PCAOB

With Deloitte Ensnared, China Localizes Audit Firms

May 16, 2012

China's Ministry of Finance recently announced a new policy that requires China's audit firms to increase their staffing of Chinese-trained and certified auditors so that no more than 20 percent of its partners are non-Chinese-certified accountants or auditors by 2017. A recent enforcement action against Deloitte is "more of a symptom than a cause" for the policy, says the general counsel of a U.S.-based audit firm.
 

A Push for Audit Quality Could Send Costs Higher

May 15, 2012

After several large audit firms scored poor marks on their most recent round of audit inspections, many are responding by stepping up their game. They are investing more in training and staff, and planning on giving problem areas more scrutiny—all of which could drive costs higher. "We are doing a number of things differently," says Robert Moritz, chairman of PwC's U.S. operations. More inside.
 

PCAOB Summons Advisors, But Mum on Rotation

May 10, 2012

The Public Company Accounting Oversight Board will assemble its advisory panel this week to address a range of emerging auditing issues, including going concern warnings, revenue recognition, and related-party transactions, but the agenda is perhaps most remarkable for what it doesn't address: mandatory audit firm rotation.
 

Doty Scores Visibility to China's Inspection Process

May 09, 2012

U.S. audit regulators will soon be allowed to observe their Chinese counterparts as they inspect firms that audit companies or units of companies that trade on U.S. exchanges, thanks to an agreement struck during a meeting of the U.S.-China Strategic and Economic Dialogue in Beijing earlier this month. Details inside.
 

PCAOB Contemplates Its Next Move on Improving Audit Quality

May 08, 2012

The Public Company Accounting Oversight Board may be cooling on its idea of mandatory audit rotation, but don't expect it to walk away from the idea of putting new measures in place to improve audit quality, including strengthening the role of the audit committee. "We're all anxiously awaiting exactly what they'll decide to do," says James Comito, a shareholder at audit firm Mayer Hoffman McCann.
 

Grant Thornton Gets Latest Rebuke From PCAOB

May 03, 2012

Add Grant Thornton to the list of major audit firms that have been called on the carpet by the Public Company Accounting Oversight Board for audit failures during inspections of 2010 audit work. The regulator found fault with 15 of the 41 audits by Grant Thornton it reviewed, or 37 percent, including one blown audit that led to a restatement.
 

Deloitte Loses Guam Client Over Registration Lapse

April 26, 2012

Audit regulators have denied a Deloitte affiliate in Guam and another firm in Germany permission to audit U.S. public companies because they performed audit work in the United States before seeking permission. The Public Company Accounting Oversight Board said the firms did not demonstrate the proper "degree of care." Details inside.
 

McGladrey & Pullen Gets Harsh Inspection Report

April 19, 2012

McGladrey & Pullen is the latest major audit firm to take a scolding from the Public Company Accounting Oversight Board. The audit regulator listed multiple problems with nearly half of the audits inspected, according to the firm's latest inspection report. The firm joins nearly all the major accounting firms in getting a public rebuke from the PCAOB for higher audit failure rates.
 

PCAOB Gets Mandate: Tone Down Rotation Talk

March 29, 2012

Congress has given the Public Company Accounting Oversight Board a clear warning to tone down talk of mandating audit firm rotation, especially since the audit regulator hasn't produced hard evidence that the benefits will outweigh the costs. During a House committee hearing last week, members of Congress said the PCAOB may be overstepping its authority on the issue.
 

JOBS Act Inspires Criticism of Regulatory and Governance Rollback

March 27, 2012

The newest members of the public company ranks will now have five years to avoid corporate governance requirements, thanks to the JOBS Act passed by Congress last week. Critics say the measure will do little more than play to scam artists. "With securities fraud running at a record level ... any reasonable person would understand there needs to be adequate protection of investors," says Lynn Turner, governance activist and former SEC chief accountant.
 

PCAOB Kicks Off Auditor Rotation Debate

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.
 

Congress Moves to Block PCAOB on Auditor Rotation

March 23, 2012

Congress has decided to join the fray over mandatory audit rotation, with a proposal to amend the Sarbanes-Oxley Act to block the PCAOB from writing a new rule limiting auditor tenure. The PCAOB is currently exploring ways to increase auditor independence, including term limits for auditors.
 

Union Wages New Proxy Battle for Auditor Tenure Disclosure

March 21, 2012

The United Brotherhood of Carpenters is pushing a new round of proxy proposals that call for corporate disclosure on audit firm tenure, to give investors more insight into longstanding relationships that might raise questions about independence. The proposals also seek to uncover how much companies paid in audit fees and the measures they've taken to keep the auditor at arm's length.
 

