' 91 Continuing Education 91 vii SECTION 9 Maintaining the Independence of Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Restriction of Services Incompatible With the Audit Function ' 94 Types of Services 94 The Relationship of Other Services to the Audit" Function. . . . . . . . . . . . . . 95 The Management Services Controversy ' '. 95 Evidence of Alleged Conflicts Associated With Audit Failures. . . . . . . . . . 96 The Special Case of Tax Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 The Special Case of Accounting Advocacy. . . . . . . . . . . . . . . . . . . . . . . . . . 100 Executive Search Services and Placement. . . . . . . . . . . . . . . . . . . . . . . . 100 Specialized Services 101 No Fundamental Change Is Necessary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Additional Safeguards Recommended. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Protecting the Independent Auditor From Management Pressure. . . . . . . . . . . 104 Transfer to the Public Sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Fee Relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Audit Committees and Boards of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 106 Audit Arrangements and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Scrutiny of Auditor Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Rotation of Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Management Policies and Procedures of Public Accounting Firms and Their Effect on Independence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 The Effect of Competition on Independence. . . . . . . . . . . . . . . . . . . . . . . . . 109 Excessive Competition: A Difficult Charge to Defend ; . . . . 110 The Inability of Users to Evaluate Audit Quality Differences. . . . . . . . . . . . 110 Existence of Competition Among Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Large Firms, Concentration, and Independence. . . . . . . . . . . . . . . . . . . . . . 112 The Overriding Effect of Time Pressures on the Quality of the Audit. . . 114 The Need for Improved Use of Budgeting Procedures in Accounting Firms 116 The Need for Further Study of Audit Staff Members . . . . . . . . . . . . . . . . . . . 118 The Problems Caused by Early Earnings Releases. . . . . . . . . . . . . . . . . . . . 118 Time-Deadline Pressures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Time Pressures in Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Pricing Practices and Independence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 The Need to Adopt Policies on Gifts and Discount Purchases From Clients 121 SECTION 10 The Process of Establishing Auditing Standards . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Definition of Generally Accepted Auditing Standards . . . . . . . . . . . . . . . . . . . 123 AICPA Pronouncements on Auditing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Separating Standards Setting From Other Issues. . . . . . . . . . . . . . . . . . . . . . . . 124 Early Success in Establishing Auditing Standards. . . . . . . . . . . . . . . . . . . . . . . . 124 The First Auditing Pronouncement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Development of the Generally Accepted Auditing Standards . . . . . . . . . . . 125 Past Evaluation of the Development of Auditing Standards. . . . . . . . . . . . . 125 The Critical Question: Who Should Set Auditing Standards? . . . . . . . . . . . . . 126 Should a Government Agency Set Auditing Standards? . . . . . . . . . . . . . . . 127 Standards Setting and the SEC 128 Should the Standards-Setting Body Be Independent of the AICPA? . . . . . 130 The Present Process and Its Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 viii Page Operations of the AICPA's Auditing Standards Division . . . . . . . . . . . . . . . . 132 Criticisms of the Present Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Recommended Changes in the Auditing Standards-Setting Process. . . . . . . . . 135 A Full-Time Auditing Standards-Setting Body. . . . . . . . . . . . . . . . . . . . . . . 135 Form of Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 Participation in the Process of Setting Standards . . . . . . . . . . . . . . . . . . . . 137 Operating Procedure 139 SECTION 11 Regulating the Profession to Maintain the Quality of Audit Practice . . . . . . . . . 141 Protecting Users From Substandard Performance . . . . . . . . . . . . . . . . . . . . . . . . 141 Influences on the Regulatory Mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 The Nature of Professional Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 The Significance of large Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Technical and Ethical Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Practice Controls to Improve Performance and Assure Compliance With Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Recent Activity by Public Accounting Firms. . . . . . . . . . . . . . . . . . . . . . . . . 143 Recent Activity by Professional Organizations. . . . . . . . . . . . . . . . . . . . . . . 144 The Effectiveness of Practice Controls . . . . . . . . . . . . . . . . . . . . . . . 145 Recommendations for Improving Oversight of Professional Practice. . . . . . . . 145 Recommendations for Peer Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 Recommendations for Publicly Available Detailed Reports of the Results of Peer Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 Recommendations for Outside Participation . . . . . . . . . . . . . . . . . . . . . . . . . 146 Penalizing Substandard Performance and Misconduct . . . . . . . . . . . . . . . . . . 147 Disciplinary Powers of State Boards of Accountancy. . . . . . . . . . . . . . . . . . 147 The Profession's Disciplinary Mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . 148 Weaknesses in Professional and State Disciplinary Mechanisms. . . . . . . 148 Imposing Penalties on Accounting Firms. . . . . . . . . . . . . . . . . . . . . . . . . 150 Significance of Inability to Penalize Firms. . . . . . . . . . . . . . . . . . . . . . . . . . . 150 limitations of a Voluntary Disciplinary Mechanism. . . . . . . . . . . . . . . . . . . 150 Alternatives to the Present Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 The Penalties of litigation and Regulatory Enforcement. . . . . . . . . . . . . . . . . . . 151 The Current Legal Climate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 The Effect of the Current Legal Climate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 Recommendations for Changes in the legal Environment . . . . . . . . . . . . . 153 APPENDIX A Significant Changes From Report of Tentative Conclusions. . . . . . . . . . . . . . . 