June 23, 2018

PCAOB Giving Big 4’s Legal Services the Stinkeye

pwc colonial award

PwC announced last month that it was launching a law firm in the U.S. because, honestly, who’s going to stop them? Plus, Deloitte wasn’t going to do it, so someone was bound to snatch up the opportunity.

PwC’s U.K. affiliate even put out a report recently that found “law firms are not keeping pace with cutting-edge technologies and growing client expectations.” And somewhere, a PwC executive is talking about how, “We have an obligation to serve the demands of the capital markets,” while other people in the room nod.

Anyway, the announcement of PwC’s U.S. law firm, ILC Legal, LLP raised more than a few eyebrows. “WHAT ABOUT AUDITOR INDEPENDENCE,” people cried, shaking their fists. And the collective response was: ¯\_(ツ)_/¯. The Big 4 firms have been flouting independence for decades and this is merely the latest variation of the nose-thumbing.

One of the chief recipients of that snook is the Public Company Accounting Oversight Board which, according to this Bloomberg Law article, is “monitoring the accounting firms’ expansion into legal services”:

“Existing independence requirements would preclude an issuer’s auditor, or affiliates of the auditor, from providing legal services to that issuer or any of that issuer’s affiliates,” PCAOB spokeswoman Colleen Brennan said. “The PCAOB monitors for compliance with that requirement and other independence requirements.”

I’ll go out on a limb and suggest that PwC won’t be as clumsy as, let’s say, the former head of audit for KPMG, when it comes to navigating the independence and compliance rules, just as long as they keep the Oscars bumblers away from this.

Regardless, if I was a PCAOB inspector badgering a PwC team with requests, you better believe I’d be extra badgery about any connections with ILC Legal. And after I was done badgering them about that, I’d badger them some more.

In the beginning, I’m sure this new law firm won’t go near PwC audit clients. But soon enough, PwC audit clients might hear about this hot legal action that they’re missing out on; some enterprising people at PwC will start talking about the “crossover opportunities” and conversations about what constitutes “legal services” will be had. Like, does a law firm only provide “legal services”? Or could ILC Legal also provide non-audit services to audit clients that audit committees won’t consider to be prohibited?

Who knows! This sounds like a job for some innovative lawyers. If PwC is a little shorthanded in that regard, maybe they can poach some of Uber’s legal team.

[BL]

Image: Wistula/Wikimedia Commons

Related articles

In Case You Need Another Reason to Hate the French

french flag.jpgWalking around the PwC office in Midtown Manhattan, our blogospondent in the field happened across a couple of young ladies having the picture taken in front of the P Dubya sign out front, proudly posing as if it was their names on the building at 300 Madison.
Said blogospondent approached the young ladies and asked if they worked at the P Dub and they responded in heavily French accents, “yes”. As result of further prying, it was revealed that the ladies do work a lot during “busy times”, sometimes between 50 and 60 hours a week!
This compared to an American tax associate who we spoke to just a couple days before who, in the last fifteen days, had worked 185 hours.
Let’s recap: America – 185 hours in 15 days in the middle of June vs. France – 50-60 hours in one week during the “busy time”.
American vitriol towards the French may now ensue.

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]