When accounting goes unaccounted for
What the fuck is this??
WSJ doesn’t know why it was redacted either. NO ONE DOES.
We’ve got some more inspection reports to dig into shortly, lots of them. EY, PwC, Deloitte, GT, BDO, RSM, Moss Adams…does anyone want to know all that? We were warned last year that this batch of PCAOB inspection reports would be “completely unacceptable” but no one said they would be completely unknowable. Thankfully they gave us deficiency rates for the other firms.
From a Klynveld Quaker:
In recent meetings with PA Business Unit leadership with all audit staff (i.e. A and SA’s), we were told that of the 32 inidivudals up for promotion to Manager in the combined three offices (Philly, Harrisburg, Pittsburgh), that 22 were officially promoted. Of the 10 that weren’t, at least 1 just came back from international rotation, and either 2 or 3 (can’t remember which) hadn’t passed the CPA exam and therefore couldn’t be considered for promotions. All raise and bonus theories were squashed (as to hard percentages), though we were told to expect some form of raise as well as variable comp at FYE.
So just a shade better than two-thirds of the Keystone KPMGers eligible for manager will be in the new manager class. As you may remember, this is pretty close to the breakdown for one office in the Rockies but a little less than an office in the northwest.
Since the firm has four months to go in its fiscal year, the fact that the local leadership wouldn’t even give a hint comes as no surprise. That said, it hasn’t stopped people from speculating about what they think the increases will be. We encourage you to share what you know, what you’ve heard, or your own wild-ass guess. And keep us updated with the latest in your office.
I guess it was funny the first four times (and that doesn’t count the chumps that don’t get press releases) but for the extra special positions, P. Dubs must prefer to keep things in house.
Mark J. Mendola has been named as PwC’s U.S. Tax leader and a vice chairman of the firm. He will also serve as a member of the firm’s U.S. leadership team and the global Tax leadership team. Additionally, he will be responsible for the network of Tax practices across the Americas, including Canada, Mexico and South America.
For those keeping close tabs on this sort of thing, MJM joined PwC in ’86, no doubt inspired to join the tax practice thanks to the efforts of the Gipper & Co. He joined the partnership in ’98 with no indication that he strayed to the HoK. Word on the street is that KPMG is pretty bent out of shape over the competitive poaching, so PwC must be backing off. For now, anyway.
[via PwC]
Here’s some less-than-stellar news about the Queen’s KPMG from today’s Financial Times: KPMG faces a […]
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Perhaps read the report. Issuer N is redacted. I would assume there is one more potential comment.
The answer is 16 and 29.6% failure. Not good
Follow the mòney
Probably litigation involving an issuer reviewed and/or lingering issues that aren’t resolved (contested finding)
None of the deficiencies coming out of the Big 10 surprises to anyone in the profession. The Big 10 are the Big 10 because they are the top money producers. They are not on top because of their quality audits. One of the largest reasons that audit quality has gone down is due to the risk based standards and doing away with rule based standards instead of principle based standards. I submit that human nature will bend towards financial goals rather than to quality when given the option to have rules verses principles. For a system to work with principles, honesty and integrity have to be paramount, and those are not paramount when given the chance to have human judgement verses professional judgement. This argument was brought up when GAAP was beginning to be merged with IFRS and the powers to be in the profession just could not help themselves fail any more than to accept this line of thinking. Academia, being what they are, are a hopeless group in a capitalist profession. We told the profession as students that principle based standards should never have bee entertained. Too much room for error and human nature.
TLDR version: Agree with you, however most of these findings have nothing to do with the accuracy of the financial statements or application of GAAP.
The full story: Generally, the PCAOB finds issues in the auditing of management’s controls. For example, when an SAP report is used in a control, the control reviewer (let’s call him Bob) is required to validate that the report is complete and accurate. The auditor is responsible for proving that Bob made sure the report was complete and accurate. The fact that the auditor proved that the report was complete and accurate does not matter one bit for the ICFR opinion. Basically they need to see evidence that Bob audited the report. If there are 10 theoretical ways the report could be wrong, they need to see evidence of how Bob proved those 10 things didn’t go wrong. The degree of evidence required to prove that Bob audited the report is a matter of judgement and the PCAOB will fail an entire audit for insufficient evidence obtained for one report, in one control (out of hundreds audited “correctly”). How did Bob know that the report extracted from SAP correctly and that no data was lost in the export? He agreed it to the general ledger. Unfortunately Bob didn’t film himself do that, so hopefully he printed off a screenshot of the G/L and put some tickmarks on it. The control requires Bob to review all items over $1,000 to ensure they were properly authorized. Hopefully Bob kept notes and support proving he did that for every single item, and hopefully he found some errors to prove he was actually reviewing stuff. IMO if investors knew what the auditors were actually spending their time doing, they would lose their mind. More time spent on ICFR that the numbers.
That description of Bob and his SAP report are spot on.
Sounds like you have some personal experience there. I haven’t had that exact experience, but my experience is close enough to know a personal experience when I hear it.
Its pure and simple – its all a big racket. Monitoring / regulatory agencies at the end of the day are in cahoots with entities they’re tasked to monitor. This is primarily because their funding source is the accounting industry itself and most senior level regulators are from these Big CPA firms. Its been this way and nothing is going to change. Its all a show, no substance or depth behind the covers.