Tag: PCAOB

PCAOB Puts Congress On Notice; Requests Public Enforcement Proceedings

Despite the setback that was the creation of the PCAOB, the Big 4 have to be pret-tay, pret-tay, pret-tay pleased with the privacy they get when it comes to the Board’s disciplinary actions.

Perpetually-acting chair Dan Goelzer wrote a letter to the Senate Banking and House Financial Services Committees saying that by keeping the proceedings mysterio and out of the public eye. The current arrangement “gives firms and auditors an incentive to drag out litigation, sometimes for years,” and that simply won’t do.

Despite the general public’s disinterest in all things accounting (until the shit hits the fan, of course), the Board is still trying to find its place as the relatively new kid on the bureaucratic block. This request seems to be an attempt at fitting in:

The Public Company Accounting Oversight Board’s proposal would repeal a requirement that its disciplinary actions remain secret, according to a copy of the document reviewed by Dow Jones.

The public now is denied access to information about accountants that have been sanctioned or charged by the PCAOB, acting Chairman Daniel Goelzer said in an Aug. 24 letter to several members of the Senate Banking Committee and House Financial Services Committee.

Since the federal government has been all about transparency lately, it would be surprising for Congress to take the Board up on the offer. The problem is, it won’t really do much to speed anything along and transparency will remain an issue. If you remember, last month the SEC issued its final rule on the PCAOB appeals process that goes into effect next week.

That rule will: allow firms to dispute findings during the inspection process; prohibit the PCAOB from making those disputed findings public until the SEC investigation is completed and the SEC still has the option to make findings permanently private, if it so chooses.

So even if Congress is convinced that the PCAOB’s plan to make the proceedings public is utter genius , accounting firms will still be able to drag things along (and keep things secret) as they see fit.

Accounting Board Seeks Public Enforcement [WSJ]

How Soon Will The New PCAOB Pronouncements Be Tested on the CPA Exam?

If you recall, the PCAOB got really busy not too long ago and doubled its audit standards virtually overnight, leading one CPA exam candidate to reach out and ask if this is at all relevant to his exam experience. If you don’t want to read the following and just want the short answer, it’s probably no.

Was wondering if you could do a brief post regarding the new pronouncements issued by the PCAOB earlier this month and when they will become eligible for testing on the exam. I am debating between taking this section and BEC in the next testing window. I’d prefer to take BEC since I don’t really feel like having to do the written portion when that goes into effect next year; however, if it comes down to memorizing a bunch of stuff that wasn’t included in my B—– package and that, I would rather get AUD out of the way. Thanks for your input!!

This is a great question so I’m happy to indulge you, let’s consult the AICPA, shall we? Lucky for all of us, they are very clear when it comes to most testing areas except for those in REG, which can cover both the current and former years’ tax numbers depending on when you take the exam. At least for this area we know for a fact that they will not be testing the new PCAOB audit standards until at least February 5, 2011. So says the AICPA:

Accounting and auditing pronouncements are eligible to be tested on the Uniform CPA Examination in the testing window beginning six months after a pronouncement’s effective date, unless early application is permitted. When early application is permitted, the new pronouncement is eligible to be tested in the window beginning six months after the issuance date. In this case, both the old and new pronouncements may be tested until the old pronouncement is superseded.

For the federal taxation area, the Internal Revenue Code and federal tax regulations in effect six months before the beginning of the current window may be tested.

For all other subjects covered in the Regulation (REG) and Business Environment and Concepts (BEC) sections, materials eligible to be tested include federal laws in the window beginning six months after their effective date, and uniform acts in the window beginning one year after their adoption by a simple majority of the jurisdictions.

So what the hell are they saying? Basically unless they specifically say so – like with FAS 141(r) being tested beginning July 1st, 2009 – new pronouncements, rules and regs will not be tested until 6 – 12 months after date of issuance. Keep in mind CPA exam questions cost a lot in time and effort alone and we just don’t see the BoE leaping head over heel to make new questions from the PCAOB’s latest busywork.

This means you’ve got another 5 months to put off Audit without having to memorize 8 new audit standards but maybe by that time the PCAOB will have another 8 to tack on. They are very busy over there these days, you know.

PCAOB Is Still Overachieving: Issues Inspection Reports for BDO, Grant Thornton, PwC

Well team, despite the little setback for the PCAOB earlier this week, Team Peek is not discouraged. In fact, they were so motivated by the SEC’s little stunt that they thought they’d churn out three major inspection reports today, just to show everyone that they get to say what’s what with these accounting firms (even if it is in an indecipherable combination of vague and wonky prose).

