When you woke up this morning did you let out a big yawn and then ask yourself “how can audit firms respond to ongoing regulatory scrutiny?” Thomson Reuters has your back:
The Public Company Accounting Oversight Board (PCAOB) released an analysis showing a concerning trend of increased audit deficiencies and noncompliance with PCAOB standards and rules. PCAOB staff expects approximately 40% of the audits reviewed in 2022 will have one or more deficiencies, up from 34% in 2021 and 29% in 2020. And the Securities and Exchange Commission (SEC) continues to charge audit firms and audit firm executives with improper professional conduct for violating auditing standards.
“The PCAOB will continue demanding firms do better, conducting transparent inspections and bringing strong enforcement actions where appropriate,” said PCAOB Chair Erica Y. Williams, signaling there is no end to the microscope.
Indeed, regulators have historically taken the approach of where there is one, there are many —whether it is financial services firms, technology companies, or now audit firms, once one major breach of misconduct occurs, regulators take a closer look at the industry at large to understand how deep and wide an issue may be.
In this environment of increased scrutiny of auditors, audit firms must double down on a culture of integrity and ensure that they have quality control systems in place to enforce compliance. Like their clients, firms must invest in their own compliance and internal controls to guard against potential misconduct.
Also at TR, this infographic on how to keep accounting staff happy. Didn’t even need to see the rest of it to know we were gonna like it. The rest of it.
The Times Union of Albany wrote about local firm BST and its enthusiasm for women in leadership:
A Latham-based accounting firm is touting the number of women it employs in leadership positions, which some partners at the firm say has been partly driven by a longtime practice of letting women with children work from home.
The firm, BST & Co., employs nine female and 14 male accounting partners. The 39 percent makeup of women partners exceeds the national average of 23 percent, according to a 2019 survey by American Institute of Certified Public Accountants. Managing Partner Ron Guzior told the Times Union that more women than men have been getting promotions to partners within the last decade.
“I think it goes back directly to our strategy and the type of culture we’ve tried to build here,” Guzior said. “The culture that we’ve built here over the years focuses on work-life balance and being flexible.”
Besides its tax department, BST includes teams dedicated to valuation and litigation, along with a “virtual accounting solutions” department offering accounting services to companies. Most employees working for the virtual accounting solutions department, Guzior said, are mothers working from home.
Guzior said the female-dominated department has helped the firm respond to a growth of women-owned businesses and women-led organizations.
“We benefit by having female partners at that level who connect with clients or potential clients at that level,” Guzior said.
Little Arizona firm BeachFleischman has acquired the majority ownership stake in the nearshore outsourcing firm, Kuadra Support, located in Hermosillo, Sonora, Mexico. “The transformation of the accounting profession creates significant opportunities. It’s no longer bound by geographical boundaries, technological impediments, or local talent scarcity. Kuadra gives us the ability to provide nearshored back-office functions and talent sourcing to the U.S. market while continuing to expand our integrated service offerings for the clients we serve who want to augment staff, scale growth, and increase capacity by leveraging Mexican talent,” said Fernando Barraza. Luis Fernando Garayzar shared “We are excited about the opportunities that lie ahead as we build upon this partnership and create a positive impact on the professional services industry.”
Triad Business Journal discusses Cherry Bekaert’s big world domination plans:
The firm will be bringing three new states to Cherry Bekaert’s footprint – Kentucky, Ohio and Indiana. All of the firm’s employees and offices will be retained, Cherry Bekaert CEO Michelle Thompson said.
“We’ve been here for 75 years all across the Southeast, we are in the most desirable market in the country,” she said. “But part of our expansion is being able to get into the right markets. These states fit right between our Nashville and Chicago offices, so it snaps right into our geography. We feel very strongly that those are complementary markets.”
Widmer Roel is happy to announce that Julia Stenberg, CPA was promoted to Audit Supervisor, Brody Engen, CPA and Eric Bucholz were promoted to Tax Supervisors, and Candace Jacobs was promoted to Senior Audit Associate.
