June 18, 2018

Accounting News Roundup: PwC’s Big Fine, U.S. Chamber’s Last Stand, #QuittheCouncil | 08.16.17

accounting news pwc frc rsm chamber pcaob weinberger council


As we’ve noted, 2017 has been a rough one for PwC across the globe. Bloomberg reports that it’s gotten only slightly worse, as the U.K.’s Financial Reporting Council levied its largest fine in its history against the firm:

PricewaterhouseCoopers LLP was fined 5.1 million pounds ($6.6 million) for misconduct over its audit of RSM Tenon Group Plc in the largest-ever sanction issued by the U.K. accounting regulator.

The Financial Reporting Council announced the fine Wednesday, along with penalties against Nicholas Boden, a senior PwC audit partner. The misconduct related to an audit of RSM’s accounts for the year ended June 2011. RSM is a professional services firm offering advice on taxes and risk.

That’s right, the FRC punished PwC for its audit of an auditor. At this point, I don’t know which business should be more ashamed — PwC for doing a crappy job, or RSM for not calling out PwC while they were doing the crappy work.

Which has me wondering — if the auditee is an auditor, do they have any responsibility to call out their auditor if they suspect the auditor’s auditing isn’t up to snuff? And if that were the case, wouldn’t it be prudent for the FRC to not only be auditing the auditor, but also auditing the auditee’s audit of the auditor as well? If this improbable scenario ever comes to be, hopefully, the robots can handle it. My head is spinning.

Auditing regulation

The SEC is seeking comment on the PCAOB’s new expanded auditor report rule before approving it, and the U.S. Chamber of Commerce, a stalwart of regulatory opposition, is getting its final hits in:

In a comment letter sent to the SEC last Friday, the chamber contends the PCAOB’s planned changes to the auditor’s report would only serve to foster confusion and increase legal costs for companies and audit firms, among other problems. If approved, the rule would “obfuscate disclosures for investors and make capital formation less efficient,” the chamber said in the letter.

If the SEC does decide to approve the changes, the chamber argued, it should do so only with a series of limitations, including a “safe harbor” to protect auditors and companies from liability, a delay in implementing the new rule, and a sunset provision that would require regulators to act to renew it.

You have to admire the U.S. Chamber’s willingness to die on this particular regulatory hill. Of course, they can send someone to die on every regulatory hill, so maybe it’s not that admirable after all.

How’s the businessman president getting along with business?

Some might say: Not so great! More CEOs have left President Trump’s business advisory councils including Scott Paul of the Alliance for American Manufacturing, who quit before Trump’s unhinged press conference yesterday. Richard Trumka and Thea Lee of the AFL-CIO quit in its wake. Trump doesn’t seem worried though because he says that the CEOs that quit are “grandstanders” and that he has people lining up to replace them. For the record, he hasn’t had any takers so far.

Larry Summers doesn’t know why all the CEOs on all the president’s councils haven’t quit, writing, “I sometimes wonder how they face their children.” Walmart CEO Doug McMillon hasn’t quit but he did tell Walmart employees that the president, “missed a critical opportunity to help bring our country together by unequivocally rejecting the appalling actions of white supremacists.” McMillon serves on the President Strategy and Policy forum with…EY’s Mark Weinberger. They both spoke about women in the workplace once upon a time.

As for Weinberger, here’s what he tweeted yesterday morning:

Jim Peterson wrote an open letter to him, asking that he resign from the council, writing in reference to Trump, ” As your lawyers will tell you, the likelihood of recidivism for a huckster and a charlatan is essentially 100%.”

I emailed Weinberger to ask him if he had “given any thought to resigning from President Trump’s Strategic and Advisory Council. If not, why?” I haven’t received a response. If you missed our call to Weinberger to resign from the council Monday, go check it out. If you decide to tweet or email Mark, tack #QuittheCouncil on there for good measure.

Previously, on Going Concern…

The EY compensation thread is now open. KPMG settled with the SEC over audit failures.

In other news:

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