Some of the best minds in my business — writing and talking about accounting and the accounting/audit industry — are not for IFRS. One of the arguments they try to use against me, “Hey Francine, aren’t you anti Big 4? Why are you handing them more government-mandated windfall profit?” is the Sarbanes-Oxley argument. Since the audit firms — especially the Four Horsemen of the “too much regulation” apocalypse — made so much money on Sarbanes-Oxley, it must be wrong.
If there were an anti-intellectual reason to be against IFRS — that is, one that can be readily appreciated by someone who is not super-technical GAAPy — it would be the, “if it’s good for the Big 4 it must be bad” argument. The other anti-intellectual argument against IFRS is the xenophobic one (there I go using a big word to describe an anti-intellectual argument).
The “No-IFRS” camp loves to say convergence gives the keys to capitalism to the “socialist Europeans.” The US is the best country in the world and we’re not going to let some stinkin’ foreigners tell us how to count our profits.
So far I am resisting the lure of anti-intellectual arguments against IFRS and waiting for the wonder of GAAP to win me over to the “side of right”. After all, GAAP has worked so well lately for transparency, accountability and comparability of financial reporting on a global basis. There’s no way the audit firms are in it for the money rather than the theoretically pure beauty of global standards.
“IFRS For Everyone” is not just another well-crafted campaign for a government-sanctioned “next big thing” to sustain the Big 4’s untenable, unsustainable, obsolete business model that produces a, purported by some, worthless product. The Big 4 are bringing their best and brightest minds, from all over the world, to the US to evangelize their colleagues and transform their clients.
Their message: IFRS is good. It’s better than GAAP. It’s the right thing for global investors.
Deloitte has partner Nick Difazio on the job. Nick has, “substantial experience with due diligence activities for acquisitions, dispositions, and Securities and Exchange Commission (SEC) filings. He has worked extensively with clients in the automotive, manufacturing and high-tech industries. Previously, he served as deputy managing partner for Regulatory and Public Policy matters and was the chief of staff to Deloitte’s chief executive officer.”
Mr. Difazio has automotive experience – at Delphi. He also has substantial experience with SEC filings. He was the subject of one recently.
On February 26, the Commission instituted two settled administrative proceedings finding that Nicholas Difazio and Duane Higgins, Deloitte & Touche LLP (D&T) engagement partners on the 2000 and 2001 audits of the financial statements of Delphi Corporation, engaged in improper professional conduct on those audits…The Commission’s Orders denied Difazio the privilege of appearing or practicing before the Commission…
That’s probably how DiFazio got to be Chief of Staff to Deloitte’s CEO, a cushy non client-service-track administrative job. That’s what Deloitte does for you when you can’t be a CPA for a while. In Nick’s case, he’s banned until at least 2011.
So messy. No one wants that when you’re running an “IFRS For Everyone” campaign.
The SEC banned Difazio from practicing and Deloitte put him in a nationally prominent leadership position? I would hate to see the partners whom they didn't promote!
Amazing but true!
Amazing but true!
That is a blatant statement of disrespect to the SEC. A partner gets sanctioned for improper professional conduct and the firm displays him in a prominent role. At least they could have kept him off the website until his sentence concluded. How many shareholders, employees and others were hurt by the Delphi fraud that he facilitated? This is serious business that Deloitte obviously disregards. As long as he brought in large revenue, the other partners could look the other way.
Can he still use the partner title if he is not a licensed CPA?
Being barred from SEC practice is not the same as losing your CPA license. It may lead a state board of accountancy to ultimately revoke a license, but not necessarily — all depends on the states where he's licensed. (Generally, most states will revoke your license if any other state where you hold a license has done so.)
Francine,
If I'm anti-intellectual in my blogging to interest non-accountants in some of these issues, so be it.
I actually don't care much whether GAAP or IFRS are used, although I do hate to see the Big Four get one legislated revenue wave after another (Sarbox, IFRS, something else will surely follow . . .). I guess I just never considered creative accounting to be such a great talent that it would receive multi-billion dollar revenue gifts from our government. Especially given hardly anyone would buy the “Big Four's services” if they weren't required to by law.
To me the most irritating thing is the obsolete business model (as you refer to it) or fundamental flaw (as I refer to it) that is the whole structure of the “public accounting industry” (controlled by the four privately held Big 4 accounting firms).
For anyone naive enough to believe GAAP or IFRS will give them “independent financial statements,” they should first read my recent blog post, “Handcuffed Without Consent.” As long as the auditors are paid for, selected and managed by the companies (and senior executives) they audit, no set of accounting standards will produce the credible financials we domestically and globally crave.
Here's the link. http://saramcintosh.wordpress.com/2010/02/03/ha...
