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The chief auditor of the newly formed Public Company Accounting Oversight Board (PCAOB) talks about what's in store for the auditing profession now that the PCAOB is in charge of oversight and auditing standards.
Within the auditing industry, Douglas R. Carmichael has earned a reputation during his career as the auditor's auditor. It is a well deserved accolade in the opinion of many who know and have worked with him. "He was responsible for the development within the profession of its own standards and is undoubtedly the most published writer on accounting standards in the world," observes New York attorney Max Folkenflik, who has used Carmichael as an expert witness on important malpractice cases both for and against CPA firms.
Today, with the accounting industry under siege, Carmichael faces his biggest challenge, the culmination of his life's work, as the first appointed chief auditor for the Public Company Accounting Oversight Board (PCAOB), the newly created regulator of the accounting industry, which will be overseen by the SEC. But in a sense Carmichael has been preparing for this role his whole life. He has studied and written about the practice of accounting for years, and has extensive experience in standard setting. "I think the litigation and other consulting I've done has given me a good handle on what happens in practice and the kind of things that can go wrong in an audit," he says.
A professor of accounting at Baruch College at the City University of New York since 1983, Carmichael, 61, will oversee the redrawing of the nation's auditing standards. He also will counsel the board on auditing and accounting practices.
Carmichael holds an economics degree and a doctorate in accounting from the University of Illinois, which is noted for its strong accounting department. At Baruch, he helped establish and was director of the Center for Financial Integrity. As opposed to the view espoused by scholars at the University of Chicago who regard regulation as unnecessary and an intrusion into the free market, "I thought it would be useful to have an academic center that recognized there was an important role for regulation," Carmichael explains. "When Enron came along it gave it an impetus it didn't have before."
Before joining Baruch, Carmichael...