For those of you constantly bellyaching about the pesky regulators and how "close enough" audits are perfectly acceptable, perhaps you should go work for Baker Tilly Hong Kong Limited. You see, that "close enough" mentality appears to have slapped them in the face, based on news from the SEC today: The Securities and Exchange Commission […]
Because that’s your job, right? The PCAOB is giving consideration to new auditing standards that would presume that certain related party transactions would constitute a fraud risk.
This just serves as another example of auditors’ responsibility for discovering fraud reaching a ridiculously unrealistic level.
According to Web CPA, “Although such standards have been in the talking stage at the PCAOB for at least five years, there is fresh interest in this area now because related-party fraud has been a factor in a number of recent corporate financial scandals.”
Classic reactive measures being employed by the Board here. No sense in developing any kind of standard until after something happens. The Board hasn’t really been doing a bang-up job on much of anything but no matter, the effectiveness of a government regulator is not the issue here.
Auditors, you’re being duped. That’s unacceptable and according to some, the procedures you currently perform over related party transactions just won’t do any more:
But some officials at the PCAOB as well as members of the accounting profession have suggested that these standards may not be sufficient. At least part of the problem involves what some have described as widespread related-party transaction fraud slipping under the radar screen of auditors.
As we’ve mentioned in the past, the PCAOB simply is not satisfied with your ability to follow the current rules, auditors. Accordingly, the PCAOB will make more rules for you to follow until they are proven inadequate and then more rules will be written and on and on. You get the idea. It’ll be routine before you know it, if it isn’t already.
PCAOB Mulls New Related-Party Standards [Web CPA]
Also see: Fair Value, Audit Committes, Related Parties Highlights Of Day 2, PCAOB SAG Meeting [FEI Financial Reporting Blog]