BDO, Grant Thornton and PwC all got their papers issued today, which leaves just KPMG as the last major U.S. firm to not have their report issued. We’ll give you the quick and dirty on these three but if you want the gory details, you’ll have to read them in depth yourself (some o know). We’ll go in alphabetical order so no one gets bent out of shape.


BDO had eight issuers mentioned in its report. Issues included not testing the underlying data used by a specialist, failure to identify a departure from GAAP before issuing its audit report, loan losses and “[failure] to perform sufficient procedures to evaluate the reasonableness of a significant assumption management used to calculate the gain on the sale of a business,” among others.

PCAOB_2010_BDO_Seidman_LLP

GT only had five issuers listed in their report with problems including two instances of departures from GAAP that weren’t identified before the issue of the audit report, testwork related to fair value determination of illiquid assets and testwork around revenue recognition. Steve Chipman got away from the teleprompter long enough to sign the letter to the PCAOB himself, along with Trent Gazzaway, the National Managing Partner of Audit Services.

PCAOB 2010 Grant Thornton LLP


Nine issuers were noted by the inspectors for P. Dubs. Various issues ranging from inadequate testing of foreign locations, loan loss issues (that’s a given) and fair value (another surprise). PwC’s response made it sound like they actually enjoy the whole inspection process, “We continue to support the PCAOB and we wish to convey our sincere appreciation for the professional efforts of the PCAOB staff.” Wonder if the engagement teams that were inspected feel the same?

PCAOB_2010_PricewaterhouseCoopers_LLP

Is the SEC Taking the “O” Away from the PCAOB?

The PCAOB has had a pretty good run of late. It all started with the SCOTUS handing them a loss that was really a win and the Board has, most recently, gotten ambitious with new risk assessment standards. What’s more is the call of acting Chair Dan Goelzer to have the Board’s enforcement inspections held publicly so audit firms can’t get all mysterio about what they did and did not do to warrant said inspection.

Well, the run of luck appears to have come to an end as the SEC issued a new rule that takes effect next month that marginalizes the Board to the benefit of the accounting firms it oversees (our emphasis).

Going into effect September 7, the rule explains how accounting firms can dispute the PCAOB’s findings during its inspection process. The firms have always had this ability under the Sarbanes-Oxley Act, but the SEC lacked a formal appeals process. (Indeed, the June 28 Supreme Court decision, which affirmed the constitutionality of the PCAOB, arose out of a small accounting firm’s dissatisfaction with its 2004 inspection report.)

A key feature of the process is secrecy. If an accounting firm appeals to the SEC, the PCAOB will be prohibited from making disputed portions of its inspection report public until the commission completes its review, which could take anywhere from 30 days to over 100 days. Moreover, the SEC could decide to keep the information permanently private if its reviewers determine that the PCAOB’s findings were “arbitrary and capricious.”

Meanwhile, the public will learn nothing about the appeals process or the issues under contention, which will further cloud the results of PCAOB inspections for the accounting firms’ corporate clients who read them. “Until now, the SEC has not restricted the transparency of inspection reports pending the opportunity to seek review,” a PCAOB spokesman tells CFO.

So let’s get this straight – if an accounting firm takes issue with anything in the PCAOB’s report, the firm can then run crying to the SEC – which makes that portion of the report secret – and then the report will sit dormant until that portion reads to their liking which can take 30 to 100 days? OH! And on top of that, if the SEC finds something to be ‘arbitrary and capricious’ that issue will never see the light of day?

It’s not like these inspection reports are being issued at a rapid clip (PwC’s and KPMG’s reports for ’09 are still MIA) or filled with details that are actually meaningful to regular folks (e.g. the clients inspected) and now the SEC is going to let the firms write their own inspection reports.

So much for that small matter of “Oversight.” At least the SEC is being (somewhat) transparent about a power grab.

Auditors Can More Easily Dispute PCAOB Findings [CFO]

While They Were at It, The PCAOB Thought They Might Chime in on Auditors’ Babysitting Skills

As we mentioned late yesterday, the PCAOB has been working hard these days. Late nights, weekends, ordering in and whathaveyou. Adrienne told you about the new eight auditing standards that you’re all expected to have memorized by Labor Day, and we wrapped up with Dan Goelzer snagging QOTD for the Board’s move towards open enforcement proceedings. This move will, presumably, be used in order to shame the pants off of those of you that dare to break the rules.

