CalPERS has a significant financial interest in seeking improvement in the integrity of financial reporting. Auditors play a vital role in helping to ensure the integrity of financial reporting and it is the important role of auditors that brings standardization and discipline to corporate accounting, which in turn enhances investor confidence. Public and investor confidence and stability are critical to the success and effective functioning of the capital markets. To ensure this confidence, as an active investor, CalPERS will provide leadership through substantive initiatives which include:

• Expand Global Principles of Accountable Corporate Governance as it relates to accurate financial disclosure, international financial reporting standards and auditor independence;
• Improve financial disclosure and audit practices through direct company engagement in the CalPERS Focus List Program;
• Comment to regulators to assist with market reform, auditor independence and accurate financial reporting;
• Engage audit committee directors through the National Association of Corporate Directors;
• Participate in advisory boards and roundtables to provide investors, perspective — International Corporate Governance Network, Public Company Accounting Oversight Board, Financial Accounting Standards Board, Securities and Exchange Commission and Congressional Committees;
• Participate within the market to address current issues - specifically CalPERS provided Testimony on:
  1. February 4, 2008 to the US Treasury Department - Advisory Committee on the Auditing Profession (PDF, 45KB) (ACAP) - Panel on General Sustainability of the Auditing Profession in which CalPERS shared its views on Auditor Independence -Auditor Liability and Risk, Audit Firm Structure & Ownership, Transparency and Governance, Auditor Responsibility for Fraud Detection, Communication with Investors and Choice in the Audit Market - Competition and Use of Other tier Auditors.
  2. March 13, 2008 to the Securities and Exchange Commission - Advisory Committee on Improvements to Financial Reporting (PDF, 54KB) (CIFiR) Panel regarding Materiality, Restatements and Professional Judgment.
  3. Follow-up letter (PDF) on June 13, 2008 in response to ACAP's addendum to Section VI. Firm Structure and Finances requesting that auditors accept responsibility for detecting fraud and improving the timely communication of these frauds to investors and shareowners; that auditors document their judgments about accounting principles and critical accounting policies in the audit report; mandate the engagement partner's signature on the audit report; provide additional transparency by providing the firm's issuer-related practice, special events at the audit firm as well as public disclosure of accounting firms' audited financial statements.