PCAOB Says Audit Failures Are No Longer Audit Failures
So, today, this happened: Hanson says the PCAOB has moved away from using the phrase "audit failures" in the boilerplate parts of its inspection reports. #FEICFRI14 — Accounting Today (@AccountingToday) November 18, 2014 You'll recall earlier this year, we pointed out new-ish language in PCAOB inspection reports that clarifies the definition of an audit deficiency. […]
The PCAOB Has a Few Specific Criticisms for Auditors But Faith in Them Regardless
The Journal of Accountancy interviewed PCAOB board members Jay Hanson and Lewis Ferguson for a piece in its September issue and the conversation is surprisingly candid. For example, Ferguson totally gets that auditors are sick of the PCAOB's alleged moving target, but has faith these auditors will appease their regulatory overlords anyway: "I’m not aware […]
PCAOB: Audit Firms Missing the Point of Auditing
Audit firms are still having some trouble pleasing the audit overlords at the PCAOB — particularly with Auditing Standard No. 5. ICFR is the new WTF, though the PCAOB sees audit firms making progress. Unfortunately, the firms are also kinda missing the point of this whole exercise. Compliance Week has the details: The next round […]
Per PCAOB Board Member, Facebook Will Not Sufficiently Prepare You As an Auditor
"For new accountants, the focus on documentation can be a difficult transition — the world of texting, Facebook postings, and tweeting may not fully prepare you. And, of course, communication skills are important even beyond the accountant's documentation of audit procedures. Being able to express yourself effectively is key to your relationships with your co-workers […]
One Guy at the PCAOB Thinks the PCAOB Should Consider Its Language
Aha! Pointy-headed professors aren't the only ones who think the PCAOB's use of the term "audit failure" is totally dramatic and possibly unnecessary. From the JofA: The PCAOB’s use of the term “audit failure” in its inspection reports of audit firms appears to have caused confusion and misunderstanding about the severity of inspection findings among […]
PCAOB Member Jay Hanson Repeats His Belief That Auditor Rotation Is Not Gonna Happen
The Brits can do whatever they want; Mr. Hanson has a story and he's sticking to it: Having reviewed the comment letters and feedback from the round table panelists and others, it is clear to me that there is little support for mandatory audit firm rotation. As I noted in my statement when we issued the […]
PCAOB Member Jay Hanson Can’t Imagine a World with Auditor Rotation
On Monday, PCAOB Chairman James Doty gave a speech where he mentioned, among other things, that "auditor term limits" was something the Board would consider in order to "protect the auditor's independence." Undoubtedly, this was disheartening news to auditors who count themselves as the Big 4 variety because they've gone on record to voice opposition and […]
Hiring Watch ’13: PCAOB
Yesterday, the PCAOB held an open meeting discussing its plans for being the most dominating force in public accounting regulation over the next few years. Within these plans is a strategory to not just be the type of regulator that points out the things that you royally fucked up, but also to be a resource […]
The Big 4 and the Revolving Door
Last week the bane of Big 4 auditors existence, the PCAOB, broke their cherry on releasing Part II of an inspection report for a Big 4 firm. The honor went to Deloitte, who sufficiently blew off the Board’s recommendations for 12 months, which led to the release of Part II.
Bloomberg‘s Jonathan Weil, who usually sits back with popcorn while these things go down before chiming in, got to it today but with a twist that you probably weren’t expecting:
board members had recused themselves from participating in meetings or discussions this year concerning Deloitte, because of past or current ties to the firm, according to three people with knowledge of the matter.The board members — Lewis Ferguson, Jay Hanson and the board’s chairman, James Doty — were appointed by the Securities and Exchange Commission in January. Doty had been a partner at the law firm Baker Botts LLP, where Deloitte is a client. Ferguson was a partner at the law firm Gibson Dunn & Crutcher LLP, which also represents Deloitte. Hanson, a former partner at the accounting firm McGladrey & Pullen LLP, has a daughter who works for Deloitte in its Phoenix office.
The board’s policy is to not disclose recusals, in spite of its mission to “further the public interest,” as if these are none of the public’s business. “Recusals are confidential,” Colleen Brennan, a board spokeswoman, said. Doty, Ferguson and Hanson declined to comment. A Deloitte spokesman, Jonathan Gandal, said: “The PCAOB itself does not comment on recusals, and as such it would be inappropriate for us to do so.”
It’s a pretty nice scoop by Jon and we’re all used to the silence from the PCAOB and Deloitte when someone gets the best of them but honestly, is anyone surprised? Does anyone care? The answer to the first question is “No.” The answer is the second question is “Maybe.”
With the exception of Mr. Hanson (family connection, we’ll give you that one), the recusals seem a little silly since neither Ferguson or Doty actually worked directly for Deloitte. Okay, so Baker Botts and Gibson Dunn have Deloitte has a client. Which Big Law firm doesn’t? It’d be pretty tough to find any DC lawyer who didn’t do some time at a firm that represented Deloitte. That goes for any Big 4 firm. They’ve all got deep pockets with lots of legal problems, of course they’re going to hire the best lawyers money can buy. Does that make guys like Ferguson and Doty unfit to make decisions with regard to that firm?
Well, for one year it does. Under the Board’s ethics code, Doty and Ferguson will be able to vote on matters involving Deloitte in January. Still, Weil doesn’t like the smell of it. And it doesn’t stop with the PCAOB:
[T]alk about being wired: The SEC’s chief accountant, James Kroeker, is a Deloitte alumnus. At the Financial Accounting Standards Board, which writes U.S. accounting rules, the wife of one board member, Russell Golden, is a Deloitte partner.
Look, we like Jon (even if he is a Colorado grad). But how do you find accounting policy makers who aren’t from the biggest, best connected firms that have the most resources? Should the Commission start appointing academics to develop policy? Eeek. Or maybe we’ll let the public make recommendations, “Yeah, my cousin’s a CPA out of Tulsa. Really knows his stuff. He’d be good.” Please.
Dan Goelzer’s seat is coming up and he’ll be replaced by a CPA. Weil hopes that the SEC will find “a qualified person without Big 4 allegiances” but with the revolving door spinning, he’d better hope for a wild card.
Goldman Sachs Envy Gains New Meaning at Big Four [Jonathan Weil/Bloomberg]