Sitting in close proximity of the same people day after day, night after night tends to wear on a person (and if you happen to be sleeping with them, it’s worse).
You start noticing the most mundane, yet painfully annoying habits of your fellow auditors and they can drive you up the boringly-beige wall. Pretty soon, assault and battery seems like your only course of action. We ask that you refrain from beat downs (it’s just not considered good professional to batter your co-workers these days), but it is, of course, your God-given right to gripe about it and share your gripes behind the offending co-workers’ back.
But before you get too high and mighty, are you absolutely sure you’re not one of the annoying ones? We consulted another former audit room survivor, DWB, and no one is immune. In order to make you more aware of your personal, er, shortcomings, we’ve assembled this handly list of the most common bad habits that occur in the audit room:
• Eating – You either eat food that makes the entire room reek or you happen to simultaneously masticate and opine on recent accounting developments. Trying to burp quietly is an act in futility and don’t react to your food like it’s sexually stimulating (even if it is). All of these make you terrible to be around.
• Personal phone calls – You know that guy that takes three phone calls from his girlfriend every single day at the exact same time? Or you happen to call your mother every day to shoot the breeze for 45 minutes. Oh, that’s you? Well, not only are you shamefully whipped and/or dependent you’re annoying the hell out of everyone else within earshot.
• Humming, whistling and/or singing – For the love of God, why on Earth is necessary to audibly hum a tune that you’re making up in your head? Furthermore, why would you put words to it? You’re an auditor, not Andrew Lloyd Webber. (And no, it’s not OK if the tune is actually one of Mr Lloyd Webber’s compositions – actually that might be worse.)
Now for those of you that simply think that a set of headphones will solve all these problems, we regret to inform you you’re gravely mistaken. Once these habits have saturated a person’s psyche, any movement, otherwise normal, will amplify the inner wrath to deistic proportions.
The above list is by no means all-inclusive and we’ll admit that our tolerance for bad human behavior is lower than most but the issue is important enough to warrant discussion and possible solutions.
Not that we need to tell any of you working on a LAF but marking the occasion seems appropriate. For those of you would like to know just what the hell it is we’re talking about, March 1st is the 10-K deadline for large accelerated filers (market cap of $700 million or more and few other conditions).
The sleepovers and MSG overdoses are almost over! Plus, now you can dump your busy season bitch. Rejoice!
Actually, not so fast. Whether or not next Monday’s deadline brings an end to your busy season is another story. Some of you may be lucky enough to coast for the next month or so but since staffing was an issue for more teams than usual this year, we’re guessing most of you will get to hop on another team to help them cross the finish line.
For those of you not on an LAF, you’re probably relieved if you happen to be getting an extra set of hands in the coming weeks. And then there are those of you that don’t work on public clients at all that probably need the help but won’t be getting it for another two weeks when the next deadline passes. Even then you might not get the extra help you need.
Well, shit. Maybe we shouldn’t have brought it up.
It’s a big day of counting items of all sorts: screwdrivers, unsold Pontiacs, Shiri Zinn Minx vibrators. And unless you’re Count von Count, we’re guessing that you’re not too psyched about it.
We’ve touched on inventories a couple of times in 2009 and now that the mother of all count days is here, we’ll open a thread for those of you poor souls that will be spending all day tagging [insert item].
Whatever your responsibilities are, we hope they won’t get in the way of your NYE plans but unfortch, one reader has already told us about the less than thrilling news they got yesterday:
I just found out I have one on new year’s eve that is three hours away from where I live for another of the firm’s offices and I likely won’t be leaving there until 8:00 pm. And this company’s inventories have historically been “messy”. F My Life.
Nothing like last minute. To top it all off they’ll probably end up counting pig carcasses outside a slaughter house.
So let this story be your jumping off point for our inventory thread. Share your nightmare inventory count stories from auditor tales of yore or what the hell you’re up to today. And don’t leave out the details like condom goodie bags. Have a great count and don’t be ashamed to use your fingers.
Guys and gals, we here at GC are concerned about something. Something other than who the next face of Accenture will be (honestly we’re excited about Chuck’s commanding lead).
No, we’re concerned that your humble servant and Farmville enthusiast Patrick Byrne is going to be unable to find an auditor for Overstock.com. The company has until January 18th to pull something together so the NASDAQ doesn’t delist them and if things continue the way they are, it’s going to be hello Pink Sheets.
Maybe things wouldn’t look so grim if PB hadn’t blown off CNN. Or if he hadn’t pissed off every single financial journalist and blogger by getting too friendy.
