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Accounting News Roundup: Auditor Rotation; CFTC’s Leases; The CFO Is Dying | 02.05.16

Companies Get Pass on Investor's Audit Firm Proposals [BloombergBNA]
The PCAOB gave up on auditor rotation last year, but that doesn't mean people aren't out there still trying to convince public companies that it's something they should do:

A shareholder resolution calling on several companies, including 3M Co., Intel Corp. and Norfolk Southern Corp., to consider changing external auditors every eight years won't go before stockholders for a vote this year.

In January, the Securities and Exchange Commission's Division of Corporation Finance said in “no-action” letters that the companies may exclude the shareholder proposals from their proxy materials under 1934 Securities Exchange Act Rule 14a-8(i)(7) because the resolutions appear to relate to “ordinary business operations.”

The resolutions, submitted by Canada-based Qube Investment Management Inc., may be the largest effort to use shareholder proposals in an attempt to force companies to change their audit firms periodically, according to a search of SEC filings.

Almost everyone agrees that limiting auditor tenure is a bad idea. The BNA article lists the 11 companies that Qube targeted with this effort and 7 of them wrote the PCAOB objecting to the mandatory rotation while the proposal was open.

Qube is not the first shareholder to push for putting the "consider changing external auditors" proposal before shareholders. Back in 2013, right after the House of Representatives passed a bill that would prevent auditor rotation, I wrote about the United Brotherhood of Carpenters pension fund's attempts and failures to get auditor rotation on shareholder ballots. The gist being that auditor rotation has been publicly recognized as a subject that is "a significant policy issue" and worthy of "widespread debate." In the past, the SEC has exempted those "significant policy issues" from Rule 14a-8(i)(7), but not auditor rotation. The Division of Corporate Finance has remained consistently inconsistent on this particular issue.

So that's interesting! Auditor rotation is more or less dead, but if the right shareholder wanted to make some noise about a change in audit firm, there are still some avenues to explore.

U.S. watchdog finds CFTC violated accounting law [Reuters]
Well, the CFTC's accounting troubles have gotten slightly worse:

The federal government watchdog has determined that the U.S. Commodity Futures Trading Commission violated a government accounting law by understating its leasing liabilities, a year-long investigation found.

The finding by the Government Accountability Office, released on Thursday, follows a Reuters report last month that KPMG found a "material" accounting error that led the auditor to withdraw financial opinions on the derivatives regulator.

When the CFTC signed "multiple-year leases, it failed to record an obligation equal to the government's total liability," the non-partisan GAO said in its report.

The agency did include clauses on the availability of funds to its financial reports, but "they were not worded or exercised property and were therefore ineffective," according to the GAO, which said the CFTC had violated a federal law that governs how budgetary obligations are recorded.

On the one hand, it's pretty bad that an agency that is tasked with such complex regulation can't figure out basic lease accounting. On the other, why did this go on for 10 years before someone caught it? "For years, neither the agency's inspector general nor its independent accountants raised objections with this practice," the CFTC spox said. He has a point! Everyone — CFTC, OIG, KPMG — looks bad here, but the CFTC is taking the brunt from Senators who want to make life for the agency difficult.

Baker Tilly International Revenue Grows 7% [AT]
$3.8 billion worldwide. And guess what's growing fastest?

In terms of service lines, audit revenue increased 2 percent to $1.383 billion, while consulting revenue grew 17 percent to $1.014 billion. Tax revenue increased 7 percent to $943 million, and accounting revenue grew 3 percent to $468 millon [sic].

Still dancing! In jeans!

Previously, on Going Concern…
Lying about audited financial statements. Leona May wrote about work-life balance in 2016. And from Open Items: Fulfill 150 credit CPA requirement and accounting career, help…

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