POLITICO discusses the lack of a Big 4 audit firm equivalent in AI. Who’s gonna tell them?
But a primary concern of algorithms and AI-based technology is the opaque nature of how they work and reach the results that they do. The NYC law’s bias audit requirement is an attempt to address that, though the industry trying to service those needs is in early days of its own.
There’s not yet an equivalent to the Big Four accounting firms that major corporations rely on to verify their books — an admittedly flawed system that is nonetheless a lynchpin of financial trust.
“There’s not any sort of regulation around who can be an auditor,” Rood said. “My guess is that changes … but that doesn’t exist today.”
Here’s a read from someone we’ve never heard of in New Zealand (sorry, Ruan Jooste):
The real problem with the auditing profession isn’t conscious corruption, it’s unconscious bias
The audit profession has been in the news plenty over the years and all over the world, and never for the right reasons. From the Enron scandal in the US that brought Arthur Anderson down with it to the Wirecard impropriety in Europe, which saw Germany’s accounting watchdog fine EY and ban it from some audits in the country.
Australian mainstream media is still banging the drum on the Big 4 oligopoly. To think PwC thought this would just quietly go away. Afternoons on the golf course must be incredibly awkward these days.
The big four accounting giants racked up billions of dollars in auditing fees in the private sector as the quality of auditing declined, heightening concerns it could trigger another Enron-type corporate collapse.
The infiltration of the big four — EY, Deloitte, KPMG and PwC — in government departments has been well documented. What is less well known is their role in the private sector as auditors sprinkling holy water over company financial accounts, as well as offering consultancy services spanning tax minimisation advice, cyber security, IT and strategy.
Their power extends to the boardrooms of corporate Australia, where hundreds, possibly thousands, of alumni are directors of the most powerful organisations.
Alarmingly, while the big four have been dominating auditing, corporate watchdog ASIC has found the quality of auditing is declining. It is something Professor Allan Fels told 7.30 is a sleeper issue that could trigger a corporate collapse.
“We know that the global financial crisis of 2008 was partly triggered by bad auditing,” Professor Fels said. “I have deep fears that something similar could occur to topple the global and the Australian economy in the coming period.”
Last year, ASIC’s inspection reports found deficiencies in a third of the biggest firms. Separate reviews found negative findings in 50 per cent of Deloitte’s auditing cases and 48 per cent of KPMG’s.
Accounting professor John Dumay described it as a market failure.
“To me, the value out of the audit is to be able to go to the investor and say, ‘We have a good company, we’re performing well, the auditors come and have given us a tick in a box, a clean bill of health, you can trust what we’ve got to say.’ That’s what an audit is supposed to do,” he says.
“When it doesn’t do that, because there are deficiencies in the audits themselves, then the system breaks down.”
And from Sydney Morning Herald:
Big four consulting firms accused of ‘lowball quoting’ to win government contracts
Taxpayers forked out $1.8 billion more than initially expected for big four consultancy contracts awarded over the past decade, sparking accusations the firms are lowballing quotes to win federal government work.
Amid growing scrutiny of the firms’ relationships with the government following the PwC tax leak scandal and ahead of a major Labor crackdown, an analysis by the Centre for Public Integrity found almost 19 per cent of contracts won by the firms were later changed.
James Henry Ingram of Little Rock, AR (b. 1949) passed away on August 9, 2023. His obituary includes a big flex:
Jim was a certified public accountant and was very proud of his profession. Jim practiced as a C.P.A., for over 50 years, in Little Rock. He was a straight A student, and graduated at the top of his class, obtaining his degree in accounting from the University of Arkansas in 1971. During one of his college summers, he worked for the Carnival on the “Bonnie and Clyde Get Away Car Exhibit” with many fun experiences.
After graduation, Jim moved to Little Rock, took the C.P.A. exam, and passed it the first time, which was a rare accomplishment for the time.
We salute you, Jim.
Alright, that’s plenty of news for a Monday morning. Go forth and have a lovely week, give me a shout if you see something interesting or even if you just want to vent, my virtual door is always open.