September 21, 2018

China Agrees to “Look But Don’t Touch” PCAOB Visits

Board member Lewis Ferguson tells of China's teasing ways in a speech that he's giving at the California State University SEC Financial Reporting Conference in Irvine:

As a first step toward further cooperation [with China], we are working toward and have tentatively agreed on observational visits where PCAOB inspectors would observe the Chinese authorities conducting their own audit oversight activities and the Chinese could observe the PCAOB at work. This would not be a substitute for a PCAOB inspection but would be a trust building exercise between regulators. Initially, such observations would focus on quality control examinations of the audit firm being examined rather than a substantive review of a specific audit. We hope such exercises will build trust and lead to further cooperation.

I guess it's something.

[via PCAOB]
 

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SHOCKER: Doesn’t Appear that Stanford Auditors were Doing Any Auditing

allen-stanford_1018295c.jpgLast week’s indictment of Allen Stanford has brought up the always popular question when fraud, occurs: “Who are the auditors that were asleep at the wheel of this disaster?”
Well, in this case, the auditors were a local UK two-person shop, CAS Hewlett, which must be Queen’s English for Friehling & Horowitz.
It doesn’t appear that CAS Hewlett has a website, but they’ve been doing the Stanford “audits” for at least 10 years, so obv they’re legit. PwC and KPMG both have offices on Antigua but Stanford preferred to stay with its “trusted firm”. Totally understandable.
And the best part? The founder of the firm, Charlesworth “Shelly” Hewlett died in January, approximately a month before the story broke on the Ponz de Stanford.
This all adds up to who-the-fuck-knows if audits were even occurring and for us to speculate if Shelly needed to get got because Stan knew that the poo and fan were coming together. Just sayin’.

PCAOB: The Rodney Dangerfield of Bureaucracies

pcaob.gif It’s tough being part of a bureaucracy, especially if you’re doing something as glamarous as babysitting auditors. The CIA, FBI, NSA have got it easy. You get to catch bad guys, use guns, and Hollywood makes movies about you. Aside from the warrantless wiretaps and otherwise general big brotherishness, it’s cool.
The PCAOB doesn’t get that luxury. They get to poke around auditors’ work and then tell them how much they suck at it. Not so fun for anybody. They also get to write auditing standards. Take the watchdog aspect, multiply it times infinity, and that’s about the amount fun we’re talking about for writing rules on auditing.
But now people are saying they’re too slow in writing these I-already-want-to-kill-myself boring rules? Yep:

“Given how little they’ve accomplished in the standards-setting area, they don’t get a passing grade,” says Lynn Turner, a former chief accountant for the SEC.
Turner says he and a group of investor advocates wrote to the PCAOB in 2004, asking it to improve fraud standards. But the work remains undone, he says.
Bill Gradison, the board member whose term expires in October, calls the criticism fair. “We’ve been much slower than other standards writers,” he says.
By comparison, the International Auditing and Assurance Standards Board, which sets international auditing standards, among other duties, finished revising its own standards in March. The process, which included 37 standards, took about five years

Man, now comparisons to the Europeans. They’re looking for some new blood at the PCAOB though, since Mark Olson is retiring as Chairman and another board member’s term is expiring.
But don’t you go calling them lazy! “the PCAOB is taken seriously by the auditing community and deserves credit for trying. ‘Anyone who says it isn’t is off the wall,'”
What a ringing endorsement.

COMPLIANCE WATCH: Oversight Board Sets Sluggish Pace
[WSJ]