While many of these conflicts exist today, they are heightened when an exchange demutualizes. Some say that proverb is actually a curse, but at the Commission we think ourselves lucky to face challenging new issues every day. Another key issue on the Commission's agenda is auditor independence. Investors in our markets rely on disclosures by public companies in making their investment decisions. Investors are more likely to invest, and pricing is more likely to be efficient, the greater the assurance to investors that the financial information that they receive is reliable.
Independent auditors play a key role in the financial reporting process.
The procedures followed by auditors enable them to express their opinions on whether financial statements are fairly presented and consistent with U.S. Generally Accepted Accounting Principles. Based on the independent auditor's opinion, investors have reason to believe that financial statements are materially accurate, fair and complete. The capital formation process hinges on the willingness of investors to make investments in the securities of public companies. Investors commit their funds to companies relying, in part, on the independent public accountant's opinion that a particular company's financial statements fairly reflect the financial position, results of operations, and cash flows of the company. Without an opinion from an independent auditor, a company cannot satisfy the statutory and regulatory requirements for audited financial statements and cannot sell its securities to the public.