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January 29, 2023

Audit Firms Being More Audit Firm-y in Response to the PCAOB’s Disappointment in Their Audits

Colin buried this in ANR this morning but I'm pulling it out and tossing it at you all like a zookeeper flings raw meat at his wild tigers ifyoufeelme.

Emily Chasan writes in CFO Journal:

This year, financial executives say their external auditors are requesting far more documents and details than usual on everything from pension assets to management reviews. As companies rush to close their books on 2013, they say these new and unanticipated demands are adding time, cost, and confusion to the audit process.

The more rigorous audits are in reaction to an alert from the government’s accounting watchdog. In October, the Public Company Accounting Oversight Board warned that it had found “high levels of deficiencies” in audits of internal controls. These controls act as a company’s first line of defense against fraud and financial misstatements.

Here we go with this shit again. QUICK, everyone find more documentation before those clowns at the PCAOB show up! Surely that will improve audit quality.

It pains me to do this because I hate to encourage him to continue spewing his precious opinion (just kidding, bro, no harm), but Big4Veteran had a related comment recently about the firms' commitment to doing the same old shit they've always done until it is no longer possible to do so:

Excellent point re: the Big 4 firms being behind the ball on recognizing and adapting to changing business cycles. I agree with you. I've said in the past the the biggest problem with the Big 4 accounting firms is that they're run by a bunch of accountants, not visionary business leaders. They are usually much more reactive than proactive. This is why they always seem to be badly overstaffed when the economy is slow and badly understaffed when there are a lot of growth opportunities. By the time they eventually adapt, the economic climate has changed again. The firms are huge, bloated organizations that do not see what's on the horizon in order to change course effectively or timely.

This applies to more than just hiring, ask that SALY chick what I mean.

Sooooo… if audit firms are jumping all over themselves to do better audits (whatever that means), does that mean their beloved methodologies weren't so hot to begin with?

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