Tag: Communication

John Veihmeyer and Tim Flynn Would Love To Tell You How KPMG Is Doing

This time of year, the leadership at your firms are on a communication offensive because you all just went through hell. They want to whisper sweet words in your ears so that you keep the faith in them and your firm.

Today we bring you a little taste of some of those sweet words courtesy of the C-suite at KPMG.

Newlynveld, John Veihmeyer was joined by Tim Flynn, COO Henry Keizer, along with some inquisitors for a grueling Q&A that should re-energize you for summer.

Conversations with Leadership
How Are We Doing?

Flynn: First one up gets the mike.

[Prepackaged Inquisitor #1]: Are we on track? How is it going? What challenges have we faced?

Flynn: I think the foundation for recovery is being laid. And I think it started, obviously, in Asia. It’s moving its way through the U.S. Things are better than people had predicted three or four months ago. And we saw retail sales today came out with improvement – consumer confidence being up. So all of those things are signs that we’re on a path for recovery. And now the question is, how does that translate into our business?

Veihmeyer: We’ve built a plan that was consistent with our expectation of what that marketplace was going to be. First half of the year continuing to be a very challenging marketplace, with a gradual increase in marketplace activity as we got into the second six months of our fiscal year. So what have we seen to date? Our results have tracked what we expected. We are actually slightly ahead of plan, six months through our fiscal year, which is the great news.

And I think everyone should feel really good about that, particularly as you look at what we’re seeing in some of the businesses – Advisory, which was clearly hard hit by the lack of spending and the curtailing of a lot of initiatives on the part of our clients, have had very strong months the last several months. And that corner seems to have absolutely turned.

And we are just beginning to see, I think, the things that really impact Audit and Tax around some of the transactional activity that really drives those incremental services that make a big difference in Audit and Tax – that’s starting to come. We expect that to translate into greater revenue over the second six months.

Quite the trifecta of vague brainteasers PI #1 had. But without being very specific, and using a couple of banal metaphors, JV and T Fly are confident that everything is cool, thanks to China and India. Europe isn’t worth mentioning, that’ll blow over. Advisory was on its deathbed but things are bouncing back. Audit and Tax are far less sexy but they’re cash cows. They might see a little more action if Advisory started showing more skin.

[Prepackaged Inquisitor #2]: My name’s [Prepackaged Inquisitor #2]. I just wanted to ask about the new role of the office managing partners, focusing on just going to market.

Keizer: By focusing the office managing partners really on two areas: one, growth of our business, and also our people. So the office managing partners teamed with the functional leaders, and the professionals within geographies, and looked outside into the marketplace, and which companies fit that criteria—impactful to our brand, our people, great growth, and profitability opportunity.

From that exercise, across the country, over 1,600 companies were identified. A process was then undertaken to actually assign specific resources. As we sit today, and we take that population of companies and say, how are we doing? The revenue growth that has been realized in our first six months, in that population, has exceeded our normal portfolio of clients. So it’s showing, again, at an early stage, focus, and a prioritization of where we want to strategically go, does translate into opportunity and revenue.

Flynn: If there’s one message that comes out of this, just one message to everybody here listening – is that the one thing we know for certain—we are not short of opportunities.

We have tremendous opportunities what’s happening around the world. The key is, how do we align our resources, look at our investments, develop our people’s skills to capitalize on those opportunities? So from a standpoint of the future – there’s tremendous opportunity for all of you, and for our businesses, as we go forward.

Your local bigwigs are out there digging up biz because things have gotten a little more competitive than we would like. We can’t simply rely on a sexy Masters Champion in every RFP so they’re getting their hands dirty for a change. Plus, from where we stand, there’s plenty of business out there so if they don’t get the job done, we’ll probably go to the bullpen.

The PCAOB Proposes Ideas on How Auditors Can Better Communicate with Other Human Beings

Last week the PCAOB announced that it was getting serious about audit committee communication after it was revealed that Ernst & Young kinda sorta didn’t think the Repo 105 sitch was worth brining up to the Lehman Brothers audit committee. Granted, Dick Fuld is pretty scary dude and has probably eaten plenty of Big 4 partners for breakfast in his day but avoiding the awkward convo this time around almost resulted in everyone fighting over stale hot dog buns in the street.


Oh sure, the PCAOB has been kicking this around for awhile but something needed to happen to get their motors going and it appears that the LEH/E&Y fallout has done the trick. We might be completely wrong on this but it’s becoming increasingly obvious that the PCAOB has lost faith in auditors to do their jobs and will continue to inundate them with rules until they get an “Uncle.”

How about that statement? It’s the typical press release whathaveyou including quotes from the bigshots:

“The proposed standard on audit committee communications is intended to enhance the relevance and effectiveness of the communications between an auditor and audit committee throughout the course of an engagement,” said PCAOB Acting Chairman Daniel L. Goelzer.

“The proposed standard contains appropriate requirements to achieve effective, two-way communication between the auditor and the audit committee, which we believe would improve audit quality,” said Chief Auditor, Martin F. Baumann.

So if we take Goelzer and Baumann at their word, audit committee communication has been pretty ineffective up to this point? That’s good to know.

And here’s the gist of the required communication:

• Communication of an overview of the audit strategy, including a discussion of significant risks, the use of the internal audit function; and the roles, responsibilities, and location of firms participating in the audit;

• Communication regarding critical accounting polices, practices, and estimates;

• Communication regarding the auditor’s evaluation of a company’s ability to continue as a going concern; and,

• Evaluation by the auditor of the adequacy of the two-way communications.

So there’s your checklist people. Sorry to ask but were these items not being discussed previously? One could assume that since these items are on the list, they weren’t always being discussed in practice. Does standard audit committee communication revolve around Gossip Girl? Tiger Woods’ mistresses?

This really appears to be an example of the PCAOB taking away auditors’ “professional judgment” and making them “professional inquisitors.” Further, as Jim Peterson has pointed out, checking off required communication will do nothing to protect auditors from liability in the future, “there is no legal defense or ‘safe harbor’ in American law based on proof of compliance with professional standards – box ticked or otherwise.”

In other words, make all the professional requirements you want, auditors are still going to get sued and claiming “But we checked the box!” will not work as a defense. So the rationale must have been checklists are fun and easy to follow? Sigh. You’ve got until May 27th to get your thoughts in on this thing before it gets rubber stamped. Get on it.

Press Release [PCAOB]