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Accounting News Roundup: PwC’s Big Fine, U.S. Chamber’s Last Stand, #QuittheCouncil | 08.16.17

Posted on by Caleb Newquist
accounting news pwc frc rsm chamber pcaob weinberger council

PwC

As we’ve noted, 2017 has been a rough one for PwC across the globe. Bloomberg reports that it’s gotten only slightly worse, as the U.K.’s Financial Reporting Council levied its largest fine in its history against the firm:

PricewaterhouseCoopers LLP was fined 5.1 million pounds ($6.6 million) for misconduct over its audit of RSM Tenon Group Plc in the largest-ever sanction issued by the U.K. accounting regulator.

The Financial Reporting Council announced the fine Wednesday, along with penalties against Nicholas Boden, a senior PwC audit partner. The misconduct related to an audit of RSM’s accounts for the year ended June 2011. RSM is a professional services firm offering advice on taxes and risk.

That’s right, the FRC punished PwC for its audit of an auditor. At this point, I don’t know which business should be more ashamed — PwC for doing a crappy job, or RSM for not calling out PwC while they were doing the crappy work.

Which has me wondering — if the auditee is an auditor, do they have any responsibility to call out their auditor if they suspect the auditor’s auditing isn’t up to snuff? And if that were the case, wouldn’t it be prudent for the FRC to not only be auditing the auditor, but also auditing the auditee’s audit of the auditor as well? If this improbable scenario ever comes to be, hopefully, the robots can handle it. My head is spinning.

Auditing regulation

The SEC is seeking comment on the PCAOB’s new expanded auditor report rule before approving it, and the U.S. Chamber of Commerce, a stalwart of regulatory opposition, is getting its final hits in:

In a comment letter sent to the SEC last Friday, the chamber contends the PCAOB’s planned changes to the auditor’s report would only serve to foster confusion and increase legal costs for companies and audit firms, among other problems. If approved, the rule would “obfuscate disclosures for investors and make capital formation less efficient,” the chamber said in the letter.

If the SEC does decide to approve the changes, the chamber argued, it should do so only with a series of limitations, including a “safe harbor” to protect auditors and companies from liability, a delay in implementing the new rule, and a sunset provision that would require regulators to act to renew it.

You have to admire the U.S. Chamber’s willingness to die on this particular regulatory hill. Of course, they can send someone to die on every regulatory hill, so maybe it’s not that admirable after all.

How’s the businessman president getting along with business?

Some might say: Not so great! More CEOs have left President Trump’s business advisory councils including Scott Paul of the Alliance for American Manufacturing, who quit before Trump’s unhinged press conference yesterday. Richard Trumka and Thea Lee of the AFL-CIO quit in its wake. Trump doesn’t seem worried though because he says that the CEOs that quit are “grandstanders” and that he has people lining up to replace them. For the record, he hasn’t had any takers so far.

Larry Summers doesn’t know why all the CEOs on all the president’s councils haven’t quit, writing, “I sometimes wonder how they face their children.” Walmart CEO Doug McMillon hasn’t quit but he did tell Walmart employees that the president, “missed a critical opportunity to help bring our country together by unequivocally rejecting the appalling actions of white supremacists.” McMillon serves on the President Strategy and Policy forum with…EY’s Mark Weinberger. They both spoke about women in the workplace once upon a time.

As for Weinberger, here’s what he tweeted yesterday morning:

Jim Peterson wrote an open letter to him, asking that he resign from the council, writing in reference to Trump, ” As your lawyers will tell you, the likelihood of recidivism for a huckster and a charlatan is essentially 100%.”

I emailed Weinberger to ask him if he had “given any thought to resigning from President Trump’s Strategic and Advisory Council. If not, why?” I haven’t received a response. If you missed our call to Weinberger to resign from the council Monday, go check it out. If you decide to tweet or email Mark, tack #QuittheCouncil on there for good measure.

Previously, on Going Concern…

The EY compensation thread is now open. KPMG settled with the SEC over audit failures.

In other news:

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Just when Sarbanes-Oxley compliance was about to get torpedoed by the financial reform bill, a new study comes out that shows companies are starting to see benefits from the legislation, “In its 2010 Sarbanes-Oxley compliance survey, Protiviti says 70 percent of executives in at least their fourth year of working to comply with Sarbanes-Oxley say they believe the benefits outweigh the costs. That’s a big swing from the first year the firm asked the same question and heard only 39 percenbenefits greater than the costs.”


Showdown Over Strippers [WSJ]
Some people in the Show Me State are not interested in living up to that name, “Last month, the Republican-controlled legislature passed one of the nation’s toughest state laws aimed at strip clubs and other adult-entertainment venues. It would ban nude dancing and the serving of alcohol in adult cabarets, force strip clubs to close at midnight and forbid seminude dancers to touch patrons.”

The legislation is currently awaiting sign/veto from MO Governor Jay Nixon.

Opponents argue that the state’s very economic recovery is at stake, “Club owners and dancers say that the venues rarely attract crime, and that the new rules would be so strict that hundreds of jobs and millions of dollars in state revenue could be lost at a time when Missouri’s economy is struggling to recover from the recession.”

JP Morgan Names Doug Braunstein CFO in Shake-Up [AP]
“JPMorgan Chase said Tuesday it is shuffling the positions of three executives, including naming a new chief financial officer. The shake up is part of a program JPMorgan Chase has put in place to have executives work across multiple divisions to broaden their experience. Doug Braunstein is taking over as CFO. He was previously head of the bank’s investment banking division in the Americas. Braunstein, 49, replaces Michael Cavanagh, who had served as CFO since 2004. Cavanagh was named head of the bank’s treasury and securities services business.”

Tropical Storm May Pose Threat to BP Spill Cleanup [Bloomberg]
The first storm of the Atlantic hurricane season may enter the Gulf of Mexico as soon as next week, possibly disrupting BP Plc’s efforts to clean up the worst oil spill in U.S. history.

Thunderstorms in the Caribbean may strengthen into a tropical storm this week before heading into the Gulf between Mexico and Cuba, said Jim Rouiller, a senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania.

“The first named tropical storm of the 2010 season appears more likely to form over the northwestern Caribbean late this week and will go on to represent a formidable threat to the Gulf, along with heightening concerns about the oil slick,” Rouiller said in an e-mail yesterday.

Forecasters are predicting this year’s Atlantic hurricane season, which runs from June 1 to Nov. 30, may be among the most active on record and hamper the U.K. oil company’s efforts to plug the leaking well. AccuWeather Inc. forecast at least three storms will move through the region affected by the spill.

New Jersey Democrats fail to extend millionaires tax [Reuters]
Garden State millionaires rejoice!

SEC Crazy Talk [Portfolio/Gary Weiss]
Sam Antar recently turned over 37,000 documents to the Securities and Exchange Commission but not because the SEC was getting nostalgic for the Crazy Eddie days.

The SEC wanted documents, emails etc. from both Antar and Fraud Discovery Institute founder Barry Minkow on companies that have been covered by both men. The information relates mostly from information obtained from short-sellers. However, Gary Weiss writes that the SEC also asked for emails that the two exchanged with two reporters and from Antar’s ex-wife.

Gary thinks that this poking around by the Commission is all too familiar, “Well, I think what we may be seeing is a repeat of the [David] Einhorn fiasco, and then some,” referring to the SEC’s investigation into Einhorn’s criticism and short-selling of companies.

Einhorn was eventually vindicated and the companies – most notably Allied Capital – outed for their shady practices. Why the SEC is digging around the very people trying to help them isn’t quite clear but then again the SEC doesn’t have the greatest track record.