September 23, 2018

Jeremy Newman and BDO Will Not Be Taking Part in Your Lowballed, Low Quality Audits

BDO International CEO Jeremy Newman is a little concerned about the trend of lowball audit fees out there. Now, those aren’t his exact words, in fact he calls it ‘‘extreme downward pressure on fees’ which still seems far more than honest than “my US colleagues call ‘fee compression.’”

He’s worried because he thinks that all this slumming around for any little opining job will lead to shoddy audits:

There is increasing evidence that fees are being forced down to such an extent that one worries this will encourage audit firms to ‘cut corners’ to reduce their own costs and thereby reduce audit quality – particularly given that the buyers of audit services (ie clients) do not monitor or determine audit quality which is a role taken on by regulators who are not involved in the pricing discussion between the client and the audit firm.

Yes, the man has evidence, courtesy of:

Canadian Public Accountability Board – “CPAB has learned that certain audit committees are pressuring firms to significantly reduce audit fees. This stance may be incompatible with the audit committees’ important role … in helping to ensure the integrity of financial reporting.”

Australian Securities and Investments Commission – “We will also focus on audit quality for new or existing audits where audit fees appear low or appear to have been reduced for reasons other than changes in the underlying business of the entity being audited.”

And he rounds it out with a quote from a speech given by Stephen Hadrill, the Chief Executive of the UK’s Financial Reporting Council, “There is a role for the market in setting higher expectations of auditors. So far the market has not played that role. Quite the opposite. It is more likely to applaud lower audit fees than higher quality.”

So if you’re desperate to retain some business or provide “client service” through the Wal Mart method, you’ll be on your own. As long as Newman is running the ship at BDO, they will be choosing quality over quantity, “despite the pressure on us to reduce costs,” no matter what other firms (read: Igbay Ourfay) are doing.

A Bizarre Market [CEO Insights]

BDO International CEO Jeremy Newman is a little concerned about the trend of lowball audit fees out there. Now, those aren’t his exact words, in fact he calls it ‘‘extreme downward pressure on fees’ which still seems far more than honest than “my US colleagues call ‘fee compression.’”

He’s worried because he thinks that all this slumming around for any little opining job will lead to shoddy audits:

There is increasing evidence that fees are being forced down to such an extent that one worries this will encourage audit firms to ‘cut corners’ to reduce their own costs and thereby reduce audit quality – particularly given that the buyers of audit services (ie clients) do not monitor or determine audit quality which is a role taken on by regulators who are not involved in the pricing discussion between the client and the audit firm.

Yes, the man has evidence, courtesy of:

Canadian Public Accountability Board – “CPAB has learned that certain audit committees are pressuring firms to significantly reduce audit fees. This stance may be incompatible with the audit committees’ important role … in helping to ensure the integrity of financial reporting.”

Australian Securities and Investments Commission – “We will also focus on audit quality for new or existing audits where audit fees appear low or appear to have been reduced for reasons other than changes in the underlying business of the entity being audited.”

And he rounds it out with a quote from a speech given by Stephen Hadrill, the Chief Executive of the UK’s Financial Reporting Council, “There is a role for the market in setting higher expectations of auditors. So far the market has not played that role. Quite the opposite. It is more likely to applaud lower audit fees than higher quality.”

So if you’re desperate to retain some business or provide “client service” through the Wal Mart method, you’ll be on your own. As long as Newman is running the ship at BDO, they will be choosing quality over quantity, “despite the pressure on us to reduce costs,” no matter what other firms (read: Igbay Ourfay) are doing.

A Bizarre Market [CEO Insights]

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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’.

BDO

Jeremy Newman Just Wants to Be Clear, We are NOT Declaring Victory Over Banco Espirito…YET

BDO_International.pngAfter throwing an all night rager last week when BDO International Global Coordination skated on the $521M verdict, Jeremy Newman, BDO Boss, wants everybody to chill.

Newman said he had always been confident that BDO International’s arms-length approach would be proved but added: ‘There is still the risk of a further appeal, as well as the appeal by the US firm.’

See? Staying cool. Not out of the woods yet. But when we beat those bastards on appeal, then we are getting down.

Newman stays cool after BDO victory
[Accountancy Age]