November 15, 2018

Reminder: If You Improperly Alter Audit Workpapers and Are Found Out, You Will Be Fired

Louder this time, for the people in the back.

pcaob alter audit workpaper

I find it fitting that one of my last posts as editor would be about career-limiting moves. When I started Going Concern, many people probably thought that I was making a big mistake; that writing critical things about Big 4 firms and airing their dirty laundry would be a severe detriment to my future employability. To a certain extent, I suppose those people are right; it’s highly unlikely that I’ll be working at a Big 4 firm or any accounting firm anytime soon. But that’s okay, I’ve left that possibility behind.

However, if you’re making a go of an accounting career, specifically as an auditor of public companies, there seem to be pitfalls all around you. It’s strange, though, because these pitfalls should be pretty easy to avoid. A few rules of thumb:

I mention that last one because the PCAOB issued a couple of disciplinary orders last week where auditors obviously couldn’t help themselves and went ahead and improperly changed audit workpapers. In each case, the person who did the improper altering was fired.

This is unfortunate because getting fired is not fun, but it’s especially unfortunate because it’s entirely avoidable! Here’s the order against Adam Sanderson, formerly of Deloitte UK:

Come on, man. Don’t do that!

Likewise, don’t do what Elliot Kim, formerly of KPMG, did:

Oh. Oh, no.

To make matters only slightly worse, “Kim did not correct Senior Manager B or otherwise disclose that the screenshot was inaccurate,” when PCAOB inspectors asked about it. The firm found out later that that was the case, and they fired Kim.

Both of these guys succumbed to the temptation to try to fix an error. But why? The PCAOB has already explained that not doing something is probably better than doing something:

The consequences of providing improperly altered audit documentation to PCAOB inspectors or investigators may in many cases be far more severe than would be the consequences of the PCAOB staff identifying the audit deficiency that the revisions to the documentation attempt to obscure.

I suppose it’s possible that in each of these instances, the impropriety may not have been discovered, the inspection result would have been slightly worse, and Sanderson and Kim would not have been fired. But why take the risk? It seems to be way less risky to accept the fact that a mistake in documentation was made, let the PCAOB discover it, add it to their list of infractions, and keep your job. Similarly, if they felt pressure from their superiors, it seems like any repercussions wouldn’t be as serious as getting fired. Sure, it might result in a lousy performance review, but chances are you were going to get a lousy performance review anyway.

Image: iStock/marchmeena29

Related articles

Deloitte: Folding Like a Cheap Lawn Chair?

deloitte.jpgIs it possible that the spinelessness of the FASB is spreading some of the firms?
Motely Foley is reporting that MGM Mirage got the Big D to drop the going concern language from its “financial assessment” which we confirmed with the author, Bob Steyer, that indeed meant the audit opinion.
Doing a little digging on this whole sitch, we found that MGM has done some duct tape repairs to its balance sheet in order to convince its banks and Big D that nothing is fucked.
Deloitte, wanting to be troopers and all, probably just had to step back from the whole thing to get perspective. “Yeah, when you look at it from back here, $14.4 Billion in debt doesn’t really look that bad.”

MGM Back From the Brink — for Now
[Motley Fool]

Deloitte May Be the #1 Firm of No Fun

heelys.jpgRegardless of who a client is or what their business is, accounting firms don’t like to lose them. Lost revenue, a little bit of a slap in the face, a promise that wasn’t delivered (which, let’s be honest, really isn’t all that rare).
For whatever reason, we find the story that Heelys, the skate shoe company, having fired Deloitte as their auditor, has to be an especially tough pill to swallow for the Big D.
Why, you may ask? How about the fact that Heelys MAKES SHOES THAT HAVE WHEELS ON THEM which might be something fun.
According to Reuters, Heelys gave Deloitte-period the heave-ho primarily because of cost considerations. That may be true but something tells us that the real reason might have been Deloitte putting the kibosh on Heelys request of the audit team to wear the skate shoes while working at the client’s HQ.
Deloitte, like all Big 4 firms, being the fun killer, likely argued that skate shoes did fall under acceptable attire in its dress code.
It was probably only a matter of time until the Heelys audit committee concluded that they had to find another audit firm with smaller sticks up their asses. Partners on the engagement are now quietly stewing with their decision that may have put their firm solidly in the #1 slot for hating all things fun.

Heelys dismisses accounting firm