June 18, 2022

I think thereare two strands in my belief about this

I think thereare two strands in my belief about this

MR. ANTLE: I do, Commissioner Hunt. One is that economic theory tells us that, yeah, perceptions are indeed important in determining equilibrium prices and in determining how markets function. There’s no question about that. Prices are set by people’s actions which are, in turn, tied to their beliefs.

Economic theory also would suggest to us, though, that having beliefs that are at variance with reality is a situation that shouldn’t exist very long in a well-functioning economy. So that’s what, sort of, ties people’s perceptions back to reality.

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COMMISSIONER UNGER: Is that the way it usually goes? In my experience, I’ve found that like it or not perception is the ultimate reality.

MR. ANTLE: Well, I have some sympathy for that view as well. The closer you get to Freud the more you believe that. But there are, hopefully, are forces in the economy that drive things, sort of, toward reality, although that process is very sloppy.

But I was going to say that since I’m here testifying for myself — I’m not representing anyone else –I have to say that one of the reactions that I have is that prohibiting certain types of services because people are concerned about this or that or there may be the appearance of a potential problem — I mean, I actually went through the document and highlighted everywhere where a concern showed up with non-audit services, and it just strikes me in a very basic sense not right.

I know I learned a lot from Professor Coffee’s talk and run-through of howauditor liability has changed over the years

One of the things we do is we let people have the freedom to go about and integrate and do the things they want until they, sort of, prove that there’s a — until we find a problem.

MR. ANTLE: Act prophylactically meaning that you think there might be a problem; therefore, you take some action in anticipation of that problem. I think that ought to be done with great consideration.

So I guess I have a fundamental, sort of, efficient market’s view of things deeply ingrained in my bones which suggests that if you have a perception that’s out of line with reality, then it’s the perception that ought to change and not reality

I don’t want to say cannot because I haven’t envisioned all possible circumstances, but non-audit services have been provided for a long time and have been provided in great magnitude.

CHAIRMAN LEVITT: What gives rise to the perception, do you think, which has become so broad and so general? And it’s very real. It’s palpable. It’s not something that’s ephemeral. What do you think has given rise to that?

MR. ANTLE: Are these perceptions that you ask about, are they responses to questions, or are you talking about perceptions that are translated into actions in terms of people have shied away from buying securities?

CHAIRMAN LEVITT: No. I think the evidence of the perceptions are actions by many corporations and audit committees to make that separation to not use firms for providing consulting to their audit clients.

These are perceptions that are so broadly seen in the press. These are perceptions expressed by financial analysts. These are perceptions expressed in the political arena. Why? What gives rise to that, and how best to address that? If perception is the ultimate reality, you can’t be blind to it.

MR. ANTLE: Well, I think it’s very difficult for anyone, even myself, to have much of a real understanding of all of the incidents that auditors face.

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