157 APPENDIX B Summaries of Research Projects 159 Index 185 ix Introduction The Commission on Auditors' Responsibilities was charged to develop conclusions and recommendations regarding the appropriate responsibilities of independent auditors. It should consider whether a gap may exist between what the public expects or needs and what auditors can and should reasonably expect to accomplish. If such a gap does exist, it needs to be explored to determine how the disparity can be resolved. The Commission met monthly since November, 1974, for a total of 66 meeting days, conducted a series of research projects, met and consulted with a variety of interested parties, and considered a range of issues concerning the independent audit function. The Commission issued a Report of Tentative Conclusions in March, 1977 and held a pub- lic meeting in Washington, D.C. in June, 1977. The Report of Tentative Conclusions and the public meeting generated a substantial number of responses, both written and oral, formal and informal, to conclusions and recommendations in the tentative report. Members of the Commission and its staff have participated in seminars and made presentations of the Commission's positions at more than 60 meetings of professional and business organizations. The AICPA and state societies of CPAs conducted 123 member forums throughout the country at which the Commission's recommendations were discussed and participants' views were tabulated. All responses were analyzed and carefully considered by the Commission. In addi- tion, the Commission reviewed and monitored developments, including steps to imple- ment suggestions contained in the Report of Tentative Conclusions. This Report, Conclu- sions, and Recommendations describes the research and presents the analysis, conclu- sions, and final recommendations of the Commission. It is formally presented to the board of directors of the American Institute of Certified Public Accountants, the body which appointed the Commission and which provided its principal financial support. However, the members of the Commission interpreted their charge to be a mandate to study all aspects of the independent audit function and to provide recommendations to, and for the benefit of, all groups interested in the function, including users of financial statements, management, auditors, and regulatory bodies. The Commission is gratified to note that the AICPA has already adopted some of the recommendations made in the Report of Tentative Conclusions and that it has appointed several committees to study many of the other recommendations. The Commission is also pleased to note the citation of some of its recommendations in recent proposals by the Securities and Exchange Commission, as well as a general endorsement of the Report of Tentative Conclusions by the Senate Subcommittee on Reports, Accounting, and Man- agement. However, in addition to such official actions, the Commission believes that many of the recommendations can be implemented through voluntary action principally by inde- pendent auditors and corporate managements and directors acting together to improve financial reporting. A GAP BETWEEN PERFORMANCE AND EXPECTATIONS The portion of the Commission's charge quoted above suggests the possibility that a gap exists between the performance of auditors and the expectations of the users of financial statements. The primary emphasis of this project has been to examine that possibility. xi [...]... influences and restrictions and would not be considered to represent particular constituencies; that the Commission would be provided with adequate resources; and that the Commission' s report would be widely disseminated, regardless of its conclusions All of those conditions have been met, and the Commission believes that its work and conclusions are independ- xv ent The final determination of that... Summary of Conclusions and Recommendations This summary of conclusions and recommendations has been prE;Wared for the convenience of readers In many instances, the conclusions and recommendations are complex and do not lend themselves to summarization This may result in the appearance of unintended differences· between the summary and the text In such circumstances, the full text should be considered... to responsibility for detection of fraud The Auditing Standards Executive Committee and the Commission studied the issue of the auditor's responsibility for fraud detection at approximately the same time and had access to much of the same background information However, the two positions were developed independently, and the Commission agreed on its conclusions before Statement on Auditing Standards... auditors While the Commission has refrained from specific recommendations for such educational activities, it believes that they are useful and should be continued The Legal and Economic Bases of the Auditor's Role State and federal statutes, the standards of the public accounting profession, and court decisions all contain definitions of the auditor's responsibilities Federal statutes, and their legislative... precise details of implementation and operation are best left to those responsible for making the changes xii THE DISTINCTION BETWEEN ACCOUNTING AND AUDITING This Commission is concerned with issues related to auditing In the course of its work, the Commission noted frequent confusion between auditing and accounting and a misunderstanding of the scope of the Commission' s work In the broadest sense,... n~quirement for a "subject to" opinion in connection with uncertainties without making adequate, simultaneous provision for the recommended standard note on uncertainties Similarly the Commission has considered the costs and benefits associated with its recommendations and the difficulties their adoption might involve The Commission has deliberately avoided making its recommendations too specific We believe... restrictions or conditions During its three years of operation, the Commission made two interim progress reports to the Council of the AICPA, one to the 'board of directors of the AICPA, issued its Report of Tentative Conclusions, and the deputy chairman addressed the annual meeting of the Institute Other than those reports, no formal or informal contacts were maintained between the Commission and the AICPA. .. ( 7-8 ) The traditional division of responsibility places direct responsibility for financial statements on management The auditor's responsibility is to audit the information and express an opinion on it This division of responsibility has been challenged recently, and suggestions have been made that all or a substantial portion of the responsibility for determining the financial representations about the... internal accounting controls It is sometimes useful for pronouncements on auditing standards to specify appropriate variations in application due to different circumstances The Commission hopes that any standards developed to implement its recommendations will contain appropriate direction for their application in different circumstances For example, in section 6, the Commission suggests that auditors... society needs assurance on matters that are principally legal-the conformity of corporate actions with laws and regulations or information on the status of pending and future litigation-the assurance should be provided by those most capable of doing so-management assisted by its lawyers Therefore, a substantial portion of the work and responsibilities in these areas should fall on the corporate or outside . Commission reviewed and monitored developments, including steps to imple- ment suggestions contained in the Report of Tentative Conclusions. This Report, Conclu- sions, and Recommendations describes. Introduction The Commission on Auditors' Responsibilities was charged to develop conclusions and recommendations regarding the appropriate responsibilities of independent auditors. It should consider. researching and developing its conclusions ~nd recommendations on the various issues it studied, the Commission on Auditors' Responsibilities h,ad to examine and comment on aspects