But the Board had one more thing to serve up yesterday and that was to put it out there that they don’t think too highly of the job auditors are doing supervising the worker bees:

“Through its inspections and investigations, the PCAOB has observed that supervision processes within firms are frequently not as robust as they should be, and that supervisory responsibilities are often not as clearly assigned as they should be,” said PCAOB Acting Chairman Daniel L. Goelzer. “Today’s Release seeks to highlight the Board’s views on the scope for using the authority provided in the Act to address those problems.”

For an industry that depends so heavily on a hierarchal structure, this does not bode well. There are several possible scenarios that led the PCAOB to jump in with their thoughts, including but not limited to:

1. Dozens of audit engagements of publicly traded companies have aloof partners that pop in once or twice a week, observe a handful of staff people feverishly ticking and tying, only to assume everything appears a-okay.

2. The PCAOB has incredible “luck” picking the biggest shitshow engagements.

3. The PCAOB is just blowing the shortage of experienced SAs out of the water.

4. Inspectors don’t buy the “we got this” story from the A1 and A2 running an accelerated filer engagement.

If you’re on one of these free-for-all audits, for crying out loud, get in touch. We want details.

PCAOB Issues Release on Failure to Supervise [PCAOB]

Accounting News Roundup: Signs That You Should Quit Your Job; District Court Issues Order in Wesley Snipes Tax Case; LarsonAllen Moves Into the Northwest | 08.06.10

BP Completes Cementing Macondo Oil Well From Top [Bloomberg]
“BP Plc completed a cement plug at the top of its Macondo well in the Gulf of Mexico, sealing off the source of millions of gallons of oil spewed into the sea after a drilling rig exploded in April.

The procedure completes the so-called t stage for BP is to finish a relief well to inject cement at the bottom and ensure there’s no leakage inside the 13,000-foot-long (3,962 meters) well bore beneath the seabed, National Incident Commander Thad Allen said yesterday.”

Ten Signs It’s Time to Leave Your Job: The Finance Edition [FINS]
Check yourself for some of these symptoms: “You’ve been holding back from voicing your grievances.”; “You have no clue where the company is headed.”; “You start to believe you can’t do better.”

And that’s just in the first five listed.

Altus completes PricewaterhouseCoopers deal [Bloomberg BusinessWeek]
PwC sells their real estate appraisal management for, what we can only assume to be, a decent chunk of change.

H&R, Jackson Hewitt shares fall on new IRS rule [Reuters]
“Shares of top two U.S. tax preparers H&R Block Inc (HRB.N) and Jackson Hewitt Tax Service Inc (JTX.N) fell Thursday on the Internal Revenue Service’s decision to eliminate debt indicator for tax-refund loans.

On Thursday, the IRS said starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with ‘debt indicator,’ which is used to facilitate refund anticipation loans (RALs).”


PKF Pacific Hawaii completes purchase of Grant Thornton Honolulu office [Pacific Business News]
Name goes official on Monday. Here’s our original report from back in May.

Two UHY LLP Partners Recently Named to Prominent Standard-Setting Implementation Groups [Market Wire]
“The national CPA firm of UHY LLP announced today the recent appointment of Houston-based partner Ana Denena to the International Accounting Standards Board’s (IASB) Small and Medium-sized Entities Implementation Group. In a separate appointment, the firm announced that Maryland-based partner Jennine Anderson was named to the Financial Accounting Standards Board’s (FASB) resource group on non-profit entities.”

PCAOB Adopts New Risk Assess. Stds; Issues Release on Failure to Supervise [FEI Financial Reporting Blog]
As we mentioned yesterday, the PCAOB has been busy. Francine McKenna guest-blogged over at FEI and gives the rundown.

Fannie Quarterly Loss Is Smallest Since 2007 [WSJ]
FTW? “Fannie Mae posted a $1.2 billion net loss for the second quarter, the smallest loss in three years, amid signs that the massive wave of souring loans that brought down the mortgage-finance giant may be easing. But Fannie still asked the U.S. government for an additional $1.5 billion.”

District Court Issues Order in Snipes Case [TaxProf Blog]
Just when you thought it was over.

If you’re not getting cloud computing you’re a loser [AccMan]
That is, you’ve got almost nothing to lose by going for it.

Midwest accounting firm buying LeMaster Daniels [Spokesman-Review]
LarsonAllen brings its business to the northwest by purchasing Spokane-based LeMaster Daniels.

Deloitte leadership race reduced to two hopefuls [Accountancy Age]
“he contest to replace John Connolly as leader of Deloitte in the UK will involve just two members of the firm’s board.

