Category: PCAOB

Another KPMG Client Gets ID’d in a PCAOB Inspection Report

Back in March, Bloomberg’s Jonathan Weil called attention to a PCAOB report that was pretty harsh on KPMG-Bermuda’s audit of Alterra Capital Holdings. At the time he wrote the column, KPMG, the PCAOB and Alterra weren’t talking but then Alterra filed a 8-K admitting that they were the filer in question.

Today Weil lets the cat out of the bag again and yes it’s another KPMG client, Motorola:lockquote>Four years ago, inspectors for the auditing industry’s chief watchdog discovered that KPMG LLP had let Motorola Inc. record revenue during the third quarter of 2006 from a transaction with Qualcomm Inc. (QCOM), even though the final contract wasn’t signed until the early hours of the fourth quarter. That’s no small technicality. Without the deal, Motorola would have missed its third-quarter earnings target.

The regulator, the Public Company Accounting Oversight Board, later criticized KPMG for letting Motorola book the revenue when it did. Although KPMG had discussed the transaction’s timing with both Motorola and Qualcomm, the board said the firm “failed to obtain persuasive evidence of an arrangement for revenue-recognition purposes in the third quarter.” In other words, KPMG had no good reason to believe the deal shouldn’t have been recorded in the fourth quarter.

This may sound familiar to some of you that read PCAOB Chairman James Doty’s speech from last week when he said this:

PCAOB inspectors found at one large firm that an engagement team was aware that a significant contract was not signed until the early hours of the fourth quarter. Nevertheless, the audit partner allowed the company to book the transaction in the third quarter, which allowed the company to meet its earnings target. Although the firm discussed the timing of the transaction with the customer, it failed to obtain persuasive evidence of an arrangement for revenue recognition purposes in the third quarter. The company had been an audit client of the firm for close to 50 years.

Weil writes, “KPMG has been Motorola’s auditor since 1959; it had been Motorola’s auditor for 47 years at the time of the Qualcomm deal.” So, yeah. How did he piece this one together? Elementary, my dear auditors:

Motorola’s identity was disclosed in public records last month as part of a class-action shareholder lawsuit against the company in a federal district court in Chicago. The plaintiffs in the case, led by the Macomb County Employees’ Retirement System in Michigan, filed a transcript of a September 2010 deposition of a KPMG auditor, David Pratt, who testified that Issuer C was Motorola. KPMG isn’t a defendant in the lawsuit.

Pratt also identified the Motorola customers cited in the board’s inspection report. It’s his deposition that allows me to describe the report’s findings using real names.

The oversight board said a significant portion of the company’s earnings for the 2006 third quarter came from two licensing agreements that were recorded during the last three days of the quarter. One was the Qualcomm deal that wasn’t signed until the fourth quarter. The board also cited other deficiencies in KPMG’s review of Motorola’s accounting for the transactions.

As is their wont, KPMG isn’t talking. Motorola isn’t talking (but maybe there’s another 8-K in our future?). The PCAOB, bound by the law -which, some say, is debatable – isn’t talking. My guess is that Jon Weil will continue to talk…er…write columns shining the lights on shoddy audits until the Board breaks its silence.

Dirty Secrets Fester in 50-Year Relationships [Jonathan Weil/Bloomberg]

PCAOB Chairman James Doty Is Concerned That Some Auditors Either Don’t Care or Are Completely Ignorant About the Notion of Independence

As you may have heard, PCAOB Chairman Jim Doty gave a speech at the University of Southern California yesterday where he discussed among other things, the possibility of mandatory auditor rotation and changing the standard auditor’s report. The prospect of these two changes aren’t exactly something auditors are stoked about but some people are of the opinion that a) auditors like to get a little too chummy with their clients which leads to b) not taking the “independence” thing too seriously and c) the auditor’s report, in its current form, its pretty much worthless.

You can read Doty’s entire speech over at the PCAOB website where touches on all of these but here’s one example around independence that probably qualifies for, in Doty’s words, “[an] approach [to] the audit with an inappropriate mindset”

[An] audit partner’s self-assessment claimed that he “overcame long-standing barriers against non-audit services at [two audit clients] with a series of well-planned meetings and supporting presentations with the Audit Committee Chair, the full Audit Committee, the CEO and the CFO at both companies.”

