Tag: Auditing

(UPDATE) Is the PCAOB Going the Way of the Dodo?

Dodo_bird.jpgWho 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.
The case, 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]

KPMG Arrives at the Paperless Audit Party

office-space-402a-061907.jpgWe’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
• M-O-N-E-Y
• 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.

Do You See What Happens?

accountant.jpgThe PCAOB was kind enough to issue a couple of examples this week of what happens when you don’t take your role as auditor seriously.
We wouldn’t dream of putting them both in one post so we’ll give you one in the morning to ponder and save the second for later right about the time you’re ready to flip out, so hang in there.
We’ve also done you the courtesy of reading (sort of) both of the orders so that you can remain fully chargeable (not counting the time you take to read this post of course):
Thomas Linden was a partner in the Chicago office of Deloitte and lead engagement partner on Navistar Financial Corporation (NFC). At the 11th hour, prior to filing the fiscal year 2003 10-K, the engagement team realized that assets, revenues, and net profits were overstated by $19.7 million.
Check out the rest, after the jump


Having a typical over-confident management team, NFC had already taken the liberty of announcing the fourth quarter earnings prior to filing the 10-K.
Because Tom Linden was a Big 4 Partner and thus impervious to any challenge he encounterd, he took the following action (all our emphasis):

• Initiated an increase of approximately 50 percent in Deloitte’s planned tolerance for misstatements in NFC’s reported financial results
• Authored, with the assistance of a member of the NFC engagement team, an NFC auditwork paper that inaccurately characterized the reasons for and circumstances surrounding the increase
• Failed to evaluate adequately the risk that NIC’s financial statements were materially misstated due to error or fraud
• Otherwise failed to act with the requisite due professional care and professional skepticism

Okay, so the last two are boring but the first two kinda, sorta give us this impression of what happened:
Dude finds out the numbers are bunk, client isn’t cool with telling their analysts (who NFC told that they had a kick ass quarter) that said numbers are bunk, so Dude up and decides to ABBACADABRA make the tolerance for misstatement 50% higher than it was for the entire audit (read: that’s a lot).
Then, after probably putting the proverbial (or possibly literal) gun to head of the “member of the NFC engagement team”, they wrote a workpaper that supposedly explained why the tolerance was all of sudden 50% higher but the rationale was something to the effect of “because we said so”.
So for all that tomfoolery (snap!), Linden gets fined $75,000 and can’t be associated with a registered accounting firm for two years and which point he can petition to be to be reinstated. Yow-za. To better times, Tom.
ORDER MAKING FINDINGS AND IMPOSING SANCTIONS In the Matter of Thomas J. Linden, CPA, Respondent. [PCAOB]

Review Comments | 07.22.09

beer.jpg• Amazon to Acquire Zappos.com for $847 Million – “Amazon says it is paying for the acquisition with 10 million shares of stock worth approximately $807 million. In addition, Amazon said it will provide Zappos employees with $40 million in cash and restricted stock units.” [Bits/NYT]
• UK ‘is losing 52 pubs each week’ – Where will the UK accountants go for lunch? [BBC]
• Who needs audit? [Accountancy Age]
• Chrysler says dealer legislation could force liquidation – “Chrysler Group could again face the prospect of liquidation if legislation aimed at reversing its decision to terminate contracts with 789 dealers becomes law, a company executive said on Wednesday.” [Reuters]
• Goldman Sachs Payments to U.S. Give 23% Return to Taxpayers – LB says “you’re welcome” [Bloomberg]