But now that Barry Ritholtz has called for a boycott, any hope for finding the next auditor to put the stamp of approval on OSTK’s financial statements is fading.
Wait! Gary Weiss has his doubts: “As for that boycott: great idea, except that with Byrne manipulating the financials, how would you know if it is having any impact?”
Whew! There’s still a glimmer.
Boycott Overstock.com [The Big Picture]
The partner track is a challenge, as we’ve discussed. The competition in the UK is fierce enough that some directors and manager in the UK have taken it upon themselves to ignore their firm’s policies regarding cross-selling:
Authorities frown upon cross-selling, which involves an auditor selling non-audit services to their audit client. The practice is a potential threat to auditor independence and the Big Four explicitly prohibit the practice from being considered in staff appraisals.
But that didn’t stop Big Four firm Deloitte’s audit directors and managers referring to cross selling when trying to secure a promotion, according to the [Audit Inspection Unit].
“A number of audit directors and managers referred in their performance evaluations to cross selling non audit services to their audit clients,” the report stated.
Maybe this isn’t as much of a problem Stateside, since the SEC has addressed services that are definitely off-limits, and a company’s audit committee has to approve all non-audit work performed by the auditors. If there was a perceived independence issue, one would hope the committee would say no dice and that would be the end of it.
However, if a potential service doesn’t fall into the SEC banned list and the audit committee gives the non-audit service the thumbs up, should a manager be allowed to point to the business that he/she introduced to the firm?
After all that hoop jumping, it would be hard for any manager to resist pointing to business that the firm eventually won. Since the Big 4 have policies against cross-selling coming up in appraisals, it might all be moot but any potential partner still wants to be able to show that they can drum up the business.
If you’ve got feelings or experiences on the matter, discuss in the comments.
Big Four partners seek promotions for cross selling [Accountancy Age]
Our friends across the pond have put it out there that as it stands, an audit report is an audit report is an audit report. Regardless of the firm doing the work, the end product is the same and the Professional Oversight Board (POB) wants audit firms to produce, “more quantitative data to better equip investors and companies with the tools needed to scrutinise their auditors.”
It’s long been popular to call an auditor’s product a “commodity” and this appears to be the Brits’ attempt to dispel that notion. The talk of asking auditors to somehow quantify quality has already garnered support in the investing community in the UK:
Michael McKersie, assistant director capital markets at the [Association of British Insurers], said he would welcome more comparative information. “The relative lack of hard quantitative reporting data on the audit firms and global networks has been… a concern. Comparability is really important and we have, in the past, seen no n-comparability [sic] here as a problem.”
Fine idea, although there’s not a single indication of how the quality could be measured and the director of auditing at the POB even admits that ‘The challenge is how can auditors demonstrate quality and those that use their services assess it.’
This whole idea of “comparability” came up because of a POB inspection of showed, “some firms were rewarding staff for attracting business at the expense of promoting audit quality.” So the answer to this problem — from the POB’s point of view — is to slap together a “rate this audit from 1 to 10” system and the firm with the highest score has the best audits?
Audit firms will always claim that their work is of the highest quality regardless of the circumstances but now regulators want them to put that in some quantifiable form. And because we like to keep the pace with our friends in the UK, it probably won’t be long before an ambitious bureaucrat Stateside (e.g. new PCAOB Chairman) will insist on a similar approach.
If there’s any wonky auditors out there that have some ideas how this could be done, we’re all ears but for now we’re firmly in the skeptical camp.
Clients blind on audit quality [Accountancy Age]
Also see: You mean the Big 4 aren’t transparent? [Tax Research UK/Richard Murphy]
Just a brief follow-up on the three ring circus known as Overstock.com. After Wednesday’s bizarro conference call, Ringmaster Patrick Byrne and his company filed an 8-K on Friday letting the SEC know that the NASDAQ wasn’t impressed with the unreviewed 10-Q that the company filed last week.
The NASDAQ notice informed OSTK that since the company thought it would be cute to file an unreviewed 10-Q, they will delist the OSTK from the exchange if they are not back in compliance with listing rules by January 18th.
It was an especially nice touch that OSTK filed the 8-K “two minutes after market close today, a day after the letter was received.”
Getting back into compliance will involve finding an auditing firm
stupid enough desperate enough willing to be the next humble servant to sign off on the 10-Q.
The issue at hand is worth putting to a vote. For whatever reason you like, choose the firm that should be the next auditor of OSTK. We’re not privy to all the possible independence issues that may exist, so anyone that brings them up to point how one firm would be disqualified can piss off.