In response, his reviewing partner noted that he was –

highly alert to cross service line opportunities and has successfully penetrated both of his accounts where few services had been
provided in the past. The results of these efforts were a number of proposals and wins but the efforts will likely impact FY 11 in [a] more significant way.

Anyway, there are other stories of bad auditor behavior, so check the whole speech if you feel so inclined. And while Chairman Doty admitted that “We don’t see these problems in all the files we look at,” it causes he and others to wonder if “these audit partners are unaware of, or simply unconcerned about, the independence rule that should make such considerations irrelevant to their compensation, and why a firm would allow such unawareness or unconcern to continue unabated.”

So flagrantly bending the rules to the point where they might as well be breaking or stupidity? Neither is too flattering.

PCAOB Permanently Bans Utah Accounting Firm, Ex-Managing Partner From Auditing Public Companies

The PCAOB has just made a serious example out of Bountiful (yes, it’s a town), Utah-based Chisholm, Bierwolf, Nilson & Morrill by banning the firm permanently from auditing public companies after “numerous violations of professional standards, including failure to detect fraud.” The Board also barred former managing partner Todd Chisholm for life and partner Troy Nilson for five years.

Curious about what kind of shoddy work the firm performed to get such a slap? Us too. Luckily the Salt Lake Trib has an example:

One of the companies that the firm audited was Powder River Petroleum International Inc., an Oklahoma corporation with offices in Alberta, Canada.

Until it was placed into receivership in 2008, Powder River’s public filings reported that it acquired, developed and resold interests in oil and gas properties. The company resold interest in oil and gas leases to investors in Asia, but reported those investments as income despite also promising investors a return of 9 percent until their principal was recouped, the board said.

That resulted in the company, traded over-the-counter, overstating its revenue by up to 2,417 percent, its pretax income up to 441 percent and assets up to 48 percent.

I called the PCOAB to see if this was the most severe ban every given to a firm and a CPA but couldn’t get an immediate answer. The five year ban also seems pretty severe. Doesn’t seem like too much of a stretch since the Board has only issued 36 disciplinary actions since 2005. I’ll update the post when I get some definitive answers. UPDATE: We’ve been informed that “it’s among the most severe” penalties issued.

It’s also worth noting that two of the firm’s clients – Hendrx Corp. and Jade Art Group – had substantial Chinese operations which wouldn’t be an issue if it wasn’t for this, “Chisholm, who does not speak or understand Chinese, relied on Firm assistants with Chinese language skills to identify audit issues, communicate with management and third-parties, and analyze documents provided by the issuer.”

Maybe those “assistants” were audit wizards, maybe they weren’t but either way, Mr Chisholm might be looking to change careers.

Chisholm

Alterra Blows Off Proxy Advisors; Recommends Shareholders Reappoint KPMG as Auditor

After all the hubbub over the PCAOB inspection report that was brought to light by Bloomberg’s Jonathan Weil, including two recommendations by proxy advisors Glass Lewis and Institutional Shareholder Services Inc., Alterra Capital Holdings has recommended to its shareholders that they vote “FOR” the ratification of KPMG as the company’s independent auditor.


From thc.gov/Archives/edgar/data/1141719/000093041311002842/c65254_defa14a.htm”>SEC Filing dated April 19th (all emphasis is original):

TO THE SHAREHOLDERS

We are writing to bring your attention to a disagreement between Alterra Capital Holdings Limited (the “Company”), on the one hand, and each of ISS Proxy Advisory Services and Glass Lewis (each, a “Proxy Advisor”), on the other hand, with respect to the recommendation by each of the Proxy Advisors to vote “against” the Company’s proposal to ratify the appointment of KPMG Bermuda as the Company’s independent auditors for fiscal year 2011 and authorize the Company’s board of directors (the “Board”) to set the remuneration of the independent auditors at the Company’s Annual General Meeting of Shareholders scheduled to be held on May 2, 2011. The Proxy Advisors’ recommendations are primarily related to a report issued by the Public Company Accounting Oversight Board (the “PCAOB”) regarding the Company’s auditors, KPMG Bermuda. The PCAOB is a nonprofit corporation established by the U.S. Congress to oversee the audits of public companies. One of the principal roles of the PCAOB is to perform inspections of the audit files of accounting firms that conduct public company audits. Each audit firm is selected by the PCAOB for inspection at least once in every three years.

