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.
I wanted to make a comment about KPMG’s new 401(k) rules. As a recent US […]
Yes, that’s a question for the group. But first, we should mention that despite the glaring lack of exclamation points, you can’t help but think that T Fly is running around 345 Park (or wherever he puts his feet up these days – is he in A/dam?) high-fiving everyone that crosses his path about the slight uptick in this year’s results:
AMSTERDAM, Dec. 16, 2010 /PRNewswire/ — KPMG, the global network of professional services firms providing Audit, Tax and Advisory services, today announced member firm combined revenues totaling US$20.63 billion for the fiscal year ending September 30, 2010, versus US$20.11 billion for the prior fiscal year, representing a 2.6 percent increase in U.S. dollars; a 0.1 percent increase in local currency terms.
“These combined FY10 revenues overall reflect positive and improving business performance across the KPMG network of firms and functional businesses worldwide,” said Timothy P. Flynn, Chairman of KPMG International.
“This improvement underscores the strength of our brand and that, in a significantly changing economic and regulatory environment, clients and stakeholders value how the high-performing people of KPMG are cutting through complexity, delivering informed perspectives and clear solutions to them,” he said.
And if it wasn’t for Google – GOOGLE! – the House of Klynveld would be the idealist employer on the globe!
Flynn added, “KPMG was pleased to be honored by Universum, the global talent consultant, this year for its ability to attract the very best people. Universum announced that students worldwide ranked the KPMG network globally second, behind only Google, as an ‘ideal’ employer. This is strong affirmation of our priority to making KPMG a magnet for talent and a place where people can maximize their potential.
“The caliber of talent is a true differentiator among professional services firms in the global marketplace, and KPMG member firms worldwide will continue to invest in their people in the year ahead, attracting the best and most diverse talent. Our growth plans call for us to recruit approximately 250,000 people over the next five years,” Flynn said.
Whether “recruit approximately 250,000 people over the next five years” actually translates to putting asses in the cubicles, will remain another matter since every firm on Earth claims to ratcheting the hiring up a notch. Anyway, feel free to discuss whatever you like related to the Radio Station revenue results, including the likelihood of more bovine flesh in your future.
Today in DERP news: Back in September, the fire alarm rang out at KPMG's London […]
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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.