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Grant Thornton May Have Hosed Fire Engine Company Audit

Posted on by Adrienne Gonzalez

It appears the Financial Reporting Council — the UK's answer to audit cops — is looking into a "minor" matter involving the company that owns London's fire trucks and former auditor Grant Thornton. The investigation is specifically aimed at financial statements ended March 31 2008 – March 31 2010 and "the preparation of financial information leading up to the identification of the restatement reported in the financial statements for the period ended 30 September 2011."

According to economia:

In April 2012 AssetCo was forced to revise its accounts. A “serious failure of management and internal financial controls” led to a significant overstatement of profits and assets.

As a result, AssetCo was forced to make prior period adjustments for 2010 that wiped more than £235m off its balance sheet.

It has also had to restructure and refinance the business to ring-fence its operations in the Middle East from the problems of the UK arm.

In 2011, the board of directors – including the chairman, chief executive and two finance directors – all left and Grant Thornton resigned as company auditors. It was replaced by PWC.

The FRC says it was a third party who alerted the FRC to issues.

It's probably all NBD and just one simple misunderstanding, right? Right. I mean we are only talking about "the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud" here. Totes easy to miss during the audit process, no audit is perfect!

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Well, shit. Maybe we shouldn’t have brought it up.

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Senators Grassley and Reed Would Like to Make Every Bit of PCAOB Wrist Slapping Public

For some time now, quite a few people have been asking for PCAOB disciplinary proceedings to be made public. Since your beloved Board came into existence, the process of slapping around sketchy auditors has been secret much to the chagrin of those people that would like audit firms to take just a little bit [pointer and thumb about an inch apart] of responsibility when they royally screw things up. It’s all for the investors, you see. After some rib jabbing by Board Member Dan Goelzer and Chairman Jim Doty, Chuck Grassley (R-IA) and Jack Reed (D-RI) have picked up the flag by introducing a bill that would make the proceedings public:

The bill would change a provision of the Sarbanes-Oxley Act that requires the Public Company Accounting Oversight Board to keep disciplinary proceedings against auditing firms confidential.

Undoubtedly, this will rankle auditors who would prefer that all the skeletons stay firmly stuffed in closets. Of course what many people forget is that the secretive nature of the PCAOB disciplinary proceedings are the exception rather than the rule:

[Grassley and Reed] argued that the PCAOB’s closed proceedings run counter to the public enforcement proceedings of other regulators. Not only the SEC, but also the Labor Department, the Federal Deposit Insurance Corporation, the U.S. Commodity Futures Trading Commission, and other government agencies use public proceedings, as does the self-regulating Financial Industry Regulatory Authority. Nearly all administrative proceedings brought by the SEC against public companies, brokers, dealers, investment advisers and others are open, public proceedings.

The Reed-Grassley bill would make PCAOB hearings and all related notices, orders and motions, open and available to the public unless otherwise ordered by the board. The PCAOB procedure would then be similar to SEC Rules of Practice for similar matters, where hearings and related notices, orders, and motions are open and available to the public.

This all seems like a pretty good idea. I mean, what makes auditors so special? Exactly. They’re not. They just happened to go from self-regulated to regulated in a flash and had a few K Street types twist in some features to Sarbanes-Oxley that kept things under wraps.

The problem, as a few people have pointed out, is that the Board still isn’t really that tough on auditors. Sure, a few more people might suffer some public embarrassment (which we’re happy to point out), but will investors really be better off? That remains to be seen but at least we’ll all be able to revel in the good fun of mocking the offenders.

Senate Bill Would Make PCAOB Disciplinary Hearings Public [AT]