The contenders vieing for the top job are Martin Eadon, head of audit, and David Sproul, head of tax. Sproul joined Deloitte when the firm acquired Andersen in the UK on the back of the Enron crisis

Both candidates gave presentations at the firm’s partner conference on 6 July but no further campaigning is expected.”

Somebody Has Been Busy: PCAOB Issues Eight New Audit Standards

Since the PCAOB was only up to Audit Standard 7 last time we checked and seems to take the conservative approach when it comes to issuing new ones, we have to say we were more than shocked to see them almost double their audit standards overnight. Gee, must be serious.


Via the PCAOB:

The Public Company Accounting Oversight Board today adopted a suite of eight auditing standards related to the auditor’s assessment of, and response to, risk in an audit.

The suite of risk assessment standards, Auditing Standards No. 8 through No. 15, sets forth requirements that enhance the effectiveness of the auditor’s assessment of, and response toial misstatement in the financial statements.

The risk assessment standards address audit procedures performed throughout the audit, from the initial planning stages through the evaluation of the audit results.

“These new standards are a significant step in promoting sophisticated risk assessment in audits and minimizing the risk that the auditor will fail to detect material misstatements,” said PCAOB Acting Chairman Daniel L. Goelzer. “Identifying risks, and properly planning and performing the audit to address those risks, is essential to promoting investor confidence in audited financial statements.”

What does this mean for auditors? Let’s check them out.

AS No. 8 – Audit Risk. This standard discusses the auditor’s consideration of audit risk in an audit of financial statements as part of an integrated audit or an audit of financial statements only. It describes the components of audit risk and the auditor’s responsibilities for reducing audit risk to an appropriately low level in order to obtain reasonable assurance that the financial statements are free of material misstatement.

AS No. 9 – Audit Planning. This standard establishes requirements regarding planning an audit, including assessing matters that are important to the audit, and establishing an appropriate audit strategy and audit plan.

AS No. 10 – Supervision of the Audit Engagement. This standard sets forth requirements for supervision of the audit engagement, including, in particular, supervising the work of engagement team members. It applies to the engagement partner and to other engagement team members who assist the engagement partner with supervision.

AS No. 11 – Consideration of Materiality in Planning and Performing an Audit. This standard describes the auditor’s responsibilities for consideration of materiality in planning and performing an audit.

AS No. 12 – Identifying and Assessing Risks of Material Misstatement. This standard establishes requirements regarding the process of identifying and assessing risks of material misstatement of the financial statements. The risk assessment process discussed in the standard includes information-gathering procedures to identify risks and an analysis of the identified risks.

AS No. 13 – The Auditor’s Responses to the Risks of Material Misstatement. This standard establishes requirements for responding to the risks of material misstatement in financial statements through the general conduct of the audit and performing audit procedures regarding significant accounts and disclosures.

AS No. 14 – Evaluating Audit Results. This standard establishes requirements regarding the auditor’s evaluation of audit results and determination of whether the auditor has obtained sufficient appropriate audit evidence. The evaluation process set forth in this standard includes, among other things, evaluation of misstatements identified during the audit; the overall presentation of the financial statements, including disclosures; and the potential for management bias in the financial statements.

AS No. 15 – Audit Evidence. This standard explains what constitutes audit evidence and establishes requirements for designing and performing audit procedures to obtain sufficient appropriate audit evidence to support the opinion expressed in the auditor’s report.

Now don’t get me wrong, I love rules and regs as much as the next girl – if not more – but I am of the thought that users of financial statements would be better served not by more rules and regs but by a more comprehensive auditor training program that starts in college. Am I asking too much?

Did we really need clarity on audit evidence? The PCAOB seems to think so and that’s fine, they are well-intentioned in their motive and you can’t fault them for that.

Accounting News Roundup: Tax Cuts Debate Rages On; Tax Issues for A-Rod’s 600th; Wyclef’s Campaign Stumbles Out of the Blocks | 08.05.10

Geithner Pushes Tax Boost for Wealthy [WSJ]
“Treasury Secretary Timothy Geithner made the Obama administration’s economic case for letting tax cuts for high earners expire at the end of this year, saying that failure to do so would harm rather than help economic growth.

In a speech Wednesday in Washington, part of the administration’s broader strategy to overcome Republican opposition on the issue, Mr. Geithner said that keeping current tax levels even on a short-term basis “would hurt economic recovery by undermining confidence that we are prepared to make a commitment today to bring down our future deficits.” The government needs the revenue it would get from allowing tax rates for the wealthy to rise, he said.”

