How Effective is Joint Public and Private Monitoring? The Case of the Aicpa Auditor Change Notification Letter

The AICPA SEC Practice Section notification rule requires a member firm to notify its former client and the Chief Accountant of the SEC in writing within five business days of the date it determines the client-auditor relationship has ended. The rule is unique because it was developed and is enforced by a private organization (the AICPA) to assist a public organization (the SEC) in fulfilling its charge of ensuring full, timely disclosure of relevant registrant information. A three-year SECPS educational effort to make members aware of their notification responsibilities recently ended. Our paper evaluates the effectiveness of the SECPS educational effort and the SECPS notification letter. It shows that registrant as well as auditor compliance and timeliness have increased during the time the notification rule has been in effect, and that the improved registrant performance is likely due in part to improved auditor performance