Case 7.6

Scott Fane, CPA

Versus

Florida State Board of Accountancy

Scott Fane, CPA, moved to Florida from New Jersey in 1985 because he hoped that Florida’s healthy economy would allow him to develop a successful accounting practice

Scott Fane, CPA, moved to Florida from New Jersey in 1985 because he hoped that Florida’s healthy economy would allow him to develop a successful accounting practice

In New Jersey, Fane used direct solicitation to pursue potential clients, but Florida’s state board banned direct solicitation by CPAs

Scott Fane, CPA, moved to Florida from New Jersey in 1985 because he hoped that Florida’s healthy economy would allow him to develop a successful accounting practice

In New Jersey, Fane used direct solicitation to pursue potential clients, but Florida’s state board banned direct solicitation by CPAs

Fane sued the Florida Board of Accountancy, alleging that its ban on direct solicitation infringed on his First Amendment rights of freedom of speech

Scott Fane, CPA, moved to Florida from New Jersey in 1985 because he hoped that Florida’s healthy economy would allow him to develop a successful accounting practice

In New Jersey, Fane used direct solicitation to pursue potential clients, but Florida’s state board banned direct solicitation by CPAs

Fane sued the Florida Board of Accountancy, alleging that its ban on direct solicitation infringed on his First Amendment rights of freedom of speech

The Supreme Court ruled in Scott Fane’s favor, concluding that the Florida State Board failed to prove that allowing CPAs to use direct solicitation methods posed a serious harm to the public

While the Scott Fane background provides a starting point, our concern should be focusing on how some of these aspects, especially competitive bidding restrictions, could affect the audit function.

While the Scott Fane background provides a starting point, our concern should be focusing on how some of these aspects, especially competitive bidding restrictions, could affect the audit function.

Prior to 1978 the Code of Professional Ethics did not allow CPAs to engage in competitive bidding practices to obtain clients.

While the Scott Fane background provides a starting point, our concern should be focusing on how some of these aspects, especially competitive bidding restrictions, could affect the audit function.

Prior to 1978 the Code of Professional Ethics did not allow CPAs to engage in competitive bidding practices to obtain clients.

At that time, through agreement with the Federal Trade Commission, CPAs could engage in competitive bidding practices as long as they were not false nor misleading

What effect might the competitive bidding process have on auditing?

What effect might the competitive bidding process have on auditing?

Competitive bidding by its nature will tend to drive down the audit fees paid for independent audits.

What effect might the competitive bidding process have on auditing?

Competitive bidding by its nature will tend to drive down the audit fees paid for independent audits.

This will likely reduce the profitability of audit engagements

What effect might the competitive bidding process have on auditing?

Competitive bidding by its nature will tend to drive down the audit fees paid for independent audits.

This will likely reduce the profitability of audit engagements

Why?

What effect might the competitive bidding process have on auditing?

Competitive bidding by its nature will tend to drive down the audit fees paid for independent audits.

This will likely reduce the profitability of audit engagements

Why? Auditors, in order to comply with GAAS, will generally have to expend the same resources regardless of the amount they are paid

What effect might the competitive bidding process have on auditing?

Competitive bidding by its nature will tend to drive down the audit fees paid for independent audits.

This will likely reduce the profitability of audit engagements

Why? Auditors, in order to comply with GAAS, will generally have to expend the same resources regardless of the amount they are paid

In the long run competitive bidding may cause firms to de-emphasize auditing in favor of other more profitable services such as consulting and tax.

What might the future hold for the auditing profession?

What might the future hold for the auditing profession?

One might speculate that the effect of the competitive bidding process, among other factors, has helped to contribute to the recent state of financial failures in the United States.

What might the future hold for the auditing profession?

One might speculate that the effect of the competitive bidding process, among other factors, has helped to contribute to the recent state of financial failures in the United States.

However, these financial failures may have brought about changes that will strengthen the audit function in the future.

What might the future hold for the auditing profession?

One might speculate that the effect of the competitive bidding process, among other factors, has helped to contribute to the recent state of financial failures in the United States.

However, these financial failures may have brought about changes that will strengthen the audit function in the future.

The Sarbannes-Oxley legislation with its expanded requirements on both management and the auditors may bring about the return of CPA firms that once again specialize in auditing and that are able to receive professional compensation for their services