Last week, seven hotshots in the world of accounting and auditing stepped up and put their name on a statement “reaffirming” the profession’s commitment to audit quality. As my headline so subtly suggests, it’s a good thing someone said something because honestly it’s kinda hard to tell they’re serious given all the audit scandals, PCAOB failures, and regulatory smackdowns.
Meet your starting lineup, auditors:
- Wayne Berson, CEO of BDO USA and chair of the global board of directors of BDO International Ltd.
- Lynne Doughtie, U.S. chairman and CEO of KPMG LLP.
- Cathy Engelbert, CEO of Deloitte US.
- Kelly Grier, U.S. chairman and managing partner and Americas managing partner of EY.
- Mike McGuire, CEO of Grant Thornton LLP.
- Barry Melancon, CPA, CGMA, president and CEO of the AICPA and CEO of the Association of International Certified Professional Accountants.
- Tim Ryan, U.S. chairman and senior partner of PricewaterhouseCoopers LLP.
In a joint statement posted to the websites of the AICPA, the Center for Audit Quality, and the above-mentioned firms that got a seat at this table, the seven horsepeople of the audit apocalypse started out by reaffirming not their promise to capital markets but rather to the poor, bright-eyed accounting grads finding themselves entering a profession at a crossroads. That’s right, Class of 2018, this one is for you.
“Graduates joining audit firms this summer can take pride in being part of a profession that is
built on trust and integrity,” they wrote, before launching into a screed about the value of Sarbanes-Oxley. Legislation, I remind you, that came about due to the fact that auditors failed abysmally in their duties hence requiring stronger laws to prevent that from happening again. The PCAOB wouldn’t be here if they’d gotten it right the first time.
The statement continues:
In the United States, this foundation is supported by an effective system of corporate governance, one that was reinforced by the same law that created the PCAOB: the Sarbanes-Oxley Act of 2002 (SOX). Among a range of provisions, the law made the independent audit committees—not management—responsible for hiring, compensating, and overseeing the external auditor. To further enhance auditor independence, the Sarbanes-Oxley Act established rules such as requiring lead engagement partner rotation every five years, as well as prohibiting a range of non-audit services to audit clients. SOX also requires the audit committee to pre-approve permissible non-audit services to audit clients; fees from these services to audit clients must be disclosed publicly.
Our profession also offers new generations the chance to work with the best and brightest in teams across disciplines in an era of unprecedented technological change. With the SarbanesOxley safeguards in place, as auditors, we are increasingly tapping the expertise of colleagues in key areas, such as information systems, cybersecurity risk management, valuation, and complex tax matters. Such a multidisciplinary approach also helps firms to integrate cutting-edge technologies into the audit, a feature that is especially important at a time when artificial intelligence, advanced data analytics, and blockchain have the potential to revolutionize the audit.
“For our new hires, this sustained dedication to quality with independent oversight puts the profession on a solid foundation,” they wrote. Remember this, first years, when you’re sitting in a dank, unused breastfeeding room/mop closet at a client site in the middle of nowhere Nebraska a few months from now wondering what it’s all for.
Perhaps most important of all, the promise of our profession is a commitment to improve—continually. Indeed, for auditors, continual improvement is more than a commitment; it is an imperative. As observed recently by SEC Chief Accountant Wesley Bricker: “Trust in the audit is nurtured as the profession consistently delivers audit quality and value to audit committees and the investing public. Trust can be nurtured or broken—it is neither static nor assumed.” We pledge to adapt to the ever-changing environment in which companies operate and report financial information. In the ongoing global dialogue around audit quality, we will remain open to constructive new ideas that are carefully informed, again in Bricker’s words, by “an assessment of the costs, benefits, and consequences (both intended and not) to the right expectations of investors and others.” Our commitment to continuous improvement benefits our workforce as much as it does the capital markets in that it instills values that are essential to success.
And that, folks, is where we’re at on audit quality. Thank goodness someone said something before we start to wonder if the profession even cares, whew.
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