Thanks for showing yet again (e.g. the Difazio situation), how flawed the system really is. The SEC and PCAOB are so handcuffed it's amazing they don't just give up. No matter what they say, the Big Four simply tell them to pound sand and go about business as usual. Here's a link to excerpts from their responses to the PCAOB's recent reviews of their audits. They don't even care if their auditors didn't do the work they should have–they just say they shouldn't be “second-guessed” by the government regulators, to quote Deloitte & Touche's direct response.
http://saramcintosh.files.wordpress.com/2010/02...
Keep up the outstanding reporting, Francine. I look forward to the day you do take a definitive stance on IFRS or not. Maybe then I'll no which way to go rather than just following my anti-intellectual gut.
Ciao for Now,
Sara McIntosh
Francine,
If I'm anti-intellectual in my blogging to interest non-accountants in some of these issues, so be it.
I actually don't care much whether GAAP or IFRS are used, although I do hate to see the Big Four get one legislated revenue wave after another (Sarbox, IFRS, something else will surely follow . . .). I guess I just never considered creative accounting to be such a great talent that it would receive multi-billion dollar revenue gifts from our government. Especially given hardly anyone would buy the “Big Four's services” if they weren't required to by law.
To me the most irritating thing is the obsolete business model (as you refer to it) or fundamental flaw (as I refer to it) that is the whole structure of the “public accounting industry” (controlled by the four privately held Big 4 accounting firms).
For anyone naive enough to believe GAAP or IFRS will give them “independent financial statements,” they should first read my recent blog post, “Handcuffed Without Consent.” As long as the auditors are paid for, selected and managed by the companies (and senior executives) they audit, no set of accounting standards will produce the credible financials we domestically and globally crave.
Here's the link. http://saramcintosh.wordpress.com/2010/02/03/ha...
Thanks for showing yet again (e.g. the Difazio situation), how flawed the system really is. The SEC and PCAOB are so handcuffed it's amazing they don't just give up. No matter what they say, the Big Four simply tell them to pound sand and go about business as usual. Here's a link to excerpts from their responses to the PCAOB's recent reviews of their audits. They don't even care if their auditors didn't do the work they should have–they just say they shouldn't be “second-guessed” by the government regulators, to quote Deloitte & Touche's direct response.
http://saramcintosh.files.wordpress.com/2010/02...
Keep up the outstanding reporting, Francine. I look forward to the day you do take a definitive stance on IFRS or not. Maybe then I'll no which way to go rather than just following my anti-intellectual gut.
Ciao for Now,
Sara McIntosh
Francine,
If I'm anti-intellectual in my blogging to interest non-accountants in some of these issues, so be it.
I actually don't care much whether GAAP or IFRS are used, although I do hate to see the Big Four get one legislated revenue wave after another (Sarbox, IFRS, something else will surely follow . . .). I guess I just never considered creative accounting to be such a great talent that it would receive multi-billion dollar revenue gifts from our government. Especially given hardly anyone would buy the “Big Four's services” if they weren't required to by law.
To me the most irritating thing is the obsolete business model (as you refer to it) or fundamental flaw (as I refer to it) that is the whole structure of the “public accounting industry” (controlled by the four privately held Big 4 accounting firms).
For anyone naive enough to believe GAAP or IFRS will give them “independent financial statements,” they should first read my recent blog post, “Handcuffed Without Consent.” As long as the auditors are paid for, selected and managed by the companies (and senior executives) they audit, no set of accounting standards will produce the credible financials we domestically and globally crave.
Here's the link. http://saramcintosh.wordpress.com/2010/02/03/ha...
Thanks for showing yet again (e.g. the Difazio situation), how flawed the system really is. The SEC and PCAOB are so handcuffed it's amazing they don't just give up. No matter what they say, the Big Four simply tell them to pound sand and go about business as usual. Here's a link to excerpts from their responses to the PCAOB's recent reviews of their audits. They don't even care if their auditors didn't do the work they should have–they just say they shouldn't be “second-guessed” by the government regulators, to quote Deloitte & Touche's direct response.
http://saramcintosh.files.wordpress.com/2010/02...
Keep up the outstanding reporting, Francine. I look forward to the day you do take a definitive stance on IFRS or not. Maybe then I'll no which way to go rather than just following my anti-intellectual gut.
Ciao for Now,
Sara McIntosh
Francine –
Here is a reason to hold off on IFRS at least for now: the IASB is not independent either fianciallly or politically of either the Big 4 or the countries that have bought into it. If and until the IASB solves its governance problems the SEC should not consider IFRS in any form – much less a “Roadmap” that implicitly sanctions IFRS and only questions the timing.
In fact Cox should have never allowed getting rid of the reconciliations of FPIs – which has only given the pro-IFRS crowd a reason to push their agenda down everyone's throat.
In the meantime the Shapiro administration has figured out that the problem is a lot tougher than they ever could have imagined. In this instance they really and truly did inherit a problem handed the day they walked in the door! So sad – now they have to figure a way out of the mess.