Auditing

PCAOB Kicks Off Auditor Rotation Debate

Tammy Whitehouse March 27, 2012

A who's who of the auditing world convened at the Public Company Accounting Oversight Board last week for two days of discussion about term limits for audit firms' engagement with clients. Opinions were predictably diverse, and consensus was rare. Goodyear CFO Darren Wells, for example, said auditor rotation should only be required after an audit failure. More views inside.

HHS Steps Up Demands in Hospital Audits

Alix Stuart March 06, 2012

The Department of Health and Human Services is expanding the scope of audits for healthcare providers that accept federal funds, and compliance officers at those institutions can expect demands for more data and documentation. The reviews "are more comprehensive ... looking at actual claims plus the systems hospitals have in place to make sure services are billed correctly," says Joanne Erde of the law firm Duane Morris.

Study: Naming Audit Partners Boosts Audit Quality, Fees

Tammy Whitehouse February 22, 2012

A new study finds that naming the audit partner in an external auditor's report generally leads to better audits, but also drives up audit fees. The conclusions, by two management professors, are based on an analysis of how audits changed after Britain enacted a "signing provision." They found increases in three different measures of audit quality. Details inside.

Investor Groups File Auditor Rotation Proxy Proposals

Tammy Whitehouse February 07, 2012

Two investor groups recently filed proxy proposals to compel companies to adopt auditor rotation policies. So far, their arguments have fallen on deaf ears. Companies have either ignored the proposals or petitioned the SEC for no-action letters, which they have won. But don't expect the battle to stop there. Details inside.

Fewer Companies Changing Auditors

Tammy Whitehouse January 31, 2012

Fewer companies changed audit firms in 2011, reflecting relative stability in the market for financial reporting. While second-tier audit firms made some inroads, picking up a net gain of 28 audit clients, the Big 4 firms saw little turnover, losing a net of only eight clients. Deloitte experienced the most turnover, with a net loss of 22 clients. More audit change analysis and data inside.

For Fair-Value Measurements, Third-Party Pricing Alone Won't Do

Tammy Whitehouse January 17, 2012

Regulators are taking issue with fair-value measurements that rely entirely on third-party services, calling for companies to support the judgments with their own analysis. Those that don't may have to answer to the SEC. "We might question whether or not the registrant uses a pricing service," warns Mark Shannon, associate chief accountant at the SEC. "If the answer is yes, how do you evaluate the appropriateness of the models?"

Foreign Banks, Others Struggle to Prepare FATCA Compliance

Reese Darragh January 17, 2012

As the 2013 deadline nears for foreign banks and others to strike a deal with the Internal Revenue Service to monitor accounts held by U.S. citizens, confusion remains about exactly which companies must comply with the law. "Until companies really pull up their sleeves and take a hard look at all the necessary changes, they won't realize the impact," says Laurie Hatten-Boyd, a principal at KPMG.

Regulators Debate Solutions to Poor Audit Quality

Tammy Whitehouse January 10, 2012

An alarming increase in the rate of audit failures at Big 4 firms has caused the Public Company Accounting Oversight Board to consider controversial ideas, such as mandatory rotation of audit firms. But others, including the SEC, are urging the PCAOB to slow down. They want a better understanding of why audits fail before taking any extreme measures to improve them. More details inside.

Audit Reform Proposals in Europe Target Big Four

Neil Baker November 29, 2011

The European Commission is set to unveil a series of audit reforms intended to improve audit quality and challenge Big Four dominance of the public company audit market. Regulators are considering mandatory audit firm rotation, new bans on services firms can provide to audit clients, and dual audits. Now pressure is mounting for regulators to pull back on some of the proposals.

New Rules on Comprehensive Income Lead to Head-Scratching

Tammy Whitehouse October 25, 2011

Companies are finding it tougher than expected to comply with a new rule on reporting other comprehensive income, raising questions about what exactly belongs in OCI in the first place. "It's a garbage dump. When FASB doesn't know what to do with something, they throw it into adjusted OCI," says Mike Loritz of audit firm Mayer Hoffman McCann. Full coverage inside.

PCAOB Starts Audit Reform Debate

Tammy Whitehouse August 23, 2011

The Public Company Accounting Oversight Board launched its shake-up of the auditing world last week, floating the idea of term limits for audit firms and their public company clients. Audit firms blast rotation as a draconian solution ill-suited to industry problems. "When, all of a sudden, do you become not independent?" asks Tim Follett of the firm Mayer Hoffman McCann. "There's no hard line in the sand on that."

States Ratchet Up Enforcement of Unclaimed Property Rules

Tammy Whitehouse July 06, 2011

Deficit-challenged states are looking at unclaimed property to help fill gaps in their budgets. They are increasingly leaning on companies to turn over abandoned assets, and some are even trying to broaden the definition of what can be considered unclaimed. "These audits are unlike anything I've seen in 30 years of doing this," says Noel Hall, a principal at tax firm Ryan.

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