A

ever than I ancipated. I know be fumber respite and further work with your

I have been a limple hit disapprinned by prur statement that everything-16. are doing a whole lot of things, but everything is going along, and you haven't given us ang speis

But, nevertheless. I hope that we have raised some questions and your own institute has raised some questions that do need remedies. Mr. CHETROVICH. May I comment!

Senator METCALF. Please.

Mr. CHETROVICH. I do not want to leave you with the impression that we feel that there is nothing to be done, that everything is rosy. We believe we are capable of coping with the situation. It is a dif cult situation. I can assure you auditing is quite a difficult art at best. God knows, there are new problems coming up all the time that we have to address ourselves to.

But I wanted to assure you that we take this very seriously. We take our responsibility very seriously. We take your staf's study very seriously.

We are going to analyze each and every one of those recommendations in terms of all of its implications as we are going through the recommendations of the Cohen Commission study and look at them all from the standpoint of what we can do, not only to improve our performance, but also to improve our appearance.

Senator METCALF. I thank you very much for that assurance. As far as this subcommittee is concerned, an assurance such as that from the private sector is what we want and feel will solve many of the questions that have arisen in our mind and the public's mind.

You have suggested on page 7 of your statement that the SEC makes very effective use of the ample opportunities for expressing its views to private standard-setting bodies. You say this arrangement complained of in the staff study has existed for almost 40 years-it bothers me, almost 40 years-without any public dissent from any SEC chairman, commissioner, or chief accountant, with the full knowledge of all sectors, including the Congress.

It seems to me that you are saying we have alleged that the SEC is not much of a tiger. It is kind of tired and it is timid and it is tame, and maybe we should do something about our regulatory agencies.

Mr. CHETKOVICH. I can understand we might see the SEC in different lights. We see them as a significant tiger, particularly at times, Senator. Certainly, congressional oversight is a very important aspect

Senator METCALF. Thank you very much for coming. I assure you we ontinue to look forward to working with you and your staff. We welome any suggestions that will help us create more and better public onfidence in your profession and ours.

Mr. CHETKOVICH. Thank you very much. We appreciate your courtesy.

Senator METCALF. Thank you. We will be in recess until 10 o'clock on Thursday. We will meet in 3302.

[Whereupon, at 1:15 p.m., the subcommittee recessed, to reconvene at 10 a.m., Thursday, April 21, 1977.]

Enclosed are two questions which I did not have an
opportunity to ask during today's hearings.

Would you kindly provide a written response for inclusion in the record.

Again, many thanks for your constructuve attitude toward helping the private sector meet the concerns raised in today's hearings.

QUESTIONS

1. On page 6 of your written testimony you suggest that the real question for our consideration is whether the concerns raised by the staff study are being effectively dealt with by the FASB, accounting profession, SEC and others. I suggest that is a question--and an important one. But I suggest that meaningful reform is not going to come from a staff study or a critical response to that study--that is history. I believe that needed changes in the presentation of and information disclosed by financial statements must come from the accounting profession and the business it audits. Meaningful answers to problems will not truly be forthcoming from a response to a staff study, but rather from self-initiated actions of the private sector itself.

Now forgetting the staff study itself, would you elaborate-on a self-critical basis, if you will--what you see as the critical problems facing the auditing profession and corporate management, and what changes are needed to meet these problems? Perhaps you would like to structure your response in the areas of-

1.

2.

Auditing standards and the questions of audit
independence;

Auditing the auditors--the question of review
boards, SEC supervision, etc.;

3. Corporate management initiatives and responsi-
bilities in the area of financial disclosure and

2. On page 12 of your written statement you state that the 50-year arrangement of the private sector working jointly with the SEC provides assurance that the quality of financial reporting will continue to be refined to meet the expectations of Congress.

What changes, if any, do you see as necessary to ensure that this arrangement continues to have credibility in a world of ever-increasing complexity and awareness. Please be more

specific.

What should be changed to continue to merit the

confidence of Congress and the public?

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