Now that you’ve enjoyed the extra hour of tomfoolery thanks to the time machine known as daylight savings time, it’s back to reality.
For auditors working on SEC filers, this means seeing less daylight from now until…well, yeah. The good news is that there’s only one week until the filing deadline for accelerated filers’ 3rd Quarter 10-Qs. For those of you on the non-accelerated types, you’ve got an extra week which could be a lifesaver or just a way to prolong…the…agony.
The bitch of the thing is that for those of you that are/will be going down to the wire, the deadlines fall on Mondays which means your weekend will likely consist of a slumber party at the client’s digs.
So for those of you that live and die by the calendar year SEC deadlines, discuss your Q3 and if it’s business as usual or if your engaging in the standard quarterly rhetoric about how you’re finding a new job right after the Q is filed.
One thing is for sure: clients don’t like getting them. Auditors may even go out of their way to not give one in order to maintain “excellent client service” or whatever the latest buzz phrase is.
Many companies risking the dreaded explanatory paragraph arrived there on their own accord but if a company is legitimately trying to recover from their stay in financial intensive care, auditors may be piling on by issuing the GCO.
Such a qualification can result in tougher-to-get and more expensive financing deals, just when the company is most in need of a break. Indeed, once hit with a going-concern qualification, companies may succumb to a “self-fulfilling prophecy,” say accounting observers. The pariah status such an opinion confers all but forces investors, suppliers, and lenders to turn away, often driving a company on the brink of bankruptcy into a Chapter 11 filing.
CFO’s piece cites the opinion of Al King, former Chairman of the Institute of Management Accountants, who mentions the guidance of auditing rules “don’t allow auditors a wider range of possible warnings.” The situation comes down to one of options: 1) we’re cool or 2) we’re doomed.
That may be a valid point but the idea of an explanatory paragraph that discusses the alignment of the planets along with management’s brilliant plan to save the sinking ship doesn’t seem like the answer.
Nevermind breaking the bad news to your client, who may be living in denial over the state of their company. Or as the Overland Storage situation demonstrated, clients just get their panties in a bunch and start firing auditors. But you still have to the your jobs, amiright?
The GC opinion. Discuss any experiences you have had in comments. Did it involve grown men sobbing like children? Delusional clients? Maybe just gnashing of teeth? Or did the partner fold like a cheap lawn chair in the name of client service?
Living with a Scarlet Audit Letter [CFO]
Did Dow 10,000 get you excited about your 401k again? No? Just a psychological level? Bah. “We don’t give a damn because we’re still down from the highs you jerk.”
Fine, you kill-joys, regardless if you still consider your nest egg to be in the crapper, there are lots of people out there that ingested inhuman amounts of MSG last night to get employee benefit plan audits completed and submitted with their Form 5500s for today’s deadline. This is our tribute to them*.
Sure, EBP audits are the redheaded step-child of audits but they keep some of you employed, they’re profitable and low risk so
everybody a few people win. Good work EBP trolls, finish up and go get your drink on.
*Maybe we were just waiting until the day of the deadline to mention EBPs. Didja ever think of that? Didja?
The public understanding of what auditors actually do is, to put it mildly, frustrating. If you were ask the average dude on the street what auditors’ responsibilities were, “Find fraud” would probably be the first thing that you would hear.
With all the public outrage against everything remotely related to finance or accounting, politicians feel like they have to do something. This usually amounts to putting pressure on bureaucrats, who in turn make rules to appease said politicians who can then point to accomplishments.
The PCAOB is no exception, and regardless of its potential extinction, has a go-getter attitude that includes potentially making the public’s perception more of a reality.
FEI Financial Reporting Blog:
Although not part of the PCAOB’s formal standard-setting agenda for the upcoming year, some SAG members argued there was a need for the PCAOB to revisit the fundamental fraud standard (SAS 99) as a standalone or ‘foundational’ standard, in much the same way as the PCAOB is in the process of re-proposing its suite of risk assessment standards as ‘foundational’ standards.
You probably know where this is going:
In response to questions, Silvers said, “We should not expect that every audit is a forensic audit… that’s absolutely not what I’m saying.” However, he added, “I think we need to move the dial a little bit so auditors have some greater obligation than is currently embodied in the current fraud standard, to have an obligation to act when there is reasonable suspicion of fraud.”