In November 2009, the PCAOB reviewed KPMG Bermuda’s 2008 audit files of a public company client located in Bermuda in connection with a routine periodic inspection. In March 2011, the PCAOB publicly issued its findings in a report dated January 28, 2011 (the “PCAOB Report”). Although the PCAOB Report did not identify the public company by name, an article posted on Bloomberg News on March 30, 2011 alleged that the public company client at issue was the Company (formerly Max Capital Group Ltd.). The Company confirmed that it was the client referenced in the PCAOB’s Report in a Current Report on Form 8-K dated March 31, 2011.

The Proxy Advisors’ recommendations also cite concerns that certain of the Company’s directors and officers previously worked at KPMG.

For the reasons set forth below, the Board disagrees with the Proxy Advisors’ recommendations to vote “against” the Company’s independent auditor proposal. The Board unanimously recommends that you vote “FOR” the ratification of KPMG Bermuda as the Company’s independent auditor.

Since this decision by the Board might not sit well with a few people, they’ve carefully laid out the case as to why sticking with the House Klynveld is the right thing to do. They are as follows:

1. The PCAOB Report did not question the Company’s valuations that are reflected in its financial statements.

2. The PCAOB Report did not impact KPMG Bermuda’s unqualified opinions on the Company’s financial statements in 2008, 2009 and 2010; there was and is no restatement issue.

3. The PCAOB made similar findings regarding all four major accounting firms.

4. The Audit and Risk Management Committee was aware of the PCAOB review and made an informed decision in recommending KPMG Bermuda as the Company’s Independent Auditor for 2011.

5. KPMG Bermuda is independent from the Company.

6. The Audit and Risk Management Committee will reassess KPMG Bermuda’s qualifications and suitability in 2012.

Just a few thoughts on some of these:

• It’s not the job of the PCAOB to question the Alterra’s valuations. That’s what KPMG was supposed to do. The PCAOB said KPMG did a lousy job of getting enough evidence to support those valuations.

• Just because there wasn’t a restatement doesn’t mean the auditors did their jobs correctly.

• Admitting that “all four major accounting firms” had similar findings says a lot about what the Board thinks of auditors.

• Is point #5 supposed to be a reminder for the shareholders that have no business acumen whatsoever?

• Point #6 could be better stated as “Our Board is getting good at jumping through hoops. See you next year.”

Any other thoughts? Leave them below.

Glass Lewis Recommends That Alterra Shareholders Drop KPMG-Bermuda as Auditor

Remember Alterra Capital Holdings Ltd? They’re were exposed by Bloomberg’s Jonathan Weil last month as the KPMG-Bermuda audit client that was selected by the PCAOB for inspection. The audit didn’t go so hot as the inspectors found “the firm did not obtain sufficient competent evidential matter to support its opinion on the issuer’s financial statements.” To put this in context, Weil explained that available-for-sale securities were the largest asset on Alterra’s balance sheet and it accounted for “half of the company’s $7.3 billion of total assets as of Dec. 31, 2008, and a little more than half of its $9.9 billion of total assets at the end of last year.”


In wake of this little revelation, research firm Glass Lewis & Co. has recommended to Alterra Capital Holdings that they kick KPMG-Bermuda to curb (after nine glorious years), according to a copy of the “Proxy Paper” sent to Going Concern. The report rehashes the whole story and then concludes with this:

Despite the lack of any restatements of previous financial statements, we believe that shareholders should be concerned about the reappointment of KPMG following the lapses uncovered by the PCAOB. Therefore, we believe that shareholders should hold the audit committee responsible for reappointing the same audit firm.

