The Big 4 has been attempting to bring sexy back to auditing for awhile now, with leaders talking about innovation this and technology that, data this and 100% testing that. And that's cool, auditing needed the confidence boost, since advisory's been strutting around getting all the attention for the last decade. So yeah, we've noticed […]
Last week the PCAOB approved its 2016 budget and also its "strategic plan" through 2019. That might sound like a more potent sleeping aid than tryptophan, but sometimes board members say interesting bits worth sharing and, today, we have some for you. Each of the board members made pretty benign statements — quibbles about the […]
If you're like us, you've been anxiously awaiting comment letters on the PCAOB's auditor reporting model proposal. There's nothing better than self-righteous firms penning letters filled with thinly-veiled condescension. Plus, the U.S. Chamber owes us all an honest effort after phoning in their initial response. So far none of the major accounting firms, the AICPA, CAQ, […]
This morning the PCAOB held their open meeting to discuss "Proposed Auditing Standards Regarding the Auditor’s Report and the Auditor’s Responsibilities Regarding Other Information." PCAOB Chairman James Doty called it a "watershed moment for the auditing in the United States." And yeah, I suppose it is. I mean, the auditor's opinion hasn't changed in 70 […]
For some time now, the PCAOB has been talking about making audit partners famous (at least to investors that are paying attention) in ways that they aren’t too thrilled about. Earlier today the Board issued a proposal for comment that will do just that.
The proposed amendments would:
• require registered public accounting firms to disclose the name of the engagement partner in the audit report,
• amend the Board’s Annual Report Form to require registered firms to disclos gagement partner for each audit report already required to be reported on the form, and
•require disclosure in the audit report of other accounting firms and certain other participants that took part in the audit.
So if you can consider yourself an astute observer of auditing policy and regs, they’d love to hear your thoughts. However, it would be greatly appreciated if you didn’t take your cues from the FASB letters and kept things constructive.
All of the Board Members made statements, including PCAOB Chairman Jim Doty (full statement on page 2) who sees this latest proposal as good sense:
I fail to see why shareholders in BNP Paribas, listed on the Euronext Paris exchange, should be able to see the name of the engagement partner in the audit report, but shareholders in Citigroup, listed on the New York Stock Exchange should not. Indeed, the names of engagement partners for some European companies that are listed on the NYSE are disclosed in U.S. filings. Why are shareholders in France Telecom to be favored over shareholders in AT&T?
And then there’s Steven Harris’s statement (in full on page 3). Harris, who is known to speak frankly about auditors, finds the proposal okay enough but would really like to see the audit partners’ John Hancocks:
While I support an identification of the engagement partner, I continue to strongly support, and would have preferred, a requirement for the engagement partner to actually sign his or her name on the audit report. My views, which I stated when the Board last publicly discussed the issue in July 2009, have not changed. Very fundamentally, I believe that nothing focuses the mind quite like putting one’s individual signature on a document.
And for good measure, he threw in this:
Many find it ironic that auditing firms in the United States, whose business is providing assurance about the transparency provided by others, resist publicly providing their own financial statements. There is no apparent reason that the auditing firms that act as gatekeepers to our securities markets should not be as transparent to investors as the companies they audit.
If you agree with Mr. Harris and happen to have a copy of your firm’s financial statements, feel free to pass it along. Or if you’d rather not wait to make your thoughts known on the Board’s proposals, you may drop them in the comments below.
For anyone that missed it earlier, the PCAOB issued a concept release today putting out some ideas for changes to the auditor’s report. The members of the Board also took the opportunity to say a few words and Mr. Harris saw an opportunity to point some things out:
The events of the last few years have been a case study of the inability of auditors to provide investors with any meaningful signal about increases in financial reporting risks when management assessments or estimates change dramatically, or when debates over significant accounting issues become difficult or contentious.
And he added the following for good measure:
Out of the ten largest bankruptcies during the financial crisis, only two had going concern opinions. During the year leading up to their bankruptcy filings, the market capitalization of the eight companies without going concern opinions declined from a collective $75.5 billion in the year prior to their respective bankruptcy filings to a collective market capitalization of just under $700 million at the time of their filing – a 99% loss in investor value.