“This was subject to some extensive discussion in the Treasury committee (Treasury’s Advisory Committee on the Auditing Profession or ACAP],” said Silvers, adding, “some people, Lynn [Turner], may feel my approach is not tough enough, some people felt we should move to some absolute liability standard [i.e.] if you don’t find fraud, it’s the auditors fault; but it’s also not my view that looking for fraud is not related to the audit, that doesn’t parse with the public’s [perception] of the audit profession.”
Our emphasis. So not every audit will be a forensic audit, so, just most of them? That’s a relief.
So not only do you need to get way better at auditing fair value, now the brain trust at the PCAOB is considering putting more auditor flesh on the hook when it comes to finding fraud. So not absolute assurance but it’s getting there.
PCAOB Announces Ambitious Agenda; May Be Time to ‘Dial Up’ on Fraud, Silvers Says [FEI Financial Reporting Blog]
Who knows? Our separation-of-powers principles knowledge is pretty much zilch. However, the PCAOB is currently “doubly insulated from both political pressure and presidential oversight” which some – including the Plaintiff in the case,
First Free Enterprise Fund – think is unconstitutional.
First Free Enterprise Fund v. PCAOB, will be argued during the new session of the U.S. Supreme Court on December 7th. Here’s the take of our sister site, ATL, last year when the possibility of the SCOTUS hearing the case first came up.
More, after the jump
We won’t rehash the whole immaculate conception of the PCAOB, as you’re all familiar with that story.
First Free Enterprise Fund v. PCAOB, however, could make things interesting: “This case has the potential to undo the SOX accounting and auditing reforms. As such, the result may impact not just the auditing profession, but also every public company as well as the users of financial statements of those companies.”
‘Undo SOX accounting and auditing reforms’? That sounds kinda serious. We won’t go so far as to suggest that you start forgetting everything that you’ve been trying to get your heads around for the past seven years, but there’s at least a possibility that the PCAOB could become extinct. That could be exciting, or it could make you completely f*cking miserable again.
New Court Term May Give Hints to Views on Regulating Business [NYT]
The Supreme Court Term – Significant Cases for Business [SEC Actions via JDA]
Supreme Court Obsessed With Business This Session [Law Review]
We’ve received several reports about Klynveldians attending “eAudit” training this summer which marks the firm’s attempt to get break into the “paperless” audit world. Reports have been mixed with some saying that it’s best technology KPMG has invested in but others claiming that it will only run on Vista which may be problematic when Windows 7 rolls out.
Forgetting the technology mumbo-jumbo, it’s been long rumored that KPMG was the last major firm to make the move to a paperless audit. This could have been due to a number of things:
More, after the jump
• Partners that have been around since WWII that can’t even use email put the kibosh on the whole idea
• Accountants, in general, resist the idea of trying a new restaurant so don’t even think about messing with their audit methods
What’s more surprising is that some Radio Station clients have said that they prefer the old school audit. Not exactly sure what is so appealing about young auditors schleping around boxes of binders that weigh a few metric asstons but whatevs.
Our point, dude, is that KPMG has finally caved on this whole “paperless” idea. Since audits aren’t truly paperless we’re not sure what all the fuss is about but KPMGers got an extra week in Florida in the dead of summer out of it. Discuss the firm breaking into the new century in the comments or let us know how terrible your lives will be because of it.
Last week we checked in with those of you working on 10-Q’s for the second quarter and it sounded like it was pretty quiet.
Large accelerated filers have until 5:30 EST today to get their 10-Q’s submitted. Any last minute meltdowns out there? Anyone going on 48 hours of no sleep to pull this one off? Let us know in the comments or email us at [email protected].
In a move that probably just adds one more annoying hoop to jump through for auditors, audit engagements will now go through quality review with adoption of AS No. 7, Engagement Quality Review (EQR).
According to the press release, “The EQR standard provides a framework for the engagement quality reviewer to objectively evaluate the significant judgments made and related conclusions reached by the engagement team in forming an overall conclusion about the engagement.”
We’re hoping the engagement quality reviewers will be given free range to document their “overall conclusions” as they wish. Some that we would suggest: “You call yourselves auditors?“, “I’m recommending that the PCAOB inspect this engagement” or “What in God’s holy name are you blathering about?“. It would be a shame for the firms to institute a check-the-box method that would compromise artistic integrity.
In other PCAOB news, the Board is asking for comments on its Concept Release “to consider the effects of a potential requirement for the engagement partner to sign the audit report.” We speculated last week that signatures in blood or dog excrement might be appropriate in many cases but if you’ve got other ideas, you’ve got 45 days to give them better suggestions.
Press Release [PCAOBUS.org]