PCAOB Logs No Progress on International Inspections [Compliance Week]
“The Public Company Accounting Oversight Board isn’t yet making much headway in catching up on overdue international inspections, but the Dodd-Frank financial reform bill at least clears an obstacle the board has repeatedly blamed for its inability to meet its inspection mandate.”

Regulator fears auditors may abandon scepticism to meet deadlines [Accountancy Age]
“The Auditing Practices Board (APB), which sets standards for the industry, is concerned auditors might be abandoning their professional scepticism to meet contractual audit deadlines, and wants to coach them in how to be sceptical.

Audit contracts are often negotiated on the assumption few problems will be revealed, according to the APB. When a potential issue does arise timetables often have to be extended.”

A-Rod’s Home Run Ball: a Tax Headache for the Record Books? [WSJ]
The ball is reportedly worth around $100k and if the ball is technically Yankees’ property and the team were to give it to A-Rod, then he may owe tax and the Yanks would get a corresponding deduction. The team could also argue that the ball is technically A-Rod’s property and then neither would owe tax.

Of course then the question remains, what if A-Rod sells or donates the ball to a nonprofit? If he sold it, then it would depend on how long he keeps it (less than a year would be at ordinary rates, greater than a year would be at capital gain rates). While donating the ball after one year could net him a near full deduction.

TheStreet.com names Thomas Etergino finance chief [AP]
Tom starts his new gig on September 7th.


IRS Hits Wyclef With $2.1 Million In Tax Liens [The Smoking Gun]
Whether it’s the U.S. or Haiti, this is not how you want to start a Presidential campaign.

Delta Said to Plan New York JFK Hub Renovation for $1.2 Billion [Bloomberg]
Anyone that has been to Terminal 3 at JFK is aware of the problem.

Happy Birthday Sarbanes-Oxley!

Eight years ago on this this glorious day, the ‘Public Company Accounting Reform and Investor Protection Act’ (in the Senate) and ‘Corporate and Auditing Accountability and Responsibility Act’ (in the House) came together to bring us Sarbanes-Oxley.

Most of you didn’t realize it at the time but this particular piece of legislation created thousands of new jobs at Big 4 firms, only to find those people out on their asses a few years later. Oh, well. Luckily, there are plenty of options with you holders of the accounting degree.


We perused the SOx Wikipedia page to find out some things worth noting:

• The final version passed the House 423-3 – Jeff Flake (R-AZ) and Ron Paul (R-TX) were two of the three voting ‘nay,’ but Flake and Paul pretty much vote against everything.

• It passed the Senate 99-0 but our friend Jim Peterson has said, “the inability of Sarbox to reach global-scale problems shows the futility of legislation so politically anodyne that it passed the US Senate [unanimously].”

• GWB called SOx, “the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt.” This, many will argue, has now been trumped.

• The PCAOB! If it wasn’t for Sarbanes-Oxley, there would be no PCAOB. Well, and some recent help from the SCOTUS.

Anyway, we’ve probably said enough. If you have fond wishes or memories of Sarbanes-Oxley that have transpired over the last eight years, cut loose in the comments.

Who Should the Next PCAOB Members Be?

Since the PCAOB is here to stay, the SEC figured it was probably best that they get some people sit on this thing to, ya know, help protect the investors, the public at large, so on and so forth.

The problem, as it appears to us, is that Mary Schapiro and the gang are plumb out of ideas for nominations. Accordingly, they’re out there looking for help from some of the best and beardest, including the Beard, acting PCAOB chair Dan Goelzer, AICPA President and CEO Barry Melancon and a few other noted notables.


However! Just because Mary Schapiro sent these people personal letters begging for some ideas, that doesn’t mean she won’t listen to yours. You can fire any names you have in mind to Board-recommendations@sec.gov. The Commission appreciates the help.

The SEC does point out that the appointees need to be “prominent individuals of integrity and reputation who have a demonstrated commitment to the interests of investors and the public, and an understanding of the responsibilities for and nature of the financial disclosures required of issuers under the securities laws and the obligations of accountants with respect to the preparation and issuance of audit reports with respect to such disclosures,” but we feel that’s subject to interpretation.

Hopefully the noms will include a few wild cards that could stir things up a bit. Sam Antar comes to mind, although the criminal record could be a bit of a problem. Francine might be up for it? We haven’t asked her yet, just throwing it out there. More suggestions welcome.

Spotlight on PCAOB Nomination Process [SEC]