Glass Lewis also wanted to make shareholders “aware” of the fact that Alterra’s Audit Committee Chair, CFO and CAO are all KPMG alumni but stopped short of citing it as a reason to oppose KPMG at the meeting on May 2. According to the report, Glass Lewis had recommended that Alterra retain KPMG as auditor prior to the last shareholder’s meeting which the shareholders did by an overwhelming margin with nearly 91 million votes voting “For,” 182k voting “Against” and 32k abstained.

PCAOB Chairman Doty Shares Some Confusing Statements Made by Auditors

Yesterday, prior to today’s excitement regarding Satyam and PwC, PCAOB Chairman James Doty spoke at the The Council of Institutional Investors 2011 Spring Meeting and he had some interesting things to say about the audit profession, specifically that auditors don’t always remember that “protecting investors” ≠ “client service”:

Time and time again, we’ve seen services that might be valuable to management reduce the auditor’s objectivity, and thus reduce the value of the audit to investors. While management may need the services, they just don’t have to get them from the auditor.

Audit firms call this “client service,” and it makes things terribly confusing. When the hard questions of supporting management’s financial presentation arise, the engagement partner is often enlisted as an advocate to argue management’s case to the technical experts in the national office of the audit firm. The mortgaging of audit objectivity can even begin at the outset of the relationship, with the pitch to get the client.

Consider the way these formulations of the audit engagement that we’ve uncovered through our inspections process might prejudice quality:

• “Simply stated we want management to view us as a trusted partner that can assist with the resolution of issues and structuring of transactions.”

• We will “support the desired outcome where the audit team may be confronted with an issue that merits consultation with our National Office.”

• Our audit decisions are “made by the global engagement partner with no second guessing or National Office reversals.”

Huh. Doty doesn’t name names but you could easily interpret those statements as one made by a client advocate, not a white knight for investors. He continues:

Or, to demonstrate how confusing the value proposition could be even to those auditors who try to articulate it:

• We will provide you “with the best, value-added audit service in the most cost effective and least disruptive manner by eliminating non-value added procedures.”

(What is a “non-value added procedure”? Whose value do you think the claim refers to? If a procedure is valuable to investors but doesn’t add value to management, will it be scrapped?)

In other words, “we promise that we won’t be pests” and “value” will be a game-time decision. And finally:

Or, consider this as a possible audit engagement formula for misunderstanding down the road:

• We will deliver a “reduced footprint in the organization, lessening audit fatigue.”

(What is “audit fatigue”? Does accommodating it add value to investors? How should investors feel about a “reduced footprint”?)

Yes, what is “audit fatigue”? Is that what happens to second and third-year senior associates every February/March? Or is this better articulated by “we know audits are annoying and our hope is that we won’t annoy you too much.”?

Taking this (the whole speech is worth a read) and everything else that happened today into account, it will be interesting to hear what Mr Doty has to say at tomorrow’s hearing.

Looking Ahead: Auditor Oversight [PCAOB]
Also see: Watchdogs caught nuzzling and wagging tails; auditor sales pitches exposed [WaPo]

(UDPATE) KPMG-Bermuda’s PCAOB Inspection Gets a Little Unwanted Attention

Most of you are acutely aware that PCAOB inspection reports, while chock full of interesting tidbits, are a little anti-climactic since we never learn who the auditees are. Oh sure, we can speculate until our heart’s content but the PCAOB says they took a vow of silence after 43 struck his signature on Sarbanes-Oxley.

The secrecy is frustrating (read: bor-ing) so it was especially cool to see Jonathan Weil let the cat out of the bag on at least one Big 4 client:

Two weeks ago,Accounting Oversight Board released its triennial inspection report on the Hamilton, Bermuda-based affiliate of KPMG, the Big Four accounting firm. And it was an ugly one. In one of the audits performed by KPMG- Bermuda, the board said its inspection staff had identified an audit deficiency so significant that it appeared “the firm did not obtain sufficient competent evidential matter to support its opinion on the issuer’s financial statements.”

