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After Constant Lehman/Ernst & Young Press Coverage, the PCAOB Is Ready to Get Serious About Audit Committee Communication

So maybe you heard about Ernst & Young and how they kinda, sorta didn’t bring up the shady accounting going on over at Lehman Brothers to the audit committee until a Matthew Lee, your fired whistleblower du jour, brought it up. Some people have suggested that if E&Y had made a single peep about this prior to, say, 2008, maybe we wouldn’t be having this discussion (okay, we’d probably still be having it).


The controversy over this incommunicado has now jolted the PCAOB into action as the they have announced an open meeting for Monday at 9:30 am sharp. Basically, they want to feel everyone out on a standard for required communication for auditors with the audit committees.

As Emily Chasan of Reuters notes, “The PCAOB has considered issuing rules on this issue for the past several years to formalize ways that auditors are expected to communicate with the audit committee of the company they are auditing,” but in classic reactionary fashion, nothing has been done up to this point. Now that we’ve had bankruptcy reports, recycled stories in the press, E&Y hating back the haters, and everything else in this shitstorm, the PCAOB is ready to talk about this.

So, if you’ve got no plans on Monday morning and happen to be in DC, head over to hear the discussion and throw in your $0.02. In the meantime, we’d love to hear some of your suggestions for mandatory talking points from the serious (e.g. accounting treatment that makes the partner even slightly queasy) to the über-ridiculous (e.g. biggest whore on the audit team).

PCAOB, SEC to Be All Up in China’s Business Next Week

Perhaps you’ve heard that some U.S.-listed Chinese companies have had some trouble with their financial reporting. Often times this leads to CFOs quitting, auditors resigning or workpapers being held hostage. None of which are good. Occurrences such as these have been going on for a little while and more recently the SEC admitted that they had, in fact, heard something about it. Perhaps even more surprisingly, a Chinese official also confessed that some of these companies weren’t exactly on top of their shit and in some may not have the faintest idea of what they’re doing.

All this excitement has finally gotten the teams at the SEC and PCAOB worked up enough that it has been decided that they’re popping over to Beijing to meet with the country’s Ministry of Finance and the China Securities Regulatory Commission next Monday and Tuesday to see what’s what.

“This meeting is the commencement of our accelerated efforts with the People’s Republic of China to forge a cooperative resolution to cross-border auditing oversight. I believe we share a common objective with Chinese regulators to protect investors and safeguard audit quality through our mutual cooperation,” said James R. Doty, PCAOB Chairman.

The delegation will be led by Board Member Lewis H. Ferguson and include staff from the PCAOB’s Office of International Affairs and Division of Registration and Inspections, and the SEC Office of International Affairs and Office of the Chief Accountant. The delegation will meet with senior leadership of the Ministry of Finance and the CSRC.

“The purpose of this meeting is to provide an opportunity to exchange information about how each country conducts inspections of auditing firms and to move toward a bilateral agreement providing for joint inspections of China-based auditing firms registered with the PCAOB,” said PCAOB Board Member Ferguson.

Reuters reports that Ferguson considers the trip a “confidence-building exercise,” just in case you were still a little queasy on Sino-Forest, et al.

Statement on Delegation to China [PCAOB]
U.S. audit watchdog, SEC plan Beijing visit [Reuters]