The Inexact Science of Making Sound, Defensible Business Judgments

March 13, 2012

Since 2008 executives have urged the SEC and others to consider issuing guidance to the capital markets to explain how regulators assess the reasonableness of business judgments, but those calls have gone unheeded. Now the Committee of Sponsoring Organizations has stepped forward with guidelines of its own on the topic. Details inside.
 

PCAOB Re-Opens Comments on Mandatory Rotation

March 09, 2012

The Public Company Accounting Oversight Board has re-opened the comment process for its concept release on whether mandatory term limits or some other solution will make auditors more independent, objective, and skeptical. So far, the board has collected more than 600 comment letters on the topic.
 

BDO USA Report Cites Common Audit Problems

March 09, 2012

The PCAOB has blasted another audit firm for poor audits. BDO USA, the latest company to get dinged, scored poorly on 26 percent of the audits studied during its 2010 inspection. The failure rate is on par with that of its Big 4 competitors, whom were all recently cited for increased rates of audit failures during 2010 inspections.
 

PCAOB Calls for More Scrutiny of Related-Party Transactions

March 06, 2012

Auditors are getting new pressure to sniff out business deals with insiders and to probe unusual transactions, including executive compensation deals, that might suggest something could be amiss. "There's a fair degree of push here to drill down further into compensation structures for executives," says Michael Scanlon, a partner with law firm Gibson, Dunn & Crutcher. More details inside.
 

PCAOB Targets Related Parties in Latest Proposal

February 29, 2012

The Public Company Accounting Oversight Board has proposed another new auditing standard, this time to steer auditors toward more careful assessments of transactions with related parties or other significant unusual transactions. Details Inside
 

PCAOB Action Illuminates Returns Accounting

February 28, 2012

A recent disciplinary action against Ernst & Young provides a lesson for corporate accounting executives and auditors alike on how not to push accounting logic to improve reported financial results. The case centers on Medicis Pharmaceuticals' accounting for returned products, an area of accounting that relies heavily on judgment—which Medicis took too far, and ended up with a restatement. Details inside.
 

Fresh SEC Guidance for Small Filers

February 28, 2012

Take heart, all you overworked, overwhelmed non-accelerated filers! The SEC has published its latest batch of guidance for small public companies, a 54-slide summary of filing errors and issues common to non-accelerated filers. From musings about the MD&A to questions about controls, and extra tips on how to ask the SEC for help, it's all in there.
 

PCAOB Preps New Standard on Related Parties

February 22, 2012

After years of fretting over how to get auditors to pay closer attention to deals among related parties within an enterprise or other unusual transactions, the Public Company Accounting Oversight Board is about to publish a proposed new standard to address the concerns.
 

Study: Naming Audit Partners Boosts Audit Quality, Fees

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.
 

PCAOB Levies $2 Million Fine on E&Y, Four Partners

February 09, 2012

In its biggest enforcement action to date, the Public Company Accounting Oversight Board has fined Ernst & Young $2 million, sanctioned four current and former partners, and fined three of those partners a total of $100,000 to settle allegations that the firm violated auditing standards and rules.
 

Investor Groups File Auditor Rotation Proxy Proposals

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.
 

SEC Appoints PCAOB New Member; Aguilar Dissents

February 06, 2012

The Securities and Exchange Commission has named Jeanette Franzel, managing director of the Government Accountability Office, to replace Daniel Goelzer as a member of the Public Company Accounting Oversight Board. But the appointment wasn't unanimous. SEC Commissioner Luis Aguilar raised concerns about Franzel's lack of credentials as an investor advocate.
 

Fewer Companies Changing Auditors

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.
 

PCAOB Enforcement Hamstrung by Privacy, Says Review

January 20, 2012

An internal review by the Public Company Accounting Oversight Board found that the biggest obstacle to a more effective process is the Sarbanes-Oxley rule that keeps investigations and disciplinary proceedings private until settled. That gives firms and individuals an incentive to litigate cases regardless of merit to delay a settlement, the review found.
 

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

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?"
 

SEC Approves Budget Increase for Growing PCAOB

January 13, 2012

The Securities and Exchange Commission has approved an 11.4-percent budget increase for the Public Company Accounting Oversight Board, mainly to beef up staffing for inspections and oversight of broker-dealer audits. The move will result in higher support fees for public companies.
 

Regulators Debate Solutions to Poor Audit Quality

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.
 

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