This being the hopelessly timid PCAOB, however, the report didn’t say whose audit KPMG-Bermuda had blown. That’s because the agency, as a matter of policy, refuses to name companies where its inspectors have found botched audits. It just goes to show that the PCAOB’s first priority isn’t “to protect the interests of investors,” as the board’s motto goes. Rather, it is to protect the dirty little secrets of the accounting firms and their corporate audit clients.

That’s why it gives me great pleasure to be able to break the following bit of news: The unnamed company cited in KPMG- Bermuda’s inspection report was Alterra Capital Holdings Ltd. (ALTE), a Hamilton-based insurance company with a $2.3 billion stock- market value, which used to be known as Max Capital Group Ltd.

Using his detective skills, Weil pieced together the number clients KPMG Bermuda had inspected, the timing of said inspections and the details of the audit deficiency (“the failure to perform sufficient procedures to test the estimated fair value of certain available-for-sale securities”) to come up with Alterra. Of course no one – the PCAOB, KPMG Bermuda or Alterra – would comment/confirm for Weil’s column but you probably knew that was coming. Nevertheless, JW gets into the how bad of an audit this really was:

It’s when you look at Alterra’s financial statements that the magnitude of KPMG-Bermuda’s screw-up becomes apparent. Available-for-sale securities are the single biggest line item on Alterra’s balance sheet. They represented almost half of the company’s $7.3 billion of total assets as of Dec. 31, 2008, and a little more than half of its $9.9 billion of total assets at the end of last year.

This sort of screw-up, some might argue, falls somewhere in the range of “horrendously bad” and “really fucking bad” and Weil wonders if Alterra shareholders will have the stones to throw the bums out at the shareholders meeting on May 2. We can’t say where any of the shareholders stand on the usefulness (or lack thereof) of the audit report, so maybe this revelation is NBD to them. But if that is the case, it seems to make an even stronger case for the irrelevancy of auditors.

Weil’s larger point is that the PCAOB continues to hide behind their policies that are supposed to protect investors but in reality come off as talking points, not so unlike the firms they regulate. The PCAOB says they’re working on that but we’ll have to wait until summer to find out how crazy things get and whether it will be enough to shove auditors back into some respectability.

Dirty Little Secret Outed in Bermuda Blunder [Jonathan Weil/Bloomberg]

UPDATE:
Alterra cops to it with an 8-K that was filed about 90 minutes ago:

Alterra is aware of a recently issued report by the Public Company Accounting Oversight Board (the “PCAOB”) related to the PCAOB’s review of KPMG Bermuda’s 2008 audit files of a public company client located Bermuda, as well as an article posted on Bloomberg that indicates that the public company client is Alterra (formerly Max Capital Group Ltd.). Alterra confirms that it is the client referenced in the PCAOB’s report.

The PCAOB report findings question the sufficiency of procedures performed by KPMG Bermuda in its audit of Alterra’s estimated fair value of certain available-for-sale securities as promulgated by generally accepted audit standards (“GAAS”). The PCAOB report questioned whether the audit procedures used by KPMG Bermuda in 2008 to verify such values were sufficient. The PCAOB report does not question the appropriateness of the values that Alterra attributed to assets available-for-sale in 2008.

Alterra notes that the PCAOB made substantially similar findings in a number of inspections of 2008 and 2009 audits performed by the larger accounting firms and, since 2008, we understand the firms have issued additional guidance to clarify the work to be completed on the audit of fair value investments.

KPMG Bermuda has represented to Alterra and its Audit Committee that it believes it properly and appropriately followed GAAS as defined at the time of the audit. KPMG Bermuda confirmed in its response to the PCAOB report that “none of the matters identified by the PCAOB required the reissuance of any of our previously issued reports.” Alterra reaffirms its belief that the asset values ascribed to its available-for-sale securities in 2008 and subsequent periods remain appropriate.

KPMG Bermuda issued an unqualified opinion for Alterra’s year end financial statements for each of 2008, 2009 and 2010.

Who’s Ready for Changes to the Auditor’s Report?

