
Exposure Drafts: Happy Same As Last Year!
Listen to Oh My Fraud, a podcast by Caleb Newquist and Greg Kyte, and get free CPE through Earmark.

Crisis in the Profession: Interns Aren’t Learning SALY?!?
If true this could shatter the entire financial system! We knew training has suffered due to remote work, spread out teams, and Covid stress over the past few years but not even learning SALY? Don’t want to think what this could do to the audit profession if it spreads. Hopefully this is just an isolated […]
Lynn Tilton vs. SALY
During my first year, the firm sent me on a solo engagement to audit a bundle of Collateralized Loan Obligations (CLOs) that a client was preparing to sell. I’d never worked on that client or in that industry, and I’d never heard of a CLO before. The manager gave me a crash course on CLOs over lunch and told me, “Just follow what they did last year.”
Audit Firms Being More Audit Firm-y in Response to the PCAOB’s Disappointment in Their Audits
Colin buried this in ANR this morning but I'm pulling it out and tossing it at you all like a zookeeper flings raw meat at his wild tigers ifyoufeelme. Emily Chasan writes in CFO Journal: This year, financial executives say their external auditors are requesting far more documents and details than usual on everything from […]
Big 4 PCAOB Inspection Reports to Be SALY
If a person was going to describe the 2010 PCAOB inspection results, you might hear things like, "didn't meet expectations" or "downright embarrassing" or "an abomination" or they may just make Hans Hoogervorst's favorite hand gesture. Simply, they weren't so good. The good news is there's no place to go but up. The bad news is […]
“Same As Last Year” and Inept Senior Auditors Are Failures of the Audit Industry
The following was written by a second year staff auditor who wishes to remain nameless. Clearly pounded out in the heat of frustration and perhaps a tad profanity-laden, it exposes a very serious problem that infects all corners of auditing from so-called "expert" auditors on down to brand new staff. Fresh-faced youngsters are often tasked […]
When Accounting Jokes Go Awry
It's great when accounting firms embrace social media. A good example of this is the "Proud to be Boring Accountants" campaign by Macias Gini & O’Connell LLP. I've worked with MGO before and can assure you, they get it. If you are a talented CPA-eligible or CPA-passed accountant in Northern California, you should probably check […]
PCAOB Bans Former Auditors From Faking the Audit Trail For the Near Future
The PCAOB has banned former Ernst & Young partner Peter O’Toole from associating with a PCAOB-registered firm for the next three years and fined him $50,000 for his part of a 2009 scheme to fake audit paperwork. E&Y removed O’Toole from the audit engagement team in June of 2010 and canned him several months later in September. The three year ban from audits is the longest bar that the PCAOB has imposed on a partner of a Big 4 accounting firm to date.
“These actions threatened to undermine the integrity of PCAOB inspection processes, and the ability of the Board to discharge its mandate to inspect the auditors of public companies,” said James R. Doty, PCAOB Chairman in a statement. “The Board moved swiftly to address this conduct, having commenced litigation against these respondents within seven months of learning of their conduct. I commend the Board’s Division of Enforcement and Investigations for its timely and effective work,” he added.
The PCAOB has also banned Darrin Estella from working with a PCAOB-registered firm for two years in connection with the improper creation, addition, and backdating of audit documentation in this case. Estella was a senior manager with E&Y’s Boston office and also let go in September of 2010.
The Board found that, shortly before a PCAOB inspection of an E&Y audit, O’Toole and Estella — acting with O’Toole’s knowledge and authorization — created, backdated, and added a document to the audit working papers that related to the most significant issue in that audit. The Board also found that O’Toole authorized other members of the audit engagement team, including Estella, to alter, add, and backdate other working papers in advance of the PCAOB inspection.
Additionally, the Board found that O’Toole and Estella provided a written document to PCAOB inspectors in which E&Y represented to the Board that no changes had been made to the audit working papers following the documentation completion date for the audit. Neither O’Toole nor Estella ever disclosed to the PCAOB inspectors that, in fact, the working papers were altered after the documentation completion date and shortly before the inspection.
The Board found that O’Toole and Estella’s actions violated PCAOB Rule 4006, which requires cooperation with Board inspections, as well as PCAOB Auditing Standard No. 3, which governs audit documentation.
The PCAOB has not released the name of the company involved, who hired E&Y as independent auditor in 2002. E&Y expressed an unqualified opinion on the company’s September 30, 2009 financial statements, which led to notice by the PCAOB that an inspection of the unknown company’s audit was being performed on March 30, 2010. The partner, senior manager and manager on the engagement were given notice on March 31, 2010. The inspection fieldwork was set to begin on April 19, 2010.
This comes on the heels of an earlier PCAOB decision which censured 27-year-old Jacqueline Higgins for her part in the scheme. Word is she has since taken a job with McGladrey’s Boston office (unconfirmed rumor), who could probably use the help.