“Like oxygen, audit quality may not be fully appreciated when it is present, but I think you can definitely tell when it’s missing.” That’s what George Botic said to attendees of the AICPA & CIMA Conference on Current SEC and PCAOB Developments in January, a get together sort of like Burning Man for auditors except without the psychedelics and skimpy costumes. Unless maybe someone did get it poppin’ in there after hours. Auditors are wild, you never know.
At that same conference he also expressed the importance of skepticism, something average citizens might call “paranoia” if you applied it to basic life transactions like checking your bank balance at the ATM but in auditors’ case it’s just part of the job. “The most important thing an auditor can bring to an audit is an attitude that includes a questioning mind for a critical assessment of evidence,” he said. “It is important to stress this with less-experienced staff who may have been working entirely remotely since they joined the firm. I encourage firm leadership to embrace and promote a culture of ‘I’ve got your back’ to ensure that engagement teams feel empowered to maintain a questioning mind and push back when warranted.” Relevant GIF.
“A questioning mind” also appears in this April 2023 PCAOB Spotlight entitled Professional Competence and Skepticism Are Essential to Quality Audits [PDF]:
The application of professional skepticism – an attitude that includes a questioning mind – is critical to planning and performing high quality audits and ensuring investors are protected.
And of course the most important reference of all, AS 1015: Due Professional Care in the Performance of Work:
.07 Due professional care requires the auditor to exercise professional skepticism. Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence. The auditor uses the knowledge, skill, and ability called for by the profession of public accounting to diligently perform, in good faith and with integrity, the gathering and objective evaluation of evidence.
So, with George’s enthusiasm for skepticism and the PCAOB’s recent hard-ass stance on audit quality in mind, let’s see what the SEC announced yesterday:
The Securities and Exchange Commission today announced the appointment of George Botic, CPA to a term as a Board Member of the Public Company Accounting Oversight Board (PCAOB).
“I am pleased that George will serve on the PCAOB Board,” said SEC Chair Gary Gensler. “George will advance the PCAOB’s mission to build trust in the financial information that public companies disclose to investors. I also would like to thank Duane for his five years with the Board, including his service as Acting Chair.”
“I am honored to be selected to serve on the Board and look forward to working with Chair Williams, the other Board members, and the SEC in my new role to help advance investor protection and improve audit quality through improvements to our standards and rules and continuing our rigorous inspection and investigation programs,” said Mr. Botic.
His CV is no joke:
Botic was most recently the Director of the PCAOB’s Division of Registration and Inspections, which includes the Global Network Firm Inspection Program, the Non-Affiliate Firm Inspection Program, the Broker-Dealer Auditor Interim Inspection Program, and the registration program. He oversaw the registration and inspection of all domestic and foreign accounting firms that audit public companies whose securities trade in the U.S., as well as all broker-dealer audits. He previously served in various roles at the PCAOB, including as its Director of the Office of International Affairs, special advisor to former Chair James R. Doty, and Deputy Director of the Registration and Inspections Division. Earlier in his career, Mr. Botic was a senior manager with PricewaterhouseCoopers.
He was at PwC from September 1990 – August 2003 and has been at the PCAOB since, so from day one of its existence. He’s been Director of the Division of Registration and Inspections since 2018. Botic is replacing current Board member Duane DesParte, CPA whose second term ends October 24, 2023.
In their own news release about the blessed event, the PCAOB said Chair Erica Y. Williams applauded the appointment. Of course she did, she’s long been sick of auditors’ shit and George is just the guy to put the fear of God in them:
“George’s decades-long commitment to the PCAOB’s mission of protecting investors makes him a uniquely qualified addition to the Board. I applaud George’s appointment and look forward to working with him in his new role as we continue to pursue our shared goal of improving audit quality to protect investors,” said Chair Williams. “I want to thank Duane for his service to the PCAOB. I look forward to continuing our work together over the coming weeks and wish him well in his next chapter.”
As we’ve excessively pointed out before, the PCAOB isn’t playing around. All those years of comments about how useless and weak they are (Project On Government Oversight accused our dear audit regulator of “doing a feeble job” in this thorough 2019 deep dive into what the PCAOB has — and has not — been doing since it was born in 2002) must have finally got to them.
No wonder certain non-Big 4 firms are starting to wind down their audit practices completely, an already thankless job is only going to get more annoying going forward. Relevant GIF again.
I have skepticism too- skepticism about the role of the PCAOB. The PCAOB and SEC are destroying the CPA profession, while all we hear from our profession leaders is happy talk. This appointment is par for the course- a bureaucrat who has been with the PCAOB since inception. The Board is filled with lawyers and bureaucrats, with little public accounting experience. The observation here is correct, mid tier firms are exiting the practice, while the only remaining small firms will be in India and Nigeria. The PCAOB cannot be reformed at this point- it must be abolished.
“Stuff and nonsense”, said Alice. As it stands, the PCAOB is just the Big Four’s (BF) cartel administrator. In 20 years the BF’s US arms had about $622 billion in revenues and paid $4.5 million to the PCAOB in fines. One dollar in fines for $138,000 in revenues. There were four PCAOB actions against them for bad audits. Assuming they did about 65,000 SEC registrant audits in the 20 years and 25% of them were “deficient” as defined by the PCAOB, that’s 16,125 bad audits and one PCAOB action for 4,030 bad audits. Think about it. These firms audit 97% of SEC registrants by market cap (MC).
Including the Little Three, BDO, GT and RSM, we have 99% of SEC registrants by MC. Why does the PCAOB look at the other firms, the peanut firms? Is it afraid of the BF or has it been bought off by the BF?
Well Commissioner Williams, am I skeptical enough to suit you?