“We heard from investors that they want more information in the auditor’s report. Investor dissatisfaction with the current auditor’s reporting model should concern other constituents as well, including preparers, auditors and regulators,” said PCAOB Chairman James R. Doty. “Today’s report from our own staff, based on their discussions with a broad audience, will be vital to the Board’s effort to develop a meaningful proposal for change in a concept release. Our intention is to expose such a release as early as this summer.” [PCAOB]

Chart of the Day (From Yesterday): Audit Failure Edition

As if the combination of March Madness and St. Patrick weren’t enough, this slide from yesterday’s Investor Advisory Group meeting should drive many to drink.


After yesterday’s findings on the usefulness (or lack thereof) of the auditor’s report, we bring you “The Watchdog that Didn’t Bark … Again.” It’s not as caught up on surveys and whatnot, as it is just pointing out some of the well, failures by auditors during the financial crisis.

The presentation was prepared by The Working Group on Lessons Learned from the Financial Crisis of the IAG and includes past comments from critics like Francine McKenna and Jonathan Weil on the expectations gap between auditors and basically everyone else. But don’t worry, it also presents the audit profession’s defense of itself including past statements from the Center for Audit Quality and PwC’s Richard Sexton the head of audit it the UK, who said this:

Now, one could come to the conclusion that Mr Sexton works for his clients first and not investors but you might not agree with that.

Now before all the Big 4 auditors get in a huff, the presentation has some criticisms of the PCAOB as well, specifically on the report the Board issued in September 2010:

If you can manage to stop drinking your breakfast for two, check out the full presentation below and discuss.

The Watchdog That Didnt Bark

The PCAOB Has Some Thoughts on This Chinese Reverse Merger Trend

In the past few months you may have heard a thing or two about small Chinese companies making their way into the U.S. by virtue of a reverse merger. If you’re not familiar, it was a speciality of the firm formerly known as Frazer Frost who got out of the business altogether because of a “culture clash” and “issues in the Chinese reverse mortgage practice area.”

All this has gotten the attention of the PCAOB who issued a Research Note (full document after the jump) today discussing t–more–>
Recently minted PCAOB Chair Jim Doty sprinkled in some thoughts for the press release but we obtained this statement from the Chairmn in case you anyone thinks they aren’t taking this shit seriously (my emphasis):

“As the PCAOB Research Note describes, small Chinese companies are increasingly seeking access to capital and trading in U.S. securities markets. The PCAOB has inspected the audits of many of these companies, when they were performed by U.S.-based audit firms. In some cases PCAOB inspection teams have identified significant audit deficiencies and, as necessary, made appropriate referrals for enforcement to protect investors’ interests in reliable audit reports.

“Many other such companies are audited by accounting firms in China. To date, the PCAOB has been denied access to determine through inspection whether such firms have complied with PCAOB standards. This state of affairs is bad for investors, companies and auditors alike. If Chinese companies want to attract U.S. capital for the long term, and if Chinese auditors want to garner the respect of U.S. investors, they need the credibility that comes from being part of a joint inspection process that includes the US and other similarly constituted regulatory regimes.”

Depending on how you perceive the role of auditors, this might seem like be a meaningless statement. But since China’s economy is going gangbusters and Big 4 firms are salivating at the thought of the fees associated with their introduction to the U.S. market, the temptation to help these companies comply with the U.S. rules might be high for an ambitious parter, office or firm.

That said, according to Table 8 of the PCAOB’s Research Note, no Big 4 firm had more than three CRM companies as of March 31, 2010 and now after Deloitte’s resignation from CCME, any partners that were entertaining the idea of chasing these companies could be having second thoughts.

Chinese Reverse Merger Research Note

The UK Invites the PCAOB Over for Tea (and Some Audit Probing)

Convergence may not be that far off after all, here it is 2011 and now we finally have U.S. and U.K. audit harassment agencies working together to share information and polish up that whole bit about protecting investor confidence in capital markets. It may or may not have something to do with the collapse of Lehman Brothers (personally I think the paranoid mistrust in foreign accounting systems – or perhaps just ours – goes back a tad more than that) but soon enough the PCAOB will have an in (after at least one failed attempt) and get a chance to harass inspect foreign firms. We anticipate that this announcement will bring it with it a fantastic new acronym so we can all keep track of who is who.

The Public Company Accounting Oversight Board today entered into a cooperative agreement with the Professional Oversight Board in the United Kingdom to facilitate cooperation in the oversight of auditors and public accounting firms that practice in the two regulators’ respective jurisdictions.

This agreement provides a basis for the resumption of PCAOB inspections of registered accounting firms that are located in the United Kingdom and that audit, or participate in audits, of companies whose securities trade in U.S. markets. The PCAOB previously conducted inspections in the United Kingdom with the POB from 2005 to 2008, but has been blocked from doing so since that time.

Acting PCAOB Chairman Daniel L. Goelzer welcomed the arrangement, which will lay the foundation for the PCAOB and POB to work together to promote public trust in the audit process and investor confidence in capital markets.

The PCAOB can thank the Dodd-Frank WSCRA which amended SOX to permit the PCAOB to share information with foreign audit agencies under certain conditions.

In light of this event, we’re wondering what happens when the two work together sharing “information.” Does it get a brand new acronym that celebrates this new dawn in inter-obnoxious-regulatory-gossiping (IORG) or does it become a hybrid acronym like the Public Professional Company Oversight^2 Board Board or PPCO^2BB? Surely we can do better.

Party at the PCAOB DC office this evening to celebrate, bring your own acronym suggestions and IFRS pocket guide.

See also:
The PCAOB Is Finally Invited to Europe’s Financial Statement Party [JDA]

(UPDATE 2) Who Will Be the New PCAOB Board Members?

~ Update 2 includes statement from PCAOB and clips from the SEC press release.

The SEC is set to make announcement circa any minute this afternoon and rumor has it that there might be last minute changes that amount to “horse trading among commissioners.” Intrigue at the SEC that has nothing to do with porn! Who knew?!?

Francine McKenna also seems excited about it:


Your wild-ass guesses are welcome at this time. We’ll keep you updated once we hear the names.

UPDATE: Silly us. Tammy Whitehouse over at Compliance Week had the potentials yesterday and we somehow overlooked it:

The SEC is expected to name John Huber, former director of the SEC’s Division of Corporation Finance, Lewis Ferguson, former general counsel to the PCAOB, and Jay Hanson, national director of accounting for audit firm McGladrey & Pullen, to three seats that have been open at the PCAOB for more than a year. It’s not clear whether one of those three will be appointed chairman, or whether that title will be granted to Daniel Goelzer, the acting chairman who has held down the fort since Mark Olson resigned in July 2009.

Granted, there are lots of rumors swirling about this “horse trading” so we wouldn’t be surprised if one of these guys (i.e. Huber, Ferguson or Hanson) got dropped for [fill in the blank].

UPDATE 2: And now, perpetually acting PCAOB chair Dan Goelzer:

“I am very pleased that the SEC has appointed three outstanding individuals to the Board. I look forward to working with Jim Doty, Lew Ferguson, and Jay Hanson in continuing to carry out the Board’s mission to protect investors and promote public confidence in audited financial reporting.

“At the same time, I want to thank the retiring Board members, Bill Gradison and Charley Niemeier, for their immeasurable contributions as founding members of the Board and for their years of dedicated service. Investors owe them a debt of gratitude.”

So the trade was Huber for James Doty (who is taking the Chairmanship), the former SEC General Counsel. INTERESTING (at least in some circles). Fro the SEC press release:

Mr. Doty is currently a Partner at Baker Botts LLP in Washington, D.C. He has represented clients on a wide range of securities law matters. He also counsels boards of directors and audit committees on problems arising under the Sarbanes-Oxley Act and related issues. Mr. Doty served as the SEC’s General Counsel from 1990 to 1992. He received an LL.B. from Yale Law School, an M.A. from Harvard University, an A.B. from Oxford University, and a B.A. from Rice University.

Yale, Harvard, Oxford and Rice? Elijah Watt Sells winners, eat your hearts out.